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.

Advertisements

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.

 

 

FCC to vote on a 5G order designed to deploy more broadband

On 26 September 2018, the Federal Communications Commission will vote on an order that members of the Commission believe will help pave the way for deployment of the small cell technology that supports 5G technology.

5G refers to a next generation wireless technology that promises to deliver wireless communications at faster speeds with increased data capacity.  Writing for TechTarget.com, Margaret Rouse describes 5G as a technology that could provide data traffic speeds of 20 gigabits per second while enabling increases in the amount of data transmitted due to more available bandwidth and advanced antenna technology.

“In addition to improvements in speed, capacity and latency, 5G offers network management features, among them network slicing, which allows mobile operators to create multiple virtual networks within a single physical 5G network. This capability will enable wireless network connections to support specific uses or business cases and could be sold on an as-a-service basis.” — Margaret Rouse

Unlike current 4G Long Term Evolution wireless technology that relies on the deployment of large cell towers, 5G depends on the deployment of small cell antenna sites that are placed on utility poles or rooftops.  5G is designed to operate in frequencies between 30 GHz and 300 GHz allowing for greater data capacity but over shorter distances.

Commissioner Brendan Carr has been given credit for driving the development and release of this order.  Mr. Carr has been traveling the United States advocating for streamlined regulations that in turn would facilitate deployment of 5G technology.  Mr. Carr sees local and state regulations for cell tower and other facility siting as an issue and is making the argument that Sections 253 and 332(c)(7) of the Communications Act of 1934 can be leveraged to make local and state regulations less adverse to 5G deployment.

Under Section 253 of the Communications Act, the Commission may preempt any local or state statute or regulation that prohibits an entity from providing intrastate or interstate telecommunications services. States and localities can regulate telecom companies in order to preserve universal service, protect the public safety and welfare, and manage public rights-of-way.  Section 332(c)(7) maintains a state or local government’s authority over decisions regarding placement, construction, and modification of personal wireless facilities.

Mr. Carr argues that the order will generate $2 billion in cost savings for the wireless industry while generating an additional $2.4 billion in wireless investment.  Actual deployment is still nascent with expectations as to what 5G can do versus what it is actually doing.  Phones using 5G standards, according to Ms. Rouse’s article, are expected in 2019.  Cities are still constructing their blueprints for reconciling their smart city concepts and the “internet of things” with 5G expectations.  It may not be until 2030 that 5G becomes commonplace.

 

NAFTA negotiations provides Trump an opportunity to force Congress’ hand on net neutrality and privacy legislation

The North American Free Trade Agreement went into effect 1 January 1994, a full two years before President Bill Clinton would sign the Telecommunications Act of 1996 and almost a decade before law school professor Tim Wu would pen the essay that set the concept of net neutrality into motion. It doesn’t come to me as a surprise that issues such as equal treatment of data over networks or the privacy of subscriber data were not huge ones back then.

From the early 1980s through the mid-1990s, the policy priorities included universal service and promoting competition in local markets while increasing telephone subscribership among low income, black, and Hispanic communities. Talking about the internet in the mid-1990s was synonymous to Natasha Romanova whispering to Steve Rogers about the existence of The Winter Soldier, something that may be real, but we just don’t know.

But by 1995, the whispers were becoming clearer to industry and Congress that the internet and high-speed broadband access to an increasingly global inter-network of computers provided investment opportunities for capital while increasing the speed and efficiency in moving the most important resource: information.

Over the last fifteen years, American telecommunications markets have had to contend with the back and forth threats of an additional regulatory overlay in the form of net neutrality rules. Attempts to codify net neutrality, the principle that broadband access providers should be transparent about their management practices while not discriminating against non-affiliated traffic, and allowing subscribers to access content of their choice, has become very politicized over the past three years. In 2015, a Democrat-led Federal Communications Commission passed net neutrality rules that were repealed two years later by the current Republican-led Commission.

And while Democrats in the U.S. Senate were able to persuade enough Republicans to pass a resolution to repeal the Commission’s transparency rules and replace them with the 2015 rules, the likelihood of passage of the resolution by the U.S. House is impossible because it is currently controlled by the GOP.

The political reality is that subscriber concerns about accessing content of their choice as well as maintaining the privacy of the data that they buy and sell is important to maintaining the internet and broadband as attractive communications tools. The Trump administration has an opportunity to head off an international net neutrality debate by including language that encapsulates net neutrality principles while reiterating the importance of protecting privacy on both sides of the border with Canada and Mexico.

An additional benefit of putting privacy and net neutrality language in Chapter 13 is that it will force Congress’ hand during the ratification process. It would be inconsistent for the United States to approve language in a treaty that incorporates privacy protections and net neutrality principles for international data trade while not recognizing those principles in its national laws. This level of certainty in American and international law will provide a great benefit for investors.