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Broadband's Impact

Obama’s Third Generation of Broadband Policy and the Universal Broadband Imperative

WASHINGTON, August 22, 2011 – The beauty of the internet has always been the disconnection of content and infrastructure.

Landline phone service was a one-to-one medium. It required the phone company’s infrastructure of wires and switches and telephones. Broadcast television was one-to-many. It relied upon the towers and transmitters of the broadcasters, plus a standard-issue television.

Let alone the fact that today we largely watch televisions connected to wires, and largely talk into mobile phones untethered to Ma Bell’s cords. There is the wealth of many-to-many communication through the multiplicity of applications that make the internet what it is today.

None of this, of course, is new – until one considers Washington’s subsidization schemes.

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WASHINGTON, August 22, 2011 – The beauty of the internet has always been the disconnection of content and infrastructure.

Landline phone service was a one-to-one medium. It required the phone company’s infrastructure of wires and switches and telephones. Broadcast television was one-to-many. It relied upon the towers and transmitters of the broadcasters, plus a standard-issue television.

Let alone the fact that today we largely watch televisions connected to wires, and largely talk into mobile phones untethered to Ma Bell’s cords. There is the wealth of many-to-many communication through the multiplicity of applications that make the internet what it is today.

None of this, of course, is new – until one considers Washington’s subsidization schemes.

What’s new is what’s next. And in the evolution of telecom and technology policy in Washington, a big debate is coming about the modernization of the Universal Service Fund into a Universal Broadband Fund.

Why the Internet’s Layers Need Each Other

There may be some yawns among those of you reading this. But think: we spend time online because of the content, the games, the Facebook updates and iPhone utilities that make us more productive or entertained or engaged. This is content. Think of it as the good stuff at the top of the internet layer cake.

Cut through the candles and the icing and we’re surrounded by internet protocols and open standards that, thank goodness, generally work well together. This is the “glue” that keeps us online.

All of the content and software and internet protocols rest on a physical base. This is the layer of wires, cell towers, “middle mile” connectivity and of transceivers that make all the connectivity possible.

This is infrastructure, and we need more of it. We need better and faster infrastructure. We need it to get us to universal broadband connectivity. And because broadband’s capabilities are always increasing and evolving, we’re going to get more good stuff on top of a layer cake with a bigger platform.

Obama’s First Two Broadband Eras

What about to happen is nothing less than a new era in Washington’s broadband policy.

There is no doubt that the 2008 presidential campaign opened up a dialogue on broadband. This was followed in early 2009 by congressional and executive branch action on broadband. And if we follow the guide of Moore’s law, in which technological progress marches forward with a new generation of processing power 18 months, we’re now entering Obama’s third generation broadband policy.

First, from the election until early 2010, we saw the “broadband stimulus.” The American Recovery and Reinvestment Act, passed February 17, 2009, allocated approximately $7.2 billion for broadband investment. Although about $300 million of these funds were later rescinded by Congress, the vast bulk of these dollars were appropriated for infrastructure investments.

In particular, the U.S. Department of Commerce put a focus on high-speed “middle mile” connectivity through comprehensive community infrastructure investments that are now rolling forward throughout the states. The U.S. Department of Agriculture, which was already experienced in administering broadband loans as part of its Rural Development portfolio, received significant new funding for remote-area broadband projects.

The Recovery Act also put in place the seeds of the next phase of Obama’s broadband policy — the National Broadband Plan. Issued in March 2010, the Federal Communication Commission’s plan had many critics. Some called it too ambitious, or at least too long at 376 pages. Others insisted its speed and coverage goals were not aggressive enough.

I think the plan’s brilliance lies in its framing. Its Part I on “Innovation and Investment” hearken to competition and spectrum policy. I’ll discuss Part II, “Inclusion,” and its focus on universal broadband in a moment. But in Part III, the National Broadband Plan put “national purposes” into a broadband focus. By linking Health Care, Education, Energy and the Environment, Economic Opportunity, Government Performance, Civic Engagement and Public Safety to better broadband, the plan did a real service. It set the agenda for the infrastructure of public and private institutions that are seeking to ensure that broadband is meaningfully used by all.

In turn, the FCC relied upon the work performed organizations such as the U.S. Broadband Coalition led by Jim Baller, by the Benton Foundation, and by the now-defunct Knight Center for Digital Excellence.

The Next Broadband Policy Topic: The Universal Broadband Fund

The next major battle over broadband policy will be over the future of the Universal Service Fund. It’s telling that the Universal Service Fund spends more than $8 billion each year on providing telephone connectivity to rural areas, and also to low-income individuals. Two other components of the Universal Service Fund offer internet connectivity to schools and libraries, and to hospitals and health care centers. This amounts to more, on an annual basis, than Obama’s one-time investment in broadband infrastructure.

How the Universal Service Fund should be reconfigured is, as of now, up for grabs. The existing mechanisms in the Universal Service Fund have been criticized by academics and by economists. In their eyes, it wasn’t cost-effective at meeting its telephone-connectivity mandate. Now the mandate itself needs to be different.

