Committee on Technology in Government

Bruce Lai, Policy

Fredy H. Kaplan, Legal

Steve Hamill, Press

Carl Thelemaque, Finance

THE COUNCIL OF THE CITY OF NEW YORK

BRIEFING PAPER OF

THE INFRASTRUCTURE DIVISION

Marcel Van Ooyen, Deputy Chief of Staff

COMMITTEE ON TECHNOLOGY IN GOVERNMENT

Hon. Gale A. Brewer, Chair

June 10, 2005

Proposed Int. No. 625-A: By Council Members Brewer, Boyland, Comrie, Fidler, Gerson, Gonzalez, James, Liu, Nelson, Palma, Recchia Jr., Sears and Weprin

Title: To create a temporary task force to study how affordable broadband access can be made available to all New York City residents, nonprofit organizations and businesses.

Introduction

On Friday, June 10, 2005 at 10 AM in the Committee Room, City Hall, the Committee will hold its first hearing on Int. No. 625-A, which mandates the creation of “a temporary task force to study how affordable broadband[1] access can be made available to all New York City residents, nonprofit organizations and businesses.”  The goal of the hearing is to get commentary on Int. No. 625.  Specifically, the Committee would like to get feedback on the necessity, mission, objectives, focus and composition of the Commission. Representatives of New York City's Economic Development Corporation and Department of Information Technology and Telecommunications, telecommunications experts, economic development experts, nonprofit organizations, wireline and wireless broadband companies as well as other technology companies have been invited to testify.

Analysis of Int. No. 625-A

In section one of Int. No. 625-A, the intent of the legislation is explained and preliminary findings of the Committee on Technology in Government regarding broadband are laid out.

First, broadband, i.e., a high-speed connection to the Internet, is a necessity for every resident, nonprofit organization and business in New York City. As the Internet evolves, the interactive applications and services on it will become multimedia experiences that will use words, images, sounds and video and will require large of amounts of bandwidth, which only a broadband connection can provide.

Second, a broadband connection improves the quality of life of everyone who has access to one. Broadband in the home expands the educational opportunities of all schoolchildren by allowing them to communicate with their teachers at home quickly and easily as well as complete homework projects that require access to on-line multi-media educational resources. Broadband saves businesses, both for-profit and non-profit, time and money by giving them the option to implement cost-saving technologies like Voice over Internet Protocol, institute telecommuting programs that reduce the cost of rent, and increasing the amount of time they have to serve their customers.

Third, broadband is often least available to low-income children and families and is also often not available to many small businesses and nonprofit organizations, particularly those located outside of Manhattan. Most importantly, broadband access is often not affordable to these underserved communities, thus, preventing higher rates of broadband adoption and limiting the social and economic opportunities of many New York City residents, nonprofit organizations and businesses.

Subdivision (a) of section two establishes a temporary task force to advise the Mayor of the City of New York and the Speaker of the Council of the City of New York as to the technical, legal, environmental and economical feasibility of providing affordable broadband access to all New York City residents, nonprofit organizations and businesses.

Subdivision (b) requires that the task force shall be comprised of nine members, five of whom shall be appointed by the Speaker of the City Council and four by the Mayor. It also says that the Chairperson shall be elected from amongst the members, and that the members of the task force shall be appointed within thirty days of the enactment of this local law and shall serve without compensation. Any vacancy shall be filled in the same manner as the original appointment for the unexpired term.

Subdivision (c) specifies that the members of the task force shall serve for a period of twelve months at which time the task force shall cease to exist, and that task force member terms shall begin thirty days from the effective date of this law.

Subdivision (d) mandates that no later than three months before the expiration of the task force, the task force shall submit a report containing its conclusions and recommendations to the Mayor of the City of New York and the Speaker of the Council of the City of New York.

Section 3 requires that this local law shall take effect immediately upon its enactment.

Differences between Int. No. 625 and Int. No. 625-A

The following are some of the differences between Int. No. 625 and Int. No. 625-A:

Subdivision (b)

· In Int. No. 625, the phrase “one of whom shall be the chairperson” was attached to the end of the first sentence of subdivision (b). In Int. No. 625-A, that phrase was deleted, and the following new sentence was inserted immediately after the first sentence, “The Chairperson shall be elected from amongst the members.”

· In Int. No. 625, the sentence regarding filling vacancies was originally written as “Any vacancy shall be filled within fourteen days by the original appointing authority.” In Int. No. 625-A, the sentence was changed to “Any vacancy shall be filled in the same manner as the original appointment for the unexpired term.”

· The sentence, originally in Int. No. 625, “The chairperson of the council of the city of New York’s committee on technology in government and the commissioner of the department of information technology and telecommunication shall provide staff to assist the task force” was deleted from Int. No. 625-A.

Subdivision (c)

· The sentence, originally in Int. No. 625, “Such task force shall serve for a period of twelve months, which shall begin thirty days from the effective date of this law or thirty days from the appointment of the last member of the task force, whichever is sooner” was changed into the following two sentences: “Such members of the task force shall serve for a period of twelve months at which time the task force shall cease to exist. Task force member terms shall begin thirty days from the effective date of this law.”

