Could Trump’s request for less NIST funding be turned into another political football?

Overview

This morning the U.S. House Committee on Science, Space, and Technology Subcommittee on Research and Technology held a hearing to consider the Fiscal Year 2020 budget request of the National Institute of Standards and Technology. NIST’s published mission is “to promote U.S. innovation and competitiveness by advancing measurement science, standards and technology in ways that enhance economic security and improve our quality of life.”  The agency provides measurements, standards, and reference materials for the technology behind a range of products and services, including computers, GPS systems, cellphones, and automobiles.

Leading Democrats Didn’t Share Too Much Concern About Artificial Intelligence 

Based on the opening statement of the chairman of the House Committee on Science, Space, and Technology, Eddie Bernice Johnson, Democrat of Texas, the primary concern of the Democrats appears to be the impact last year’s shutdown had on NIST research and staffing and how the proposed reductions would compound the problem of reduced research output combined with a reduction in staff.

House Subcommittee on Research and Technology chairman Haley Stevens appeared to emphasize the defunding of programs that support the manufacturing sector and also expressed her concerns about the potential of 400 staffers being let go from the agency.

Both Chairman Johnson and Chairman Stevens provided more of a passing reference to artificial intelligence and advanced communication, observations that don’t appear commensurate with the proposed reductions the areas of advanced communications, networks, and data systems.

The Administration’s proposed cuts in advanced communications, networks, and data systems are severe.  The Administration wants to reduce spending in this area by 41.4%, from $68.6 million in FY 2018 and FY 2019 to $40.2 million in FY 2020.  While NIST director, Dr. Walter Copan, explained that there would be a $8 million increase in spending in the area artificial intelligence, he could not provide, during his testimony, the specific methodology leading to the Administration’s proposed overall reductions for artificial intelligence and advanced communications.

What Messages Are Being Sent?

From the Trump Administration’s end, the message appears to be the hope that NIST’s attempts to coordinate research initiatives between the private sector, public sector, and academia will make up for the reduced contribution by the federal government to research.

Congressional Democrats may see the Administration’s proposal as an opportunity to portray funding reductions as a threat to America’s economic growth. The President’s budget may give them the opportunity to make an argument that Mr Trump is continuing his shutdown of the government with this request and again risking the creation of a negative impact on the economy.

Congressional Republicans may have their bluff called on how dedicated they are to economic growth. Supporting the President’s proposed reductions may be seen as in direct conflict with their economic growth narrative. How can the Republicans support infrastructure development and investment while cutting of a conduit for development and investment?

On the other hand, Congressional Republicans could turn this into an opportunity to push back on their party’s leader, just enough to show a little independence from the White House.

In the end, Congress controls the purse strings and could present a budget in the fall that invests more in the NIST than the President is requesting.

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Capital. The true digital divide

A couple early morning thoughts on the digital divide.  So far the digital divide narrative has occupied two schools of thought that are not necessarily opposed to each other.

Race and the Digital Divide

The first school of thought revolves around race.  Given that within the black American community there is a higher level of poor households, affordability is keeping blacks from accessing the internet via high-speed broadband infrastructure.  If blacks do not have the income to sustain a broadband business model, then internet access providers are less likely to deploy facilities in poor neighborhoods.  Lack of deployment in these neighborhoods may result in a barrier to valuable information that may lead to greater economic opportunities, according to advocates seeking to close this gap.

Rural Communities and the Digital Divide

The second school of thought revolves around rural communities.  The argument is that lower population density as compared to urban areas makes deploying broadband access facilities in rural areas more expensive.  In addition, terrain, such as that faced by internet access providers in mountain states, has traditionally added to the problem of higher costs to provide broadband access facilities.

An Overlooked Divide

There is another divide, one that is often overlooked and it has to go to what is known as “first-mover advantage.” The real value generated by the internet is the ability to extract, analyze, package, and distribute information, and have that information be available digitally forever.  The focus on a gap between facilities deployed in black neighborhoods versus facilities deployed in white neighborhoods or the gap between rural community deployment versus urban community deployment goes to seeking out new suppliers of information.  The civil right veneer that has been placed over the broadband racial divide hides this supply-side characteristic from the policy debate.  It has also created the opportunity for the political left to craft an electoral package that can be sold to voters.

