Convergence in France

Iliad, a new French telecom company, offers its customers 81 TV channels, VOIP and broadband access at 24 Mbps for $36 a month. I pay $134 a month for 100+ TV channels and broadband access at 1.5 Mbps. What's wrong with this picture in the land where the Internet was born?

Slower than almost everybody else

That's the U.S. with regard to internet speeds. Take downloading a high-definition movie, for example. In our big cities it takes about 1.4 minutes if you are paying for our highest speeds; by the way you pay about $300 a month for such service. If you lived in  Seoul, Hong Kong, Tokyo, Zurich, Bucharest and Paris, it would take 7 seconds and cost you $30 a month.

But if you live in Chattanooga, Tenn.; Kansas City (in both Kansas and Missouri); Lafayette, La.; and Bristol, Va., your speed is about the same as the foreign leaders. Is that because these cities do not have Comcast and other monopolies as their carrier? They have a city-run network or start-up service.
the lack of competition in the broadband industry. 

As the head of the FCC recently said, "Three-quarters of American homes have no competitive choice for the essential infrastructure for 21st-century economics and democracy.” 

Still not competitive

How can it be that the country that invented the Internet is ranked 16th in the world in broadband penetration, speed and price?  But that is reality.

The really difficult thing to accept is that the reason for our being second-rate in the world of the Internet is because our Internet providers have managed to snuff out competition.  Most of us have really only one cable provider.  Sure, there is DSL and satellite, but are they really competitive?

Take advantage of low interest rates today

That's what Barry Ritholtz argues.  Start fixing our infrastructure.  Interest rates will be rising and, with them, the costs of the fix. Here are some things Ritholtz thinks we could work on.

• Our electrical grid consists mostly of wires strung between wooden poles, which may have been innovative in 1850 but is somewhat past its sell-by date today. After Hurricane Sandy, much of New Jersey, Long Island and Connecticut lost electrical service for two weeks. The entire grid needs to be hardened, upgraded against cyberattack — and buried underground.

• We can make our road system “intelligent” by using sensors and software to move traffic more quickly and efficiently than the current “dumb” system does. The productivity boost and fuel savings make this a big return on investment.

• Bridges that are well past their life expectancy should not simply wait to fail. We should be actively replacing these. The alternative is waiting for random events — like the truck crash that caused the Washington state Skagit River bridge collapse — to cause a disaster.

• The United States’ cellular network is a decade behind Europe’s and Asia’s coverage and reliability. Mandate better minimum service requirements and make available cheap financing to wireless providers to do so. We can do the same with broadband as well. 

• The interstate highway system has been one of the lasting legacies of the Eisenhower administration. It is time for a full upgrade of this economic multiplier.

50% more

That's what we in the U.S. are paying for entry level broadband per month vis-a-vis Sweden, the lowest cost country. But, as you know, the issue is about more than absolute dollars. How many megabits per second does your dollar buy? In Japan it costs you $.22 per megabit per second. In the U.S. the number is $3.18.

Once More Into The Breach

How is it possible that the U.S. invented the internet but we pay more for slower service than many of the Western nations? Sad but true. I can't believe that I've been saying this for five years. As has Bruce Kushnick. His latest diatribe was triggered by the release of the FCC Internet Access report.

This report cost around $300,000,000 to produce but it's hard to figure out what the money was spent on as much of the data is wrong. Go here, type in your zip code and see how accurate the data is. I did it for my old stomping ground, the Vineyard, and was surprised to see that Comcast does not provide service there although most of the Vineyarders I know use either Comcast or Verizon.

After Kushnick eviscerates the FCC report, he naturally moves to the cost and speed of broadband here and elsewhere. You know we are getting raped, yet the FCC will likely allow the providers to charge us even more.

There is a lot of junk in space

Of the 4,000 satellites orbiting earth, only 1,400 are working. Plus, there are about 5,000 metric tons of garbage from the working satellites. So, maneuvering around this junk to avoid hitting it is not an easy task. Some of our legislators are concerned and have asked the FCC to work with NASA to keep the number of satellites manageable. 

The junk is not necessarily a whole satellite; just a tiny fleck of paint from an old satellite can cause a lot of damage. Yet, many companies, such as SpaceX and Boeing, want to launch even more satelites. SpaceX wants to launch 4,425 more by 2024 to build out a broadband network in space.

