From 3G Wireline to NG Wireline: A Policy of Bandwidth Abundance

Blair Levin

Executive Director, Gig.U Broadband Communities

Dallas, Texas April 16, 2013

Key Question

How do we move the Washington debate to the

Silicon Valley Frame?

North Star

Policies that incent faster, cheaper, better broadband

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Generations

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1G

Dial-up

2G

DOCSIS 1.0, DSL

3G

DOCSIS 3.0, FiOS,

UVerse

XG v NG Networks

Built for voice or video

Technology and Business Model DNA about scarcity

Key Question: how to allocate scarcity

XG Built for Data

Technology and Business Model about Abundance

Key Question: how to cheaply deploy to deliver abundance

NG

CITI/NBP report analyzed all public plans for deployment; no world leading networks in sight

Report suggested, and experience has confirmed, current market forces will not drive deployment of world leading wireline networks in the U.S.

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Internet speeds have not kept up with computing and storage growth

Dial up Broadband

Computing

Storage

Internet Speed

National Broadband Plan recommended the nation needed a critical mass of ultra-high speed test beds

C + O > (1-r)R + SB + (-CL)

C – Capital Expenditures O– Operating Expenditures r – Risk R- Revenues SB- System Benefits (Benefits that drive increased revenues outside the communities where the new or incremental investments are made.) CL- Losses due to competition

For the investor, the equation usually looks like this:

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The returns for the investor do not justify the investment

Costs Benefits

C + O < (1-r)R + SB + (-CL)

But how do we do that?

The path forward: change the math

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Sector /opportunity

Ecosystem change CapEx OpEx Risk Revenue Competitive

Losses

Telco Grant of monopoly Lower Raise

Cable Grant of monopoly, pole attachment law, compulsory broadcast license

Lower Raise

Rural areas USF Lower Lower

Wireless Limited # of licenses Lower

DBS Limited # of licenses, program access

Lower Raise

Broadband upgrade

Deregulation, two wire policy

Raise Raise

Wireless upgrade

More licenses, lowered TAC, oversight of siting authority

Lower Raise Raise

Broadcast television to digital

Provide 2nd channel for transmission of content

Lower Lower Raise

Historically, investments are made when policy – generally with federal leadership – alters equation

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Reduce cap ex, op ex, risk

Use Existing Assets More Effectively

Reduce cap ex, op ex, risk

Regulatory Flexibility and

Efficiency

Reduce risk and raise revenues

Aggregate Demand

Key Strategies

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• Build to Demand Model

• Access to ROWs, Facilities

• Reduce Regulatory Time Reduce Cap Ex

• Access Payments

• Reduce Ongoing Regulatory Costs

• Utilize Existing Billing Platforms Reduce Op Ex

• Build to Demand

• Standardize Functions Across Areas, Vendors

Reduce Risk

• Demand Acceleration

• Marketing Platform

• New Services Increase Revenues

• Distributed Innovation

• Seeding Long-Term Growth

Increase Ecosystem Benefits

Tactics within existing powers of communities

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A number of communities are responding by taking control of their bandwidth destiny

Gigabit Ready Initiative seeks to broaden the reach of higher-speed broadband in Lansing area

Partnership to Bring Ultrahigh-Speed Internet to Six Communities

Old Town, Orono residents and businesses to receive ‘super-high-speed’ Internet

MSU, Lansing on track for high speed internet

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Tasks for Government in Broadband Policy

Getting broadband everywhere.

Getting everyone on broadband.

Using broadband better to meet public purposes.

Assuring equitable access to key inputs to all current and potential competitors

Using broadband to drive innovation.

Virtuous Cycle that an upgrade stimulates

Better networks

Better Government

uses

Broader adoption

Greater competitive

dynamic

Greater innovation

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Chart 1: National gigabit build out when cost curve drops enough to meet rising competition curve

Gig.U/community collaboration, fiber impact on high op-ex of copper, big bandwidth applications, drive down costs, risks, and increase revenues

Google, others, drive up competitive risks

Point when incumbents will invest in broad NG upgrades

Cost Curve

Competition Curve

Chart 2: From a national perspective, it is not certain the curves will ever meet

The slopes of the lines might flatten before the lines ever meet

Chart 3: In Austin, the lines may have already met

Google Announces Austin Project

AT&T Announces Austin Project

April 9

Chart 4: If FCC wants US to lead in NG Networks, policy direction Is clear; bend the slope of the curves

How FCC Should Want to Affect the Cost Curve

How FCC Should Want to Affect the Competition Curve

Chart 5: How the FCC has affected the slope of the curves

How FCC should want to impact the cost curve

How FCC should want to impact the competition curve

Negative FCC impact on the competition curve

No FCC impact on the cost curve

Final Question

Will the Next FCC Merely Offer a Challenge or Will It Meet the Challenge?

Thank You