Transcript: Community Broadband Bits Episode 281

This is the transcript for Episode 281 of the Community Broadband Bits podcast. Will Rinehart of the American Action Forum in Washington D.C. discusses telecommunications and economics with our host Christopher Mitchell. Listen to this episode here.

Will Rinehart: And I do think that obviously good policy is very very important and that's where you and I agree a lot. You know there's obviously some good policies that can be enacted. There's probably better conversations that could be had in this space and that's also something else that I really do really want to see. You're

Lisa Gonzalez: listening to episode 281 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzales as a research organization. We here at the institute make it a habit to hear all sides of the debate along the way we make connections with people who offer perspectives on policy that differ from ours. We consider these conversations critical as we analyze factors that help us create policy recommendations and resources for local communities. This week Christopher talks with Will Rinehart from the American Action Forum. They got together at the recent broadband community's economic development conference in Atlanta. In this conversation you'll hear the two discuss a variety of topics they talk about the area of telecommunications and economics and the forum's approach. You'll also hear that these different perspectives aren't as black and white as they first appear. Now here's Christopher with Will Rinehart from the American Action Forum.

Christopher Mitchell: Welcome to another edition of the community broadband bits podcasts. I'm Chris Mitchell with the Institute for Local Self-Reliance. Coming to you from Atlanta sitting practically on a runway at the Atlanta airport with Will Rinehart the Director of Technology and Innovation Policy with the American Action Forum. Welcome to the show. Thanks Chris. Thanks for having me. We're at the broadband community's event here. We just had our second panel which is called a blue ribbon panel and general session kind of thing. And you and I are typically brought on as people who have very opposing points of view.

Will Rinehart: [laughs] To kind of get the crowd riled up in the morning.

Christopher Mitchell: And I you know as someone who has strong points of view I think there's tremendous value in the audience hearing from multiple points of view on very much. So what does the American Action Forum do as a think tank based in Washington D.C.?

Will Rinehart: You know we do a little bit of everything. My boss is a former CBO director. We do a lot of economic analysis of various sorts. That's kind of where I try to focus on -- my focus obviously is in technology policy. So with that comes a lot in telecommunications and broadband deployment. And one of the other major areas that I really have kind of come to work a lot on are these you know platform technologies. You know Facebook and Google which have been getting a lot of interesting critiques as of late and the mob switches very very quickly when we talk about 18 months for this all to change over.

Christopher Mitchell: As someone who's long been skeptical I'm also leery of mobs.

Will Rinehart: So yes. Yeah. The platform area is another area work a lot in and also AI and I've been doing some actual original research in AI and productivity numbers. And the sharing economy and kind of you know how work is changing as well. So it's there's a lot of interesting work to be done to be very honest if you're in this kind of space between policy and in technology and I really do want more people to be looking at this because I think there's still a lot of very low hanging fruit.

Christopher Mitchell: Now I think your work might be carriage caricatured as just being pro industry reflexively pro cable pro telecom monopoly. And I want to ask you like for people who make those sorts of accusations. Do you feel you are pro cable and telephone monopoly.

Will Rinehart: No no not at all. Wow this is this is a this is a really harsh setup.

Christopher Mitchell: No, I mean I don't I don't mean to say that you are. I'm saying that there are people who say that and in many ways I think when I'm on offense you're defending the industry you appear to be you know defending them in ways that you may disagree with me and also disagree with them. But you're focused the reporters are interested in how you disagree with me. So I want to be fair.

Will Rinehart: Yeah. No no. I guess the I think the there's there's obviously a nuance and a depth to all the different positions and you know individuals may kind of pick out and really hone in on one thing or another thing that you said without really kind of understanding the nuance. I guess part of it really comes down to me is just seen and I think that you actually mentioned this to me that you know your originally from Minnesota. And so for you the ability of government to kind of come in and solve a lot of very interesting problems. Like that's kind of the baseline compared to myself. I'm from Springfield Illinois. And so I see a lot of these issues bubble up over and over again with with government based solutions. I guess I'm just much more skeptical of our ability to really kind of change and curtail markets and I do think that obviously good policy is very very important and that's where you and I agree a lot.