It is the other side of the equation, the production side, that, in my opinion holds more value.  When we look at the history of the internet, particularly the period when the internet was commercialized, its players included white venture capitalists; Web 1.0 internet service providers, i.e. AOL, CompuServ, Mindspring, etc.; and dial-up access providers such as BellSouth.

Black Americans could always access information from analog sources, i.e. television; print media; or word of mouth, but the efficient extraction, cataloging,  indexing, aggregation, and distribution of information via the internet were the domain of companies invested in and managed by whites.  As whites continued to level their first-mover advantage, this gap between producer/owner of capital and consumer continued to grow.

Capital not only seeks a vacuum, it also seeks a return.  Returns from investing in black or even rural communities were not going to be as high as returns invested in affluent neighborhoods, neighborhoods whose residents probably owned shares in the very companies that commercialized the internet in the first place.  Closing the “digital divide” means first closing the capital divide.

What will Government Do Next?

Government will do nothing from a capital perspective to close the digital divide. The Federal Communications Commission has a number of universal service funding initiatives designed to encourage mobile and fixed broadband deployment in rural areas; to facilitate the delivery of health care via broadband; and to reduce the costs incurred by low-income consumers for accessing and maintaining high-speed broadband service.  By subsidizing the consumer demand for broadband services, the Commission hopes to encourage the delivery of broadband services.  But again, the focus is on consumer demand, not bridging the capital gap.

The philosophical underpinnings of the American economy, where capital is to flow freely to its best use may prohibit government from taking any concrete action for closing a capital gap.  If blacks or rural residents had sufficient capital to purchase, construct, or maintain broadband access facilities, using their intimate knowledge of their communities to distribute services, we might see a decrease in the gap.  We should expect that government will stay on a path of incentivizing capital investment in infrastructure development versus trying to repair capital discrepancies via a capital transfer.

Atlanta should avoid the net neutrality debate. It’s not good for business

Internet Innovation Alliance co-founder Bruce Mehlman posted an article yesterday discussing the positive impact relaxed regulatory requirements can have on investment in and deployment of broadband networks. According to Mr. Mehlman, investment in broadband rose by $1.5 billion to $76.3 billion.  He contrasts this to the $3.2 billion decline in investment between 2015 and 2016.

What made the difference? According to Mr. Mehlman it was the decision last year by the Federal Communications Commission to repeal their 2015 open internet order, a decision that put into regulatory code a number of net neutrality principles.  The 2015 order treated broadband access providers as telephone companies by applying consumer and telephone network management rules that were based on communications law from the 1930s.  That approach, according to Mr. Mehlman, just can’t fly in the 21st century.

Unfortunately, Washington has been embroiled in a debate over how net neutrality principles should be applied.  There is a consensus among opponents to and proponents of net neutrality principles that consumers should be able to access web content of their choice; that content providers should not have their traffic speeds throttled by broadband access providers; and that broadband access providers should be transparent about the terms and conditions of their services.  Whether a rule by a regulatory agency is the best approach to ensuring these policy goals is an issue.

Getting to yes on net neutrality may be best brought about by an action of Congress.  Defining net neutrality in the law and laying out the components of its meaning will give content providers and broadband access providers definitive guideposts that help settle any conflicts in the future.  Without a congressional action, the industry and consumers run the risk of a back and forth regulatory battle driven by changes in political power, particularly when a new presidential administration takes over and a new chairman is appointed.  That type of uncertainty every four years is not good for consumers or business.

As more people and businesses move to Atlanta, regulatory certainty becomes an asset for the person who telecommutes; for the financial technology company that needs to maintain connection to its app subscribers; to the student who relies on distance learning to complete assignments.

Treating a broadband provider facing competition from three or four more broadband providers as if they were a monopoly local telephone company in 1934 won’t contribute to Atlanta’s continued growth.

