Alton Drew

Reading the shift …

Category: Uncategorized

Broadband networks remain resilient …

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JUNE 17, 2020

 

USTelecom recently released updated data on broadband network traffic growth during the COVID-19 crisis. Elevated levels of traffic persist compared to the pre-crisis baseline, though overall network traffic decreased since its peak in mid-April. Since reaching a high of 27% over the pre-crisis baseline the week of April 16, the average traffic increase was between 10% and 13% from May 7 – June 11.

Even with the traffic increases, USTelecom members’ core network capacity remains fully capable. Interconnections between networks have remained uncongested, even during peak traffic periods, with an average of 61% to 74% of the total capacity of peering links available as a buffer.

Source: USTelecom

Of banks and the politics of coronavirus support …

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Politics of banking

Earlier today, the chairman of the U.S. House of Representatives Select Sub-committee on the Coronavirus Crisis, James Clyburn, Democrat of South Carolina, sent a letter to Steven Mnuchin, Secretary of the United States Department of the Treasury, and Jovita Carranza, Administrator of the Small Business Administration, requesting that Treasury and the SBA take steps to ensure that $130 billion remaining under the Paycheck Protection Program and Health Care Enhancement Act (PPP) are allocated to businesses truly in need and that both agencies increase the level of transparency about the recipients of funds that have already been expended.

According to the letter sent by Chairman Clyburn, Congress is concerned that with no clear guidance issued by either the Treasury Department or the SBA, larger businesses that already had lending relationships with banks that distributed the funding, would be first in line for the lion share of funds.  It was partly due to this fear that Congress followed up the Coronavirus Aid, Relief and Economic Security Act (CARES Act) with the Paycheck Protection Program and Health Care Enhancement Act, which provided an additional $310 billion in funding and set aside $60 billion to be distributed by community lenders with a track record for lending money to smaller borrowers.

The political controversy surrounding the support program is spawned by Chairman Clyburn’s that banks release the names of all recipients of paycheck protection program funding.  Republicans apparently have not signed off on this request given the lack of Republican signatures on Chairman Clyburn’s letter.  In addition, Secretary Mnuchin has referred to the requested information as proprietary, a description that Chairman Clyburn does not agree with.

The issue appears more a political one than a market one.  Neither demand or supply for these funds are the result of economic interaction between the seeker of loanable funds and provider but more the result of government imposed shutdowns, and the resulting slowdown in the economy as social distancing and quarantines have reduced foot traffic in restaurants, stores, and automobile showrooms to a halt and in a number of cases has caused businesses to seek bankruptcy protection.

The big banks, including J.P. Morgan Chase, Bank of America, Truist, Citibank, and Wells Fargo have been called out by critics for hooking up larger businesses with more established relationships versus the mom and pop with ten employees on the verge of shut down.

But as Paul Miller of Miller & Co. LLP shared in a post on BloombergTax.com, there are alternative sources of funding for small businesses out there.  They include:

  • The Employee Retention Credit;
  • Local and state coronavirus resources (see http://www.fundera.com);
  • Crowd-funding;
  • Venture capital; and
  • Traditional lines of credit.

 

Elected officials should better promote information technology when addressing rural economies …

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Information driven firms don’t require the standard top-down hierarchical structure. It has no need for administrative staff. It barely has need for a managerial staff. Each wage earner must become more of a self-sufficient information node, with each node given more or less equal weight by a reduced by still centralized management.

The new information infrastructure will look more like a distributed energy platform versus the standard step down energy platform. This means greater reduction in labor, a forecast that has been bouncing around for half a decade.

