Here - Gig.U

Report
From the Early Adopter’s
Dilemma to the Game of Gigs:
Building the Information Rich
Commons
Blair Levin
Brookings Institute
Metropolitan Policy Project
Kansas City – Gigabit City Summit
January 13, 2014
The Arc of History
You Are Here
A Commons in Our Time
City Thinking in 1914
What assets would be critical for
economic and social progress in the
decades ahead?
Known
• Water?
• Electrical?
Unknown
• Distribution Center?
• Airport?
• Technology Focused University?
The Future
Economic value creation, which for several
millennium was based on the manipulation
and distribution of physical objects,
increasingly will be based on manipulating,
transporting, and analyzing bits of information.
City Thinking in 2014
What assets will be critical for economic
and social progress in the decades
ahead?
Known
• Ubiquitous, affordable and abundant bandwidth
networks
• Device, Sensor and M2M networks that provide
actionable intelligence
• A digitally ready population and digitally ready
city government
Tools
Bandwidth
• Ubiquitous, cheap,
smart sensors
providing actionable
intelligence
• Never a constraint to
innovation,
economic growth,
social progress
People
• A digital ready
population
• A digital ready city
government
The
Information
Rich
Commons
Devices
• The Internet of Things
• Open Data
• Big Data
Networks
People
• Gigabit Fiber
• Muni Wi-Fi
• Universal Affordable
Access
• Digital Readiness
• Responsive
Government
The
Information
Rich
Commons
Today’s Focus
Devices
• The Internet of Things
• Open Data
• Big Data
Networks
People
• Gigabit Fiber
• Muni Wi-Fi
• Universal affordable
access
• Digital Readiness
• Responsive
Government
The
Information
Rich City
Prediction:
In Five Years There Will be Two Kinds
of Cities
Cites with
Cable v.
Copper
Cities with
Cable v.
Fiber
Prediction:
In Five Years There Will be Two Kinds
of Cities
Cites with
Cable v.
Copper
Cities with
Cable v.
Fiber
Housing
Early Data: Increases Housing Values
The Impact of High-speed Broadband Availability on Real Estate
Values: Evidence from United States Property Markets
By Molnar, Savage & Sicker
University of Colorado, August 15, 2013
Prediction:
In Five Years There Will be Two Kinds
of Cities
Cites with
Cable v.
Copper
Cities with
Cable v.
Fiber
Economic
Attractiveness
Early Data: Increases Attractiveness as
Business Location
Prediction:
In Five Years There Will be Two Kinds
of Cities
Cites with
Cable v.
Copper
Cities with
Cable v.
Fiber
GDP Growth
Early Data: Increases GDP
“Our study suggests that communities where gigabit
broadband was widely available enjoyed higher GDP,
relative to similar communities where gigabit broadband
was not widely available. The 14 communities with widely
available gigabit broadband that we studied enjoyed over
$1 billion in additional GDP when gigabit broadband
became widely available, relative to communities where
gigabit broadband was not widely available.”
The Early Adopter’s Dilemma:
No Map of Path to the New World
Two Questions
What Networks will
Market Forces, Left
Alone, Produce?
What Have
Municipal Efforts To
Date Produced?
Topics for Today
What Networks will
Market Forces, Left
Alone, Produce?
What Have
Municipal Efforts To
Date Produced?
In the Summer of 2009, the National Broadband Plan Team asked
CITI to provide a report on all publicly announced broadband
deployments for the years ahead
The Data was Deadly
For the First Time Since the Beginning of the Commercial Internet
there was no National Carrier with Plans to Deploy a Better Network
than the Current Best Available Network
Report suggested, and experience confirmed,
current market forces would not drive deployment
of world leading wireline networks in the U.S.
