Public or Private Ownership? Community Broadband Bits Episode 132

Ever since the last time I spoke with Blair Levin on Episode 37, I have wanted to have him back for a friendly discussion about public or private ownership of next generation networks. Though Blair and I entirely agree that local governments should be free to decide locally whether a community broadband network investment is a wise choice, he tends to see more promise in partnerships or other private approaches whereas we at ILSR tend to be concerned about the long term implications of private ownership of essential infrastructure. In what may be the longest interview we have done, Blair and I discuss where we agree and how we differ. 

We weren't looking to prove the other wrong so much as illustrate our different points of view so listeners can evaluate our sides. Ultimately, we both believe in a United States where communities can choose between both models -- and some may even seek solutions that incorporate both. Blair Levin was the FCC Chief of Staff when Reed Hundt was Chair and was instrumental in forming Gig.U. In between, he did a lot of things, including being Executive Director for the FCC's National Broadband Plan. He is currently with the Metropolitan Project at Brookings

This show is 37 minutes long and can be played on this page or via Apple Podcasts or the tool of your choice using this feed.

Transcript below.

We want your feedback and suggestions for the show-please e-mail us or leave a comment below.

Listen to other episodes here or view all episodes in our index. See other podcasts from the Institute for Local Self-Reliance here.

Thanks to Dickey F for the music, licensed using Creative Commons. The song is "Florida Mama."



Blair Levin:  If you and I were on the FCC, we would vote the same way.  If you and I were at the state legislature, you and I would vote the same way.  But if you or I were at the city council level, we might well vote differently.


Lisa Gonzalez:  Hi, again.  You are listening to the Community Broadband Bits Podcast, from the Institute for Local Self-Reliance.  And this is Lisa Gonzalez.

We last spoke with Blair Levin on the Community Broadband Bits Podcast in the spring of 2013.  He's back again, to engage in a friendly debate with Chris on public versus private investment in broadband infrastructure.  The two compare notes on the pros and cons of each approach this week, as a way to eventually achieve universal access.  Blair is currently a Senior Fellow with the Brookings Institute Metropolitan Project, and is running the Gig.U project.  He's also the former Executive Director of the National Broadband Plan, and was Chief of Staff to the FCC during the Clinton Administration.  We certainly are lucky to have him as a guest.

Each week, the ILSR produces the Community Broadband Bits Podcast in order to share information on publicly-owned networks and related telecommunications issues.  We hope you'll consider contributing to our advertisement-free efforts.  Please visit and click on the orange "donate" button.  Here are Chris and Blair.


Chris Mitchell:  Welcome to another edition of the Community Broadband Bits Podcast.  I'm Chris Mitchell.  And today, I'm back with Blair Levin.  Blair is now with the Brookings Institute Metropolitan Project, but you may also know him from his work with Gig.U, and as the Executive Director of the National Broadband Plan.  Welcome to the show.


Blair Levin:  Thank you very much.


Chris:  So, Blair, you and I have had some, I think, great discussions in the past.  One of the things that becomes quite clear is that you and I agree on, I think, the vast majority of facts, and even theory.  Which is that we both agree that there's a problem in the United States, that we need more investment and better networks, and that the -- we're afraid that the incumbents aren't doing a good enough job.  I think that's a way of summing it up, perhaps.


Blair:  Um, I'd articulate it slightly differently.  Which is, simply -- granted, this comes out of my work with the National Broadband Plan -- which is that today in the United States we have a -- for most communities -- a cable versus copper framework.  And there's a big problem with that, which is that, over time, bandwidth constraints will constrain innovation and economic growth and social progress.  And so we want to move as rapidly as possible to a framework that has cable versus fiber.  Now, where it gets interesting is how do you do that?  And what's the best strategy for doing it?  But what you and I absolutely agree on is that that would be a much better framework for America.  Because then, instead of worrying about how do we allocate scarce bandwidth, we'd be focused on the right question, which is, how do you use that new basically infinite bandwidth to drive economic growth?


