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Rural Broadband Stimulus Under Fire, But Is It All Really an AT&T-Sponsored Smoke Screen?

One of the things we have tried to teach readers over the last few years is how important it is to follow the money trail when encountering a group, politician, or researcher counter-intuitively arguing “up is down” or “right is left.”  So when a business columnist in the Press of Atlantic City slammed rural broadband as a service provided “to a group of people who mostly don’t want it,” we started digging:

The FCC claims this effort will give 7 million rural people reliable access to high-speed Internet connections. So the hundreds of millions of urban and suburban Americans who wish their Internet was faster and more reliable will pay for 2 percent of us to get just that.

Or maybe we’ll be paying for redundant, overpriced telecom work by companies that donate to rural politicians.

Federal stimulus spending in response to the recession already included $7.2 billion for this same purpose. An analysis by Navigant Economics of three big projects under that Broadband Initiatives Program found:

Even “areas in which very high proportions of households were already served by multiple existing broadband providers” were eligible for subsidized broadband work.

The author’s suspicion that money was involved in all this was correct, but he completely missed who was boarding the money train.

Navigant Economics, the “research group” that produced the inflammatory report slamming rural broadband funding, happens to count AT&T as one of its important clients.

The group, a subsidiary of Navigant Consulting, provides economic and financial analysis of legal and business issues to law firms, corporations and government agencies.

In fact, Navigant pitches its services to a range of corporate clients:

Navigant Economics provides economic analysis in litigation and regulatory proceedings involving competition issues. Our experts have provided testimony in proceedings before District Courts, the Department of Justice, the Federal Trade Commission, the Federal Communications Commission, the Federal Energy Regulatory Commission, and numerous state Public Utilities Commissions.

We provide economic analysis and testimony in connection with mergers and acquisitions and antitrust claims of:

  • Anticompetitive horizontal agreements (price fixing, bid rigging, potential anticompetitive effects of joint ventures)
  • Unilateral conduct (predatory pricing, refusals to deal, monopolization via patent fraud)
  • Vertical restraints (exclusive dealing, requirement contracting, tying and bundling)

We also offer economic analysis and testimony on issues of price and rate of return regulation, mandatory access, quality of service, and benefit-cost analysis, with especial expertise in regulatory proceedings involving communications and the Internet (software and hardware sectors, network unbundling and “net neutrality” issues affecting telecom and cable firms, retransmission consent and other content-related issues, and the range of wireless spectrum issues) and all types of energy markets.

Phillip "Making Sense, Not Dollars" Dampier

The result is what critics refer to as “dollar a holler research” — bought-and-paid-for-results that coincidentally fit the framework of a client’s public policy agenda.  In this case, AT&T (among other phone companies) has fretted about broadband stimulus funding ever since the Obama Administration made it clear the industry would not collectively control the program or reward themselves at taxpayer expense.  In addition to criticizing the decision-making process, phone and cable companies have objected to numerous applicants who applied for grants to build networks serving communities those companies have ignored or under-served for years.

To say AT&T has no vested interest in the outcome of rural broadband would be the first major understatement of 2012.

Martyn Roetter with MFR Consulting said Navigant was giving a bad name to researchers.

“Navigant Economics as well as other economists in academia and the consulting profession seem increasingly prepared to support arguments in favor of their clients’ desires and goals regardless of whether they are reasonable or preposterous,” Roetter wrote. “Unfortunately this behavior tends to blur the distinction between (a) respectable advocacy with findings based on evidence and rational arguments and (b) indefensible nonsense, discrediting both academics and consultants.”

Navigant spent much of 2011 trying to convince regulators and the public that T-Mobile actually doesn’t compete with AT&T, so there should be no problem letting the two companies merge.  Readers win no prizes guessing who paid for that stunner of a conclusion.  Thankfully, the Department of Justice quickly dismissed that notion as a whole lot of hooey.

Navigant’s second ludicrous conclusion is that there is no rural broadband availability problem.  Navigant has a love affair with slow speed, spotty DSL (sold by AT&T) and heavily-capped 3G wireless (also sold by AT&T) as the Frankincense and Myrrh of rural Internet life.  With those, you don’t need any broadband expansion (particularly from a third party interloper).

