The Economy Hub
April 12, 2013
Consider some of the things that have bound our nation together:
Universal postal service at a flat rate, whether you live in Santa Monica or Sitka, Alaska. Interstate highways, built with taxpayer funds and free of tolls. Regulated phone and electric service, with lifeline rates for the economically disadvantaged.
These were all based on a social contract honoring the notion that essential infrastructure should be available to all — indeed, that those normally left by the side of the economic road might be most in need.
But you can kiss that notion goodbye, because today's model of building public infrastructure is to let private companies do it.
Americans are becoming more dependent on privately operated toll roads to get where we're going, and on private delivery services like FedEx and UPS to carry our parcels. But the greatest shift has occurred in the sector that is most crucial in the information age: communications and data networks.
That brings us to Google — as happens sooner or later with any discussion touching on digital technology. The Mountain View, Calif., behemoth has branched into the Internet service business by introducing a fiber-optic data network for homeowners in Kansas City, Mo., and its neighboring namesake in Kansas.
The service, which is expected to be fully functional by the end of this year, is upending the traditional business and regulatory model for phone, video and data communications. But Google managed to exempt itself from the regulations that typically force cable companies to wire all neighborhoods, rich, poor and in between, for the Internet. The result threatens to leave underprivileged neighborhoods in the digital dust.
Ceding such a crucial service to a private company with minimal regulation is something that happened with virtually no public discussion about its implications for society.
"The dialogue has to happen at the national level, because it can't happen at the local level," says Shannon Jackson, an anthropologist at the University of Missouri-Kansas City.
It's unsurprising that Google's activities underscore the evolution of the infrastructure model, because the company is pervasive. Its Gmail is the nation's largest single email network, relied on by millions of users for daily communications. But Google is still a corporation, and if it decided tomorrow that Gmail didn't produce for its bottom line, nothing could stop the company from shutting it down. Compare that to the obstacles facing the U.S. Postal Service in its desire merely to end Saturday mail delivery to save money; under intense political pressure,USPS last week dropped the plan.
Google is not the only firm that provides a service on which millions of users have come to depend but which is wholly subject to private economic decision-making. Facebook claims more than a billion users worldwide, but its network is heavily geared toward exploiting their personal information to make money for itself.
But Google Fiber, as the network is called, is the best example of the private rollout of socially crucial infrastructure. In 2010, the company invited communities to compete to become the first location of a service providing connection speeds of up to 1 gigabit per second, as much as 100 times faster than the average high-speed network. Bids arrived from 1,100 communities, and the winners were Kansas City, Kan., and Kansas City, Mo. Last week, Google announced that Austin, Texas, will be the next municipality to get the service.
It was obvious from the start that the removal of regulatory obstacles would count heavily in the race. The victors promised sedulous cooperation, including a team to provide "on-the-spot" exceptions where rules and regulations threatened delays. The two Kansas Cities even bowed to the demand they "obtain Google's approval for all public statements" about the project.
Notably, they didn't insist that Google guarantee service to their most disadvantaged communities. The reason is obvious: They didn't have any real choice about the terms; it was fiber on Google's terms, or no fiber at all.
That's a real departure from the model of universal service that governed cable-based Internet service more recently, in which a cable company typically is granted a citywide monopoly — if it promises to serve every neighborhood. (That's the deal Time Warner Cable has from Kansas City, Mo.)
The municipalities plainly were willing to meet Google's conditions because a nation-leading, super-high-speed Internet service looks like an offer a city can't refuse. "This makes us stand out from the crowd," says Sly James, the mayor of Kansas City, Mo. Obviously there's no prospect of building such a network with municipal funds, he says. "We have a lot of needs and very little money. We would not be in this mode unless Google came."
Google is rolling out the fiber network according to what it calls a "demand-driven model." Dividing the community into 202 "fiberhoods," it announced that only those where a certain percentage of residents signed up in advance and paid a $10 registration fee would qualify for service. The percentages ranged from 5% for dense urban neighborhoods to 25% for spread-out suburbs. The service will cost $70 a month for Internet, $120 to include TV.