25
For 85% of the Country, Cable had the Faster Network and the
Cheapest Upgrade Path
The Future Looked Like a Cable v. Copper Competition that would be
Premised on Allocating Scare Bandwidth Instead of Building on
Technological Advances to Deploy Abundant Bandwidth
Cable v. Copper
Cable v. Fiber
Business Model: Allocating
Scarce Bandwidth
Business Model: Deploying
Abundant Bandwidth
Consequence for
Innovation:
Buffering drives desire for
higher priced tiers;
therefore upgrades follow
innovation
Consequence for
Innovation:
Scales to higher levels of
video (4k, 8k), thereby
upgrades enable innovation
of higher performance
knowledge exchange.
Core Proposition:
Harvesting from Past
Investment
Core Proposition:
Future Proof
to here?
How do we move from here
A Way to
Understand the
Challenge
The Prisoners’ Dilemma
The Prisoners’ Dilemma
The Prisoners
Are Both Better
Off if They Trust
Each Other Not
to Confess
The Prisoners’ Dilemma
The Cops’
Mission is to
cause a
“Defection”
The Prisoners
Are Both Better
Off if They Trust
Each Other Not
to Confess
The Prisoners’ Dilemma
Substitute the
Idea of
Investing in
Next
Generation
Deployments
for Confessing
and Harvesting
Sunk Costs for
Staying Quiet
The Prisoners’ Dilemma
Cable and
Telcos Are Both
Better Off if
They Trust Each
Other Not to
Deploy NG
Networks
The Regulator’s Dilemma
How to Cause a Defection?
Topics for Today
What Networks will
Market Forces, Left
Alone, Produce?
What Have
Municipal Efforts To
Date Produced?
Three Different Drivers
Supply Side Driven
(Google Fiber v.
Incumbents)
Small Cities
(Federal Money,
Market
Structure
Driven)
Demand Side
Driven
(Gig.U, etc.)
Current Math:
Returns Do Not Justify the Investment
Currently, the private investment equation usually looks like this:
Costs
Benefits
C + O > (1-r)R + SB + (-CL)
C – Capital Expenditures
O– Operating Expenditures
r – Risk
R- Revenues
SB- System Benefits
(Benefits that drive increased revenues outside the communities where
the new or incremental investments are made.)
CL- Losses due to competition
37
The path forward: change the math
C + O < (1-r)R + SB + (-CL)
But how do we do that?
38
Key Strategies
Use Existing
Assets More
Effectively
Reduce CapEx, OpEx,
risk
Regulatory
Flexibility and
Efficiency
Reduce CapEx, OpEx,
risk
Aggregate
Demand
Reduce risk and raise
revenues
39
Tactics within existing powers of communities
Reduce Cap Ex
• Build to Demand Model
• Access to ROWs, Facilities
• Reduce Regulatory Time
Reduce Op Ex
• Access Payments
• Reduce Ongoing Regulatory Costs
• Utilize Existing Billing Platforms
Reduce Risk
• Build to Demand
• Standardize Functions Across Areas,
Vendors
Increase Revenues
• Demand Aggregation
• Marketing Platform
• New Services
Increase
Ecosystem Benefits
• Distributed Innovation
• Seeding Long-Term Growth
40
Google Starts Spreading Information
Commissioned by Google
Published 2013
The Unfolding “Game of Gigs”
(as of August 5, 2014)
Seattle*
Denver
Sioux Falls
Spokane
Tucson*
Columbia
Jefferson City
Colorado Springs
Albuquerque*
Minneapolis - St. Paul
Orlando
Las Vegas
Omaha
**
Phoenix*
Salt Lake City
Portland
Provo
Winston-Salem*
Augusta
Dallas
Fort Lauderdale
Greensboro
Jacksonville
Houston
Miami
Oakland
Chicago*
Cleveland*
San Francisco
Austin
Kansas City
Raleigh-Durham*
Charlotte
Nashville
Atlanta*
San Antonio
San Jose
Chattanooga
Leverett
Longmont
Wilson
Urbana-Champaign*
Gainesville*
Burlington
Bristol
Chanute
Blacksburg*
Independent
Projects***
St. Louis
San Diego
Los Angeles
*Gig.U Community
**Note: Cox plans to eventually build a
gigabit throughout its footprint, but is
starting with these cities.