Net neutrality challenges the affordability of information

Last weekend, the State of California upped the ante in the net neutrality debate when Governor Jerry Brown signed into law SB 822, a bill that put into California law net neutrality requirements that were contained in the Federal Communications Commission’s 2015 Open Internet Order, a set of rules that were later repealed by the FCC in its 2017 Restore Internet Freedom Order.  Section 3101(a) and Section 3101(b) of SB 822 provide the core element of the legislation and reads as follows:

“3101. (a) It shall be unlawful for a fixed Internet service provider, insofar as the provider is engaged in providing fixed broadband Internet access service, to engage in any of the following activities:
(1) Blocking lawful content, applications, services, or nonharmful devices, subject to reasonable network management.
(2) Impairing or degrading lawful Internet traffic on the basis of Internet content, application, or service, or use of a nonharmful device, subject to reasonable network management.
(3) Requiring consideration, monetary or otherwise, from an edge provider, including, but not limited to, in exchange for any of the following:
(A) Delivering Internet traffic to, and carrying Internet traffic from, the Internet service provider’s end users.
(B) Avoiding having the edge provider’s content, application, service, or nonharmful device blocked from reaching the Internet service provider’s end users.
(C) Avoiding having the edge provider’s content, application, service, or nonharmful device impaired or degraded.
(4) Engaging in paid prioritization.
(5) Engaging in zero-rating in exchange for consideration, monetary or otherwise, from a third party.
(6) Zero-rating some Internet content, applications, services, or devices in a category of Internet content, applications, services, or devices, but not the entire category.
(7) (A) Unreasonably interfering with, or unreasonably disadvantaging, either an end user’s ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of the end user’s choice, or an edge provider’s ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be a violation of this paragraph.
(B) Zero-rating Internet traffic in application-agnostic ways shall not be a violation of subparagraph (A) provided that no consideration, monetary or otherwise, is provided by any third party in exchange for the Internet service provider’s decision whether to zero-rate traffic.
(8) Failing to publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of those services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.
(9) Engaging in practices, including, but not limited to, agreements, with respect to, related to, or in connection with, ISP traffic exchange that have the purpose or effect of evading the prohibitions contained in this section and Section 3102. Nothing in this paragraph shall be construed to prohibit Internet service providers from entering into ISP traffic exchange agreements that do not evade the prohibitions contained in this section and Section 3102.
(b) It shall be unlawful for a mobile Internet service provider, insofar as the provider is engaged in providing mobile broadband Internet access service, to engage in any of the activities described in paragraphs (1), (2), (3), (4), (5), (6), (7), (8), and (9) of subdivision (a).”

Political actors that favor the FCC’s implementation of net neutrality rules have managed in the past to endear their position to the public by describing efforts opposing the rules as a barrier to freedom of expression.  Net neutrality rules proponents argue that internet service providers have a financial incentive to use their positions as gateways to internet access to favor their content over that of edge providers.  Favoring ISP content may take the form of throttling data coming from a favored website or blocking a consumer’s access to their favorite website.

Net neutrality rules proponents would also argue that even if their access to a website was not blocked or data from their favorite website not slowed down, the receipt by an ISP of compensation in exchange for giving an edge provider higher priority of their traffic may mean that smaller content providers are put at a disadvantage compared to larger content providers with deeper pockets.

Opponents of putting net neutrality into an agency rule would agree that the principles of net neutrality should be adhered to.  However, as network operators, ISPs argue that they cannot afford to devalue their networks by frustrating consumer access to internet content.  The internet has grown in use and popularity as a result of the “network effect” where as more consumers use the internet, the demand for and supply of content and other services increases thus increasing the value of an operator’s network.  In the end, blocking, throttling, or prioritizing content would only work against the network operator.

Often overlooked in the net neutrality debate is the global nature of the internet.  Facebook users, for example, take for granted that most of the social network’s subscribers are not located in the United States and that we all access a network of interconnected computers located in multiple countries. The traffic you receive can come from a number of jurisdictions before landing on your computer.

Ironically, California leads the way in North America when it comes to internet traffic density.  According to data from Akami, California accounts for 5.1% of traffic flows in North America.  Statista.com reports that internet traffic in North America amounts to  1,411,021 terabytes a month. This means that California’s approximate share is 71,962 terabytes a month.

And the amount of internet traffic flowing is expected to continue increasing.  According to findings by Cisco, internet traffic is expected to increase by 278 exabytes a month by 2021.  As gateways for internet traffic, ISPs concerned about managing congested networks may want to employ a time honored method of congestion management: price, and this method of determining where resources flow is what is really being kept in check by SB 822.