Chris:  See?  And I thought that if I just left you a gap, you'd do a better job of explaining than I would.  So thank you for that.  And I think that one of the things that we very strongly agree on is that Google Fiber has led to a new discussion that I think is very important.  You know, from my perspective, it's really helped to help the media understand why this is important.  And I think both you and I recognize that Google Fiber is not something where we can expect Google to build throughout the whole country, but that it's leading to a new conversation that we need to have.


Blair:  Yeah, that's absolutely right.  And I think very, very highly of Google for their willingness to do it.  But one reason we started Gig.U was, we didn't want to be in a world where Google -- where, basically, the only way to get the kind of infinite bandwidth was to "fit the Google algorithm."  Because, as you just said, there are a lot of communities that aren't going to fit it.  And also, as a country, I think it's very bad to premise important policies based on the activities of a single company -- no matter how fantastic they are at engineering.  So, the Google Fiber project -- which actually grew out of the discussions we had with them at the Plan -- the really amazing moment that demonstrated the truth of what you had said earlier was when 1,100 communities applied.  That was a BIG number.  And the incumbents all said, well, yeah, you know, it's just like asking Santa Claus for a present, there's no cost to it, and stuff.  But the truth is, it's very difficult to get 1,100 communities to spend time and energy and political capital trying to do something.  And what I think they were saying -- and it's subject to interpretation -- was, look, there were 1,100 communities in the United States that understand that economic growth and leadership in the future depends on having much better networks than they have today.  And they want to be in the front end of that, not the back end.


Chris:  Absolutely.  And I also know that you tend to agree that cities should have the authority to build their own networks, or to partner with any entity that they choose.  Because you're on the Board of Advisors for the Coalition for Local Internet Choice.  So, ...


Blair:  Yeah, no, Not only am I on the Board of Advisors.  It's actually -- if you go back to the National Broadband Plan, I would be the first to admit that we tried to do -- tried to set up a process by which a lot of things were done that have a certain kind of political viability to them.  So, whether it be the incentive auction and spectrum, and a bunch of other things in spectrum -- that I think are really important -- but also were politically pragmatic.  We did try to favor those things we thought would be likely to move the ball forward, as opposed to doing simply theoretical things.


One slight exception to that was -- we did suggest that Congress preempt all state laws that would impede broadband development, particularly these municipal -- these laws that restrict municipalities.  Now, I did not expect Congress to do that.  But I thought it was really important to put a stake in the ground, that these laws were very problematic.  And I am both delighted and surprised by the extent to which the FCC has now taken up that banner.  And I fully expect the FCC to take action a couple of the egregious rules, or state laws, some time next year.  I might note that it's unfortunate, in my view -- I mean, one of the Plan's big critics from DSL Reports -- I was amused by this the other day -- where he said -- the single most --I can't remember the exact quote, but, nothing is more important to broadband competition than getting rid of these rules.  And yet, in his analysis of -- discussion of the National Broadband Plan, never mentioned that we had actually recommended getting rid of the rules ...


Chris:  Recommendation 8.19, I believe it was.


Blair:  Something like that, yeah.  You remember.


Chris:  It's the one that I remember.


Blair:  Right.  Right.  That's exactly right.  Good memory.  And -- but I'm delighted with where that's gone.  And, look, at the end of the day, there's a very interesting legal question about the power of the FCC to do that.  But that should not distract us from the following, which is the way we thought about it, which was -- our job was to do what we could to make sure that Americans have the fastest, best, cheapest broadband.  And there's no evidence in the record that any of these laws have led to faster, better, cheaper broadband.  There IS evidence in the record that these laws have led to slower, worse, more expensive broadband.  So, the defenders of those laws ought to articulate, what is their strategy for having faster, better, cheaper broadband?  I'm not saying eliminating those laws will do the trick by itself.  But I am saying it's certainly a positive step.  But the best thing, frankly, is if the states themselves recognize the error of their ways and change it.


Chris:  Absolutely agree.  The states really need to repeal those laws.  Because I don't think that we can expect that the FCC would repeal all 19 laws that we currently see.  And the restriction in California, which some count as number 20, which only applies to some more rural areas generally.  So we really do need ...