“The notion that a nominal maximum speed in a shared radio access network is comparable to a nominal maximum speed of a fixed broadband line to a location is a striking example of ignorance, wilful or otherwise, of the very different operating characteristics and capabilities of these two transmission media,” Roetter soberly observed.

But he knows better.

Roetter

Kevin Post, columnist for the Press of Atlantic City, bought Navigant’s conclusions hook, line, and sinker and repeated them in the press.  In fact, he upped the ante parroting the time-honored provider argument that rural America doesn’t need 21st century broadband because, well, they just don’t want it:

This costly effort is aimed at bringing broadband to a group of people who mostly don’t want it, according to a 2010 Pew Internet survey.

Half of Americans who don’t use the Internet told Pew that the main reason is they don’t find it relevant to their lives.

Only one in 10 nonusers said they would be interested in starting to use the Internet sometime in the future.

Actually, the Pew Internet survey came well before Navigant’s outlandish conclusions, and didn’t directly address the rural broadband availability problem.  Instead, Pew was looking at broadband adoption rates, primarily in places that already have one or more broadband providers.  Pew found what providers have already realized themselves: broadband growth and adoption is slowing; everyone who wants the service in urban America already has it or wants it.  Those that don’t are typically older and lack computers or are too poor to afford the asking price.

Post’s suggestion that a Pew Study concluded rural America does not want broadband service is an exercise in fixing the facts.

That’s the magic of the Dollar-a-Holler Echo Machine.  Big telecom companies hire public policy consultants and researchers to find their way to “scientific” evidence proving their corporate agenda, and then feeds the “facts” and “research” to receptive reporters, astroturf “consumer groups,” and politicians to bolster their case.  It’s not AT&T suggesting there is no rural broadband problem — it’s Navigant Economics.

As Roetter writes, “A basic knowledge of wireless markets exposes the […] indefensible nature of the positions outlined above. A policy based on ‘tell me what you want to hear, pay me, and I will reproduce it all regardless of its merits’ is a disservice to professionals who try to remain objective and independent, i.e. professional.”

Currently there are 12 comments on this Article:

  1. Jeff Eisenach says:

    Wow.

    As one of the authors of the Navigant study, a member of the Pew Internet and American Life advisory board, and someone who’s been around the broadband policy world for a long time, I was flabbergasted by Phil Dampier’s original post , and am even more amazed to see it getting picked up here.

    Here are a few easily verifiable facts people should consider.

    First, as clearly stated in the first footnote, the report was commissioned by the National Cable and Telecommunications Association. It was also filed by NCTA with the FCC, and NCTA issued a press release “claiming ownership.” AT&T had nothing to do with it; there is no conspiracy. (How Phil got this wrong is a mystery — maybe he can explain.)

    Second, NCTA’s point is that a lot of RUS money is being used to overbuild areas which are already served by cable, which some people think might be both unfair to cable companies and not a very good use of money. (Do those points strike anyone as somehow outside the bounds of reasonable discussion? Is there something wrong with actually analyzing them? What, exactly?) Our report simply looked at the extent of overlap in three specific RUS grants, and performed some calculations showing what it is costing to provide broadband access to each incremental household.

    No one has challenged our analysis.

    Third, on whether 3G wireless “counts” as broadband, see the FCC’s own National Broadband Plan report on broadband availability, which concludes that (a) 4G will get built out pretty much everywhere there is 3G today and (b) 4G either is or can be made (for relatively low incremental cost) sufficient to serve as a very high speed wireline substitute in rural areas. That’s not Navigant’s conclusion, it’s the FCC’s (which we cited). But if you don’t think wireless should count, that’s ok: We also reported our results without counting 3G.

    Fourth, there’s nothing in the report — nothing, nada, zip — that suggests there is “no rural broadband problem.” Nor does the report take a position on the broader question of providing support for rural broadband. I personally have always favored some sort of program, and indeed authored a favorable report on the tax-incentive based approach included in early version of the 2009 Stimulus bill. What’s is tough to support, I think, is a program that is passing new homes at the rate of $7.2 million per.

    So, with all that in mind, everyone can decide for themselves who’s doing the “hollaring.”

