Bacon's Rebellion

Democracy Thrives in Sunlight

Dueling Methodologies

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by

James A. Bacon
in

Is the United States lagging other economically advanced nations in the deployment of broadband infrastructure? That’s the ineluctable conclusion of a study published by the Organization for Economic Cooperation and Development and cited by the blogger Groveton in a recent Bacon’s Rebellion column, “The Commonwealth is Flat.”

In a Wall Street Journal op-ed piece today, Robert M. McDowell, a commissioner on the Federal Communications Commission, argues that the OECD methodology is “seriously flawed.”

First, says McDowell, the OECD measures broadband connections per capita, not per household. Per capita metrics favor nations with smaller family units, like those in Europe, and punishes nations with larger households, like the United States. It doesn’t matter if you have one, two or six people living in a household — if the household is served by broadband, everyone in that household has access to it.

Secondly, contends McDowell, the OECD does not include Wi-Fi hot spots unless they are used in a so-called “fixed wireless” setting. One third of all wireless hot spots in the world are located in the U.S. As an increasing number of computer users access the Internet through laptop wireless connections in hot spots, U.S. access to broadband may be significantly undercounted under the OECD methodology.

As for the Asian countries like Korea and Japan, where broadband penetration is significantly, higher, McDowell argues that their dense, urban populations make them more economical to serve. Compare densely populated New Jersey with Korea, and guess what: New Jersey has a higher penetration rate.

The United States has more telecommunications competition than most European countries, McDowell says, and the rate of broadband penetration continues to increase rapidly as video applications create market demand for higher bandwidth. Bottom line: We’re really doing OK. Our system works.

Is McDowell taking a Pollyannish view? Darned if I know. His reasoning does seem to make sense. I just don’t know if his arguments have counter-arguments.

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9 responses to “Dueling Methodologies”

  1. Groveton Avatar
    Groveton

    As I said in one of my posts about the article I wrote – everybody has an agenda on this topic. And that includes the various FCC Commissioners. Here is an article about Robert McDowell from the time (about a year ago) he was being considered for the FCC –

    http://www.mindfully.org/Reform/2006/McDowell-FCC-Lobbyist10mar06.htm

    And here’s the key quote:

    “McDowell the FCC Commissioner?

    Even though President Bush has not yet formally nominated Robert M. McDowell to the FCC, industry leaders are praising the choice. “It goes without saying that if McDowell is nominated it will be a big win for consumers in 2006 as I expect McDowell to be pro competition,” wrote Rich Tehrani, president of the media news company TMCNet, last week. “Not faux competition with concepts like tiered-Internet services being thrown around in an effort by incumbent providers to hold content providers and consumers hostage.” Alaska Senator Ted Stevens (R), chair of the crucial Senate Commerce Committee, also says he supports McDowell.

    But once ensconsed at the Commission, McDowell will have to prove whether he is really pro anything besides the clients he has represented over the last decade, alternately using the rhetoric of deregulation or government mediation, depending on which suited his immediate needs.”.

    McDowell is certainly a smart guy but, like I said, everybody has an agenda.

    Here is what I think is a pretty unbiased article on the matter of OECD counting methods:

    http://www.freepress.net/news/24180

    This article contains commentary from another FCC Commissioner:

    “Political Football

    Political hand-wringing and corporate second-guessing are likely to continue to be the most immediate fallout effects of the new estimates.

    At the FCC and on Capitol Hill, the OECD figures have become a political football. FCC Commissioner Michael Copps, a Democrat, called the purported U.S. slide a “national embarrassment” and reiterated a call for a “national strategy” to ensure the country manages broadband access deployment.

    “Every year brings more bad news as the United States slides further down the broadband rankings,” Copps said in a prepared statement. “These rankings aren’t a beauty contest—they’re about our competitiveness as a country and creating economic opportunity for all our people.”

    So, we have two FCC Commissioners disagreeing with each other.

    Like I said, everybody has an agenda.

    My beliefs:

    1. Counting total broadband connections is folly. China and India will win this race even if they have a much worse infrastructure. It’s all about broadband penetration – not total connections. Commentations who proclaim American victory based on a raw count of connections will soon have to explain China’s leadership in that arena.