Blair:  Yeah, and ...


Chris:  ... states to step up.


Blair:  Well, we do need the states to step up.  But also, look, there are distinctions between the laws.  It's interesting.  Google was considering -- and this is all publicly-known information -- Google was considering adding Denver and Boulder but found that the Colorado law prohibited them from moving forward.  Fortunately, Boulder has already passed a popular referendum that would now allow them to do a deal with Google, or anybody else, or do it themselves.  But there are some other laws that I find troubling, like the North Carolina law.  But nonetheless, the North Carolina law did not impede the kind of public-private partnership that Google, or AT&T, or some other folks were thinking about.


Chris:  So, one of the things that I think is interesting is that, though you and I may agree on so many of these things, we take a slightly different view in terms of what we might advise a given city to do.  And I don't really want to focus on the details of any given city.  But I think if we just sort of posit an ordinary United States city, I would generally encourage them to look more at a publicly-owned network, whether they operated it or not, as long as they still had some form of ownership over it.  Whereas, I get the impression that you tend to think it would be better if an independent company -- maybe Google, maybe some other local company -- was to own and operate the network.  And that's what I think we can talk about for the rest of the show.  Is that an accurate description?


Blair:  Um, yeah.  I mean, one way of thinking about it is, probably on these issues, if you and I were on the FCC, we would vote the same way.  If you and I were at the state legislature, you and I would vote the same way.  But if you or I were at the city council level, we probably -- well, it all depends on what's actually in front of us, but we might well vote differently.


Chris:  Right.  And I think, you know, both of us recognize that there's definitely different factors involved.  You know, I would not recommend -- I usually use the city of Philadelphia as an example -- cities that have historically, I'd say, don't have the trust of the voters, perhaps, in all cases -- may want to think twice.  When you have, you know -- you have some cities that just have a history of corruption.  Which is maybe a different case than Philadelphia.  But I would not say that every city should build their own network.  But I tend to lean in that direction.  And ...


Blair:  Yes.


Chris:  ... the reason that I do is because I think that if you have a private company build it, one of my greatest fears is that the private company can then decide to sell it.  And there's no real public referendum.  And, fundamentally, Comcast is not a company that built cable networks all over the country.  They're a company that bought cable networks all over the country.  And so, I'm just -- I'd like to get a sense from you as to if that's a fear that you would share?


Blair:  It partly depends on what problem you're trying to solve.  What problem -- I saw it with the National Broadband Plan and again with kind of Gig.U was, how do we get out of the framework in which the fundamental business question is, how do we allocate scarce bandwidth?  And that's the cable-copper framework that most cities have.  How do we move to a -- how do we deploy abundant bandwidth?  How do we let Moore's Law drive it?  And so for me, if the network is there, and it's delivering abundant bandwidth, the negative case of selling it to a private-sector entity is -- I'm less afraid of that than I think you are.  Now, I recognize that private-sector folks are going to have private-sector motives.  I also -- and some of those motives are not always in the public interest.  But I think some of the others -- some of them are.  So, the question is, how do you get the right framework so that -- as is often the case with the private sector -- they're doing the right thing, not the wrong thing.  And I'm one of those guys who is, you know, fundamentally a capitalist.  But I also believe that government has to, you know, do things like require transparency, so that, you know, consumers can compare apples to apples, and things like that.

So -- and then, by the way, there's no perfect solution, right?  I mean, you're -- the fact that they can sell it -- I'm not sure what the problem down the road is.  But there are other problems that we could talk about, with public ownership that does not -- really about corruption.  It's just about the nature of the public sector to be able to do certain kinds of functions well.


Chris:  I absolutely agree that there's no perfect solution.  And in many cases, I view this very much as, in some cases, giving a community the maximum opportunity to fix mistakes that may occur as they go along.  And I would also say that -- you know, why you say, "I'm a capitalist," the -- it's hard when you're having a conversation in the United States -- I tend not to understand what people mean by "capitalist."  And so I just want to say that I'm also fully in favor of markets working and that sort of thing.  I'm -- you know, I've ...