Will Rinehart: You know there's obviously some good policies that can be enacted. There's probably better conversations that could be had in this space and that's also something else that I really do really want to see. I'm not I mean I'm not for one industry or another. I'm actually much more interested in innovation and ensuring that innovation occurs and that the form that that take for me often often you know lines of this idea of permissiveness innovation. Let's see what's going to happen then when bad things do happen and let's try to police it when they do happen. And so I think just for me there's hesitation and skepticism in our ability to really changing and define and curtail these markets. And also I guess a little bit more optimistic about the outcomes themselves.

Christopher Mitchell: So when you talk about the permission this innovation it's interesting I think everyone says that they want that. I know very much so. And one of the things that I firmly believe is that if we had rather than two major cable companies that are you know charter and Comcast if we had 15 and there were even regional monopolies. I feel like I would be more likely to think that there could be permissions innovation even if they were very powerful but they were less large. The scale of Comcast and Charter makes me think that the biggest threat to permission is innovation the ability to just come up with new things is those two companies because they have such a you kind of have to deal with them if you want to be innovative in the broadband market today.

Will Rinehart: I think the numbers game is an interesting question. This is something that seems to at least inform and implicitly inform a lot of the conversations that go that go on and the number of like you know 15. So if we had for example within each market if we had 15 different players there's often this problem.

Will Rinehart: On the downside that a lot of economists will talk about which is you can't have you can't have elements of scope. You can't have an economics of scope that that practically speaking when you're a very small player your ability to use the investment which is you know as you know is a very very kind of tall order to actually spread that across your consumer base is very very difficult. So I you know who knows what exactly the right number is and I guess that's also one of my skepticism but I don't think that necessarily more competitors is is always going to be a better better situation.

Christopher Mitchell: Right. I just I think I wasn't totally clear and that's a very good point for why it's unreasonable to expect that we'd have 15 different choices in the market and infrastructure competition basis. The point I was I was trying to make was that if we had 15 cable companies each of which was dominant and a monopoly. So if Minnesota and Upper Midwest had cable company A and the East Coast cable company be and there were still these kinds of almost monopolies. The mere fact that you would have different companies that were kind of looking over their shoulders at each other to me is a different dynamic. So it's not to say that any one person would be to choose from 15 firms but that there's not just two major firms out there that are kind of calling the shots when we have so much collapsed or there's just two major cable companies in the United States at this point.

Christopher Mitchell: I worry that they can do things that even if they're the whole country was divided you know and then there was not overlapping territory. If there was a higher number of those entities there are going to be checking each other and there is going to be a different result than when you have just two firms.

Will Rinehart: That's a bit of a different articulation than what most people would say in this space which is you know instead of having effectively one cable provider in a region or you'll have one you know one DSL based provider in a region you know oftentimes a conversation typically goes region by region. So it's like you know this market whatever this market is let's say you know in your example it's Minnesota let's say it's the Twin Cities market. It has you know rather what is being added within the conversation is that you know well within this market we need X amount of players. And what I think you're saying is that wait a second maybe instead you'd have three or four providers that would be for example within the twin cities and a different set of three or four providers with the B and within a different region.

Will Rinehart: I still kind of go back to this problem which is a pretty endemic problem which is again scale and scope. We do know to a certain extent that companies when they are able to buy at scale they're actually able to provide the services cheaper for specific consumers. There is this range of providers that typically works really really well for a region which is effectively three or four. Now it seems that only the major cities seem to really get that you get. You know for example a some sort of you know independent fiber provider a cable provider and then effectively your you know your DSL based provider that has you know done some sort of overbuild or or really developed out with fiber and therefore you have effectively these three competitors these obviously as you're well aware come from historical decisions on actually providing a very specific franchise service and in each of the different cities and so you know for a very long time.

Will Rinehart: One of the ideas was will we need to provide some sort of competition for the broadcasters and so we're going to give them the cable providers an outline within our region and that's where a lot of these original franchising agreements come from in kind of where the you know where the footprint originally comes from. It comes from you know effectively the 50s and 60s we made these decisions about creating some sort of competition playing field. And that's again that's also part of where I I times find myself skeptical of some of these the measures to specifically create competition in these spaces because at some point in the future you won't have to live with those decisions that you've made. I know there are some cities that specifically had dual providers of cable and those cities now typically have two sorts of cable providers.