SB 822 prohibits ISPs from charging content providers for the handing off of edge provider traffic.  It is ironic that proponents of these rules on the one hand support the notion of regulating broadband providers like telephone companies, but prohibit the very practice telephone companies have used to recover a portion of their network costs. As internet traffic increases along with the costs for delivering traffic, would proponents prefer ISPs increase the prices the end use consumer pays while providing edge providers with free content? If this is the case, then net neutrality proponents in California, many of whom are unwittingly support keeping edge provider costs low, may find accessing information on the internet less affordable.

 

State resources either Abrams or Kemp can use to drive rural broadband in Georgia.

At first blush, the stances of the two candidates for Georgia on the issue of broadband deployment are pretty much standard fare.  Citing her responses to a questionnaire by the Georgia Chamber of Commerce Democratic Party candidate Stacey Abrams describes broadband an essential business service.  To boost the economy of rural Georgia, Ms. Abrams mentions her support for the Georgia Department of Transportation’s efforts to expand broadband along the state’s rights-of-way.

Ms. Abrams is referring to the Georgia Department of Transportation’s Georgia Interstate and Wireless Broadband Deployment P3 Project.  The primary goal of GDOT’s broadband project is statewide expansion of GDOT’s NaviGAtor traffic management system.  GDOT considers NaviGAtor as a first step toward bringing broadband to more of the state’s citizens.  GDOT states that by recycling its assets i.e. state rights-of-way, GDOT can accomplish the mission without any additional tax revenues. Once private partners are on board, the project is slated to take 25 years to design construct, and deploy the fiber optic cable and small cell network along 1,300 miles of state rights-of-way.

Republican Party candidate Brian Kemp echoes Ms. Abrams sentiments about broadband being a game changer for rural Georgia.  While not citing GDOT’s NaviGAtor, Mr. Kemp cites similar benefits offered by the state’s program including eliminating fees for use of state rights-of-way; exploring tax incentives for tech companies and entrepreneurs  committed to expanding high-speed internet access in rural Georgia, and incentivizing public/private partnerships with the use of low interest loans.

Rural broadband deployment has moved further to the front of the national policy agenda line.  Federal Communications Commission chairman Ajit Pai, himself a native of rural Kansas, has been touting closing the rural digital divide since joining the FCC.

Georgia, according to the website BroadbandNow, is America’s 20th most connected state, but has some work to do when it comes to increasing the availability of alternatives for 1.4 million residents who have access to only one wired provider. Approximately 870,000 Georgia residents do not have access to a wired connection with at least 25 megabits per second download speeds.

Georgia has already taken steps to help bring more broadband networks to its citizens. In addition to GDOT’s NaviGAtor traffic management system, the state’s Department of Community Affairs is required to develop the Georgia Broadband Deployment Initiative,  a program that provides for funding for the purpose of delivering broadband to unserved areas.  Money is to be spent on capital expenses and expenses directly related to the purchase or lease of property or to communications services or facilities. Through the funding of qualified political subdivisions i.e. cities, counties, etc., Georgia hopes to promote trade, commerce, investment, and employment opportunities.

An additional state resource that Georgia can use to close its rural broadband divide is the OneGeorgia Authority.  OneGeorgia, with the use of two funds, provides financing for rural areas committed to developing their economies.  By law, Georgia’s governor serves as OneGeorgia’s chairman, putting either Ms. Abrams or Mr. Kemp in a power position to drive rural Georgia’s broadband deployment in particular and the state’s economic growth overall.

 

 

The likelihood of net neutrality being codified in statute looks dim…

Republicans in the U.S. House and U.S. Senate have been pushing for legislation that codifies net neutrality principles, making them a part of federal law.  Even with control of both chambers of the U.S. Congress, Republicans have not been able to convince enough Democratic members of Congress to get on board with passing a law that would avoid the back and forth pendulum between promulgating and repealing net neutrality rules on the agency level at the Federal Communications Commission.

Last spring, 52 U.S. Senators, including three Republicans, voted to reinstate net neutrality rules that were repealed in December 2017 by FCC chairman Ajit Pai’s Restoring Internet Freedom Order.  Mr. Pai’s treatment of net neutrality keeps the emphasis on one of the open internet’s four principles, transparency but leaves the other three principles; throttling, paid prioritization, and blocking, up to the “network effect”, where broadband access providers argue that discouraging use of the internet by blocking, throttling, or discriminating between carriers would lead to a devaluation of their networks, thus an illogical approach to take.