Blair:  Yeah, no, look, that's actually a very fair point.  And probably I should have articulated that a different way.  But one of the things that I think is a problem -- and, by the way, it's also a problem with certain kinds of public-private partnerships -- is that there is a high level of risk capital that is involved here.  If -- if we were starting with a blank piece of paper -- if you had a brand new city -- I would say the city should build fiber and then have a wholesale offering, and then have a bunch of retail opportunities on top of it.


Chris:  Absolutely.


Blair:  That's probably, you know -- if you're doing greenfield, in a brand new city, you should -- that makes sense.  But in today's market, what Google is doing -- and what the folks in Champaign-Urbana, who we work with, to help those communities, which are Gig.U members, get a gigabit network, or the folks in Louisville, Kentucky, or the folks in Portland, Maine -- there are private companies who are investing risk capital.  And that capital is at risk.  There's no guarantee.  You're not getting a monopoly, like AT&T got in 1913, or the cable industry got -- they don't actually like to talk about it that much, but they got a monopoly in the '60s and '70s and '80s in the franchises.  It was -- prohibited from competing with them.  That went away with the '96 Act.  It really went away in '92 with the Cable Act and the program access rules.  But the point is, there was signif- -- there is significant risk capital involved here.  And I don't -- it's difficult for cities to do risk capital well.


Chris:  I think that one of the things that I pull out of your preference for the private companies is the sense that -- you know, we want to get to this area of abundance.  And I absolutely agree.  And -- but my thought is that it seems like you're thinking abundance from a technical perspective.  Which is that if there's a fiber network -- and I think Susan Crawford often makes this point -- that there would not be as much incentive to create false scarcity on a fiber optic network.  And I -- one of the things I would worry about would be that even with a cable versus fiber rivalry in the market -- that you could still have a duopoly in which, effectively, Wall Street was pulling the strings so that both providers -- even if we were having better speeds than we are currently having today -- we might be getting overcharged on a regular basis, and things like that.  And so I'm curious how you might respond to that -- the creation of false scarcity even though you're on a gigabit network.


Blair:  Um, well, I think it's a really good question.  And there's actually an example, in the world, of it happening, right?  Which is the Verizon FiOS strategy.  Which I also admired.  But, I think, in the fullness of time, we start to recognize that Verizon probably made a mistake in trying to match cable's speed, as opposed to doing what Google Fiber is doing, which is to completely overwhelm cable's advantage.  That is to say, instead of saying, I'm going to have the same thing, plus a bunch of other things, so I'll have a better total value proposition, what Google is saying is that we will be 20 times better than cable at the same price point.  So for ...


Chris:  I'm nodding my head furiously.


Blair:  Yeah.  And so, that's a very good point.  I think one of the great things about what Google Fiber -- and a lot of other communities -- there have been a ton of gigabit announcements -- we'll see in 2015 and 2016 the extent to which they play out -- but we are starting to see a changed kind of consumer expectation, that they want to have not just kind-of-good networks but best-in-the-world networks -- world-leading networks.  Once we have those -- and I think the consumer expectation is there -- I think it will be a while before we have a danger of scarcity again.  I'm -- being older than you, Chris, I kind of worry about what is it we can do that can solve the problem for like 10 years as opposed to 30 years.  So I appreciate some people who -- you know, my friend, Professor Benkler of Harvard, who is a really thoughtful and interesting guy.  And we disagreed about a lot of stuff.  But he once came to me, and was concerned that, you know, cable would max out at 5 gigs on their network, and that this was going to be a big problem for the country.  And I said, well, the person who writes the second, or third, or fourth, or fifth broadband -- National Broadband Plan will be the one to worry about what happens when, you know, we need more than 5-gig networks.


Chris:  Put that under the category of problems you WANT to have.