Will Rinehart: Those decisions it seems are very long lasting within a city. So the question is is where. Where do you go from here now and how do you create an innovative space going forward. But I do know that one area that seems to be an interesting potential competitive check is at least with wireless. And I know this is something that you and I have discussed in the past. For me I think why it's interesting as you know whenever you have kind of robust competition on the wireless space as well whenever consumers choose that wireless service they tend to also demand more or tend to put you know there seems to be some sort of competitive pressure that's put on the traditional fixed services and so they also tend to either increase their quality or decrease their their prices for whatever that bundle is.

Will Rinehart: So to me I think that's going to be an interesting thing going forward especially considering kind of where we've gone over the last 20 years with this. I think in the immediate future it will be very interesting to see what happens with the kind of the fixed wireless space and again I know that there's there's a whole bunch of kind of different sorts of competitive issues there but there seems to be something happening there that whether or not they are completely substitutable in service there is something with the fact that consumers want both. They want both you know high quality wireless service and high quality fixed service and that the effect of that is rather that there's pressure that's put also on the fixed providers. We

Christopher Mitchell: are seeing I think new hope in the U.S where we're fixed wireless is coming in using the wired service within the building to distribute. And that's exciting in talking with those fixed wireless providers. We generally find that they do not see an approach do that in single family homes. So you know in some ways depending on which market you're talking about it has different impacts. I continue to find that mobile wireless is not a substitute in any way for high quality fixed access. One of the things that I wanted to pull out from your discussion about past franchising that I think is underappreciated is that the reason the vast majority of Americans have access to broadband as defined by the Federal Communications Commission has 25 megabits by 3 megabits which we're going to discuss in a minute. In terms of that standard is because cable passes like 92 percent of Americans.

Christopher Mitchell: The reason that 92 percent of Americans are passed by it is because franchises granted cable companies certain rights to use the public right away in return for a requirement to build out to everyone. I don't believe cable companies would have made those significant investments in the lower income communities or in density in areas with lower density. Absent those requirements and so I don't want that to be lost in terms of when we talk about some of the perhaps negative repercussions of franchising historically. It accomplished something remarkable in terms of 92 percent of Americans having cable services. Indeed

Will Rinehart: indeed. Yeah and I guess the point that I would that I would ultimately make with this is that there's obviously tradeoffs and there's always tradeoffs the situation. One of the things that I try to do and try to understand is well what are those tradeoffs. At the end of the day. And as you had mentioned and mentioned very specifically adding that was that seems to have been and continues to be the tradeoff that's made you know this is something that Google Fiber has been criticized pretty resoundingly for in the last couple of years. There's a lot to unpack there. The other part of it that I guess kind of I would say worries me but that really is kind of the opaque box which is the conversation that goes on and how these are you know in the kind of tit for tat that goes on with it within the city.

Will Rinehart: So that also to me is an interesting part of this as well that you have this kind of back and forth between the city and the provider it's like well you know your the you know your the provider you've been the provider for however many years you've been you know a provider for 30 or 40 years we've signed these contracts with you. Now you come back to the table and that also adds a very interesting tinge to the conversation back and forth and to a certain extent this is what Google is hoping to break up a little bit. Who knows if that's effective. Who knows if that tradeoff really is effective at providing a lower cost service to individuals.

Christopher Mitchell: Right. And I salute you for discussing the tradeoffs because I try to do that as well as very much so. And I recognize you know and I've gone back and forth that people at Google about this because they are anti franchising and I would like to see everyone have access. And I also recognize that if you try to require a company like Google to require everyone of access they're going to go somewhere else and then you will end up with nobody necessarily having you know better access. So this is definitely something that's one of the reasons that I like pushing authority down so that communities can make those decisions on their own.

Christopher Mitchell: To some extent how they want to weigh the different tradeoffs. Yeah yeah. So let's talk about the the 25 3 because you've rightly noted that when I'm often criticizing the lack of competition it's based on this assessment of 2005 3 as the state level yeah.