    2. The WiFi issue is somewhat real although using “whole world” comparisons is not. The question is not whether 1/3 of the world’s WiFi hotspots are in the US. The question is whether the US has more WiFi hotspots than the 14 countries ahead of us in the OECD rankings.

    3. The issue of business connectivity is definitely legitimate. This probably depresses the US total.

    4. Population density definitely makes a difference as I said in my comments on the article I wrote. So what? The US has the population density it has. Citing population density differences is just excuse making. The question is how we stay at the forefront given our population density.

    5. Telecommunications competitiveness between the US and Europe is a huge red herring. It’s like airline competition – sounds good on the outside, smells like sewage on the inside. At the end of the day airline connections and broadband connections are location specific. If I want to fly from Dulles to O’Hare I have a lot of choices on United, a few new choices on Southwest and not much else. If I want braodband in Great Falls, realistically I can choose Cox or Verizon.

    In addition, the question isn’t monopoly vs. duopoly – it’s full, free market competition vs. a regulated market. Some European countries may have one less carrier than locations in the US but they also regulate that carrier to ensure that broadband is deployed.

    The US has neither effective regulation nor broad based competition. This is because the United States has allowed the start-ups (Teligent, PSINet, Covad, etc etc) to get trampled by the incumbents. We have also allowed merger after merger (Nynex, Ameritech, GTE, SNET, Pacific Bell, AT&T, MCI, Media General Cable in Fairfax County, etc etc) to reduce the number of companies competing.

    6. The real statistic to watch is the change in broadband growth or penetration. Like the rising costs of health care in the US – the statistics just don’t look good. Even if you discount the OECD method for measurement the trajectory seems bad.

    Finally, there has been broadband for a long time. The OECD has been measuring broadband penetration across countries for quite a while. WiFi is not all that new nor is the OECD. Where are the FCC’s own statistics? They are just now being collected. Does that seem right?

    The Democrats want to believe the OECD numbers because they show the US falling behind during the Bush Administration.

    The Republicans suddenly want to discount the OECD counting methodology because it shows the US falling behind during the Bush Administration.

    Everybody has an agenda.

    Except Al Gore – he invented the internet.

  2. Larry Gross Avatar
    Larry Gross

    excellent commentary!

    especially the part about Al G!

    but one curiosity… in smaller, more populous, more compact countries.. one would think that WiFI would be the bestest way to “penetrate” .. whether by capita or by household.

    I know that in our rural areas.. they are talking about “spraying” wi-fi from the fiber-optic backbones.. as a way to penetrate..

    that’s what I read.. what I know is pretty much squat.. compared to someone like Groveton – whose words on this were very educational.

    thanks. but what say you about the wi-fi penetration in dense urban locales in Europe and Asia?

  3. Anonymous Avatar
    Anonymous

    The real question is whether we do enough worthwhile work to make the expense justifed. I’m not sure widespread wi-fi gaming is buying us much, other than keeping people off the streets.

    RH

  4. Larry Gross Avatar
    Larry Gross

    Perhaps I’m such a clueless optimist that I think that if WiFI is made available to rural kids – some of those kids will use it to get a better education and grow up to be another Bill Gates…

    … then of course .. we’d tax the heck out of him to pay for the kids who chose electronic gaming instead of learning… and grew up jobless….

  5. Groveton Avatar
    Groveton

    Larry:

    Thanks for the kind comments.

    I have not read the op ed piece yet. WSJ.Com is a paid subscription and I don’t want to buy it just to read more from another guy with an agenda – even if he is an FCC Commissioner! I can wait until I find a paper copy.

    I’ll rely on Jim Bacon’s reporting of the matter.

    Jim says that the US has 1/3 of the world’s WiFi hotspots. That may be right.

    However, that doesn’t say anything about WiFi penetration in Europe.

    I don’t know if the US has higher WiFi penetration than Europe. However, even if we do have higher penetration, it’s questionable to me whether that would make a big difference in the broadband penetration rate and whether the advantage will last long.

    WiFi is a brand name coined (as I recall) by a group called the WiFi alliance. They wanted to promote wireless LAN tachnology.

    In technical terms, there are many WiFi standards based on the 802.11 set of standards. It is a good, economical technology. However, it has limited range / antenna. This range varies based on a number of factors but 50 to 100 meters is probably a good estimate. There are other concerns about maximum bandwidth and security as well. However, by all measures, the 802.11 series of standards have been a success.