Blair:  Yes, exactly.  That would be a wonderful thing.  But I think in the near term, in terms of really moving the ball forward quickly, if you could take the kind of thing that Google Fiber is doing and offer WAY beyond what people are currently using.  And the key point here being -- what that means is that the incremental cost of adding speed is basically zero.  And so, people don't -- in the current market, there's actually an incentive to have a little bit of a -- tying off the scarcity and throttling.  Because it moves people to the kind of the higher tiers.  There's a good reason why, in Kansas City, at one point -- I think was true at one point, I think it's still true -- Time Warner Cable has like nine different offerings.  'Cause they're trying figure out who you are, and how they can move you up to the next tier.  Whereas, Google basically has just two tiers: the gigabit -- which is kind of unlimited -- for 70 bucks, and kind of a starter kit, 5 megs -- which is, by the way, better than the current low-end, which is one or two, in the DSL bucket.  But at an almost-low -- you know, at an incredibly low price.


Chris:  We have some people who might be thinking you're forgetting that they have also the ability of the TV channels.  But I think you're talking about specifically -- they basically have two Internet speeds you can have, ...


Blair:  That's right.  That's right.


Chris:  ... DSL-type speed or gigabit.  And if you have gigabit, then you could also get cable television, if you would like.


Blair:  That's correct.  For an extra 50 bucks on top of that.  That's right.


Chris:  Well, I've taken a couple of shots at your leaning toward the private sector ownership.  You alluded to some things you think the public sector does not do as well.  And I'm just curious if you want to raise those, and give me a chance to force me to respond ...


Blair:  Sure.  And I'll give you a chance to -- exactly.  As I know you will.  Well, one is risk capital.  As opposed to kind of what you might think of as utility capital.  And those are two different kinds of -- ah, the market treats them differently.  One, you really have to evaluate the risk of never getting your capital back.  The other, what you're really addressing is kind of what is the rate of return relative to inflation and all kinds of other things.  So it's a very different kind of market.  Cities are very good at raising utility capital -- for parking lots, for electric and sewer and stuff like that.  I, in fact, used to be a bond lawyer, and I'm familiar with that.  But I think this kind of thing, particularly given the market structure we have today, involves risk capital, which is not what cities do well.

The second thing is management -- technology management.  I am very impressed by a number of cities, and the CIO -- who have great CIOs.  And I think one of the things the Obama administration should get more credit for -- but they never will, because that's just not the kind of thing that presidents get credit for -- is, they brought in some very good technology folks.  But the truth is, it's very difficult to attract the kind of technological management that you need to operate these networks -- on a government payroll, and with civil service, and all kinds of other things.  There's lots of different reasons for that.  But that's a second problem.

And the third problem -- which is related, by the way -- is the scale problem.  In other words, if a -- you know, there's a reason why Comcast or AT&T have a bunch of advantages, in terms of how they buy equipment, in terms of how they buy programming, in terms of how they buy the, you know, relationships to certain devices like set-top boxes.  You need to have a certain scale to make those things work efficiently.  It's difficult -- there are small, rural companies who do it without scale, but they often do it with government assistance -- the Universal Service program.  Or because they effectively have a monopoly.  But -- in that local market.  But when you're talking about larger cities, even with a large city, it's very difficult to have an Internet service provider who is only operating in one place.

So, those are three things that, you know, I can see scenarios in which -- like in Wilson, or Chattanooga, where, you know, for various reasons, those three things were overcome.  But, I think, generally, I would be skeptical, if I were on a city council, of a proposal to have the city operate it, starting with those three things, although those are not the only three things.


Chris:  I think that makes a lot of sense.  Those are good criticisms.  And I'd respond to each one in different ways.

The risk capital, I think, is interesting, because I do think that if we wanted to see more Chattanoogas and Wilsons, the risk capital would be the biggest limiting factor.  I just -- I don't see that that's going to be the model that we're going to see a lot of cities moving forward with.  And I think one of the things that I think about, as someone who wants to encourage as much public ownership as is feasible, is how to figure out how to make it so that we don't have to involve risk capital.  By doing incremental, phased builds.  And figuring out how to -- for instance, I've been talking in a number of different places I've given presentations about, is the idea of modestly raising property taxes to build an open-access fiber network.  Because it is a risky investment.  Although I don't think we can count on risk capital.  And, to some extent, you know, trying to unlock the Macquarie-type deals that I think you're probably even more familiar with than I am.