Will Rinehart: So a couple of years back the FCC actually decided to to raise the level of broadband to 25 3 from a level I believe is for one previous. So I didn't have any criticism of the FCC raising to you know to a new level broadband service content continues to expand. Clearly the threshold levels and the determination of what at know what a broadband service should look like should expand over time as time goes on. The one criticism that I've had with this and my one worry that I've had with this is that when you get to a 25 megabyte level there is this other sort of technology that effectively is wiped from the map and it just doesn't exist anymore. And in fact you saw this you know one of my criticisms of the past FCC administration was very much aligned with this which is that the past administration really said there are two options either you get fibre to the home or you've got a cable service and that is it additionally fixed wireless. I

Christopher Mitchell: mean you can get significant 25 50 megabit even true in some cases 100 megabit fixed wireless now.

Will Rinehart: But if I if I remember correctly a lot of the a lot of the original CAF funding models didn't actually include fixed wireless so they only included effectively these two options.

Will Rinehart: And I guess my point is is that you know the United States is unique in its in its historical development in that we do have a lot as you noted we have a whole bunch of homes that are passed by cable franchise of some sort. That's interesting and really it's unique to compare to for example Europe which has a far higher amount of DSL related technologies and so that in the United States DSL even though it is potentially it potentially has growth and there's very specific features to American style telephone service that make it different than European which I will freely admit. But that is often discounted and that's DSL based or telephone based technology is constantly discounted. I think that's worrying is that especially in the last round of DSL and now we're getting to a new set of standards in DSL so that the VSL is at a 20 limit was twenty four point five mega video cell 2.0 which is up to 40 and then there are the original DSL was only its potential maximum was quite literally half of a megabyte shy of the 25 megabyte.

Will Rinehart: Which to me seems a little odd that in fact this technology which you could have a potential upgrade path if you had the right kind of incentives to develop out and there's clearly individuals wanting to switch that there's a potential upgrade path there but that isn't included if your threshold for broadband is 25 megabytes and the standard effectively maxes out at twenty four point five megabytes then you're not included within any of these models and therefore a huge amount of people who specifically in rural communities who actually do have service level at you know the 20 to 25 megabyte region that drops dramatically once you hit 25 hopefully in the end of the year I'll be putting out a paper on this and very early what I've found is that effectively when you look at rural regions that the changeover at least in the last and most recent updated FCC data is that the ability to get onto the internet when you look at this 20 to 25 megabyte region effectively almost adds 20 percent of the population.

Will Rinehart: So there is a very significant. There's something that's going on here and that's what I'm interested in is looking at an actual competition that exists in the market not just necessarily. This is what we think exists in the market. Here's a threshold in this the data has to be interpreted not just you know it doesn't exist without any sort of interpretation or reading bias and that's what I'm really interested in getting at.

Christopher Mitchell: It's interesting I feel like my position would not be significantly different if the standard was 23 23 by five for instance and so it would include the I mean I think the biggest challenge with this and I think we're running the risk of I would say nitpicking because given the nature of DSL when you have a theoretical maximum almost nobody achieves that because you have the distance limitations and so in some ways I might say that it would be appropriate to not be including those in terms of a future definition. I mean we kind of run through this odd thing in which some people consider 25 3 to be the sort of the threshold of high speed. The actual term is more like minimum broadband you know basic broadband I think is really the term. So I mean one thing that frustrates me and I'm curious how you react is that we see the federal government putting so much money into programs that are expanding DSL which means that you're giving a household right now or you're giving AT&T twenty five hundred dollars 22 hundred dollars to upgrade them to DSL and in five years we're going to be giving them X dollars more because DSL is already obsolete.

Christopher Mitchell: AT&T CEO has said this. I think anyone who actually looks at it recognises that to the extent that there is there are future upgrades it's not going to happen in these rural markets in particular that have longer runs all of the things you talk about like G fast which is what CenturyLink will often talk about. That's like inside a building. It's not it's not across town so in many ways I'm frustrated I feel like is a wasted investment to even be thinking about DSL when we need to be figuring out how to get people on a path where they'll be having faster speeds that are necessary down the road.

