Disruptive Technology and Public Funding of High Speed Broadband Networks

In my posts on the issue of National Broadband Plan and Broadband  Networks, I have consistently cautioned against creating publicly funded monopolies for OFC Networks and reminded readers about the regulatory issues involved in managing our legacy of wire line based incumbents. One of the reasons for avoiding the same is the nature of telecommunications where technology change is the rule.The advent of affordable  and competitively provided mobile services debunked the notion of telecoms as natural monopolies, yet we risk repeating this faulty argument when it comes to high speed broadband.

In India, the Public Sector Incumbents BSNL and MTNL have been supported with billions of rupees to survive in a competitive environment. However, not even their dominance in wire line telephony has helped them compete with a nimble private sector. On the other hand, regulatory protection of legacy public investment in their wire line networks has had a negative effect on competition in that segment in the country. The result is very poor broadband penetration.

Today's Times of India carries an article about a new laser developed by the California Institute of Technology that promises to greatly  outdo the speed of existing OFC cables (that are based on older S-DBF lasers). This sort of disruption should be expected in telecommunications. There could be many more such developments even before the roll out of nation-wide  OFC network projects which is underway in many counties (like India's NOFN by BBNL) is even completed. What then will be the fate of the sunk (public) investment in these (then) obsolete megalithic OFC networks?

This will inevitably throw up complex regulatory issues such as those described above, with less than optimal results. This brings me back to what I wrote in my posts titled  "Broadband Networks through Infrastructure Sharing" and National Broadband Networks: Regulation, Universal Service, Competition and Monopolies."

We may need to learn from the story about the "Tortoise and the Hare" that we may not win in the long run if in our haste to speed up high speed broadband deployment, we ride roughshod over hard learned lessons about competition and technological neutrality.

Worship Worthy Connectivity

Its been a while since I blogged.

 Finally found inspiration in a story about a man who was saved from a tigress attack by mobile connectivity. In rural Madhya Pradesh (a state of India), on the outskirts of a national park, two villagers clambered up a tree to escape a tigress. The humble cell phone was how they could be rescued. So now the cell phone in question is being worshiped by its owner as yet another avatar or proof of God's presence.

In another article the FCC's drive for universal broadband connectivity is being seen as a shot in the arm for public safety communications.in USA.

ICTs have all the answers.

Delay in NOFN Roll Out-As Expected

The Economic Times today reports yet another delay in roll out of NOFN by BBNL as the PSUs are unable to award contracts worth Rs 6 billion for cable laying and trenching. 

I would invite readers to review my post titled, "National Broadband Plans-The Largely Unexamined Competition Debate" under the label NOFN. I have already covered in previous posts, my reasoning as to why  India should have hesitated before venturing to roll out a country wide network using the nomination route involving Public Sector Incumbents. When various option were being examined as to which methodology to choose for NOFN, there was an explicit impatience with the usual USOF method of first arriving at subsidy benchmarks and then bidding out a scheme on a regional/sub-regional basis to all eligible operators. This was frowned upon as too tedious and a source of delay. 

It was decided that creating an SPV of PSUs would be the better way forward especially as BSNL already owns the chunk of rural OFC networks.

I have examined this debate in my post "Broadband Networks through Infrastructure Sharing Route"  (also placed under the label NOFN). An alternative model has been presented to readers. One that is based on bidding.

 The right way in  my view would have been to encourage/mandate  BSNL to share its OFC capacity with the region wise winning bidder and to include the leasing plus incentive cost in the subsidy benchmarks. With this arrangement the network could have been rolled out by multiple USPs thereby creating the required  non-discriminatory open access  OFC backbone in rural blocks  with no adverse impact on competition. The facilitation extended by USOF (Central Government) by way of coordination with state governments for right of way clearances could have been done in this model too. This would probably have gone faster and ensured that at least  a good proportion  if not all villages would be reaping the benefits of high capacity OFC backbones connectivity by now.

Lesssons for US Regulation from Plight of Government Schools in Rural India

An article titled "Education Scam" in today's Financial Express speaks about the poor service delivery from government schools  wherein relatively well-paid government school teachers don't go to school to teach. Students of these schools have been found fare much worse in terms of educational performance compared to those attending private schools in rural India. The former  do much better when given tuition but that means parents having to spend themselves in spite of the state funding school infrastructure and regular teacher's salaries. It has been concluded that it would be much better to allow private schools to flourish and give poor parents cash to pay school fees. 

This reminds me of the billions of Rupees pumped by USOF/Government into rural land line infrastructure (incumbent owned) with abysmal results in terms of improvement in voice or data connections.

On this analogy would it not be better to address the Market Efficiency Gap in rural telecommunications through effective regulation and resultant competition and then to focus targeted subsidies only where markets fail either because there is no viability for suppliers or certain population segments cannot afford required services. 

 I would much prefer a situation where there are a multiplicity of suppliers for the public to choose from, even if in terms of various (less than state of the art) technology platforms, than one in which much money is spent on a supposedly ideal technology platform but with sub optimal  results.  This could well be  the fate of ambitious government sponsored roll outs of OFC networks which recreate monopolies and limit competition at huge costs.

Progress the E-way

A though provoking article "Solving Social issues through Technology" draws attention to the progress India has made in the realm of technology (reference the latest Mars mission) and the need to harness technology to bring education, facilities and opportunities to rural Indians and others who aspire to break out of poverty. It pins hope inter alia upon the NOFN.

Another article, "Technology rings in Financial Inclusion" highlights that in India, 65% of population has no access to banking but mobile phones  can change that. Innovative applications can enhance financial literacy and in fact, it has been proven by field research that even illiterate Indians take to financial inclusion apps and become adept at mobile banking.

All this has been said before (and posted about before in this blog). What we need most in my opinion is the Market Efficiency side of reforms to ensure that connectivity is widespread and universally available and that regulations encourage the use of ICTs including all aspects of the mobile/broadband ecosystem. This includes of course Universal Service Regulation.

Mobile Connections for the Poor-Is this the Right Way

I have written on more than one occasion on USOF India's Schemes aimed at providing subsidised devices and mobile connections to the rural poor. This scheme has finally been cleared by the Government for implementation. In general my posts have inter alia tended to caution against potential  implementation problems. These can be seen under the label USOF India.

A news item about  FCC's detection of rampant misuse of the United State's Universal Service Fund's Lifeline Programme in North Carolina should further caution us. Here people in the eligible category were found to be beating the call limit associated with this subsidised facility by taking multiple connections under the programme (from different telephone companies in the state). While in this case the fraud has been detected, there are calls to close this programme.

USOF's own experience with the (fixed line) individual rural household phone scheme has been that it posed a monitoring headache. Why compound the error with mobile connections?

US Regulation in a liberalized environment

An interesting article titled "As Regulatory Power Wanes, State Crafts New Telecom Plan" about the state of Vermont captures the problem of achieving Universal Service (US)  in an advanced, competitive and liberalized without making typical public investment mistakes and in my view underlines the importance of US Regulation.

The article points out that when much of what the telecommunications sector does is de-regulated the government has only investment as a tool to achieve the desired level of penetration. However, it cautions against the government getting involved in the following quote:

“The danger, of course, when government gets involved in these kinds of investment activities, is: Is government going to put money in the right places?”

My answer would be to better define government's role and methodology within the regulation of US so that public interventions don't end up doing more harm than good.