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From the Early Adopter’s Dilemma to the Game of Gigs: Building the Information Rich Commons Blair Levin Brookings Institute Metropolitan Policy Project.

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Presentation on theme: "From the Early Adopter’s Dilemma to the Game of Gigs: Building the Information Rich Commons Blair Levin Brookings Institute Metropolitan Policy Project."— Presentation transcript:

1 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

2 The Arc of History

3 You Are Here

4 A Commons in Our Time

5 What assets would be critical for economic and social progress in the decades ahead? Known Water? Electrical? Unknown Distribution Center? Airport? Technology Focused University? City Thinking in 1914

6 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.

7 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 City Thinking in 2014

8 The Information Rich Commons Bandwidth Never a constraint to innovation, economic growth, social progress Tools Ubiquitous, cheap, smart sensors providing actionable intelligence People A digital ready population A digital ready city government

9 The Information Rich Commons Networks Gigabit Fiber Muni Wi-Fi Devices The Internet of Things Open Data Big Data People Universal Affordable Access Digital Readiness Responsive Government

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11 The Information Rich City Networks Gigabit Fiber Muni Wi-Fi Devices The Internet of Things Open Data Big Data People Universal affordable access Digital Readiness Responsive Government Today’s Focus

12 Prediction: In Five Years There Will be Two Kinds of Cities Cites with Cable v. Copper Cites with Cable v. Copper Cities with Cable v. Fiber Cities with Cable v. Fiber

13 Prediction: In Five Years There Will be Two Kinds of Cities Cites with Cable v. Copper Cites with Cable v. Copper Cities with Cable v. Fiber Cities with Cable v. Fiber Housing

14 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

15 Prediction: In Five Years There Will be Two Kinds of Cities Cites with Cable v. Copper Cites with Cable v. Copper Cities with Cable v. Fiber Cities with Cable v. Fiber Economic Attractiveness

16 Early Data: Increases Attractiveness as Business Location

17 Prediction: In Five Years There Will be Two Kinds of Cities Cites with Cable v. Copper Cites with Cable v. Copper Cities with Cable v. Fiber Cities with Cable v. Fiber GDP Growth

18 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.”

19 The Early Adopter’s Dilemma: No Map of Path to the New World

20 Two Questions What Networks will Market Forces, Left Alone, Produce? What Have Municipal Efforts To Date Produced?

21 Topics for Today What Networks will Market Forces, Left Alone, Produce? What Have Municipal Efforts To Date Produced?

22 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

23 The Data was Deadly

24 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

25 Report suggested, and experience confirmed, current market forces would not drive deployment of world leading wireline networks in the U.S. 25

26 For 85% of the Country, Cable had the Faster Network and the Cheapest Upgrade Path

27 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

28 Cable v. Copper Business Model: Allocating Scarce Bandwidth Consequence for Innovation: Buffering drives desire for higher priced tiers; therefore upgrades follow innovation Core Proposition: Harvesting from Past Investment Cable v. Fiber Business Model: Deploying Abundant Bandwidth Consequence for Innovation: Scales to higher levels of video (4k, 8k), thereby upgrades enable innovation of higher performance knowledge exchange. Core Proposition: Future Proof How do we move from here to here?

29 The Prisoners’ Dilemma A Way to Understand the Challenge

30 The Prisoners’ Dilemma The Prisoners Are Both Better Off if They Trust Each Other Not to Confess

31 The Prisoners’ Dilemma The Prisoners Are Both Better Off if They Trust Each Other Not to Confess The Cops’ Mission is to cause a “Defection”

32 The Prisoners’ Dilemma Substitute the Idea of Investing in Next Generation Deployments for Confessing and Harvesting Sunk Costs for Staying Quiet

33 The Prisoners’ Dilemma Cable and Telcos Are Both Better Off if They Trust Each Other Not to Deploy NG Networks

34 The Regulator’s Dilemma How to Cause a Defection?

35 Topics for Today What Networks will Market Forces, Left Alone, Produce? What Have Municipal Efforts To Date Produced?

36 Three Different Drivers Supply Side Driven (Google Fiber v. Incumbents) Demand Side Driven (Gig.U, etc.) Small Cities (Federal Money, Market Structure Driven)

37 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 Currently, the private investment equation usually looks like this: 37 Current Math: Returns Do Not Justify the Investment CostsBenefits