Blair:  I've had a number of discussions with them, yeah.  And it's an interesting model.  And I think in some communities it makes a lot of sense.  And I certainly think any community should have the right to think about it.


Chris:  Right.  So then, on the management issue, I'm -- I'm -- I've been giving this a lot of thought, because I think it's a criticism I've heard a lot.  And I go back and forth as to whether or not I think it's valid, over what time scale.  And I say that because I've looked back at the history of electrification.  And, a lot of times, people look back and say, well, electricity was much simpler.  Well, in many ways, I think it wasn't.  People were getting electrocuted on a regular basis.  You know, every day, there was a newspaper story about linemen, somewhere in the country, being electrocuted.  It was an incredibly challenging business, and many argued that cities didn't have the savvy, and the ability to get those people.  And I think the record has proven that, when it came to electricity, that cities did very well.  And, I would say, even better than the private sector.  Now, I think, the question is whether or not the Internet, and Internet networks, will evolve along the same path.  And I'm trying to figure that out.  So, it's a good question.  I think history is a little bit on my side.

But then, empirically, at least in the short term, I see a lot of very talented technical people that want to work for these fiber optic networks, because they're cutting-edge, and they're interesting.  Now, I don't know what happens after that sort of initial time period fades away.  But it's a good question.  And I don't want to make this show too long, by spending too long on it.  So, I'm going to dodge that one with that excuse of time.  It's a host prerogative, let's call it.


Blair:  Yeah, well, listen, I'll speak slightly against interest, and tell you a very quick story, that while we were in the very early days of Gig.U, I was talking to someone who -- basically, an engineer at a very prominent ISP, who said, basically, no one goes to GM to build used cars.  What you go to GM for, if you're an engineer, is, you get excited about building the concept cars -- the cars we'll be driving ten years from now.  And what this person said -- I love what you're doing with Gig.U, but, frankly, in my company, the real focus is, how do we just, you know, jury-rig this used car to deliver miles for another ten years?  So, you know, it is a really good point.  But I got to tell you -- and I've spent most of my life in the private sector, but I've had different stints in government, including being in ** along the way -- and I'm just -- my general concern, if I was on the city council, would be, can we hire people who are going to be as good as our competitors?  Because we're talking not about a monopoly situation but a competitive situation, in terms of making sure that the network works, and customer service works, and that kind of thing.


Chris:  Well, it's a good question.  And I have an answer that, unfortunately, trivializes it. And it's fun, so I'm going to throw it out there ...


Blair:  Do it anyway.  Yeah.


Chris:  ... which is -- It doesn't take a whole lot to run a network better than CenturyLink, or to have better customer service than Comcast ...


Blair:  [laughs]


Chris:  ... if you're in the Twin Cities.  And these are companies that hire good people, but, fundamentally, I actually think that your question of scale works AGAINST those big companies.  And I worry, to some extent, that Google -- I wonder how, you know, my parents will deal with Google.  Because I think Google is terrific for someone like me, that doesn't need any hand-holding.  But there's a lot of people out there who do need hand-holding.  And I don't know if companies like Google can provide it.  Now a company like -- I believe it's ITV, right?  Or ITV -- IT3 ...


Blair:  Yeah.  Yeah.  Yeah.


Chris:  In ...


Blair:  Champaign-Urbana.


Chris:  Urbana-Champaign.


Blair:  Yeah.


Chris:  I think they can do it.  I think they do a terrific job of it.  And there's -- Sonic does a great job of it.  And so, there's ...


Blair:  Good point.


Chris:  ... definitely examples of it.  But it's -- you know, it's one of those things where we do need to hire people who will do a great job.  And they'll do far better than their competitors.  But we shouldn't forget who the competitors actually are, for right now.