Will we ever be #1 in Internet Capabilities

Bruce Muchnick has another paper about the future of broadband in America.  It does not look bright. We still offer slower speeds at higher prices than most advanced countries. He also thinks that the FCC is giving our money to the carriers without getting anything in return.

The high cost of internet access in America is not new. It has been the case since at least 2006. When will we get an FCC that stands for us?

It's on Schedule A, Allan

Allan Hubbard, Bush's assistant for economic policy, wrote in yesterday's Wall Street Journal that "those who have to buy coverage (he's talking about health insurance) on their own get no tax break at all." I pay for my own health insurance and Schedule A of Form 1040 allows me to deduct some of this cost. See here for additional insightful observations of Mr. Hubbard.

On the same page Robert McDowell, FCC commissioner, takes off on the recent OECD survey of broadband usage. He attacks the survey because the methodology re usage was based on per capita. He ignores the real issues of the survey - we pay more for slower service.

Where does Bush get these guys?

When will the FCC work for us?

I can't believe that it's been six years since I started writing about our country's poor Internet performance and high Internet cost.  The OECD periodically reports on the Internet status in their various countries.  We are not the cheapest; there are 28 (of 34) OECD countries whose citizens pay less than we do for web access. This high cost has affected Internet penetration; in 2002, the United States had the sixth-highest broadband penetration among all O.E.C.D. countries. Last year it was in 15th place.  Somehow in the country that invented the Internet we rank 17th in terms of average download speeds.

And now net neutrality has once more become a hot item in the halls of Congress.  The lobbyists are out in force to allow the telecommunication companies to discriminate amongst its users; equality of access will vanish.

The 20th century FCC was concerned with us.  Remember the MCI decision? They also made sure that you could use a non-Bell phone to make calls on Bell networks.  AT&T was cut up into smaller - and sometimes more responsive - companies.

Will the 21st century FCC put us first?

Sense

Every so often you read something that resonates with you and are surprised at who wrote it. A year ago I wrote about Lee Iacocca’s words. Today, I read a speech by Leo Hindery and was surprised at how sensible he was. Hindery is not an academic. He is a very successful businessman in the telephone industry - CEO of AT&T Broadband and its predecessors, Tele-Communications, Inc. (TCI) and Liberty Media. He now runs his own investment company.

Like any human, he is not without problems, one of which was his association with Daschle that forced Daschle to withdraw as nominee for Health and Human Services Secretary.

Nonetheless, he has some worthwhile things to say about our economic quandary. Hindery lays most of the blame on the shift from advancing the cause of the middle class to advancing the cause of the rich, which was really a change in the sense of responsibility of corporate leaders. Hindery speaks approvingly of Reginald Jones, CEO of GE, who in 1972 said that his job was to work in behalf not only of shareholders but also in behalf of employees, customers, communities and the nation. Hindery writes that Jones then went on to say that a large fully-employed middle class growing from the bottom up would be the very best thing for his company, its shareholders, and the United States.

Jobs are a major concern for him and he’s not talking about any old job. He’s convinced that good-paying jobs are the heart of a good economy. He asserts that if you add in those who are underemployed we are really looking at a much higher unemployment rate, something on the order of 15+%.

He makes the interesting point that in other developed countries consumer spending accounts for less of the economy than in ours. Here, it was 71%. But we are now moving to a lower ratio; this movement has to be considered in any economic planning. And, of course, he laments the size of our trade deficit, the loss of manufacturing jobs and the size of the credit losses.

Hindery does not think the current economic plans are up to the job because they are

• Too small by half;
• Not nearly timely enough in some of its spend-out rates;
• Too focused on small one-time individual tax cuts [$233b]; and, most important,
• Too underperforming against the only measure that really counts, which is job creation.

He thinks we need our own Marshall Plan.

More specifically, he advocates the following:

1. A genuine national industrial & manufacturing policy plus trade policies that put American workers first and are as mercantilist as the policies that exist in the major emerging markets - especially in China, India and Brazil - and in some of the other major developed countries such as Germany.

2. A ten-year (not a two-year) program of significant public investment to upgrade and rebuild our nation's infrastructure, which will immediately create 18,000 new jobs for each $1 billion we spend [source: Univ. of Mass.-Amherst PERI] and help American companies succeed in the global marketplace.

3. Policies that encourage private investments in wind and solar PV energy, together with targeted [i.e., $50b] federal government spending related to:

• Improving energy efficiency in manufacturing facilities,
• Smart grids and smart meters,
• Ready-to-go transportation projects and clean-energy public transit vehicles, and
• Building retrofits.