Reasoning Behind Int. No. 625

Goal of Task Force: Universal Broadband Adoption

The primary goal of the task force created by Int. No. 625 is to determine a vision and a strategy to guide New York City government in its efforts to ensure that affordable broadband is accessible to every single resident, nonprofit organization and business in New York City, with the ultimate objective being universal broadband adoption by all residents, nonprofit organizations and businesses in New York City.

Affordability is a Significant Barrier to Broadband Adoption

In New York City, broadband is accessible to almost every resident through either the cable modem or Digital Subscriber Line (or DSL) service.[2] However, only 38 percent of all New York City households have actually adopted broadband.[3] That means 62 percent of all New York City households have not adopted broadband, and it is likely that most of these households are low-income households. At a recent Committee on Technology in Government hearing, Mark Levine, Vice President of the national nonprofit organization, One Economy Corporation, which promotes the use of technology among low-income families, testified:

· “The truth is that affordability remains a significant barrier to adoption of broadband by those on the lower rungs of the economic ladder, since the going rate of $40 per month is beyond the reach of many.”[4]

Additionally, “over the course of a 3-year period, broadband costs at least $1800,”[5] and that amount of money is approximately equal to or is more than the cost of purchasing and using a computer for those same three years. Additionally, in the U.S. Department of Commerce’s Report, A Nation Online, 38.9% of non-Internet users or Internet users with only dial-up access say the main reason why they have not adopted broadband is because it is “too expensive.”[6] In that same report, only 7.5% of households with incomes under $15,000 a year live in a broadband household, while 57.7% of households with incomes above $150,000 a year live in a broadband household.[7]

In addition to significant broadband access problems outside of Manhattan for small and mid-sized businesses,[8] the biggest barrier to broadband adoption for many businesses is also affordability. “For many businesses, particularly those with low profit margins, broadband providers have not lowered their prices that would justify the additional expense of adopting broadband.”[9]

Because affordability is such an issue, the City of Philadelphia is planning to price residential access to its citywide wireless broadband network at $16-$20, about half the price for comparable residential DSL or cable modem service, and business-class access at $50-$60, about half of the price of comparable business-class DSL or cable modem service.[10]

The Underlying Assumption: Broadband is a Necessity

The assumption that drives the creation of the task force mandated in Int. No. 625 is the assertion that broadband is a necessity, not an amenity, for every resident, nonprofit organization and business in New York City. Throughout the world, water and electricity are now seen as a necessity. Accordingly, government has long been committed to ensuring that these public goods are universally available. Increasingly, broadband is being recognized as a necessity and a public good in today’s world.

Broadband is Being Recognized as a Necessity and a Right

President George W. Bush,[11] the European Union,[12] many Asian countries,[13] as well as cities all over the U.S. and the world – including Philadelphia,[14] Seattle,[15] Los Angeles,[16] and Taipei, Taiwan[17] – have publicly committed to building either citywide wireless or wireline (usually fiber-optic) broadband networks for its residents, within the next several years or next decade. Michael Copps, a current FCC Commissioner, has characterized access to broadband a civil right:

· “Each and every citizen of this great country should have access to the wonders of telecommunications – whether they live in the rural countryside or the inner city; whether they are high income or low income; whether they have disabilities, whether they are young or old. I’d go even further: I don’t think it exaggerates much to characterize access to telecommunications in this modern age as a civil right.”[18]

Why Broadband is a Necessity

The following describes why broadband is increasingly being considered a necessity and a right.

Broadband Improves Quality of Life

Broadband is a transformative technology that improves the quality of life of everyone who has access to it. In today’s world, access to broadband – that is, high-speed access to the Internet – is the key that opens the door to its vast information resources,[19] much of which are multi-media, thus, requiring a high-speed connection. In addition to e-mail and “surfing the Web” quickly and easily, broadband allows its users to take advantage of the newest (and usually cheaper) communications technologies, including Voice over Internet Protocol,[20] video e-mail, video conferencing, the networking of home electronics and appliances, peer-to-peer file sharing, and digital television as well as IPTV (Television over Internet Protocol).[21] Instead of standing “in line,” broadband saves its users time and money by giving them the option to shop on-line, to bank on-line, and to find health and financial information on-line. According to The Pew Internet & American Life project,[22] the Internet has successfully been incorporated into almost everyone's daily lives in the U.S.[23] In November and December of 2003, Pew found that:

· “92% of respondents qualify the Internet as a good place to get everyday information.

· 85% of respondents say the Internet is a good way to communicate or interact with others.

· 75% say the Internet is a good place to conduct everyday transactions.