For elected officials promising more job opportunities in the rural space, they will have to reconcile this coming reality and either weave it into their economic opportunity narrative or look for a fall guy or gal for the coming doom in the labor markets.  The adjustment will not be easy for their constituents.  The voter/citizen has been under considerable stress due to work from home requirements, stay-in-place requirements, and reductions in workforce as government induced fall off in demand for services took hold of and wrecked certain business models.  As part of his promise to create jobs in rural America, apparent Democratic nominee Joe Biden has proposed a $20 billion rural broadband plan for deploying more advanced communications technology into rural America.  Mr Biden states that this funding will equal three times the amount of funding under the U.S. Department of Agriculture’s Community Connect Grant Program.  Under 7 CFR section 1739.1, the purpose of the program is:

“to provide financial assistance in the form of grants to eligible applicants that will provide, on a “community-oriented connectivity” basis, broadband service that fosters economic growth and delivers enhanced educational, health care, and public safety benefits. ”

Donald Trump’s broadband program doesn’t seem that definitive.  On his campaign website, the President notes as an accomplishment a 2018 program dedicating $50 billion to empower rural economies, 80% of those moneys going directly to state governors and the remaining amount going to selected states that apply for a rural performance grant.  Whether funds went to the governors or to select states applying for performance grants, the amounts promised by the President appear less than those promised by Mr Biden.  Currently, according to the Department of Agriculture’s website, the Community Connect Grant Program is closed.  Funding this program or another one like it would support the President’s rhetoric about increasing economic opportunities in rural areas.

The economic uncertainty surrounding the COVID-19 pandemic has fueled talk about people leaving the cities for urban areas.  Axios, citing polling results, reported that one-third of Americans are considering moving to less densely populated areas including rural areas.  Urban residents are more likely to consider a move versus suburban or rural residents.  If this finding were to materialize then there might be an uptick in demand for broadband services in these areas.

Supporting more broadband is a political win for either of these candidates.  Consumers should bear in mind that broadband roll-outs call for coordination between federal, state, and local government agencies and the policy desires of a president are not enough. Elected officials will need to put their money where their mouths are and ensure the funding of programs such as the Community Connect Grant Program and other similar programs.

 

 

Balkanizing internet regulation is out of step with the uniformity needs of financial technology

Posted by on in broadband, Congress, digital trade, Financial Regulation, fintech, UncategorizedLeave a comment

Analysis

The eye-catcher ….

In two weeks, state utility regulators will convene in San Antonio, Texas for the National Association of Regulatory Utility Commissioners annual meeting to discuss how they can leverage a recent decision by the United States Court of Appeals-DC Circuit that the Federal Communications Commission cannot preempt state regulation of concerns over consumer access to and privacy on the internet via broadband.

Some states such as California have moved ahead with their own net neutrality laws, hoping to enforce consumer protections by prohibiting internet access providers from lowering traffic speed from certain websites or preventing internet service providers from favoring their own content by blocking a consumer’s access to content that the consumer prefers.

The state-by-state approach problem

The problem with a state-by-state approach for a financial technology firm is the uncertainty that data and capital face when they traverse state borders. Will a content delivery firm tasked with storing and transmitting financial data on behalf of a financial technology firm have to enter into different interconnection agreements per state because of the differing consumer privacy laws encountered in each state?  Will differing requirements on paid prioritization result in financial data traffic slowing down depending on which state border it crosses?

There is an irony that on a global basis, the United States is a staunch proponent of freer cross-border data flows, but would run the risk of subjecting those same data flows to a hodge-podge of regulations that create digital toll roads for financial data traffic.

The changing consumer taste in banking

What federal and state policy makers should be focusing on is ensuring the amount of bandwidth necessary for digital transmission of financial data and capital is available.  Our use of digital banking services will not be shrinking anytime soon.  MediaCom Business cited data in a blog post that 92% of millennials make their choices as to where to bank based on the digital services a bank offers.  Legacy banks hoping to compete with digital upstarts are accepting this type of demand an, as found by consulting firm Accenture, are exploring how best to integrate and deploy technology necessary for meeting this demand.

Recommendation: Seamless versus Balkanization

The supply of digital banking and payment systems services combined with increasing demand for these services means more bandwidth is needed in order to optimize the consumer experience.  State and federal policy makers can facilitate this need for increased bandwidth by focusing policy on ensuring the delivery of this infrastructure.  Coming up with 50 different rules on net neutrality is more distraction than help.

What should be spawned in next month’s NARUC meeting is a recommendation for national legislation on consumer privacy.  Consumer privacy concerns should no longer be leveraged to create 50-plus fiefdoms for net neutrality.  Transmission of information, data, and knowledge should be a seamless experience for consumer and firms that use financial technology to transmit value and capital.