***Category not comprehensive
But what about those
communities who are
not on Google’s Map?
GIG.U FALL 2014 STATUS CHART
University
Community
State
Method
Status
Virginia Tech
Michigan State
U of Florida
U of Louisville
U of Kentucky
Texas A&M
U of NC
NC State U
Duke U
Wake U
ASU
Georgia Tech
U of Chicago
Blacksburg
East Lansing
Gainesville
Louisville
Lexington
College Station
Chapel Hill
Raleigh
Durham
Wake-Forest
Phoenix
Atlanta
Chicago
Storrs, New Haven,
others
Columbia
Missoula
Albuquerque
Cham/Urbana
Shaker Heights
Morganton
Seattle
Orono
VA
MI
FL
KY
KY
TX
NC
NC
NC
NC
AZ
GA
IL
PPP
PPP
Local Utility
RFP
RFP
RFP
NCNGN
NCNGN
NCNGN
NCNGN
GF
GF
Legal Reform
Downtown Gig Zone
Local ISP Offering
Innovation Zone Network Built
3 New Entrants Building Gig Networks
Pending
Incumbent upgrade to Gig
Deal with T, Negotiating with GF
Deal with T, Negotiating with GF
Deal with T, Negotiating with GF
Deal with T
Negotiating with GF
Negotiating with GF
Telco Upgrading Network
CT
State RFP
RFP in Process
MO
MT
NM
IL
OH
WV
WA
ME
RFP
Study
RFP
RFP
PPP
PPP
Legal Reform
PPP
Developing RFP
Study Complete; developing response
Developing RFP
Local ISP Developing Network
Pilot Project
Spectrum Based Pilot Operational
Telco Upgrading Network
In Discussions, Spin Off Projects
U of CT
U of Missouri
U of Montana
U of New Mexico
U of Ill
Case Western
U of WV
U of Washington
U of Maine
Zone
• Cleveland
• Beta Block
• Blacksburg
• Gigabit WiFi
Zone
• Morgantown
• Transit Areas
Using White
Spaces
Zone (Cleveland,
Blacksburg and
Morgantown)
District
• Gainesville
• Innovation
District in
Partnership
with
University,
Utility, and
Real Estate
Developers
Zone (Cleveland,
Blacksburg and
Morgantown)
District (Gainesville)
Neighborhoods
and City
• Lansing
• Community
Strategies
• Louisville
• RFP with Three
Providers
• ChampaignUrbana
• RFP with Single
Provider
Zone (Cleveland,
Blacksburg and
Morgantown)
District (Gainesville)
Neighborhoods and
City (Lansing,
Louisville, and
Champaign-Urbana)
Region
• North Carolina
NGN
• Joint RFP with Six
Communities and
Four Universities
Zone (Cleveland,
Blacksburg and
Morgantown)
District (Gainesville)
Neighborhoods and City
(Lansing, Louisville, and
Champaign-Urbana)
Region (North Carolina
NGN)
State
• Connecticut
• RFI Organized
by Major Cities
in which All
Communities
are Invited to
Participate
Zone (Cleveland,
Blacksburg and
Morgantown)
District (Gainesville)
Neighborhoods and City
(Lansing, Louisville, and
Champaign-Urbana)
Region (North Carolina
NGN)
State (Connecticut)
Key Question for City Officials
Are the Networks Serving
Your Community Today
Sufficient for Ten Years from
Now?
Three Key Insights
1. Everything that happens in your city ten years from
now will be enhanced or degraded depending on the
quality of the networks.
2. Many things you are doing today or will do in the next
few years will affect the quality of the networks you
have ten years from now.
3. Broadband is bought as a community. While
Individuals think they make a choice, the choice is
predetermined by choices the community makes.
86%
of the experts
believe there will be
“new, unique and
compelling
technology
applications that
capitalize on
significant increases
in bandwidth in the
United States by
2025.”
Bottom Line
Cities with
Cable v. Fiber
Cities with
Cable v. Copper
Thank You

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