Saturday, January 31, 2015

Subsidies for ISPs create capital, not networks or jobs

Techdirt has found an interesting map of the current FIOS network from Verizon. Techdirt goes on to say that even after receiving billions in subsidies from many states to help Verizon build out their network to 100% of residents and businesses, FIOS still only covers 12% of the US population. Did Verizon ever give any of that money back when they backed out of the deals? No.

Instead they converted that money into capital for pumping their stock, delivering dividends to the 1% who happen to own most of their stock, and bonuses to their C-class executives. As the Techdirt article notes, Wall Street hates building networks. Networks are expensive, take years to recover the investment and they tend to serve everybody instead of just the shareholders.

This is not an isolated case. The abuse of subsidies for privately held communications networks is endemic to the last mile carriers. When I say last mile, I mean the companies that sell direct to consumers and businesses. That would be companies we know and love, like Comcast, Verizon, Time-Warner, Centurylink and ATT (I would use the ampersand in their name but it never comes out right due to a coding bug in Blogger).

Robert Cringeley runs a blog about networks. He's quite familiar with how networks are built, how much they cost and how big companies operate when presented with a subsidy. Cringeley has documented the waste and fraud in ISPs subsidies in all their gory details on his blog. To sum it up, over a decade, the major ISPs pissed away $200 billion and more since that article was written in 2007. Rather than improve or build out new networks, ISPs converted those subsidies into stock options, bonuses, and dividends. In a word, capital.

When businesses create capital, they don't create jobs. Jobs are for the rest of us. Capital is for the men and women at the top.

If governments at all levels are so willing to invest in networks, and are continually getting burned by their investments in privately held networks, then perhaps they could turn their watery gaze to community broadband. Community broadband has far more scrutiny and transparency than those companies run by CEOs who negotiated a fat salary with their friends on the board. Isn't it funny how they like to refer to their business as "private enterprise"?

More to the point, community broadband service providers have to answer to politicians, local politicians, who have to answer to their constituents. Mind you, these are constituents who can pay a visit to the city council, the county board or what have you. The bonus is that in over 400 communities nationwide, the communities that built their own networks have prospered handsomely from their investment.

More than $200 billion since 1994 has been siphoned off the American economy by private ISPs in a way that has created few if any new networks and no new jobs. Cities like Chattanooga, TN, Wilson, NC and even Cedar Falls, IA, have all enjoyed the benefits of community broadband with gigabit speeds. Community broadband can fill the vacuum left by the private ISPs. They can build the networks that all of us want, with an entity that has the local community in mind first. Community broadband can and will create and attract high paying, middle class jobs. What a novel concept.

If you would like to see community broadband in your neighborhood, check out the following sites for education, guidance and perhaps even a little assistance:

Community Broadband Networks
The Coalition for Local Internet Choice
Next Century Cities
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