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Desperate Attempts to Drag the USA Into the Digital Economy

In the USA an interesting initiative has been taken by a number of leaders in the telco industry who are frustrated with the inability of the country to start building the high-speed broadband infrastructure that is needed for the development of its digital economy.

While the Obama Administration has the right vision to make this happen—and the American National Broadband Plan is a good example of this—the dysfunctional political state of the country makes it impossible to establish the industry transformation needed to make this happen.

Universities around the world—through their Research and Education Networks (RENs)—have always shown leadership when it comes to new innovative developments. They already have all-fibre networks and are heavily involved in developments such as Internet2.

So it was excellent to see the launch of the University Community Next Generation Innovation Project, or Gig.U. This project is aimed at aggregating demand for the design, investment and ultimate deployment of next-generation (gigabit) networks in communities around university campuses in the USA.

Gig.U is a broad-based group of almost 30 leading research universities from across the United States. Drawing on the country’s rich history of community-led innovation in research and entrepreneurship, Gig.U seeks to accelerate the deployment of ultra-high-speed networks to leading American universities and their surrounding communities. Improvements to these networks drive economic growth and stimulate a new generation of innovations addressing critical needs, such as healthcare and education.

The group will seek cooperation with the commercial telcos, in the hope that the initiative will stimulate these companies to increase their fibre deployment, which can be used in this plan.

However, as with all the other good initiatives that we have seen in the USA over the last three years, so far there has been no indication whatsoever that the incumbent players have any interest in collaborating and/or assisting in the industry transformation that is needed to move towards more open infrastructure.

This also became clear in the telcos recent submission to the FCC regarding the Universal Service Fund (USF) review that is taking place in the United States. They are not using this opportunity to look at innovations and new technologies that would enable them to develop the new business models needed to deliver new services. As a matter of fact, they very deliberately fail to mention any innovative developments that can be achieved on all IP-based infrastructure. Their proposal is again based on complexity, incremental changes and abiding by the old-fashioned method of service delivery that has been used for the past 50 years.

The incumbents are cleverly focussing the debate on a range of very complex regulatory issues regarding pricing, conditions, access and interconnect arrangements. They are masters at this, and they can use their enormous regulatory game-playing skills to move the debate from the bigger picture and get all the expert telco engineers engaged in an endless debate on the minute, complex details of the reform plans. They also skilfully use their powerful position at a time of dysfunctional politics where there is no leadership expected from the Administration. In the knowledge that, because of this situation, nothing will happen unless they take the initiative the telcos are basically indicating that they are happy to take the lead as long as that is done on their terms. In all reality this will mean a further undermining of competition, higher end-user prices and only a drip feed approach towards innovations.

Another underlying element of their submission is to create for themselves an opportunity to ensure that, once the transition takes place, from the old telecoms environment to a full IP environment, they will still dominate this IP environment, ensuring that this will not lead to an open network environment.

While the Gig.U plan may be able to enhance the capabilities of the research and educations institutions it is highly unlikely that it will have any effect on the country’s vested interests, who are determined to hang onto their lucrative monopolistic business models, showing no respect for the greater good of the country.

Gig.U could have more success in working with independent telcos such as Google and a range of municipalities who in rolling out their own fibre networks and perhaps a few more of the smaller niche players. However the question is how much impact will this have on the overall market?

It looks as though the current dysfunctional political system will enable the incumbents to triumph once again, and that great initiatives such as Gig.U will struggle to make a difference.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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Models? Frank Bulk  –  Aug 1, 2011 7:57 AM

What innovative models did you have in mind to build out fiber to a home and maintain it over the next 20 years at $4,500 a pop?

innovative policies Paul Budde  –  Aug 1, 2011 8:23 AM

Hi Frank,
Thx for your question.

In my view the future of telecoms is not in voice or faster access to the Internet but in facilitating the transformation of the economy and many social sectors. Costs in healthcare, education, energy, etc. are spiraling out of control and we have to find new ways to deliver such services. In my opinion if you would built infrastructure with that trans-sector concept in mind you could fund FttH. The government will need to redirect funds from these sectors and guide them in the direction of e-delivery. Patients can be monitored more from home (especially the Chronicles ill as well as people that require age care). Rather than building separate infrastructure for smart grids, utilities could also use the FttH network and the same applies for services such as e-education, e-government, digital media and so on. By changing policies that creates an environment where basic infrastructure can be shared between sectors they also start sharing the cost base and that would create better business models for both the infrastructure and the applications. This is basically the foundation of the FCC National BB Plan, however, it is not backed-up with policies that leads to that trans-sector approach. Telcos will invest in FttH if they see the business model for it. Look at Japan, Korea, Australia, New Zealand were govts are changing telco policies and that is leading to new investments in FttH.

Korea: http://www.buddeblog.com.au/frompaulsdesk/south-korea-stimulating-broadband-by-spending-on-e-education/
Australia: http://www.buddeblog.com.au/news-and-views/australias-national-digital-economy-strategy/

I don't think the healthcare and energy Frank Bulk  –  Aug 1, 2011 8:48 AM

I don't think the healthcare and energy sectors are going to put dollars behind this (or let politicians take money away from them) until the revenue/cost saving models become more obvious to the giants in each of those sectors.

leaders or laggards? Paul Budde  –  Aug 1, 2011 9:23 AM

I agree Frank I am just disappointed as in the past America often was the leader in these developments :)


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