Broadband policy and the free market

Starlink is a great product.   It’s made a dramatic difference for us at our rural home, where it is the only broadband solution available.  

• We had Centurylink ADSL for years, and Centurylink never made the slightest attempt to offer anything better.
• We are miles from the nearest fiber run.   The local fiber provider would be happy to extend fiber down our road, but it would be at our cost — it passes too few houses to make sense for the fiber provider.  It would be costly for us and the 1-2 other homes that want to see it happen.
• Fixed wireless coverage cannot reach us due to hills.   It would have been a great choice, but we would need to erect a massive antenna tower, for which we could probably not get a permit.  Many people in the area are happy with fixed wireless, however.

So, Starlink is the only viable answer, and it is a great one.  The app is great, installation was easy, the equipment has been durable, and the service has been very reliable. 

Starlink is also great for mobile users — RVs, campers, touring musicians, etc.  A friend of ours recently used it while doing some remote camping in the Cascades; he gives it a big thumbs up.  Another friend used it on a vacation in a remote area and had a great experience.   I had missed the air carrier announcement; Ben Thompson ($) pointed this out in his recent Stratechery newsletter; this will dramatically improve internet access while flying and will affect my airline choices.  

As noted in Stratechery, Starlink is built on the success of SpaceX and the continued attack on launch costs.  The commercial race to drive down launch costs has opened up whole new businesses and will continue to do so; that is why I am excited about StokeSpace and other space startups.  Turning space launches over to the free market has been a great thing.  Again, Stratechery has a great write-up on launch costs this week ($) (Stratechery is well worth the subscription cost).

So, the free market has organically provided several very good broadband solutions for underserved markets — Starlink and fixed wireless.  Other providers, such as Amazon’s Project Kuiper, intend to follow Starlink following the continued improvement in space launch costs.  This is how the market should work — aggressive corporations and scrappy operators jump in to provide these new solutions, and additional entrants follow in.   A sensible policy would be to try to throw some fuel on the fire — encourage Starlink to expand faster, encourage other LEO operators to come online, and encourage fixed wireless operators to serve new areas.

However, US broadband policy is stuck in bizarro world.  Billions of dollars have been allocated at the federal and state levels, and many sites report that not a single house has come online.   There is a lot of bureaucracy, a focus on buried cable operators instead of the various wireless choices, and a lot of money flowing into consultants and plans and administration instead of real progress.   It is complex to track the broadband legislation, but here is a first attempt.  (I apologize for any errors, it is a little complicated to walk through all the material, and I have probably screwed something up.)

The Bipartisan Infrastructure Law, passed in late 2021, included $65B in funding for broadband access.  The largest part is $42B+ for the BEAD program administered by the National Telecommunications and Information Administration (NTIA) in the US Department of Commerce.  The objectives of the Broadband Equity Access and Deployment (or “BEAD”) Program are:

Funded by the Bipartisan Infrastructure Law, BEAD is a federal grant program that aims to get all Americans online by funding partnerships between states or territories, communities, and stakeholders to build infrastructure where we need it to and increase adoption of high-speed internet. BEAD prioritizes unserved locations that have no internet access or that only have access under 25/3 Mbps and underserved locations only have access under 100/20 Mbps.

The BEAD program is administered through the states, for instance, the Washington State program (administered by the Washington State Broadband Office in the Washington State Department of Commerce), the Ohio BEAD program (administered by the Ohio Department of Development), and the California BEAD program (administered by CPUC).  Each state can run the program from different parts of the state government, but they all follow a prescribed grant-making process.

Washington State has received at least $176M of these grants (including or in addition to $8.9M in administrative funds; I am not certain if this is included or is additional money).   Additional state monies have been allocated for a total of $777M being spent on broadband access in Washington State. This money is further broken out and assigned to counties or other entities that oversee the spending of the money.  

BEAD status can be tracked nationally via this NTIA-sponsored tracker built by CostQuest, a telecom consulting firm. The Washington State tracker is at this site.  Other states have their own trackers, apparently all built separately.  You can also track Washington State's progress at the Digital Equity Dashboard, where you can drill down into the Broadband Funding Map.  Or maybe you want to look at the State Broadband Survey.  Some of these sites were built by another subcontractor, Breaking Point Solutions.

I’ve pored over all these sites and attempted to understand the process and status.  It is not easy to grasp.  I’d love to see an actual accounting of the dollars spent and project status, but I haven’t found it.  It doesn’t appear we have spent much on building out connectivity and connecting homes.  

In my rural area, most of the allocated funding is going to Centurylink and Verizon, two incumbents who have been in the telecom market a long time, and have done nothing for broadband access in my area.  

