SENATE PANEL MULLS SUBSIDIES, WIRELESS AS BROADBAND OPTION

“We have left off our Bell friends and long distance friends to get away from the yin and the yang of who was right and who was wrong,” Hollings said. “Wireless companies may need to consolidate and obtain more spectrum,” he said, asking panel what, if anything, govt. could do to subsidize rollout of Wi-Fi. Hollings reiterated need for the govt. to subsidize broadband demand or infrastructure, specifically citing consideration of new technologies such as Wi-Fi as “high-speed alternatives. And while I tend to doubt Bell claims that wholesale pricing regimes discourage investment, perhaps we should examine those, too.” While Wi-Fi came up throughout hearing as among broadband alternatives that warranted closer look, several panelists said such advanced wireless technologies also didn’t offer same geographic reach or degree of reliability that their wireline counterparts did. Sen. Allen (R-Va.) said he and Sen. Boxer (D-Cal.) had been in discussions with Defense Dept. and FCC on draft legislation that would require Commission to make additional unlicensed spectrum available for such technology and to craft rules covering areas such as quality of service. Draft would also include Wi-Fi hardware on the list of items for which schools and libraries are eligible for discounts administered by the Universal Service Fund.

Ranking Committee Republican McCain (Ariz.) expressed frustration, echoed by several other committee members, about extent to which broadband legislation had remained stalled this year on Capitol Hill. “We continue to be gridlocked on this issue in Congress and the Senate,” he said. “Clearly we won’t act this year. Perhaps with less campaign contributions it will free some of us up to be more conducive to negotiations and freeing gridlock by special interests.” He rejected need for subsidizing broadband build-out or demand. Although rolling out broadband services more quickly to U.S. consumers is important, “starting some massive, multimillion-dollar central planning effort to do so is not what I believe in or support.”

Former FCC Chmn. Reed Hundt cited “nonvirtuous cycle” that occurs when investment migrates from industry such as the telecom sector, including reduction in innovation and declines in introduction of new services. Govt. now is at “the very knife edge of decision” in figuring out how to jump-start sector in way that involves competition rather than just consolidation, Hundt said. He stressed need for new policy of universal service. “The government needs to make an investment of public monies in jump-starting our broadband industry,” he said. “There has never been a communications industry or a transportation industry in the history of America that didn’t benefit from an original jump- start or incentive plan to get going. This broadband industry needs that help now.”

While other panelists disagreed with need for govt. to take such strong hand, Michael Price, vice chmn. of Evercore Partners, advocated paying broadband consumers subsidy to stimulate demand. “The trend of recycled bankrupt assets’ becoming economically viable again will only serve to hurt the strong players of today in the years to come,” he said. “Just as the 1930s economy needed a ‘New Deal,’ today we need a Technology New Deal.” Price outlined proposal in which a service provider would be paid $300-per-subscriber subsidy if it agreed to provide high-speed service for under $30 per month for 3 years. Payment would be based on net-subscriber additions and could bring broadband to 20 million new homes at a cost of $6 billion over 2 to 3 years, he said.

Stanford U. Law Prof. Lawrence Lessig touted model that would ensure that providers of network services “respect basic principles of service neutrality.” Holding electrical coverplate he said he borrowed from his room at Four Seasons Hotel, Lessig said Internet networks could take lesson from electricity infrastructure, which doesn’t make any distinction between what kinds of technologies are connecting to it for current. “That principal of neutrality is critical to ensure that the next Microsoft can come along and displace this Microsoft,” he said. Lessig also stressed need for opening unlicensed bands of spectrum even more and setting minimal rules to ensure that new technologies are protected from interference.

Microsoft Senior Vp-Chief Technical Officer Craig Mundie agreed with need for more wireless spectrum for unlicensed bands, saying creation of minimal rules was critical to ensure that technology innovation occurred. “Those 2 changes would produce in the wireless context exactly what the Internet looked like 10 years ago today,” he said. “It would produce a platform where an extraordinary range of competitors could develop new technologies that would drive demand for broadband services and explode the Internet on wireless technologies the way that 10 years ago wired technologies did the same.”

But several experts said limiting factor of using Wi-Fi for broadband deployment was that its geographic reach was much less than that of DSL or cable, creating challenge for investment policies. Reliability also is an issue for new advanced wireless technologies, several panelists said. “The essential foundation of broadband policy will be on wires,” said Peter Huber, senior fellow at Manhattan Institute. “This is not to take away from wireless.” Result of current federal telecom policy has been to make cable “short-term beneficiary,” enabling it to have a market share of 2-to-1 over DSL.