GOP control of the House is under threat this November.  If election sentiment carries over into the midterms, it is likely that the Democratic Party will capture the House.  Rasmussen Reports found that 47% of likely voters in the United States’ midterm elections are likely to vote for the Democratic Party while 42% of likely voters may cast their ballots for the Republican Party.

In the U.S. Senate, Republicans hold 51 seats while the Democrats hold 47 seats. Two independents, Angus King of Maine and Bernie Sanders of Vermont, caucus with the Democrats.  The Democrats need at least four seats to regain control of the Senate.

In the U.S. House, Republicans hold 236 seats to the Democrats 193.  Democrats need to pick up at least 25 seats to garner a House majority.

Will Democrats run on net neutrality as an issue? Based in polling from Pew Research, net neutrality is likely not an issue to grab the eardrums of voters.  For all voters, economic issues overall took first place, according Pew’s poll.  When broken down, the top six issues were:

  1. Immigration
  2. Health care
  3. Education
  4. Politicians/Government systems
  5. Guns/gun control/gun laws
  6. Economy/economic issues

For Democrats, while the top three overall issues for all voters were also a part of the Democrats of top three issues, gun control, politicians and government systems, and jobs rounded out the bottom three of their top six concerns.

House Democrats are aligning with their base’s apparent lack of priority for net neutrality.  Looking at a sample of 102 House Democrat websites, only four (3.9%) of those sites mentioned net neutrality, the open internet, or internet freedom as a key issue.

The low priority given to net neutrality this campaign season by voters and House Democrats tells me that Democrats will be in no hurry to join Republicans in drafting a bipartisan net neutrality bill.

 

Verizon moves ahead with 5G

Verizon yesterday announced the rollout of Verizon 5G Home internet service. Verizon claims in its press release that it is the first company to introduce 5G commercially in the United States with service to be provided in parts of Houston, Indianapolis, Los Angeles, and Sacramento.

Given the lack of uniform industry standards, being first to provide 5G service means moving ahead with the service based on its own proprietary 5G standards.  According to Hans Vestberg, Verizon’s chief executive officer,  “To be first, we encouraged others in the ecosystem to move more quickly at every step. We appreciate the partnership of network equipment makers, device manufacturers, software developers and chip makers in reaching this critical milestone. The entire wireless industry gets to celebrate.”

Verizon will start taking consumer orders for the service on 13 September 2018 with the service taking effect on 1 October 2018.

SDx Central, a technology content provider and research firm, estimates that the first phase of 5G standards will probably not materialize until late 2018 when industry can base concrete standards on high profile cases. However, Verizon sees no concerns with moving forward with its own proprietary standards.  Rather, it sees itself as a leader on moving the industry further along the journey to rolling out 5G. According to company spokesman John O’Malley:

“The 3GTF standard we developed actually accelerated the adoption of the international standard last December — two years earlier than most people thought it would happen. And now, device, infrastructure and other technology leaders are developing products that will run on that standard. And when those products and technologies are available, we’ll evolve our offerings as well. The entire industry is working together on this.”

Although Verizon did not mention the impact of its 5G rollout on global trade, broadband communications has been described as an important platform for international commerce, particularly for small and medium enterprises.

In 2013, the World Economic Forum determined that 95% of businesses located in countries that are part of the Organisation for Economic Co-operation and Development has an online presence. The internet in general and social media in particular allowed these businesses to market products globally and reach customers outside of their regions.

Joshua Meltzer of the Brookings Institution in a paper addressing the internet as a platform for international trade said the following:

“Significantly, the Internet is creating new opportunities for small and medium-sized enterprises (SMEs) and for businesses in developing countries to engage in international trade and become part of the global economy. By providing opportunities to access business inputs such as cheaper telecommunications, strategic information on overseas markets, legal and consulting services, and cloud computing, SMEs and developing country firms are now more than ever able to become globally competitive. With a website, these firms can now engage internationally, reaching customers and communicating with suppliers all across the world.”

Could we see further integration of the aforementioned cities into global trade as a result of this rollout?