[links open in new window]
(From Mercury News Article June 2, 2009)
Challenging the Legislature to "spend only what we have," Gov. Arnold Schwarzenegger
declared Tuesday that devastating cuts in the state budget are unavoidable, but said they could lead to lasting reforms and a revived economy.
Addressing a rare joint session of the state Senate and Assembly, he urged lawmakers toresolve a $24 billion deficit within two weeks, before the state starts to run out of cash. Schwarzenegger stuck to his revised cuts-only budget-balancing plan, unveiled last week, that includes eliminating the state's welfare-to-work program and its health insurance program for poor children, along with deep cuts to schools, parks and higher education.
Introduction
As California and most States face similar challenges it boggles the mind that these agencies and officials continue to follow the same flawed bureaucratic processes that got them in this situation in the first place. And even if Wall Street and the federal government continue to bail these states out how long can this last?
As we are experiencing the worst economic downturn since the Great Depression the Telecom and Cable Industries seem to be flying under the radar. The government continues to bail out large financial, insurance institutions and auto makers, promising that these bail outs will get these companies back on their feet. Does anyone truly believe this?
Auto makers can re-tool to start making cars that will benefit our economy and the planet. But what are the financial markets going to do? The whole financial and banking system needs to be reformed but this is not the subject of this post.
A serious re-vamping of State operational and revenue models is needed and the first place to start is with variances in operating and revenue models surrounding broadband infrastructure and communications services in our communities, cities and counties.
During this economic downturn the American people and businesses are finding a way to pay
for the most expensive internet access and communications services in the World. They will put off a credit card payment (or use that same credit card) to pay and maintain multiple accounts for their cell phones, pay TV, internet access, VoIP, land lines, fax lines, GPS, etc. because these are services that we, as Americans, cannot live without.
American businesses and households pay $100, $200, $400 or more per month to large incumbent Telecom and Cable companies. These companies compete daily to pull every dollar they can from our communities and cities to line their pockets with the mask of responsibilities to stock holders. These companies remain in the black while almost every other major industry in the United States is struggling to survive.
The creative solutions and initiatives to combat this economic downturn will be borne from the communities in which we work and live... from the ground up. Not from the top down. Communities and Cities now have the means to launch revenue generating broadband infrastructures that can provide the core communications and internet access needed to sustain as a community while bolstering economic stimulus and community outreach programs within their markets.
These core services will greatly benefit the communities they serve by providing low-cost, high-speed ubiquitous internet access and communications for their residents, businesses, local governments, public safety/first responder, health care, school systems, colleges, libraries, low-income households or other public or departmental agencies. Revenue from these core services will remain within the communities.
Then we will demand (and pay for) extended or enhanced communications, entertainment, internet, and other peripheral products and services from large incumbent operators and service providers.
Communities, cities and counties throughout the United States have issued numerous RFI's and RFP's over the years that have only found their way to the circular file because of the lack of assets and viable cost-effective solutions to build out these wireless infrastructures.
This can only be attributed to past FCC and White House administrations and their blatant support of large incumbent Telecoms and Cable companies. They have allowed these companies to monopolize all the assets needed, namely spectrum.
Brief History
In January 2008 the FCC allowed AT&T and Verizon to gobble up most of the 700MHz spectrum at auction... thus the reason for the transition to DTV.
The FCC also allowed Sprint and Clearwire to approach hundreds of non-profit 2.5GHz Educational Broadband Service (EBS) license holders to lease this spectrum. These
non-profits include state government agencies, state universities and university systems, publiccommunity and technical colleges, private universities and colleges, public elementary and secondary school districts, private schools (including Catholic school systems in a number of large metropolitan areas), public television and radio stations, hospitals and hospital associations, and private, non-profit educational entities. These are non-profits located in OUR COMMUNITIES!
How and why did the FCC allow this to happen? This is something we need to scrutinize a bit further.
The FCC recently approved (Election Day, 2008) Sprint and Clearwire merging their spectrum holdings to form "CLEAR" [1]. It is their intention to offer WiMAX based Fourth Generation or "4G" wireless services using this spectrum. Intel has announced their laptop silicon chip sets (Rosedale 2) will support WiMAX mobile technology in only four bands of spectrum, one of which is the EBS band.