38 C + O < (1-r)R + SB + (-CL) But how do we do that? The path forward: change the math 38

39 Reduce CapEx, OpEx, risk Use Existing Assets More Effectively Reduce CapEx, OpEx, risk Regulatory Flexibility and Efficiency Reduce risk and raise revenues Aggregate Demand Key Strategies 39

40 Build to Demand Model Access to ROWs, Facilities Reduce Regulatory Time Reduce Cap Ex Access Payments Reduce Ongoing Regulatory Costs Utilize Existing Billing Platforms Reduce Op Ex Build to Demand Standardize Functions Across Areas, Vendors Reduce Risk Demand Aggregation Marketing Platform New Services Increase Revenues Distributed Innovation Seeding Long-Term Growth Increase Ecosystem Benefits Tactics within existing powers of communities 40

41 Google Starts Spreading Information Commissioned by Google Published 2013

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44 Winston-Salem* Augusta Dallas Fort Lauderdale Greensboro Jacksonville Houston Miami Oakland Chicago* Austin Kansas City Raleigh-Durham* Charlotte Nashville Atlanta* San Antonio San Jose Provo Seattle* Denver Sioux Falls Spokane Tucson* Columbia Phoenix* Las Vegas Omaha The Unfolding “Game of Gigs” (as of August 5, 2014) *Gig.U Community **Note: Cox plans to eventually build a gigabit throughout its footprint, but is starting with these cities. ***Category not comprehensive Independent Projects*** Cleveland* San Francisco Chattanooga Leverett Longmont Wilson Urbana-Champaign* Gainesville* Burlington Bristol Chanute Blacksburg* St. Louis San Diego Los Angeles Salt Lake City Portland Jefferson City Colorado Springs Albuquerque* Minneapolis - St. Paul Orlando **

45 But what about those communities who are not on Google’s Map?

46 GIG.U FALL 2014 STATUS CHART UniversityCommunityStateMethodStatus Virginia TechBlacksburgVAPPPDowntown Gig Zone Michigan StateEast LansingMIPPPLocal ISP Offering U of FloridaGainesvilleFLLocal UtilityInnovation Zone Network Built U of LouisvilleLouisvilleKYRFP3 New Entrants Building Gig Networks U of KentuckyLexingtonKYRFPPending Texas A&MCollege StationTXRFPIncumbent upgrade to Gig U of NCChapel HillNCNCNGNDeal with T, Negotiating with GF NC State URaleighNCNCNGNDeal with T, Negotiating with GF Duke UDurhamNCNCNGNDeal with T, Negotiating with GF Wake UWake-ForestNCNCNGNDeal with T ASUPhoenixAZGFNegotiating with GF Georgia TechAtlantaGAGFNegotiating with GF U of ChicagoChicagoILLegal ReformTelco Upgrading Network U of CT Storrs, New Haven, others CTState RFPRFP in Process U of MissouriColumbiaMORFPDeveloping RFP U of MontanaMissoulaMTStudyStudy Complete; developing response U of New MexicoAlbuquerqueNMRFPDeveloping RFP U of IllCham/UrbanaILRFPLocal ISP Developing Network Case WesternShaker HeightsOHPPPPilot Project U of WVMorgantonWVPPPSpectrum Based Pilot Operational U of WashingtonSeattleWALegal ReformTelco Upgrading Network U of MaineOronoMEPPPIn Discussions, Spin Off Projects

47 Zone Cleveland Beta Block Blacksburg Gigabit WiFi Zone Morgantown Transit Areas Using White Spaces

48 Zone (Cleveland, Blacksburg and Morgantown) District Gainesville Innovation District in Partnership with University, Utility, and Real Estate Developers

49 Zone (Cleveland, Blacksburg and Morgantown) District ( Gainesville) Neighborhoods and City Lansing Community Strategies Louisville RFP with Three Providers Champaign- Urbana RFP with Single Provider

50 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

51 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

52 Zone (Cleveland, Blacksburg and Morgantown) District (Gainesville) Neighborhoods and City (Lansing, Louisville, and Champaign-Urbana) Region (North Carolina NGN) State (Connecticut)

53 Key Question for City Officials Are the Networks Serving Your Community Today Sufficient for Ten Years from Now?

54 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. 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.

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57 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.” 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.”

58 Bottom Line Cities with Cable v. Fiber Cities with Cable v. Copper

59 Thank You


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