At the Broadband Breakfast Club last month, “Making the Universal Service Fund into a Universal Broadband Fund,” BroadbandBreakfast.com hosted experts from a range of stakeholders, including Russell Hanser of Wilkinson Barker Knauer, Hank Hultquist, vice president of federal regulation for AT&T, Joshua Seidemann, director of policy for the National Telecommunications Cooperative Association, Michael Spead, senior technical specialist for broadband at ICF International, and Darrell M. West, vice president and director of governance studies at the Brookings Institution.

Three key points emerged from the debate.

First, unlike plain old phone service, there is a multiplicity of technologies, and a multiplicity of business models, in broadband connectivity. That means the government needs to be clearer about what it wants when it comes to universal broadband, said Hank Hultquest of AT&T.

Second, not every consumer is going to wants or needs a land-line phone. A new broadband connectivity fund may identify consumer and offer them a choice between land-line phones, mobile phones, or broadband access, said Darrell West of Brookings.

Finally, several panelists alluded to the possibility of a new digital divide: between low-speed broadband, such as 5 Megabits per second (Mbps) or less, and higher-speed broadband, such as 45 Mbps.

Watch the debate online.

Remember that getting to universal broadband connectivity, by itself, won’t do anything. Just as telephone wires and broadcast towers’ value was limited by the people with whom you could talk, or the shows that you could watch.

But because of the internet’s protean nature, and because of the vastness of its nooks and crannies of content, it is and will remain far more useful and important for individuals, for businesses and for the anchor institutions of our society.

Making sure that the good things offered by the internet are available and accessed by all is the true next challenge for our nation’s broadband policy.

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Broadband's Impact

Dianne Crocker: Recession Fears Have Real Estate Market Forecasters Hitting the Reset Button

Growing fears of recession trigger pullback on previous rosy forecasts.

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The author of this Expert Opinion is Dianne Crocker, Principal Analyst for LightBox

The lyrics to “Same As It Ever Was” by the Talking Heads certainly don’t apply to how 2022 is playing out in the commercial real estate market. Two quarters of negative economic growth has put a damper on market sentiment and triggered fears that the U.S. economy is heading for a recession. By midyear, market analysts were taking a good, hard look at their rosy forecasts from the start of the New Year and redrawing the lines.

Once upon a time…

At the start of 2022, forecasters were bullishly predicting that commercial real estate investment and lending levels would be nearly as good as 2021. This was significant, considering that 2021 set new records for deal-making and lending volume as the debt and equity capital amassed during the pandemic while looking for a home in U.S. commercial real estate.

What a difference a few quarters have made. Virtually, all the predictions that started the New Year were obsolete by mid-summer. The abrupt shift in market conditions is palpable and surprised just about everyone. Now, markets are reaching an inflection point that is in sharp contrast with the strong rebound of last year.

The two I’s: Inflation and interest rates

At the core of the recent upset in market sentiment is the persistence of high inflation, which seems to be ignoring all attempts by the Federal Reserve to raise interest rates and bring prices down. Higher inflation is having a ripple effect throughout the economy, pushing up the costs of construction materials, energy, and consumer goods. Among the notable economic indicators showing stress at mid-year was the GDP, which fell for the second consecutive quarter, and the Consumer Price Index, which jumped 9.1% year-over-year in June – the highest increase in about four decades.

In July, the CPI fell to 8.5%, an encouraging sign that inflation was beginning to stabilize. By the latest August report from LightBox, however, hopes were dashed when the CPI showed little improvement, holding firm at a still high of 8.3%.

The market is responding to a higher cost of capital as lenders tap the brakes. As the cost of capital rises with each interest rate hike and concerns of a recession intensify, many large U.S. financial institutions are pulling back on their loan originations for the rest of 2022 and into 2023. This change in tenor is a significant shift, given that 2021 was a record-breaking year for commercial real estate lending. Many lenders have already shifted to a more defensive underwriting position as they look to mitigate risks.

The Mortgage Bankers Association, which had previously predicted that lending levels in 2022 would break the $1 trillion mark for the first time revised their forecast downward in mid-July. By year-end, the MBA now expects volume to be a significant 18% below 2021 levels—and one-third lower than the bullish forecast made in February. Now, investment activity is cooling as higher borrowing costs drive some buyers from the market.

In the investment world, transactions were down by 29% at midyear due to a thinning buyer pool as higher rates impact access to debt capital. Market volatility is causing investors, lenders, and owners to rethink strategies, reconsider assumptions, and prepare for possible disruption.

Looking ahead to year-end and 2023

The rapid and diverse shifts in the market make for an uncertain forecast and certainly a more cautious investment environment. The battle between inflation and interest rates will continue over the near term. As LightBox’s investor, lender, valuation, and environmental due diligence clients move toward the 4th quarter—typically the busiest quarter of the year–unprecedented volatility is driving them to recalibrate and reforecast given recent market developments.