All 50 states are independently doling out money.  This might be good if the 50 states innovated and tried different methods, but there is no diversity in approach; we are just duplicating bureaucracy 50 times — all this website and map activity is being duplicated 50+ times.  We are spending a bunch of tax dollars on process definition and process management and websites and databases and white collar workers and consultants to futz around with it all.

We have walked away from the market-based success that is happening and are attempting to enforce something else through bureaucracy, like a centrally planned economy – there is even a 5 year plan.   We are squandering the strength of our open market system, we aren’t accelerating what is already happening, we are putting money into the pockets of white collar administrators and consultants, and we are routing money towards incumbents who have done nothing about the challenge.  There is no evidence that anyone has studied the broadband rollout in more connected countries like South Korea to see if anything could be learned (And it is not just density — South Korea appears to have a more straightforward regulatory setup and simpler government approach)

The whole approach is cumbersome, slow, and wasteful.  We need more thoughtful policies that leverage the strength of our people and our free markets.  We know how to use tax credits and tax policy to increase the attractiveness of business goals; we do this all the time as a nation.  Encouraging broadband access is a great goal, and we need great policy to match it.

Market Discipline, Market Failure

In our broadband policy, we fail to encourage the free market to do what it does best. Sometimes the free market does need some guiderails though.

I see people bemoaning the potential breakup of Google, and even at times arguing against any substantial remedies.  I am very optimistic about the benefits of breaking up Google or substantially altering their business practices.  

Paul Maritz, one of my mentors at Microsoft and afterward, frequently mentioned the idea of “market discipline.”  This phrase has a slightly different meaning in the banking arena; as Paul used it, though, it applied more to the misbehavior of powerful industrial firms.  When a company faces stiff market competition, it learns market discipline —  it continually hones its offerings and business to acquire and keep customers.   This serves customers well — they get good products at reasonable costs as competitors constantly try to gain market share.   However, when a company is too dominant, market discipline relaxes, and companies start manipulating products in ways that aren’t customer-focused or economically rational.  The company becomes undisciplined and starts making decisions that a competitive market would not reward.

Google is very dominant in search, and any user will tell you that Google Search results have become less user-friendly as more and more paid content is jammed in the first page of results.  This paid content may be serving Google very well, they are certainly making a great deal of money, but it is clearly not serving users well.  

In my most recent search (“Best Smoker”), for instance:

• There were no organic results on the first page
• One of the sponsored results was for a product that wasn’t even a smoker
• The results vary widely from day to day.   AI results coming in and out, shopping links coming in and out.  
• None of the results matched, in my experience, what my smart smoker friends are buying

We’ve all had a form of this experience.  It drives one to try alternatives to Google, which is probably not Google’s objective, but their power is getting in their way.  

Amazon is equally dominant in shopping, and searching for smokers on Amazon will also bring up mostly sponsored results with no organic results.  And Prime has nearly lost its meaning, as so many offers fit inside the definition of Prime now, with wildly varying delivery guarantees.   This may be great for Amazon, but it is a terrible experience.  I never start a search on Amazon any more, it is just an endpoint once I know what product I want. 

For both Amazon and Google, their market power has resulted in a decaying user experience.   Without the requirement to earn our business every day, the companies steer the UX towards capturing maximum value for themselves, regardless of user impact.  

Will a breakup or other restrictions on Google address this?   Who knows, but the history of significant antitrust actions is hopeful.   Microsoft has become more competitive and more focused on customers as its power has waned.  The breakup of ATT ultimately drove telecom costs way down and encouraged new mobile and backhaul entrants.  There is no reason to believe a breakup or operating restrictions on Google would not be equally positive.  We are better served as consumers when multiple companies are fighting hard for our business.

Short Notes

The new Kindle Scribe tempts me, but I don’t want my notes off in some closed Kindle ecosystem (or Remarkable ecosystem). The market of "reading notes" is never going to become its own ecosystem – no one is going to organize their life around the Kindle or Remarkable devices. I want these devices to integrate into the notes tools I use.

I am not buying the assessments about Apple’s push into the home.  No one wants to spend more time being the ops manager for their house; a product that makes it easier to manage home ops will not find a market.

The US is lapping the world in space startups and space launch costs ($).  Very heartening. A smart person said to me – maybe we shouldn't worry that much about disappearing auto jobs; maybe we should double down on the space economy. Intriguing.

The tech industry and the energy industry are increasingly entangled – Google nuclear plants, Amazon nuclear power deals, Microsoft and TMI.  Moore’s law comes for everyone, one way or another.