Blair:  Yeah.  But I would say, I think it's a really good counter-example.  Because Sonic and ITV are both wonderfully run companies -- certainly given what I know, and I haven't done due diligence, but I deeply admire the leadership in those companies.  And they seem to inspire people.  And it is absolutely true that once you get to be too big, you become very bureaucratic, and therefore not responsive to people.  And that's a problem too.

But I would also -- my guess would be that if you were to talk with them, they would say, individual cities can't achieve what we've achieved.  You certainly need -- you may not need the scale of a Comcast or an AT&T, but you need a lot more scale than an individual city is likely to offer.


Chris:  And I want to end with one last thought that we can both deal with.  Which I think is the hardest problem facing all of us.  And that is, expanding Internet to everyone.  And I actually think that expanding Internet to everyone in rural areas is not as difficult as the urban area.  And I say that because in rural areas, we have models that work.  We have the electric coops, and telephone coops.  And, fundamentally, I just think that if we got them the capital they need, they would pretty much serve everyone in rural America with pretty good connections -- much better than the sort of proposed wireless plans, and that sort of thing.  So, if you would just sort of indulge me in that.  And we'll just focus on the lowest income areas.  And -- for instance, in Kansas City.  My question is how to make sure, you know, everyone in Kansas City is able to have a decent Internet connection.  When Google, you know, has provided a connection to the vast majority of the city.  But there's areas that ...


Blair:  I believe about 90 percent of the networks -- or, of the neighborhoods qualify.


Chris:  Right.  Although I -- one of the shows that we've either just had on or are going to have on in the next week is a discussion with the people from Connect For Good.  And in some of these areas, there's a concern.  Some of these neighborhoods that have been lit up still only have, you know, 10 percent of people signing up.


Blair:  Um hum.  Yeah.


Chris:  So ...


Blair:  I mean, -- Can I answer that -- I'd be happy to answer that, and there are a couple of answers that I think are often ignored, but let's just start with the following question.  Is there anyone in Kansas City who's worse off because Google came?


Chris:  And that's -- this is a question where I usually say, you know, at this moment in time, no.  And I think, you know, in another year, probably not.  In five years, my concern is that, you know all the classic problems with universal service.  If you go down this path ...


Blair:  Sure.


Chris:  ... of treating it like a market.  And, you know, my concern is much like Yochai Benkler's -- is that the decisions we're making now are going to have very serious repercussions 5, 10 years in the future.


Blair:  Yeah.  Look, I think that, from the country's perspective, it was incredibly important to find a way to break the investment paradigm of 2009.  And that investment paradigm was fundamentally that both cable and the telcos were both better off if they chose not to invest in next-generation networks.  There's a bunch of reasons why that's true, but fundamentally they both were better off harvesting their preexisting network investments.  And so I'm totally in favor of finding ways to give them new incentives to invest in better networks.  Google Fiber is a big part of that.  Gig.U and others.  Everywhere that such an effort has happened, incumbents have responded by lowering prices, by improving speeds, and improving customer service.  So I think that that just kind of fundamental -- bringing that new dynamic in improves it for everybody, whether or not they're buying Google's service.

There's also an interesting asymmetry between the way Google upgrades and the way cable upgrades.  Such that, as it plays out over time, the cable guys will respond.  And unless you allow them to price-discriminate house-to-house, which I don't think is likely to happen, what you'll see is that if you get a critical mass in a city, cable will respond.  And therefore cable will essentially be upgrading and will be offering a competitive, much faster speed to everybody, because of the way they upgrade.  They have to upgrade system by system, not neighborhood by neighborhood.


Chris:  Right.  I want to refocus it just briefly back on -- you know, is the low-income question.  Which I think Google has solved beautifully with this option of the free connection.  And I think the dynamics of it would work out well for any ISP at scale.


