2 QITCOM 2012 - Stagg Newman (Next Gen Broadband)

Lessons from Connecting America:The National Broadband Plan

Perspectives for the MidEast

Dr. Stagg NewmanMcKinsey AdvisorQITCOM QATAR 2012March 5, 2012

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Congress’s charge in the Recovery Act led to the creation of the National Broadband Plan

Congress said that the plan should:

• “Ensure that all people of ______ have access to broadband capability and establish benchmarks for meeting that goal.”

• “[I]nclude . . . a detailed strategy for achieving affordability . . . and maximum utilization of broadband infrastructure and service”

• “[I]nclude . . . an evaluation of the status of deployment of broadband service”

• “[I]nclude . . . a plan for use of broadband . . . in advancing consumer welfare, civic participation, public safety and homeland security, community development, health care delivery, energy independence and efficiency, education, worker training, private sector investment, entrepreneurial activity, job creation and economic growth, and other national purposes.”

Goals

A plan to encourage private investment and

innovation (w/ the exception of

subsidies for rural America)

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Goals of the National Broadband Plan

• Goal No. 1: At least 100 million U.S. homes should have affordable access to actual download speeds of at least 100 megabits per second and actual upload speeds of at least 50 megabits per second.

• Goal No. 2: The United States should lead the world in mobile innovation, with the fastest and most extensive wireless networks of any nation.

• Goal No. 3: Every American should have affordable access to robust broadband service and the means and skills to subscribe if they so choose.

• Goal No. 4: Every American community should have affordable access to service of at least 1 gigabit per second to anchor institutions such as schools, hospitals and government buildings.

• Goal No. 5: To ensure the safety of the American people, every first responder should have access to a nationwide, wireless, interoperable BB public safety network.

• Goal No. 6: To ensure that America leads in the clean energy economy, every American should be able to use broadband to track and manage their real-time energy consumption by 2020.

Goals

Countries need pragmatic aspirational and achievable goals that reflect their people, infrastructure, and government

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What the NBP is? What it is NOT? ….

What the National Broadband Plan is:

▪ A fact driven analysis of the state of broadband in the U.S. and the gaps between aspiration and reality

▪ A set of recommendations (>>100) for the FCC, the Administration and Congress

What the National Broadband Plan is not:

▪ A self-actualizing plan.

▪ A new regulatory structure for the communications industry

Goals

Most recommendations have not been implement, many due

to political stalemate…Major breakthrough last month

on Spectrum Policy

Nevertheless, a wealth of valuable analysis is available including the entire plan, supporting analysis, public input, workshops, etc at

www.broadband.gov

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Gaps in the broadband ecosystem (circa 2010)

Availability gap

Adoption gap

Digital skills gap

National purposes gap

• Fourteen million Americans do not have access to broadband infrastructure that can support today’s and tomorrow’s applications

(Fixed wireless access w/ LTE is best way to close gap)

• 93 million Americans do not have broadband at home

• Many Americans lack digital skills, even as many job openings are posted exclusively online

• The U.S. ranks in the bottom half of comparable countries on nearly every metric used to measure the adoption of health information technology

• Most of the U.S. electric grid is not connected to broadband

• First responders are using outmoded spectrally inefficient narrowband communications technology that denies them access to broadband applications for public safety and health.

Goals

In all but perhaps the most advanced Asian countries, the gaps will be similar while the specifics differ

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Several gaps may be hampering innovation, investment, and competition

Gaps Issues• Spectrum for mobile competitors is likely to enhance mobile

competition• More spectrum may also allow wireless technologies to

serve as closer substitutes to fixed broadband providers

Need for spectrum

• Consumers often do not know true performance of services purchased

• Consumers generally unaware how their own actions, along with internet characteristics, can affect performance

Lack of transparency for consumers

Patchwork of wholesale regulations

• Current data (commission and external) lack detail to make granular competition policy decisions

• Existing data collection does not allow comparative evaluation

Lack of detailed data to inform competition policy

Innovation, Investment, and Competition

• Well functioning wholesale markets can help foster retail competition

• Today's wholesale access policies were developed without reference to a consistent analytical framework

Policy gaps will likely be very country specific. Need for more spectrum for broadband wireless is universal.