Will Rinehart: Again this is a very difficult problem and to say that there's any easy solutions here. You know I can understand the the well you would say is the other side on this which is that these technologies themselves are just absolutely effectively stranded. There's no reason why we should be supporting them anyway.

Will Rinehart: You know the G fast stuff which is what CenturyLink has been pushing there actually recently in the U.K. and this is very specific to the U.K. and obviously they have as you said they have shorter runs so the actual you know the actual loop is much much shorter. In Europe as compared to the United States which makes obviously the speeds at the at the consumer level much faster. If only we were destroyed in World War II we could. Yeah I know that and that's exactly the reason why is because I don't want to say they wired it completely. Greenfield after World War II bought a very significant portion of Europe did effectively do that. So the very first fast. I think the very first fast network is actually going into the U.K. right now which still you're talking about practically speaking even though the theoretical maximum is one gig you are still seen for them. They're projecting about 150 megabits per second which is really really really fast at least. You know within that region I'm hesitant necessarily to count out that technology.

Will Rinehart: You do see a lot of regions that are still very connected with it and there's a difference between and you know obviously there's a lot happening with both AT&T and Verizon because you know Verizon has been effectively been exiting the fixed broadband market that Verizon and AT&T each have their own different paths you have Verizon has been getting rid of or even selling an awful lot of their DSL assets and it has been giving it has been going that route frontier and so frontier so there is clearly a lot still happening within within these markets which I think need to be looked at a little bit more. I

Will Rinehart: do wonder specifically about this about the AT&T president in which he specifically said that he thinks that DSL is a in technology I guess I guess I'm maybe I'm a little more optimistic than he is of his own base technology but I still think that there's probably something you can that you can do with this and there's still you still effectively have a whole bunch of wires in the ground. You still have a lot of assets that are out there and if you can recycle the copper. Yeah but you can also. You also have put there's clearly technology that for example the way that DSL works you have to get. You have to get relatively fast speeds the office even serve it. So there's clearly developing development of the network that exists within there within there and I think that enterprising people and indeed maybe other companies could repurpose that. And again it's a tough business. This is not an easy business to get into.

Christopher Mitchell: No I definitely agree. I want to come to the final point though which is one of preemption recently in a newspaper URL you and I are both quoted here and I praised you afterward because we went through this issue several years ago of of the Institute for Local Self-Reliance was on the position of encouraging the FCC to preempt states that had preempted local communities. Our rationale is we're an organization that's against the preemption and oddly enough the FCC preemption would have removed preemption. So we ordinarily we're not supporting any kind of preemption. You were against preemption then. Now we find ourselves with Verizon and Comcast saying yes we want the FCC to preempt local laws and states even on a variety of issues regarding regulating privacy and net neutrality and 5G and things like that small cell deployments. You had the same position which was to point out that preemption was not very wise.

Will Rinehart: I wouldn't necessarily it's not very wise. It's not within the FCC gambit. I mean you look at their legal authority and it stops it preemption there isn't. They don't have the preemptive rules at least in the way that it was interpreted under the municipal preemption order and I don't think they really I don't think there's a good case to be made here either. Right

Christopher Mitchell: . I mean to be clear let me know if I'm mischaracterizing this. What we're looking at is a section of law which is largely unexplored in which the FCC basically is supposed to remove barriers to investment and Comcast and Verizon had previously said that that was a very narrow scope or even not.

Will Rinehart: Yeah. It was they said it was deregulatory which I actually tend to agree with him on that it was a deregulatory when you 7 0 6 8 7 0 6 7 0 6 in the reporting in the 7 06 a bean you know I certainly to talk to people who actually wrote that section which because it seems a little it seems to be this kind of interesting addendum an afterthought it really yeah. Maybe there was something else there. Because it actually also gives power to the state. And no one has any idea how that would be exercised. Yeah and there is there's a lot of really interesting legal questions here. I'm positive about federalism I do think that obviously the states and municipalities really should be you know in all sorts of ways be involved in this. And I do think that the power at least that Congress had given the FCC doesn't really extend to this question of you know preempting preempting states on on this issue of privacy because you know AFACT effectively you know the FCC and the way that Congress has has gone in the last year in this last Congress is saying something to the effect of you know I mean privacy is kind of off the table we're not.