Long term leases of this spectrum (15-30 years) were negotiated with these non-profit Licensees at extremely undervalued terms[2]. This can be attributed to the tactics used by potential Lessees during negotiations to secure these long term leases and to the lack of proper due diligence on the part of non-profit Boards of Trustees and their assignees to perform basic diligence including analyzing and forecasting the present and future value of their spectrum, technology standards, cost basis, CaPex, OpEx and revenue models[3].
Non-Profit Boards of Trustees were impelled to sign these long term leases under the assumption that CaPex would be too high (at that time). This discouraged Boards of Trustees and their assignees from forecasting current and future CaPex, OpEx and revenue models that would have favored build out of their own core broadband infrastructure using the asset they have maintained for decades. This eventually lead to only one alternative... accept the lucrative offer as put forth by Sprint or Clearwire due to the responsibilities of Boards of Trustees to the constituency they serve.
It is ironic that the very non-profit agencies that hold and manage the rights to their 2.5GHz Educational Broadband Service (EBS) spectrum are the same non-profit agencies that now will potentially become their own customers and consumers and pay a premium to CLEAR. Even worse is the fact that all of these non-profit agencies are the very agencies that were represented as potential applicants to NTIA BTOP and RUS broadband stimulus funding during the BTOP public round table meetings and panelist discussions.
Had these non-profits in medium and large MSA's not succumbed to the lure of under valued upfront cash payments and residual lease payments these non-profit EBS License holders would be in a position to generate much higher gross revenues by establishing public/private partnerships with local (W)ISP's, governments, communities, cities, counties, school systems, public safety/first responders, health care and other stake holders through private sector investment that would facilitate exponential job creation and greatly enhance NTIA BTOP, RUS and ARRA initiatives and programs as a whole.
Instead, all of these agencies and tenants will conceivably have to go through the 2.5GHz EBS spectrum "middle man" to obtain the services critical to sustaining their own infrastructures surrounding NTIA BTOP, RUS broadband programs and associated ARRA programs as a whole.
The Solution
The most immediate creative and viable solution in developing and deploying a nation wide broadband plan lies with a proactive approach by Clearwire so we will leave AT&T and Verizon out of the mix for now.
As Clearwire now controls about 85+ percent of the 2.5GHz EBS band covering major MSA's in the United States the following model is proposed. This new model does not effect existing lease agreements with non-profit 2.5GHz EBS license holders.
Link to Proposed Model (graphic opens in new window)
--
The overall benefits of "CLEAR" (Clearwire/Sprint) partnering with local GSA 3.65GHz service provider(s) and equipment manufacturers in concurrent build out of the 2.5GHz EBS band (fixed/nomadic/mobile), 3.65GHz band (fixed, nomadic), and other synergistic spectrum (e.g. 5.nGHz, 4.9GHz, 2.4GHz, etc) provides for the following:
[1] Sprint Nextel Corporation ("Sprint") and Clearwire Corporation ("Clearwire") have filed a series of applications pursuant to Section 310(d) of the Communications Act of 1934, for authority to transfer control of certain licenses, authorizations, and de facto transfer spectrum leases held by Sprint, Clearwire and their subsidiaries to a new wireless broadband company also called Clearwire Corporation ("New Clearwire"). Approved 11/4/08. Also lists Orders & Public Notices, Recorded Documents http://www.fcc.gov/transaction/sprint-clearwire.html
[2] VERMONT STATE COLLEGES -- LEASING OF EDUCATIONAL BROADBAND SERVICE (EBS) SPECTRUM & COMPETITIVE BIDDING REVIEW; "Our information suggests that VSC likely did not receive full fair market value for its licensed spectrum asset and likely would have received higher compensation through a competitive bidding process."(pg. 16, Thomas M. Salmon, CPA, Vermont State Auditor ) http://www.accessdelray.org/pdf/vermont_case_study.pdf
[3] VERMONT STATE COLLEGES -- LEASING OF EDUCATIONAL BROADBAND SERVICE (EBS) SPECTRUM & COMPETITIVE BIDDING REVIEW; "While VSC was not required to seek a professional appraisal or valuation of its EBS licenses, or technical advice from expert outside counsel, prior to entering into a long term lease, it should have done so as a matter of proper due diligence. Broadcast spectrum is a scarce resource and a professional valuation would, in our opinion, have served VSC well."(cvr. Ltr, Thomas M. Salmon, CPA, Vermont State Auditor) http://www.accessdelray.org/pdf/vermont_case_study.pdf
(From Mercury News Article June 2, 2009)
Challenging the Legislature to "spend only what we have," Gov. Arnold Schwarzenegger
declared Tuesday that devastating cuts in the state budget are unavoidable, but said they could lead to lasting reforms and a revived economy.Addressing a rare joint session of the state Senate and Assembly, he urged lawmakers toresolve a $24 billion deficit within two weeks, before the state starts to run out of cash. Schwarzenegger stuck to his revised cuts-only budget-balancing plan, unveiled last week, that includes eliminating the state's welfare-to-work program and its health insurance program for poor children, along with deep cuts to schools, parks and higher education.