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Trends in demand and supply suggest a looming spectrum gap

Moreover with sufficient spectrum wireless BB is the best way to serve “unserved” areas.

Need to transform spectrum policy to

meet wireless broadband demands

•300-500 MHz more spectrum for mobile broadband•More spectrum for unlicensed and new paradigms•Incentive auctions•Wider blocks of spectrum

Spectrum

Forecasted mobile data traffic in North America

Mobile broadband spectrum pipeline

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Policy changes needed for a range of issues

Gaps Issues

• Current allocation and utilization data is largely unattainable and often esoteric

• FCC needs at its disposal multiple tools for reallocating underutilized spectrum to next-generation users

Spectrum

• Wireless broadband growth is causing network strain that will intensify with next-generation technologies

• Spectrum can take years to reclaim• Growing need for expensive backhaul services, including

microwave

• Access lacking in terms of capacity, flexibility and affordability

• Opportunistic access to spectrum is limited to certain bands

• Demand for unlicensed spectrum among key stakeholders

• There is no framework for identifying future spectrum bands and needs

• Coordination of multiple domestic and international stakeholders

Policy scope too bounded

Access models limited

Suboptimal backhaul deployment

Insufficient capacity for broadband

Few spectrum reallocation tools

Lack of transparency in allocation and utilization

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Government regulation and policy affects deployment decisions.

Gaps Issues• Pole rental rates affect cost of broadband in rural areas—up

to 20% of a rural subscriber’s bill• “Make ready” charges for poles can constitute >10% of cost

of deployment• Multiple sets of sometimes inconsistent rules and policies

Too costly to access poles and other infrastructure

• Disputes over poles and ROW access linger for months, years; many states have better policies and timelines

• Near-constant litigation on scope of privately-owned pole, duct and conduit access rights

Time to access and resolve disputes

• Data on infrastructure availability not uniformly kept or updated

• Processes and fees for use of public rights-of-way and gov’t facilities for broadband facilities disparate and varied

Lack of information and data on infrastructure

• Different rates for pole attachments based on category of service offered affects upgrade and service decisions

• Failure to consider broadband as part of public works projects at planning stage can drive up costs substantially

Policies affect deployment decisions

Infrastructure

Enlightened policy can lower input costs and speed time to market.

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Making broadband available

Create a new Connect America

Fund

Intercarrier compensation

reform

Create a new Mobility Fund

Support universal availability of broadband and high-quality voice grade service with at least 4 Mbps actual download/1 Mbps upload speedsDevelop expedited process to target funding to unserved areas, shifting funds from legacy programsProvide support where there is no private sector business case to offer affordable serviceEncourage innovation with a technology- and provider-neutral program

Target funding to states that are significantly lagging national average for 3G coverage

Eliminate inefficient and irrational economic behaviorEncourage transition to IP-to-IP interconnectionStaged transition away from per minute rates to allow companies and investors to prepareProvide opportunity for adequate cost recovery

Inclusion

Availability policy must be driven by deep analysis of a country’s people

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Adoption by demographic & socioeconomic segment –in-depth surveying

49

59

69

35

64

7475

50

68

93

84

59

40

86

77

55

24

90

80

70

60

50

40

30

20

100%

10

0Hispanic*BlackWhite65+50-6430-4918-29RuralNon-

rural$40K

to $75K

$20K to

$40k

Less than $20K

College+

Some college

High School

Less than High

School

$75K +

*Hispanics includes both English and Spanish speaking Hispanics;

Percent of American adults

*Hispanics includes both English and Spanish speaking Hispanics;

Percent of American adults

Adoption

Cost – 36%▪ 15% - monthly fee for service▪ 10% - cannot afford a computer▪ 9% -- activation fee/contractDigital literacy – 22%▪ 12% -- lack of comfort with computers▪ 10% -- hazards of online life