    • I think there is some confusion here. We originally wrote about this research report last year http://stopthecap.com/2011/05/30/cable-lobby-pays-for-research-report-that-miraculously-agrees-with-them-on-rural-broadband-reforms/) and noted it was an NCTA paid effort.

      This piece is about AT&T’s recent use of your report in their own lobbying efforts. AT&T lobbyists have referenced this report in information packets sent to legislators. In fact, in at least two instances I have seen media outlets reference it as part of AT&T’s recent talking points against certain USF reform proposals.

      AT&T is also a client of Navigant. Reminding us the nation’s largest cable lobby bought and paid for this research, which we noted last year, hardly bolsters its credibility.

      AT&T in particular supports your contention that wireless mobile broadband is a suitable rural broadband replacement and downplays the rural availability problem. You state your report does not downplay the rural problem, but those who read it will quickly find you consider 3G wireless to meet the criteria for broadband, despite the fact its speeds are inconsistent, and more importantly, you completely ignore the usage cap regime which now limits consumption under regular pricing to around 2GB per month (3G or 4G). A consumer looking to consume 10GB per month, hardly a lot, will pay upwards of $80 a month for it, assuming 4G networks provide reliable service in rural areas.

      As I said last year, your report takes a very optimistic view of how much broadband is actually available in these rural areas, assuming availability based on what is physically possible to provide. But as our readers have repeatedly noted, what is possible isn’t at all reality on the ground. There are places within blocks of a central office, including inside one of the areas you studied, where companies like AT&T and Frontier will simply not provide DSL for economic reasons, not practical ones. Cable operators don’t wire rural areas that fail to meet population density tests either.

      As far as nobody challenging your analysis, you are missing out:

      http://broadbandbreakfast.com/2011/07/expert-opinion-broadband-adventures-in-wunderland-the-myth-of-the-7-million-home/

      The broader point about the cost to wire rural America is one we’ve all heard before when rural electrification and universal telephone service was first debated. When the country defines a certain service as essential, there will be high cost areas and relatively low ones. Commercial providers will pick the low-hanging fruit and ignore the areas they deem unprofitable to serve.

      Your sponsors could effectively eliminate this problem themselves by delivering quality service across the footprints where these stimulus-funded projects are proposed. Demand for 21st century rural broadband projects doesn’t develop in well-served areas, after all.

      • Jeff Eisenach says:

        OK, so when you take out the heated rhetoric (yours), the pure mistatements of fact (yours again), and the ad hominem attacks (yours and Martyn Roetter’s), what you’re left with is a disagreement between you and the FCC over whether 4G constitutes a reasonable wireline substitute in rural areas. Fine. Good debate to have. If you think you can win it on the merits, maybe you shoud consider leaving out the character assasination and conspiracy theories — and you might be take more seriously.

        • Setting aside your wounded doe routine, this is actually about more than you and I.

          As anyone who actually lives in rural America will tell you, the broadband problem on the ground is far more complicated and involved than the national cable lobby would have public policymakers believe.

          Your report depends on theoretical “facts” about DSL coverage and company-produced coverage maps. Our readers tell us constantly these maps say service is available, but in reality is not, is not planned to be, and probably never will be. One can’t solve America’s broadband problems until correctly identifying who has service and who does not, who can get it, and who cannot. Sorry, but that level of detail just won’t come out of the providers themselves. Telling rural America they can have broadband from AT&T at 3G (or 4G) speeds with a 2GB monthly usage cap isn’t much help either.

          My credibility is just fine, thank you. After all, I don’t have to worry about producing reports and findings that fall precisely in line with what a paying client wants to read. I represent consumers and I do this without a penny of industry money. Can you say the same?

          • James R Bivins says:

            I agree with this there is more money being put out for wireless when wireline is got everything for low-incone budget.I live inrural area where the maps show charter,but there is no cable.These companies that say they want new customers,they don’t expand area that don’t have these opition for true broadband,that is cable,just go out and buy another company and the services get worse and they don’t fix problems and don’t make cheaper for customers.They don’t listen to the customers.They just look for profits for their pockets.

