Jon Peha


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Jon Peha is Chief Technologist at the FCC. He spoke on Session 4: The Politics of Regulation at the Freedom to Connect 2009 conference.

If you'd like more info about the conference, see

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Jon Peha

  1. 1. Mythology of Rural Broadband Jon M. Peha Chief Technologist, FCC Professor, Carnegie Mellon University Freedom to Connect, March 2009 Opinions expressed are those of the author alone © 2009 Jon Peha Myth 1: Less Interest in Rural Areas (So the market is right) There is great speculation about why a third less households would want broadband. Income? Education? Profession? Culture? © 2009 Jon Peha
  2. 2. % US Households with Internet But rural households are roughly as interested in Internet © 2009 Jon Peha A Simpler Explanation • Roughly one third of rural households do not have access to terrestrial broadband services at any price. – (No one knows exactly how many) – So not surprising that % of rural households subscribing to broadband is one third less. © 2009 Jon Peha
  3. 3. Myth 2: If customers unwilling to pay cost of buildout, costs exceed benefits. (So the market is right, version 2) • But the benefits of broadband do not go only to those who subscribe, and thus pay for build-out. – People decide to pay based on benefits to themselves, not based on benefits to everyone. – A free market will underinvest in any product with this property. – (Positive externalities lead to market failure.) © 2009 Jon Peha Reasons for Spill-Over Benefits • Impact on local community – Some studies show broadband deployment is followed by increases in small business creation, job creation, and property values. • Even those who do not use the Internet benefit • More studies are needed! • Impact on Internet users outside the community – Other Internet users gain ability to communicate with residents of newly served community • Social networks gain members, ecommerce merchants gain customers, etc. – “Network effects” – increasing the size of a network benefits those who are already in it. © 2009 Jon Peha
  4. 4. Myth 3: Unserved communities don’t gain from broadband, but not harmed by lack of broadband • More network effects: reducing the size of a network harms those who remain. – Dial-up Internet can be seen as a network. • Applications were once optimized for dial-up users • Designers now assume broadband, so Internet experience for dial-up users gets steadily worse. – Non-Internet services also degraded as broadband- based replacements become popular. • Newspapers, airline reservations, government documents, health care information, book stores, ... © 2009 Jon Peha Myth 4: Government involvement in infrastructure always helps. • Kenya builds 140 Megawatt Kiambere Dam • Benefits exceed costs? A fit for the community? – Kenya accepts debt – 7000 residents displaced – Farms under water. 82% of income lost. © 2009 Jon Peha
  5. 5. No “one size fits all” solution • Some communities have created wireless broadband nets – with public funds, private funds, or combination thereof. – Some boast of great success, e.g. government savings greater than build-out costs, advancement of other community goals. – Others expended a lot of money and time, with limited benefit. • Pittsburgh leaders hoped for citywide wifi network. – For Pittsburgh at that time, benefits did not seem to justify costs – Pittsburgh had DSL, cable. Getting 3G wireless. • An effective and uniquely Pittsburgh solution – Wifi deployed throughout downtown, but not citywide – Financially sustainable – Builds on resources and ideas from Pittsburgh institutions – Part of broader community goal: revitalizing downtown © 2009 Jon Peha Lessons • Broadband matters • We should not – assume that the market solves all problems perfectly – devise initiatives that merely replicate what the market is already doing very well – assume that an effective strategy in one community can be replicated in another • We should continue to – seek innovative technology, business, and policy approaches – study past experiences, learn from successes and failures – let government create right environment © 2009 Jon Peha
  6. 6. New Developments • New spectrum in 2009. – Spectrum availability is important for rural broadband – DTV transition frees up spectrum • Cellular carriers gain access to new licensed spectrum • Unlicensed devices allowed to operate in TV “white spaces” • New funding in 2009 – $7.2 billion for grants and loans related to broadband • New information gathering begins in 2009 – New “broadband inventory” • New National Broadband Plan under development © 2009 Jon Peha For More Information • Jon M. Peha, Bringing Broadband to Unserved Communities, Brookings Institution Press, July 2008. • Jon M. Peha, Wireless Pittsburgh: Sustainability of Possible Models for a Wireless Metropolitan-Area Network, New America Foundation Working Paper, Feb. 2008. • More at © 2009 Jon Peha