Skype Journal Test

Sunday, September 28, 2008

Rural Internet access is an Obama priority

From Friday's U.S. presidential debate, in discussion of domestic spending priorities, Senator Obama said:

And I also think that we're going to have to rebuild our infrastructure, which is falling behind; our roads, our bridges, but also broadband lines that reach into rural communities.

As I reported Monday, Obama wants to pay for rural net access directly, using the Universal Service Fund. All Americans now pay for the USF with a surcharge on their telephone service, subsidizing the higher costs of connecting distant homes, schools, and hospitals to the phone network. From the Obama/Biden rural issues page, under the headline "Support Rural Economic Development":

Connect Rural America: Barack Obama and Joe Biden will ensure that rural Americans have access to a modern communications infrastructure. They will modernize an FCC program that supports rural phone service so that it promotes affordable broadband coverage across rural America as well.

The Democrats' technology policy says America's Internet needs an upgrade. America's broadband is much slower (2.35 megabits per second) than average broadband in other countries, like Japan (63), South Korea (49), Finland (21), Sweden, and France.

Deploy Next-Generation Broadband: Barack Obama believes that America should lead the world in broadband penetration and Internet access. As a country, we have ensured that every American has access to telephone service and electricity, regardless of economic status, and Obama will do likewise for broadband Internet access. Obama and Biden believe we can get true broadband to every community in America through a combination of reform of the Universal Service Fund, better use of the nation’s wireless spectrum, promotion of next-generation facilities, technologies and applications, and new tax and loan incentives.

While Senator John McCain didn't speak to rural connectivity during the debate, he's on record as wanting a slower, more indirect mechanism, offering tax breaks for rural ISP investment. From McCain's campaign's technology policy page:

John McCain would seek to accurately identify un-served or under-served areas where the market is not working and provide companies willing to build the infrastructure to serve these areas with high speed internet services incentives to do so. He also supports private/public partnerships to devise creative solutions and help rural area and towns and cities in their efforts to build-out broadband infrastructure through government-backed loans or low-interest bonds.

John McCain will establish a “People Connect Program” that rewards companies that offer high-speed Internet access services to low income customers by allowing these companies offset their tax liability for the cost of this service.

This is consistent with McCain's trust of deregulated markets over government services. McCain/Palin haven't identified how they would offset their plan's lost tax revenue.

Note that McCain's "high-speed Internet" is pre-Obama's "Next Generation Broadband".

America's 59 million rural voters tended more Red than Blue in past elections. Those votes are in play in 2008 thanks to Obama's extensive field operation, policies relevant to rural voters, and frustration with the Bush administration, and top-of-mind domestic and foreign issues.

2008 Telecom Issues by you.

In my view, Obama is tops if you are a telecom consumer or you advocate for Internet civil rights. On the other hand, an incumbent big telecommunications company or national ISP will flip those scores, putting McCain on top to preserve their market power from disruption or complication.

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At September 28, 2008 at 5:03 PM , Anonymous Jim Courtney said...

What puzzles me is that thirteen rural telcos in Ontario (each with 5,000 to 15,000 customers) are installing fibre to the home in their communities of up to 2,000 homes this year and intend to go to the farms in the next couple of years. All basically justified financially to CFO's with no need for any government subsidies or other external financing. (I've interviewed the VP at one of them.) Obama's plan sounds like another con job in the U.S. being foisted on U.S. taxpayers.

At September 28, 2008 at 7:36 PM , Anonymous Phil Wolff said...

Rub in your Canadian goodness, Jim. Oh that our lower states were as enlightened and productive. I cannot comment on rural Ontario telcos but I learned several things when I spoke at a Lansing conference of rural Michigan telcos.

First, they would not exist without the Universal Service Fund. The way they have been regulated for the last generation or two requires high rates of landline penetration, often the most expensive "last miles" in the country. Subsidies allow them (force them) to charge someone 20 miles from nowhere the same as someone in Detroit, including line service and repair. Margins are razor thin, the markets are impoverished compared to the suburbs, none are getting rich, and rural telcos are failing around the US.

Second, they are getting hit with painful competition for which they are unprepared. Until the 1990s, they had local monopolies, letting them extract returns on capital. Now wireless and cable and consumer VoIP (Skype, Vonage) are offering substitutes and customers are demanding midband Internet, with concomitant infrastructure upgrades.

At the same time, as the RBOCs merged and consolidated oligopolic market power, they are cherry picking the most lucrative of rural customers, leaving the most costly and least profitable for the rural telecoms.

That's now.

By way of prelude, the USF was instrumental in increasing access to phone service. It is now administered by a private sector not-for-profit.

Obama is simply using existing funding sources with a proven and transparent distribution authority to support related goals; adding Internet access to the USAC's charter.

With FCC, USAC, and congressional oversight, this is much less likely to be a con job than McCain's approach of having the IRS administer these goals after the fact.


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