-- ## --
Introduction
As California and most States face similar challenges it boggles the mind that these agencies and officials continue to follow the same flawed bureaucratic processes that got them in this situation in the first place. And even if Wall Street and the federal government continue to bail these states out how long can this last?
As we are experiencing the worst economic downturn since the Great Depression the Telecom and Cable Industries seem to be flying under the radar. The government continues to bail out large financial, insurance institutions and auto makers, promising that these bail outs will get these companies back on their feet. Does anyone truly believe this?
Auto makers can re-tool to start making cars that will benefit our economy and the planet. But what are the financial markets going to do? The whole financial and banking system needs to be reformed but this is not the subject of this post.
A serious re-vamping of State operational and revenue models is needed and the first place to start is with variances in operating and revenue models surrounding broadband infrastructure and communications services in our communities, cities and counties.
During this economic downturn the American people and businesses are finding a way to pay
for the most expensive internet access and communications services in the World. They will put off a credit card payment (or use that same credit card) to pay and maintain multiple accounts for their cell phones, pay TV, internet access, VoIP, land lines, fax lines, GPS, etc. because these are services that we, as Americans, cannot live without.American businesses and households pay $100, $200, $400 or more per month to large incumbent Telecom and Cable companies. These companies compete daily to pull every dollar they can from our communities and cities to line their pockets with the mask of responsibilities to stock holders. These companies remain in the black while almost every other major industry in the United States is struggling to survive.
The creative solutions and initiatives to combat this economic downturn will be borne from the communities in which we work and live... from the ground up. Not from the top down. Communities and Cities now have the means to launch revenue generating broadband infrastructures that can provide the core communications and internet access needed to sustain as a community while bolstering economic stimulus and community outreach programs within their markets.
These core services will greatly benefit the communities they serve by providing low-cost, high-speed ubiquitous internet access and communications for their residents, businesses, local governments, public safety/first responder, health care, school systems, colleges, libraries, low-income households or other public or departmental agencies. Revenue from these core services will remain within the communities.
Then we will demand (and pay for) extended or enhanced communications, entertainment, internet, and other peripheral products and services from large incumbent operators and service providers.
Communities, cities and counties throughout the United States have issued numerous RFI's and RFP's over the years that have only found their way to the circular file because of the lack of assets and viable cost-effective solutions to build out these wireless infrastructures.
This can only be attributed to past FCC and White House administrations and their blatant support of large incumbent Telecoms and Cable companies. They have allowed these companies to monopolize all the assets needed, namely spectrum.
Brief History
In January 2008 the FCC allowed AT&T and Verizon to gobble up most of the 700MHz spectrum at auction... thus the reason for the transition to DTV.
The FCC also allowed Sprint and Clearwire to approach hundreds of non-profit 2.5GHz Educational Broadband Service (EBS) license holders to lease this spectrum. These
non-profits include state government agencies, state universities and university systems, publiccommunity and technical colleges, private universities and colleges, public elementary and secondary school districts, private schools (including Catholic school systems in a number of large metropolitan areas), public television and radio stations, hospitals and hospital associations, and private, non-profit educational entities. These are non-profits located in OUR COMMUNITIES!How and why did the FCC allow this to happen? This is something we need to scrutinize a bit further.