Continued softness in transaction volume is likely to continue as rates and valuations establish a new equilibrium. If property prices begin to level out, there will be more pressure on buyers to consider how to improve a property to get their return on investment. The next chapter of the commercial real estate market will be defined by how long inflation sticks around, how high interest rates go, and whether the economy slips into a recession (and how deeply). The greatest areas of opportunity will be found in asset classes like office and retail that are evolving away from traditional uses and morphing to meet the needs of today’s market. Until barometers stabilize, it’s important to rethink assumptions, watch developments, and recalibrate as necessary.

Dianne Crocker is the Principal Analyst for LightBox, delivering strategic analytics, best practices in risk management, market intelligence reports, educational seminars, and customized research for stakeholders in commercial real estate deals. She is a highly respected expert on commercial real estate market trends. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Digital Inclusion

White House Presses Outreach Initiatives for Affordable Connectivity Program

White House officials urged schools and other local institutions to engage in text-message and social media campaigns for the ACP.

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Photo of President Joe Biden, obtained from Wikimedia.

WASHINGTON, September 15, 2022 – The White House on Monday urged schools and other local institutions to engage in text-message and social media campaigns, PSAs, and other community-outreach initiatives to promote enrollment in the Federal Communications Commission’s Affordable Connectivity Program among of families with school-age children.

The Affordable Connectivity Program subsidizes internet service bill for low-income households. Monthly discounts of up to $30 are available for non-tribal enrollees, $75 for applicants on qualifying tribal lands. In addition, the ACP offers enrollees a one-time discount $100 on qualifying device purchases.

To boost ACP enrollment, speakers encouraged schools to reach out directly to families. Bharat Ramanurti, deputy director of the National Economic Council, said text-message campaigns drive up enrollment in government programs. A Massachusetts text-message campaign doubled ACP enrollment rates in subsequent days, said Ramanurti.

Also highlighted was the administration’s “ACP Consumer Outreach Kit,” which provides partners with resources, including fliers, posters, audio PSAs, social-media templates.

In fact, many of these tactics have proved effective in increasing ACP enrollment among telehealth patients. In addition, Microsoft and Communications Workers of America recently announced a circuit of ACP sign-up drives in that will tour several states including Michigan, New York, and North Carolina.

Political considerations as November nears…

As students go back to school and midterm elections loom, new ACP sign-ups could benefit the enrollees as well as the Democrats’ political chances.

Public officials and private experts alike recognize the value of community involvement in extending broadband connectivity and digital literacy nationwide. Marshaling community institutions – like schools – to maximize broadband access could help Biden and other Democrats overcome inflation-driven electoral headwinds in the November midterms. The White House obtained commitments from 20 providers to offer high-speed internet plans for $30 per month or less to ACP-eligible households – this means no out-of-pocket costs for recipients of ACP discounts. Free broadband coverage could bring the administration – and all Democrat candidates, by extension – back into the good graces of low-income families.

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Digital Inclusion

Federal Government Must Collect More Granular Data on Minorities to Aid in Initiatives

Discussion on the “data gap” comes as the nation tries to connect the unserved and underserved.

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Screenshot of Denice Ross, the White House's chief data scientist

WASHINGTON, August 31, 2022 – In order to serve the needs of all Americans, the federal government must gather and act on more granular data on underrepresented minority groups that have been historically overlooked in the data-gathering process, said Denice Ross, the White House’s chief data scientist.

Ross argued at an online event hosted by the Center for Data Innovation on Tuesday that many minority groups – including African Americans, Native Americans, the disabled, and the LGBT community – are disadvantaged by the “data divide,” a term which refers to disparities in the amount and quality of available data on various groups.

Ross was citing a report issued earlier this year by the Equitable Data Working Group, a task force created by President Joe Biden earlier this year, which said policymakers are often unable to perceive or ameliorate problems facing minority communities if data on those communities are unavailable or insufficiently disaggregated. Disaggregated data, the report says, is “data that can be broken down and analyzed by race, ethnicity, gender, disability, income, veteran status, age, or other key demographic variables.”

The report recommends a federal data collection strategy that safeguards privacy and facilitates analysis of “the interconnectedness of identities and experiences,” or how individuals’ various minority-group identities compound the societal disadvantages they face. The report also advocates the creation of “incentives and pathways” promoting minority representation in the data collection process.

The recommendations come as the broadband industry and federal agencies try to improve knowledge of where there are unserved and underserved areas for broadband connectivity and to take action to improve digital literacy. The Illinois Broadband Lab and other state broadband offices, for example, implement a community-up approach to data gathering. Direct community involvement provides data insights that help states deliver coverage to in-need communities, officials say. 

In the panel discussion that followed Ross’s opening remarks, experts and academics agreed that community outreach is a necessary step in closing the data divide. Dominique Harrison, director of bank Citi Ventures’ Racial Equity Design and Data Initiative, said that some in the African American community view data collection with skepticism.  

Christopher Wood, executive director of LGBT Tech, argued that the passage of a federal privacy standard is a critical step toward establishing trust in government data collection. The most recent attempt to pass a national privacy regime, the American Data Privacy and Protection Act, was approved by the House Committee on Energy and Commerce last month.

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