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Broadband – The Best Way NARUC Staff Subcommittee on Finance and Accounting October 9, 2007

Broadband – The Best Way NARUC Staff Subcommittee on Finance and Accounting October 9, 2007. Glenn Blackmon, Ph.D. Olympia, WA www.glennblackmon.com mail@glennblackmon.com 360 556-7888. Which broadband issue?. Low-income households? Elderly? Businesses? Rural households and farms?

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Broadband – The Best Way NARUC Staff Subcommittee on Finance and Accounting October 9, 2007

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  1. Broadband – The Best WayNARUC Staff Subcommittee on Finance and AccountingOctober 9, 2007 Glenn Blackmon, Ph.D. Olympia, WA www.glennblackmon.com mail@glennblackmon.com 360 556-7888

  2. Which broadband issue? • Low-income households? • Elderly? • Businesses? • Rural households and farms? The policy issue is a combination of affordability and availability.

  3. Broadband Issue is Largely Rural

  4. VT ME NH

  5. The 20% of ZIPs with lowest population density account for 64% of population w/o access to broadband Data Source: FCC broadband report, 12/06.

  6. Demographic Differences Also Affect Demand for Broadband in Rural Areas

  7. Looks like the classic balancing act for state regulators • Encourage regulated companies. • To introduce new technology. • To meet demand as it develops. • To avoid white elephants. • Require regulated companies. • To avoid unreasonable discrimination. • To meet public policy obligations.

  8. State regulators have used this balancing approach before • Technologies and services. • Touch-tone dialing. • Caller identification. • Digital switching. • Fiber trunking. • Modem bit rates. • Using rate design, depreciation practices, other tools.

  9. Federal universal service program could have helped • Sec. 254(b): Access to advanced services, at reasonably comparable rates. • Sec. 254(c): Evolving definition of basic service, based on actual use of services.

  10. Instead… • 2002 Joint Board recommendation said no broadband support. • Not essential, not widely used, too expensive. • Maybe not even telecommunications. • FCC agreed in 2003. • Broadband now classified as an information service. • But rural ILECs can include broadband investment in USF.

  11. Even without a national strategy • Broadband adoption is increasing rapidly. • Broadband quickly hit 50% penetration. • Urban/rural gap is slowly narrowing. • More rural carriers are offering broadband. • 91% of NTCA respondents offer broaband. • 87% say they face competition in some form.

  12. Source: Pew Internet & American Life Project, May 2007.

  13. Rural competition will speed broadband • Fixed wireless services offer broadband alternative. • Also encourages wireline incumbents to offer broadband.

  14. Customer: Canola farmer Exchange: Edwall-Tyler, WA USF Support: $1,165.68/yr DSL: Not available In town DSL: 1.5MB $39.95/mo

  15. Existing USF does not encourage broadband • Rural ILEC getting $1K in USF per line per year. • No broadband outside town. • Broadband from cellular ETCs is unavailable or expensive. • Universal service program may pay $2-3K per year and still not buy broadband.

  16. Fixed wireless alternative • Wireless loops used to provide both voice and broadband Internet. • Company will use other capacity, such as electric utility fiber to the home, where available.

  17. Fixed wireless provider • Must provide voice to qualify for high-cost support, even though voice already available. • Voice service adds complications, such as rural interconnection. • Will get 50-75% of ILEC support under Joint Board cap mechanism. • In non-rural’s rural areas, no support at all.

  18. Summary • Deregulatory policies have complicated rural broadband. • Hard to see a viable role for state regulators. • Nation is likely to make progress even without a national strategy. • More rural competition means more rural broadband.

  19. Glenn Blackmon, Ph.D. www.glennblackmon.com mail@glennblackmon.com 360 556-7888

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