(For Part I of this report, see: ISOC-NY: Building Tomorrow’s Broadband, Part I: The Networks)
While everyone in theory understands that the internet brings wealth and business and tax dollars, far too many governments are trying to tax it in ways that could kill it in their area. Recently, the state of North Carolina lost a lawsuit in which it tried to collect taxes on sales to North Carolina residents by Amazon, which is based in Washington state.
Newby’s Allied Fiber avoids very serious government regulation by providing only the core of the network and not trying to build the last mile. Few appreciate the scale of regulation in the last mile. Donny Smith of Jaguar Communications in Minnesota has a fiber network covering almost 10,000 square miles (a 100 mile by 100 mile area). He told me a few years ago that he had to deal with:
Minnesota State Historical Preservation Office, US Army Corps of Engineers, Minnesota Pollution Control Agency, USDA Natural Resources Conservation Service, the U.S. Fish and Wildlife Service, Minnesota Department of Natural Resources (DNR) Trails and Waterways Division, Minnesota Department of Natural Resources (DNR) Division of Lands and Minerals, each county’s soil and water conservation district, and, last and perhaps most enormous, every township and city in the coverage area (Smith says there were 103).
In addition, he submitted linear yards worth of paperwork in order to obtain funding from the US Department of Agriculture’s (USDA) Rural Utilities Service (RUS).
Joe Calzone of ION said that he’s worried about the cost of using poles. The language in the National Broadband Plan is vague enough that the state of New York, which faces a massive budget shortfall, wants to tax the use of rights of way by networks like ION.
“The national broadband plan is just a series of recommendations. It’s not a plan,” said Calzone.
“We need a national fiber plan,” said Newby. He pointed out that places like Australia and The Netherlands have fiber because the government has made it so.
“In Australia they did the right thing. They did not trust Telstra, the ILEC. They built carrier neutral fiber. I was concerned about whether the plan would survive the cash that Telstra spent on Australia’s election, but the fiber plan has survived.”
“Meanwhile, in North America, we’re building networks on an ROI basis in an era of no finance. The banks, which are not creditworthy, can get finance, but they won’t lend, because they don’t see businesses as creditworthy.”
“The Bell System was a quasi-socialist enterprise that built the foundation for America’s technological leadership of the world.”
The stimulus has not helped North America either.
“Canada is only subsidizing companies that are already in the business,” said Louis Houle, general manager of Quebec Connect. “I don’t think that Bell Canada needs a grant. We need money here at the rural level and we don’t have it.”
“The government is only interested in cell phones, while people in rural areas understand that without high speed internet and computers in the village, the kids will not return here.”
No infrastructure without corruption
New York City has the world’s largest subway system in terms of route miles (although Tokyo’s rail system, which includes elevated ground trains, carries more people). It could not have been built without Tammany Hall corruption.
Bruce Kushnick of TeleTruth pointed out that the phone companies have collected hundreds of millions of dollars each year in taxes that are not spent. He added that less than 20 years ago, the various states signed deals with the Bell companies to allow the phone companies to collect billions of dollars in taxes from customers — illegally — to deliver 45 Mbps to each home.
“In Sweden, the state built a network and rented it,” said an NYU student attending the meetup.
“Yes, but you have health care too,” said another NYU student.
“In Finland, broadband is a birthright,” said Newby.
The idea of disruptive innovation says that some progress inevitably displaces market leaders, so market leaders try to preserve their dominance by ensuring that there is no technological innovation and by buying up and shutting down any bringers of change.
So perhaps it is inevitable that large internet companies will try to crush the small. It may even be inevitable that government will help large internet companies crush innovation.
But entrepreneurs such as those at the ISOC-NY meeting will surely give innovation a chance.
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