    I think what you are referring to in regard to “spraying wi-fi from fiber optic backbones” in rural areas is WiMax. It’s conceptually similar to WiFi but based on the 802.16 set of standards. It uses a lot of spectrum, costs a lot more than WiFi but has much, much greater range (and capacity) per antenna. It is still immature so all range and nandwidth estimates have to be taken with a grain of salt and the realization that range will vary by topology. However, a range of 2 – 20 kilometers is probably safe for early commercial versions of the technology. Some people will say it has a range of 50 KM but I believe that the delivered bandwidth will drop off a whole lot at those theoretical distances.

    Regardless of the ultimate capability of WiMax it seems destined to be a key technology (worldwide) in the future. One problem holding it back is that it requires a lot of radio spectrum and there isn’t that much unused spectrum available in the US. Sprint Nextel happens to own some spectrum useful for WiMax and that company will probably be the pioneer (among big companies) of WiMax deployment in the US.

    WiMax poses some serious competitive issues to communications companies. Most of these issues are being discussed in terms of a new spectrum auction being run by the FCC (on behalf of those who finally own the spectrum – the people of the US). As I say – everybody has an agenda. When it comes to these spectrum auctions it’s high tech vs. telecom.

    For a good article, read:

    http://money.cnn.com/news/newsfeeds/articles/djf500/200707181811DOWJONESDJONLINE001088_FORTUNE5.htm

    This kind of stuff is unbelievably important to the US in general and high tech states like Virginia in particular.

  6. Larry Gross Avatar
    Larry Gross

    thanks for the article!

    with regard to WiFi and WiMax – on my Electric Cooperative website they say they are partnering with a Wireless Provider (who I assume plans on using electric poles and wireless towers to establish a wireless grid.

    I don’t have a clue how longer extentions of wireless infrastructure/antennas compares with wired/fiber optic… but it might be a cheaper way to achieve penetration in varying- density rural areas – because basically where the power lines go – defines where rural density is.

    I’m not sure where the government belongs on this issue but I think it is safe to say that the strategic goals of private enterprise won’t align “nicely” with social strategies for widespread penetration.

  7. Toomanytaxes Avatar
    Toomanytaxes

    Just a point of reference. A study by the National Exchange Carrier Association (NECA), which serves rural telephone companies around the US, suggested that the cost to upgrade “5.9 million rural telephone access lines to 8 Mbps, a level capable of delivering a basic multimedia package to rural customers, is $11.9 billion.”

    Of course, it is possible to provide broadband connections to rural markets with other technologies. But the bottom line is still rural markets are much more expensive to serve, especially if we want more than one pipe to the barn.

  8. Groveton Avatar
    Groveton

    Toomanytaxes –

    Rural markets are much more expensive to serve.

    No doubt about it.

    To me the question is whether the broadband connections would help save on the subsidy from urbanizing counties to rural counties in Virginia.

    The literal answer is “No. Broadband connections, by themselves, won’t do anything”.

    However, I am hopeful that the rural counties than cannot generate sufficient income to pay the taxes needed to educate their own children or pay for their own police will be motivated to improve their economic lot if given high speed connections to the internet.

    That’s why I believe that the broadband connections must be accompanied by an aggressive economic development plan to change the economic landscape of poor rural counties in Virginia.

  9. Larry Gross Avatar
    Larry Gross

    I agree with the thought that extending broadband to rural areas won’t directly change other important parts of the economic equation.

    Other than natural resource extraction, the more remote rural areas of Va do not have that much to offer what most companies need -which is a well-educated labor force that can effectively function in an information and technology dominated economy.

    People with minimal high school educations from such areas simply lack a competitive skills – for those jobs.

    It doesn’t matter where those jobs are – 200 miles away in an urban area or in a remote rural area with good broadband connectivity.

    What broadband to rural does do – is provide kids with the opportunity to overcome their disadvantaged circumstances and to grow up with much better educations and the ability to successfully compete for world jobs.

    Broadband to rual areas – is an investment in human resources in my humble opinion.

    Ultimately – it could lead to less reliance on our urban areas to “take care” of our rural areas.

    Having said that – I DO NOT believe that the way you approach this is by essentially throwing unlimited tax dollars at the problem.

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