Government and the Digital Divide

Capitol_domeThere were two interesting announcements from politicians in the last week concerning the digital divide. First, there was an announcement from President Obama saying that he wants to connect 20 million more Americans to broadband by 2020. Then Greg Abbott, the governor of Texas, announced that he wants to connect all of the 5.2 million schoolchildren in Texas to the Internet by 2018.

President Obama’s announcement was accompanied by a plan called ConnectALL. The plan was prompted in part by a recent study that shows that households making less than $25,000 per year are half as likely to have broadband as households that make more. The plan makes a number of specific proposals for things the federal government can do to increase broadband penetration rates:

  • The primary tool proposed is to revise the Lifeline program that subsidizes telephone service for low income households and to redirect the $1.2 billion spent annually on that program to subsidize broadband connections instead. This is something that is already underway at the FCC and the proposed rules on how this might work are expected out later this year.
  • The plan also includes an initiative to improve digital literacy skills. The plan would engage a number of volunteer and non-profit organizations to make this a priority. This would include AmeriCorps volunteers as well as organizations like the Corporation for National and Community Services, and the Institute of Museum and Library Services. The plan would also promote more computer skill training at two-year colleges.
  • The plan would also promote the reuse of computers and similar equipment no longer needed by the federal government.
  • The plan would also direct the NTIA to get more involved in supporting community broadband planning. It would also bring in a number of non-profits and philanthropic groups to help with this effort.
  • The plan also calls for ISPs to offer more lower-price products for low-income households.

The Texas governor has not yet released any details of how he might go about connecting all school children to broadband in such a short period of time. The only solution I can imagine that could happen that quickly would be some sort of cellular plan just for kids to get connected to school servers. 2018 is practically right around the corner in terms of solving broadband issues.

These kind of announcements always sound great. Certainly both politicians have identified real issues. It’s becoming quite clear that poor households are increasingly finding broadband unaffordable. But one has to ask how much success the federal plan might really have. Certainly subsiding internet connectivity for low-income households will bring some new households onto the Internet. But you need to ask how much of an incentive $10 per month is for a home that can’t afford broadband today.

Certainly the $1.2 billion per year in Lifeline funding can reach 20 million people – that amount will provide cheaper broadband to 10 million homes. But you would have to think that a lot of those homes are already receiving this same subsidy today for their home phone, and when a household swaps a phone subsidy for a broadband subsidy they are no better off in terms of total telecom spending. They will just have swapped a $10 per month discount from one bill to another.

And all of the other proposed solutions sound wonderful on paper – but will they work to get more people on the Internet? I know that computer literacy training can work well if done right. I have one client who has been holding training sessions for customers for well over a decade and over the years they have brought a lot of elderly in their community onto the Internet. But they say that it takes a major time commitment for each potential customer and a concentrated effort for this to work – they often will work with a given customer for many months before that person is comfortable enough to buy Internet at their home.

And none of the federal ideas really fix the underlying problem of affordability. The Lifeline program will reduce broadband by $10 per month, but in homes that are surviving on jobs that pay $12 per hour or less, broadband at any price is hard to afford. I certainly don’t have an answer to this problem, but there are other ideas that I think ought to be considered as well. For example, $1.2 billion per year could supply a lot of broadband by building a huge number of neighborhood WiFi transmitters that could bring cheap or free Internet to many homes at the same time. I’ve always thought that the cities that are looking to provide free WiFi broadband are on the right track because that brings broadband the neediest households  without the paperwork and expense that comes with subsidy programs.

The last item on the list above has the most promise. A lot of good could come from pushing the major ISPs to offer a $10 or $20 broadband alternative. But this was forced onto Comcast a number of years ago and they largely shirked the responsibility and provided low-price broadband to very few homes.

I’ve been skeptical for years that the Lifeline program makes a lot of difference. It probably did when the program first started in 1985 and the typical phone bill was under $20. But the $10 discount that was a lot in 1985 is worth a lot less now. It just doesn’t feel like enough of an incentive to make the difference the government is hoping for.

Europe Attacking Our Tech Companies

european unionIt’s clear that the European Union is attacking American technology companies. Evidence is everywhere. Consider the following examples or recent crackdowns against US technology in Europe:

  • Last year stringent rules were imposed on Google and other search engines to allow people to remove negative things from searches – these rules are being called the “right to be forgotten”.
  • The European Union is getting ready to file a massive anti-trust case against Google for the way that it favors its own search engine over others. The estimates are that the fines they are seeking could be as high as $6 billion.
  • Last year the EU voted in favor of making Google divest into multiple companies.
  • Numerous countries in Europe have blocked services from Uber.
  • The EU is going after Apple’s fledgling music business saying that they have the market power to persuade labels to abandon ad-sponsored sites like Spotify.
  • A decade ago there were several major antitrust cases filed against Microsoft.

There are numerous reasons for the antipathy that Europe seems to have towards American companies. President Obama said in an interview last month that the negativity was largely driven by economic competition and that Europe wants to find a way to support its own burgeoning tech companies over the behemoth tech companies like Google, Facebook, and Microsoft. He thinks a lot of the complaints by the EU are due to lobbying by European tech companies. He said that “oftentimes what is portrayed as high-minded positions on issues sometimes is designed to carve out their (European) commercial interests.”

But the president also admitted that some of the reaction to American tech companies is in reaction to the European history of suppression of freedom by dictators. For example, Germany just spent decades merging with East Germany and their history of oppression from the Stasi, the secret police. This makes some of these countries very sensitive to the recent revelations of the extent of the spying by the NSA. This one revelation might eventually be the beginning of the end of the open Internet as numerous countries are now building countrywide firewalls to shield them from such spying. It’s natural that this mistrust carries over to companies like Google and Facebook, which clearly have a business model based upon profiling people.

Another reason for going after American companies is tax revenues. The American tech companies have become adroit at claiming revenues in jurisdictions where they pay little or no taxes. Of course, this means that they avoid claiming profits in European countries which have fairly high tax rates. (This also means they avoid paying taxes in the US as well).

Finally, there might be an even more fundamental reason for the apparent European distrust and dislike of American technology. In this article published by Business Insider UK there is a look at the fundamental differences between the way that Europeans and Americans view entrepreneurship, technology, and uncertainty avoidance. The article shows the results of a survey and study done by the European Commission looking at how citizens in various countries look at certain issues. I think there has been a natural assumption that since both places are democratic and share a lot of first world values that we naturally think the same about technology. But the study shows some major differences between Europe as a whole and the US. Interestingly, England is very similar to the US in attitudes and perhaps our Yankee ingenuity and willingness to take risks is really part of our British heritage.

Here are some of the findings of that study:

  • Over 90% of Americans think that individualism is more important than compliance with expected social values. In Europe only a little less than 60% of people value individuality first. And in some places like Russia and Denmark less than 30% valued individualism more than compliance with social expectations.
  • When asked to agree or disagree with the statement, “entrepreneurs exploit other people’s work”, only 28% of Americans agreed with that statement (and the American dream is largely to own your own business), while the results in Europe spanned from only 40% agreeing in France, to 50% in the Netherlands, and over 70% in parts of southern and eastern Europe.
  • The US has a much lower threshold of uncertainty avoidance (unwillingness to take a chance on new ideas and new technologies). In the US only a little over 40% of people view themselves as risk adverse while in Europe it’s over 70%.

This means that to some extent the European Union is representing the will of its people when they crack down on US technology firms, which are viewed negatively as entrepreneurial and high risk. These kind of cultural gaps are very hard to bridge and US companies might have problems in Europe for decades – if they’re even resolvable at all.