The FCC recently approved (Election Day, 2008) Sprint and Clearwire merging their spectrum holdings to form "CLEAR" [1]. It is their intention to offer WiMAX based Fourth Generation or "4G" wireless services using this spectrum. Intel has announced their laptop silicon chip sets (Rosedale 2) will support WiMAX mobile technology in only four bands of spectrum, one of which is the EBS band.
Long term leases of this spectrum (15-30 years) were negotiated with these non-profit Licensees at extremely undervalued terms[2]. This can be attributed to the tactics used by potential Lessees during negotiations to secure these long term leases and to the lack of proper due diligence on the part of non-profit Boards of Trustees and their assignees to perform basic diligence including analyzing and forecasting the present and future value of their spectrum, technology standards, cost basis, CaPex, OpEx and revenue models[3].
Non-Profit Boards of Trustees were impelled to sign these long term leases under the assumption that CaPex would be too high (at that time). This discouraged Boards of Trustees and their assignees from forecasting current and future CaPex, OpEx and revenue models that would have favored build out of their own core broadband infrastructure using the asset they have maintained for decades. This eventually lead to only one alternative... accept the lucrative offer as put forth by Sprint or Clearwire due to the responsibilities of Boards of Trustees to the constituency they serve.
It is ironic that the very non-profit agencies that hold and manage the rights to their 2.5GHz Educational Broadband Service (EBS) spectrum are the same non-profit agencies that now will potentially become their own customers and consumers and pay a premium to CLEAR. Even worse is the fact that all of these non-profit agencies are the very agencies that were represented as potential applicants to NTIA BTOP and RUS broadband stimulus funding during the BTOP public round table meetings and panelist discussions.
Had these non-profits in medium and large MSA's not succumbed to the lure of under valued upfront cash payments and residual lease payments these non-profit EBS License holders would be in a position to generate much higher gross revenues by establishing public/private partnerships with local (W)ISP's, governments, communities, cities, counties, school systems, public safety/first responders, health care and other stake holders through private sector investment that would facilitate exponential job creation and greatly enhance NTIA BTOP, RUS and ARRA initiatives and programs as a whole.
Instead, all of these agencies and tenants will conceivably have to go through the 2.5GHz EBS spectrum "middle man" to obtain the services critical to sustaining their own infrastructures surrounding NTIA BTOP, RUS broadband programs and associated ARRA programs as a whole.
The Solution
The most immediate creative and viable solution in developing and deploying a nation wide broadband plan lies with a proactive approach by Clearwire so we will leave AT&T and Verizon out of the mix for now.
As Clearwire now controls about 85+ percent of the 2.5GHz EBS band covering major MSA's in the United States the following model is proposed. This new model does not effect existing lease agreements with non-profit 2.5GHz EBS license holders.
Link to Proposed Model (graphic opens in new window)--
The overall benefits of "CLEAR" (Clearwire/Sprint) partnering with local GSA 3.65GHz service provider(s) and equipment manufacturers in concurrent build out of the 2.5GHz EBS band (fixed/nomadic/mobile), 3.65GHz band (fixed, nomadic), and other synergistic spectrum (e.g. 5.nGHz, 4.9GHz, 2.4GHz, etc) provides for the following:
- Ubiquitous (one account) fixed, nomadic and mobile broadband wireless services, communications, applications, media and entertainment for all residents, businesses, local/county governments, school systems, colleges/universities, public safety, first responders, health care, libraries, low-income households, etc. within the coverage area (GSA)
- Revenue models will enable CLEAR to maintain projected bottom line profits using the 2.5GHz EBS while revenue models using the 3.65GHz will flow back to the communities through the public/private partnerships (PPP's) that will be formed. For example:
- CLEAR (2.5GHz services) can charge whatever they see fit for enhanced fixed/mobile/nomadic wireless services (which subscribers will demand) including increased upload/download speeds, VoIP, enabling delivery platforms for three-screens digital media, hosted video platforms, video servers, CDN, publishing platforms, technology platforms for rich media, Encoding/Transcoding, DRM and content security, client software, streaming, players, asset management, streaming and delivery platforms, VOD, subscription, rental, download to own, ad-supported, carrier services and delivery, hybrid, service bundles, three-screens convergence devices and services, hybrid set-top boxes, carrier and over-the-top enabled devices, broadcast and streaming, CE device streaming platforms, software platforms for three-screens services, etc.