    • Ron Dafoe says:

      I have one response and would like an honest answer from you:

      Why do you consider anyone that wants to cpmpete with cable “overbuilding”. I hate that word. If that was applied to everything else, we would have no competition from anything in our lives. I do not see giving an area another form of broadband as overbuilding, it is giving them competition. I garantee you that the cable company used tax payer money to get into the area, in some form.

      • Jeff Eisenach says:

        Nothing wrong with overbuilding, unless the area is insufficiently dense to support competition, in which case a single provider is better. See http://www.itif.org/files/JTHTL.pdf.

        • Scott says:

          Laying infrastructure is not overbuilding, if communities across the US built out fiber networks with open access to ALL private business (ISP’s, Cellular, Public Services, etc) that would ensure competition and equal access without protectionist actions by monopoly or duopoly providers.

          We tried it through requiring Telco’s and Cable co’s to allow open access and it’s not in their interest nor will it ever be to allow 3rd parties to provide the same services they do over their copper or fiber lines. They fought it internally delaying projects, denying requests, increasing prices for PoT lines, cancelling contracts, and externally lobbying for deregulation or to block competition. They won, and now you see what were stuck with..

          4G is never going to be a solution for consumers, it’s going to be priced by AT&T and Verizon at the highest monthly rate they can get away with along with metered per GB allowances that are far too low for reasonable usage of individuals and families and obscenely expensive even before the ‘overage’ fees kick in. Nor is 3G/4G a good technical solution for fast reliable wired networks anymore than WiMax or Satelite is a quality replacement for wired networks. Latency and packet loss become a huge issue for many users providing a sub par and barely acceptable service.

          Providers like AT&T love 3G/4G it since it’s a free license to print money with little to no oversight or restrictions compared to their abandoned wired networks.

          With the direction AT&T is going community efforts for rural broadband are going to be more important than ever to provide much needed quality services that private businesses refuse to fill and invest in from now and into the future.

  2. David Smith says:

    AT&T’s bandwidth capping is akin, in my opinion, to trampling on free speech. The Internet and today’s technology makes us realize that there is a new freedom–the freedom to information. Without information, we cannot make informed decisions for the democratic process. What is more, we are now as dependent on the Internet for information, as we are on the highways and the roads for getting around. In the past, when we needed more roads, we built them, and of course we can do the same for broadband.

    In fact, billions in U.S. taxpayer dollars have already been spent to lay what is now known as “Dark Fiber” –broadband pipelines which companies like AT&T do not even use. Essentially, this is an arbitrary move on the part of corporate greed to make more profit and at the same time, not upgrade their infrastructure. The result? Korea and Eastern European countries have Internet many times faster, which is uncapped and costs half as much.

    A paradigm of unlimited internet has to be defended, or we will be shackled in tomorrow’s world of live video streaming, remote surgical medical procedures, or effortless contributions to governance via online forums.

    Please sign my petition to stop data capping at: http://www.change.org/petitions/stop-data-capping

  3. James R Bivins says:

    People in rural area are not been offered the better option for true broadband.Cable is faster,cheaper,and has the GB’s.They offer 1 to 3 services and AT&T to sell less for more profit,so they don’t fix things that need to be fixed to be better.They just jack prices up and say its better.They took over Bellsouth and nothing has changed.They have more say than do.They are like other companies like Wildblue and Verzion that say that they want to help rural area but don’t.Wireless may be good for the cities but not for rural.

  4. mike says:

    the fact is the local ISPs locked out independant carriers and start ups for rural broadband by lying to the people who did the covereage maps, telling them they covered areas they didn’t and since it was impossible to refute this because their word was more important, the vast majority of the projects were not funded. Its better NOT to allow competition and get the rural people help, and then leave them in the dark! Big business wins again!!!

  5. James R Bivins says:

    These companies are good about throwing out the words people want to hear,but not the real action that people want to see w/ them words.What companies don’t understand is that if rural area that option true broadband like cable in their area that they are not going to get anyway why should they want it.The cable companies want new custmomers why don’t they give rural areas that don’t it that change by offering it to them by sending out ads that say if we can get enough people in your area that we will bring cable to your area.But all they can do is forget about area.I would rather have cable than this Wildblue they are more wireless than like DSL or cable.

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