Broadband Economics 101 - Focus on the economics, not the technology

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The press is full of stories about the AWS-3 spectrum in the 2.5-GHz range that M2Z has been trying to convince the FCC to release so it can build a nationwide broadband network. The vote on the auctioning of this spectrum, with some conditions, was supposed to take place at the Dec. 18 FCC meeting. The meeting has been cancelled, although it is not clear whether the FCC commissioners might still vote on this item by circulation, which means without a meeting. Each commissioner would still vote and include his or her comments.

The U.S. Congress, the National Telecommunications and Information Administration, and the Commerce Department have all weighed in against the FCC voting on this spectrum with its special requirements (25 percent of the service is to be free, no adult content permitted, and the network must cover 95 percent of the U.S. population). Further, T-Mobile USA and others are concerned about interference to their own networks if this project moves ahead. Over the past few days, there has been a flurry of articles and letters pushing the FCC to abandon this auction as the rules now stand. Perhaps it has gotten the message, or perhaps it simply wants to push this agenda item through behind closed doors. In any event, I believe the new administration and the new FCC will want to take a look at this spectrum to determine how it can best be used to serve the public.

The FCC, Congress and the executive branch of the federal government have been saying for years that we need to provide broadband services to those in the inner city who cannot afford it as well as to rural America where it is simply not available. There have been a number of recent attempts to increase broadband services including muni-WiFi, which has failed almost everywhere it has been tried, and Broadband over Power Lines (another FCC favorite), which could have provided services to rural America had it worked and not caused interference to so many other services and had it not cost too much to deploy.

Of course, Clearwire is building what it says will be a nationwide network at 2.5-GHz using WiMAX, but this is a pay service. Even if it does ultimately cover inner cities and rural America, it won't be at a price that the Internet community and the government want to see: free. The FCC also recently passed a ruling making the TV white space spectrum available for broadband services on an unlicensed basis. While some (including me) believe this will cause interference to customers' TV sets, others are heralding this as the way to provide broadband to all. But there are many unanswered questions. Who will pay for the infrastructure and the equipment? Who will provide access devices to the inner cities where most citizens can hardly afford to pay their existing bills? Who will make the service available to rural America where the population per square mile makes the business case unworkable?

All of these ideas and attempts to provide broadband for the 100 million people (33 percent of the U.S. population) who either do not have access to broadband or cannot afford today's offerings are well meaning, but they miss the mark. Someone has to pay for free access. Someone has to pay for the infrastructure, the devices and connection to the Internet. For someone to invest the money for all this, there has to be a reasonable return on the investment, OR the investment has to be paid for from some other source such as the federal government or with tax incentives for those who build the system. Perhaps some of the Internet companies believe they can pay for it with ad-based revenue.

Internet website companies did not and do not pay for the wired Internet, they pay to attach to it. The companies that build the backbone using wire, cable, fiber and microwave radio systems pay for the infrastructure. In the Internet world, the companies that build the Internet infrastructure are not the ones reaping the rewards for their investment. As wired Internet traffic grows and more infrastructure is needed, a new model will have to emerge that will help pay for the Internet infrastructure. The same is true for the wireless Internet.

The goal of providing broadband access to all who want and need it is a noble one. It has been proven that having access to the Internet helps people achieve higher levels of education and higher levels of understanding, and that is good for all of us. However, at the end of the day, someone has to pay for all of this.

I believe we can achieve the goal of broadband to everyone only if we put together a government/private partnership and only if this partnership works together to expand wired, cable, fiber, wireless, microwave, and satellite technologies in a way that makes sense for those who invest and for those who are underserved. It makes no sense to me to keep throwing out portions of the wireless spectrum and hoping someone will finally figure out an economic model to make it work. It would be far better to find a way to use some common spectrum and share the cost of deployment with all of the parties concerned.

Those who say the U.S. is behind much of the world in broadband deployment are correct. But it is not because of technology. It is because of economics. Many countries where broadband is more widely available are making government/private partnerships work. Isn't it about time we focus on the real issue--the economics--rather than the technology?

Andrew Seybold is an authority on technology and trends shaping the world of wireless mobility. A respected analyst, consultant, commentator, author and active participant in industry trade organizations, his views have influenced strategies and shaped initiatives for telecom, mobile computing and wireless industry leaders worldwide. www.andrewseybold.com