- Community (PPP's) 3.65GHz can charge low-cost base core subscription rates for basic fixed/nomadic wireless internet/network access and communications, fixed/nomadic VoIP, VPN's, fixed point-to-point. These local networks will also provide applications and services autonomous to local communities and cities for residents, businesses, local governments, public safety/first responder, health care, school systems, colleges, local newspapers, libraries, low-income households or other public or departmental agencies distance learning, employer outreach, telemedicine, destination market portals, etc.
- Marketing can be set up in a way that potential subscribers will have multiple PPP/CLEAR SLA's to choose from.
- Adhere to the FCC deadline that's pushing lease holders nationwide to find operators that will put 2.5GHz spectrum to substantive use by May, 2011 (model can lead to concurrent build out in all CLEAR GSA's and may possibly extend this deadline of May, 2011).
- Combat any concerns as to how the 2.5GHz Educational Broadband Service was acquired by CLEAR, use the overall premise of the ARRA to create a sense of community (social capital) while improving Company brand to new all time highs.
- Greatly increase subscriber base to CLEAR services
- This model makes the non-profit EBS license holder look very good in the eyes of all communities, cities and municipalities within the GSA coverage area (instead of sole beneficiaries of CLEAR lease monies being the constituency of that particular EBS license holder)
- Spectrum use and management of all available bands is greatly improved
- This model can help to set the standard for BTOP, NTIA, RUS, FCC, NEBSA in:
- Rural Markets (un-served, under served) - In markets where CLEAR has obtained licenses where GSA coverage spills over to these markets CLEAR can partner with local service providers AND the electric/telecommunication cooperatives to incorporate the latest in state-of-the-art broadband facilities. (Supports comments made by the NEBSA regarding funding for lease partners -http://www.ntia.doc.gov/broadbandgrants/comments/6F1B.doc - Pg. 8, Sec 6)
- Urban and Suburban Markets - CLEAR (2.5GHz) partnership with local 3.65GHz GSA public/private partnerships will expedite concurrent build out of new state-of-the-art broadband wireless facilities and deliverables and;
- The development and deployment of a new national broadband plan, delivered to Obama and Congress by February, 2010
- Exponential job creation in markets throughout the United States
- CLEAR 2.5GHz EBS, partnering with Community (PPP) 3.65GHz, solidifies CLEAR's position in the market and provides distinct competitive advantage over future ATT/Verizon 700MHz LTE offerings.
[1] Sprint Nextel Corporation ("Sprint") and Clearwire Corporation ("Clearwire") have filed a series of applications pursuant to Section 310(d) of the Communications Act of 1934, for authority to transfer control of certain licenses, authorizations, and de facto transfer spectrum leases held by Sprint, Clearwire and their subsidiaries to a new wireless broadband company also called Clearwire Corporation ("New Clearwire"). Approved 11/4/08. Also lists Orders & Public Notices, Recorded Documents http://www.fcc.gov/transaction/sprint-clearwire.html
[2] VERMONT STATE COLLEGES -- LEASING OF EDUCATIONAL BROADBAND SERVICE (EBS) SPECTRUM & COMPETITIVE BIDDING REVIEW; "Our information suggests that VSC likely did not receive full fair market value for its licensed spectrum asset and likely would have received higher compensation through a competitive bidding process."(pg. 16, Thomas M. Salmon, CPA, Vermont State Auditor ) http://www.accessdelray.org/pdf/vermont_case_study.pdf
[3] VERMONT STATE COLLEGES -- LEASING OF EDUCATIONAL BROADBAND SERVICE (EBS) SPECTRUM & COMPETITIVE BIDDING REVIEW; "While VSC was not required to seek a professional appraisal or valuation of its EBS licenses, or technical advice from expert outside counsel, prior to entering into a long term lease, it should have done so as a matter of proper due diligence. Broadcast spectrum is a scarce resource and a professional valuation would, in our opinion, have served VSC well."(cvr. Ltr, Thomas M. Salmon, CPA, Vermont State Auditor) http://www.accessdelray.org/pdf/vermont_case_study.pdf
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