Key reasons for non-adoption

Relevance – 19%▪ 5% -- content with dial-up▪ 5% -- internet is a waste of time ▪ 4% -- Nothing to see ▪ 4% -- Don’t use it muchRemaining reasons:▪ 15% -- other or combination of several reasons▪ 5% -- not available where they live▪ 3% -- can use the internet all they want at work

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Framework for recommendations – an example

Launch a three-part National Digital Literacy Program

Improve focus on evaluation, measurement, best practices, and state-level initiatives

Focus on “relevance” through public/private partnerships

Expand low income universal service support to broadband (see USF)

Adoption

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Accelerate efforts among low-adopting groups facing significant social or physical barriers

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The national purposes mandate

“a plan for use of broadband infrastructure and services in:

▪ advancing consumer welfare▪ civic participation▪ public safety and homeland security▪ community development▪ health care delivery▪ energy independence and efficiency▪ education▪ worker training▪ private sector investment▪ entrepreneurial activity▪ job creation and economic growth▪ and other national purposes.”

Healthcare

Energy and the environment

Government performance and civic engagement

Public safety and homeland security

Economic opportunity

Education

American Recovery and Reinvestment Act, §6001(k)(2)(D):

National Purposes

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Gaps persist in fully utilizing broadband for public safety and homeland security purposes

Gaps Issues

Public Safety

No nationwide public safety network

No nationwide, interoperable broadband wireless network that is ubiquitous, redundant, and resilientFew public safety agencies have access to commercial wireless mobile broadbandCommercial broadband does not support public safety requirements and is not cost effective

Outmoded 9-1-1 system 9-1-1 services utilize varied legacy communications networksFew public safety agencies have access to broadband services to support next-generation 9-1-1

Outmoded alerting system Current distribution technology limits amount of audio/visual to Americans over broadcast channelsFEMA has taken steps to develop IPAWS but clear implementation milestones are needed

Critical infrastructure vulnerabilities

Companies reported $265M+ in cyber crime-related lossesCommunications providers subject to frequent attacks on critical IP-based infrastructureInsufficient incentives and safeguards for security of critical communications assets

Source: Internet Crime Complaint Center

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Enables high coverage communications, resilient coverage and guaranteed access in a cost effective manner leveraging commercial assets

Provides access to additional capacity during emergencies, as well as increased network resiliency

For exceptional times and places when PS & commercial infrastructure is insufficient (e.g. wilderness) or has been destroyed

Solution for Reliable, High Coverage Mission Critical Voice, Data, & Video 4G Services

Coverage deep inside large buildings and capacity for high pedestrian density (e.g., shopping centers) can only be provided by in-building solutions

Public Safety Broadband Wireless Network

Public Safety’s Dedicated RAN using Commercial cell sites and core

Commercial Wireless Networks

Public Safety Roaming and Priority Access

Deployable Equipment Caches

Deployed and controlled by PS

DAS and Picocell Systems

In-Building/Underground Coverage in PS Spectrum

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Innovative public private partnership can lower the costs of a nationwide broadband public network from >>$20 Billion to < $10 Billion

Public Safety

Feb. 2012: Congress passes enabling legislation for BB PS network with public/private partnership

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Lesson for all upon reflection 2 years later

• Realizing the public good from BB requires addressing a complex set of factors that include availability, adoption, and national purposes that are country specific and political.

• Wireless will drive the next “Big Wave” of innovations, provide exciting applications and services and be the most capex efficient way to provide broadband to “unserved” people and areas but …

• Spectrum policy must be dramatically changed to realize this potential:

More licensed spectrum and More unlicensed

Innovative approaches (e.g. incentive auctions) to create more efficient usage

Wider blocks of spectrum

• Understanding the barriers and solutions to greater adoption and requires deep analysis of both users and non-users of broadband

• Innovative public private partnerships provide more capex efficient methods to meet national purposes (e.g. BB Public Safety).

Implications for all countries