Naturally, the most affluent fiberhoods qualified first. Shortly before the deadline of Sept. 9, 2012, huge swathes of the Missouri city's poor east side were still off the list. An intense drive by community groups rectified that, but 20 neighborhoods, almost all low-income and high-minority, failed to qualify.
Google has tried to put the best face on this by portraying the qualification process as a sort of community kumbaya, "allowing the citizens of City to determine where and when the Project will be deployed." (The words come from Google's contract with Kansas City, Mo.)
But that's nonsense. Had the city tried to make that determination through its elected representatives, say by requiring service to underprivileged neighborhoods, Google's response would have been, "Adios." The company's goal was to spend money where it was likeliest to attain a critical mass of customers. The inevitable outcome was an economic one: redlining.
There's nothing new about this, Jackson observed. "People on the east side are left out of a lot of things," she told me. "They don't have automobiles, they're not private homeowners. They haven't been part of the discussion since the turn of the 20th century."
There's no point in blaming Google for this result. "Digital inclusion is really important to us," says Jenna Wandres, a spokeswoman for Google Fiber, adding that the company "believes communities are stronger when they're connected to the Internet." That's probably true, as a philosophical matter. But Google is an economic actor, not an agent of social policy.
Although the company says it's trying to narrow the digital divide, its pricing may not meet the needs of inner-city residents even in neighborhoods that qualified, says Michael Liimatta, a community activist focused on improving Internet connectivity for the disadvantaged. Many people in those parts of town will be unable to sign up even for a lower-speed service Google is offering for free for at least seven years, after payment of a one-time $300 fee that can be spread over a year. That's because the fee structure still oriented toward homeowners, and most of the housing stock on the east side is owned by absentee landlords.
"This hasn't worsened the digital divide and hasn't narrowed it," Liimatta says. "The unconnected stay unconnected."
What this experience shows is the impotence of public leadership. Utility companies have always groused about requirements that they provide universal service. They always say it's too expensive to build and there's too little consumer interest. Left to their unregulated druthers, they'll just harvest the low-hanging fruit — and they'll block any alternatives.
In the 1920s and 1930s, for example, Southern utilities resisted the creation of the Tennessee Valley Authority, arguing that they were serving the region just fine by themselves. But the valley was the poorest part of the poorest region in the country, where 99 out of every hundred farms had no electricity. The TVA fixed that, and soon the valley was among the most profitable electric markets in the U.S.
The argument today is that competition among Google-like fiber, phone companies, and cable operators will work to get broadband connections to everyone.
But the opposite may happen. Time Warner Cable told Kansas City it would compete more vigorously with Google, but it wanted (and received) the same deal Google got, including the right to draw its own service boundaries. (AT&T has also proposed to wire Austin for fiber — assuming it gets Google's terms). If cable companies had been allowed to wire Kansas City on Google's terms from the start, then broadband connections would be about as common on the low-income east side as Neiman-Marcus stores.
Some policy experts say the old mandate of universal service may be obsolete in the new world of rapidly changing technology — that requiring that the best technologies go to everyone will stifle innovation. "If you require gigabit service everywhere, you will have gigabit service nowhere," says Blair Levin, a former official at the Federal Communications Commission who is now a communications and society fellow at the Aspen Institute. The goal, he says, is to have "a new social contract that protects universal service and also allows innovation," adding that allowing municipalities like the two Kansas Cities to experiment with public-private partnerships may eventually yield the best answer.
Yet that still leaves open the question of who benefits from the partnership, and on what terms. It's hard today to find anyone in Kansas City to speak ill of Google, and that's not necessarily because of the contractual restriction. For customers whose neighborhoods qualified, the fiber service will surely be spectacular. But who's looking out for those left on the far side of the divide?
Michael Hiltzik's column appears Sundays and Wednesdays. Reach him at email@example.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.
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