Blair:  Absolutely.  And that was going to be my next point.  Which is, what we're seeing is, actually, a very interesting experiment about what's the real barrier?  We do have a very big problem in this country, which is the one-third of the country that is not ready to really utilize the Internet in the way that they should be able to do.  And by "should," I simply mean, there are all kind of advantages -- I'm not saying that this should be their -- how they should get their entertainment.  Rather, I'm saying that, from the point of view of shopping more efficiently, or getting healthcare more efficiently, or getting education, getting job training, there are all kinds of advantages of being digitally literate.  And as a society, we really have to address that.  That's actually -- on the one-year anniversary of the Plan, I said that I thought that was our biggest error in the Plan, was not to think more creatively about that particular problem.  I take full responsibility.  The team did a great job.  We just didn't -- I just didn't think enough about it.  And I think that, unfortunately, while there have been some good things that the NTIA -- which is a federal government agency in the Department of Commerce -- they've done some good things, we have a long ways to do -- I was very heartened to see Commissioner Clyburn, of the FCC, give a speech in which she called for reforming the Lifeline program, which serves low-income people, to bring it up to the broadband era.  I think she laid out five principles that are very, very good.  We have to do that.  But, frankly, this debate about how we deal with the networks, and improve them, they are related, but I think that we as a society have to be able to move -- you know, kind of two streams at once.  And not wait for everybody to become digitally literate before we start moving on improving the networks.


Chris:  The neighborhoods that are not served at all by Google -- do you anticipate that maybe a city, or state money, or federal money, ultimately, would be provided so Google could expand their program in there?  Or could we establish some requirement for any ISP to offer some base level at no charge?


Blair:  Ah, I think there's an infinite number of possibilities that I could speculate about.  But it's kind of like -- you know, I come at it from the perspective of one who was Chief of Staff at the FCC during the '96 Act.  And we focused ENORMOUSLY on the following question: how do we increase competition between the long-distance providers and the local providers.  Now, from the perspective of 2014, you might say, well, here's how we solved the problem: we had them merge.  And that's not very good.  But if you look at it the way I do, which was, what we were really saying was, how do we get voice to be more competitive?  MASSIVELY successful.  Right?  Because long-distance as a market disappeared, because cell phones and Skype and a thousand other things basically lowered the economics of offering the voice service.  So you can't -- again, I admire people like Yochai Benkler, who can tell me what the problem will be 30 years from now.  But I think if you can -- if you can accelerate a solution for like a 5-to-10-year parameter, you're doing pretty good.  And my view is that I have confidence that if we can drive a -- like I said, the cable-fiber framework, we're going to drive all kinds of uses that are ultimately going to increase the value proposition for the networks in a way that low-income people will absolutely be able to take advantage of.  And, by the way, the government's going to want them to take advantage of it.

The great argument we haven't yet gotten to, but we're going to get there in a few years, goes to the following point.  Which is, government will be the last enterprise to operate on both an analog and digital platform.  And, as every bank knows, as every financial services knows, as Walmart knows, as every big enterprise knows, you really don't want to operate on two platforms; you really want to operate on a digital platform.  There are lots of different reasons for that.  Government is no different.  Except that they have to serve everybody.  They're going on two platforms.  So, yeah, I feel real confident that government will find ways of making sure that everybody's on adequate networks, to improve the way government actually delivers those public goods and services.


Chris:  Well, I'm going to let you have the final word.  And I really appreciate you coming on the show.  I always have -- I think we have terrific discussions.  And I always learn a lot.  So, thank you for sharing that with us.


Blair:  Thank you very much.  Always a pleasure to talk with you, even when we disagree, 'cause it's -- as you and I have chatted ** before, if the debate's between us, the country's going to move in a good direction.


Chris:  Right.  And I can imagine a Comcast lobbyist listening to this and saying, wait, when did they disagree?


Blair:  [laughs]


Chris:  Thank you.


Blair:  About risk capital.


Chris:  Right.


Blair:  Talk to you later.


Chris:  Have a good one.


Blair:  Thank you so much.


Lisa:  If you're interested in hearing our other interview with Blair, check out episode number 37.  He and Chris talked about the Gig.U project and also talked a little more about the private sector investment in essential infrastructure.  Send us your ideas for the show.  E-mail us at .  Follow us on Twitter.  Our handle is @communitynets .  We want to thank Dickey F for the music again this week.  His song, "Florida Mama," is licensed through Creative Commons.  Thanks for listening, and have a great day.