These initiatives alone would very quickly create 3 million new jobs, including nearly 1 million construction jobs and 800,000 manufacturing jobs.

4. A very strong "Buy American" requirement related to all federal procurement, which now comprises about 19% of our economy, along with policies which encourage the domestic manufacturing of green energy component parts.

5. Major tax incentives for businesses of all size to invest in state-of-the-art laboratories, domestic jobs-focused R&D, and follow-on manufacturing plants and equipment.

6. Programs similar to Roosevelt's Civilian Conservation Corps and later programs like VISTA and CETA, in order to provide employment opportunities for this year's 6.4 million high school and college graduates and the graduates who will follow. To appreciate the magnitude of just this one challenge, the unemployment rate of workers with only high-school diplomas is already 19.6%, not even including the high school classes of 2009.

7. Significant expansion of job training and apprenticeship programs.

8. Public-sector employment initiatives that target urban renewal and, especially, enhanced inner-city K-12 education.

9. Passage of the Employee Free Choice Act so that the 60 million or so workers who would like to join unions can do so without obstacles, since expanding union membership is one of the clearest signposts on the road to growing the middle class from the bottom up and less income inequality.

Beyond these nine points, Hindery urges a restructuring of the financial world as well. He is at a loss to understand why TARP money was given without any charter that loans had to be made. And the stress tests which accept a 25:1 debt-to-net-capital ratio are laughable.

He closes by discussing what he feels are the root causes of the current problems, corporate irresponsibility and excessive executive and management compensation.

For the 35 years following the end of the Second World War, the critical component of making the pursuit of the American Dream fair for all Americans was how honorably government and business behaved and interacted, and for the most part they did pretty well. Now, however, Corporate America often uses the excuse of needing to "stay competitive" in the global economy to justify breaking its social contract with workers.

But the global economy doesn't have to mean more job insecurity, stagnant wages, and little or no health care or pension benefits. And it also doesn't have to mean threatening workers with moving their jobs overseas and slashing their benefits, just because multinational corporations have almost complete mobility of capital and technology and American workers have almost no mobility.

Every day in America, we tolerate the needless offshoring of millions of jobs, when CEOs could instead be demanding immediate tax cuts for manufacturers, tax credits for U.S.-based R&D expenditures, and trade agreements that incorporate anti-subsidy and anti-currency manipulation provisions and strong labor and environmental standards.

Every day in America, we are foreclosed from the benefits that would come from a meaningful carbon cap-and-trade system, because just one member of the 160-member Business Roundtable - Exxon Mobil - opposes this system, despite the fact that nearly every other developed nation in the world is in the process of implementing one.

Every day in America, a handful of insurance companies keep universal health care from the 100 million or so citizens who are either uninsured or chronically underinsured.

In my opinion the reason these things are happening is because also every day in America, the average public company CEO earns about 400 times what his average employee makes, while thousands of other managers in both business and financial services drink heartily from the same frothy trough.

For most of the last century, CEOs in the U.S. earned roughly 20 times as much as the average employee [source: EPI per NY Times, 12-18-05 and 1-01-06], and even today the ratio of CEO pay to that of the average employee has remained around 22-times in Britain, 20-times in Canada, and 11-times in Japan. But in just ten years time or so, we in America abandoned this fair and equitable relationship, both in business and in financial services.

And in the process, we not only shot our own economic foot off, but that of nearly every other economy in the world. For not only is our current extreme disparity in compensation an ethical embarrassment and an affront to workers and shareholders, but it also sadly underpins, in my opinion, almost every major corporate misbehavior of the last decade, especially including this great "financial crisis of 2008". As the infamous bank robber Willie Sutton said when asked why he robbed banks, "It's where the money is."

Leaders No More

Yes, we did invent the Internet. No, we are no longer leaders when it comes to capabilities and cost of the Internet we use every day. The OECD has a number of spreadsheets documenting the current status. In terms of speed, 14 countries have faster download capabilities than we do. In terms of price we get a lot less for our money than many of our Western allies; in Canada, in Denmark they get twice our speed and pay less for it.

In the past three years things have not improved for us. The FCC has announced a National Broadband Plan to change things, but it doesn't look very promising, largely because it does nothing to promote greater competition.

Rewarding superior service

The FCC is pushing the abandonment of net neutrality because the U.S. has such fantastic broadband speeds as the following chart shows.