Christopher Mitchell: We're not going to deal with. So let me let me see if I got this right because I don't know as much about this as you do. But Congress uses the Congressional Review Act to nullify FCC privacy regulations which also says not just were getting rid of those but the FCC has no authority to regulate on privacy until Congress gives it new authority to do so. Exactly. If the FCC were to preempt states then theoretically the only other entity that could regulate privacy might be the Federal Trade Commission. But there are also limited from not being able to regulate common carriers. So theoretically no one can regulate privacy anywhere. The

Will Rinehart: states still have a lot of power in this and this is the reason why there's obviously a lot of the state state measures and say bills the state AGs and I do think that state Agee's probably need to be getting involved in this in this space. And they have in the past I mean New York obviously has gone through a lot of this. You know some of them or some of the more active Agee's and there are a number of state AGs that have taken this upon themselves and taking this as a mantle the common carrier exemption for which effectively bars the FTC from from going after common carriers. That's still kind of an interesting question because from my understanding it's only really been determined in the Ninth Circuit which is out of California and whether or not the interpretation within the Ninth Circuit really would apply writ large the rest the United States is is a really big question.

Will Rinehart: Again I'm not a lawyer so I it's just interesting for me to see all these kind of jostling occurring. Still there's only a couple I think only two or three of these bills actually got passed and Hawaii was one of them. I mean I have concerns for the bills for other reasons as I have been saying a number of times I would hope much more for an opt out system instead of an opt in system because that is kind of the you know the privacy standard that we've talked a lot about in the FTC has talked a lot about. So I have criticisms for the local bills on that angle but whether or not the FCC can really go in and do anything I don't think that they have the authority to do that and in fact to be very very blunt Congress probably needs to reengage in this and this is something I've been almost all of my work.

Will Rinehart: You should see something on these lines. Congress needs to reengage with these questions because these are very tough questions that in fact in the 96 act the Congress kind of left to the FCC. And so the FCC had to deal with these very tough both political and legal questions. And this is the reason why is either loved or hated depending on you know whatever issue you're talking about with the FCC. I would again like the Congress to actually kind of again kind of comeback think again about what privacy should look like. Who should be the arbiter of this. I think there's a potential for a kind of like a memorandum of understanding which is something I've also said about net neutrality.

Will Rinehart: You know you'd have kind of this better relationship between the FCC and the TC which they've done in other spaces. The understanding being that both of these agencies would come together on very specific issues they would have kind of a you know a working group they would they would work with economists and they'd work with consumer groups they would work with engineers and they would figure out what the issues are and start kind of bringing them to the forefront. The FTC has done a lot of really great work on this. I would like to see the FCC kind of get reinvigorated in that way and it's possible a lot of other countries have done it but it needs to be done in the United States.

Christopher Mitchell: Well thank you for coming on the show. It's really great. I mean we often get requests from people that have differing points of view. So appreciate you coming in the lines then.

Will Rinehart: Yeah of course. And I'm on Twitter. So if you want to tell me how I'm wrong that's the easiest way to let me know how I'm wrong.

Christopher Mitchell: Great. Thanks.

Will Rinehart: Thank you.

Lisa Gonzalez: That was Christopher and Will Rinehart from the American Action Forum. We have transcripts from this and other podcasts available at Email us at with your ideas for the show. Follow Chris on Twitter. His handle is @CommunityNets. Follow me and the networks dot org stories on Twitter were the handle is @MuniNetworks subscribe to this podcast and the other ILSR podcasts Building Local Power and the Local Energy Rules podcast you can access them on Apple Podcasts, Stitcher, or wherever else you get your podcasts. Never miss out on original research by also subscribing to our monthly newsletter Thank you to Arne Huseby for the song "Warm Duck Shuffle" licensed through Creative Commons. And thanks for listening to episode 281 of the Community Broadband Bits podcast.