· 69% think the Internet is a good entertainment resource in everyday life.”[24]

Broadband is Crucial to Economic Competitiveness

The Yankee Group predicted $223 billion in cost savings with universally available broadband in the United States, while an August 2002 study by Dataquest, Inc., a unit of Gartner, Inc., estimates that the implementation of “true” broadband infrastructure could result in an incremental increase in the United States gross domestic product by as much as $500 billion annually for each of the next 10 years.[25] Access to affordable broadband is particularly important when put into the context that New York City residents and businesses are not just competing with each other; they are competing in the global economy. In the book, The World is Flat,[26] Thomas L. Friedman sheds further light on the world that is emerging and America’s role in it:

· “The dynamic force in [the current stage of globalization] – the thing that gives it its unique character – is the newfound power for individuals to collaborate and compete globally. And the lever that is enabling individuals and groups to go global so easily and so seamlessly is not horsepower, and not hardware, but software – and all sorts of new applications – in conjunction with the creation of a global fiber-optic network that has made us all next-door neighbors.”[27]

In other words, technology, enabled by broadband access, has enabled anyone -- whether they live in a first world nation or a "developing nation" -- to compete with the United States, including New York City.

Broadband is Must-Have for All Businesses

Many business will not locate new offices or branches in locations where there are broadband constraints. Broadband is now at or near the top of 'must-haves' for many new businesses. Communities with ubiquitous and affordable broadband will continue to attract jobs while communities with broadband constraints will lose jobs over time. Businesses typically want far more bandwidth than residences, and thus the economic development issue is the availability of large data pipes for affordable prices.[28] In New York City, broadband is essential for many of its major industries.

· Finance. $1.5 trillion in financial trades are completed over existing broadband networks each day.

· Media. Print, broadcast and online services depend on a robust fiber infrastructure.

· Telecommunications. It is a $23 billion annual industry, representing 3% of the City’s economy.

· Technology. Opportunities and incentives for the development of innovative new technologies depend on broadband networks, particularly fiber-optic connectivity.[29]

The United States is Falling Behind in the Broadband Race

According to the International Telecommunications Union,[30] South Korea, Hong Kong, Taiwan and Japan rank 1st, 2nd, 7th and 13th respectively in the world in terms of broadband adoption per capita (i.e., broadband penetration), while the United States just fell to 16^th in 2005, down from 4th in the world in 2002. The Organization for Economic Cooperation and Development recently reported that the United States dropped from 10th place to 12th place in a per capita ranking of developed nations with high-speed Internet access. President George Bush recently said of the United States’ drop in the broadband access rankings:

· “America ranks 10th amongst the industrialized world. That’s not good enough. We don’t like to be ranked 10th in anything. The goal is to be ranked 1st when it comes to per capita use of broadband technology. It’s in our nation’s interest. It’s good for our economy.”[31]

In terms of price, broadband in Asian countries is about half of the price of broadband in America[32] while, at the same time, being 10-20 times faster, sometimes more. For example, in Japan, citizens can get a 26 Mbps connection for $22 U.S. dollars a month, half the price of and about 13 times faster than the typical cable modem connection in the United States.[33] Recently, Hong Kong announced that some households now have access to 1 Gbps connections, about 50 times faster than the average cable modem connection in the United States.[34]

Broadband Expands Educational Opportunity

Broadband access at home is crucial for the success of children in school. With broadband, learning is not confined to the school day. “Learning moments” can happen at home as well. Specifically, broadband access at home will help schoolchildren communicate with their teachers at home, do research, complete homework and access on-line educational resources. As Elisabeth Stock, Executive Director of the nonprofit organization Computers for Youth, which supplies and trains low-income families to use computers and the Internet, remarked at a recent Committee on Technology in Government hearing: “Parents use the Internet to help their children learn … and stay connected to the school.[35]

Broadband Helps People Find Jobs and Upgrade Skills

More and more, the Internet is becoming the place where employers post job opportunities that are not available through word of mouth or in-person community networks. Conversely, with broadband access, jobseekers can also market themselves to employers. In addition to facilitating the connection between jobseekers and employers and vice versa, broadband access brings the wealth of information resources to its users and helps promote lifelong learning. Broadband facilitates long-distance education and training that helps workers upgrade their skills and gain credentials to move up the employment and career ladder. As Myron Uretsky, Professor of Information Technology, Stern School of Business, New York University, said at a recent Committee on Technology in Government hearing: “We need to take steps to make sure that anyone wanting to upgrade their skills has affordable access to the necessary resources.”[36] Many of those resources are on the Internet, and broadband allows users to access these resources quickly.

Broadband is Key to the Development of Businesses

Broadband makes businesses – large and small – more productive by allowing them to communicate and share files quickly and easily with customers around the world via e-mail and Web technology. Additionally, broadband allows businesses to save on telecommunications costs through Voice Over Internet Protocol (VoIP), save on travel expenses through video conferencing capabilities, and save on rent through telecommuting programs. With broadband, employees have more flexibility to work from anywhere, at home or on the road. Finally, broadband enables businesses to improve on their marketing efforts, as broadband’s “fast, seamless connection to the Internet enables companies to reach an infinitely larger pool of customers,”[37] particularly customers in other parts of the U.S. and in other countries.

Broadband Can Improve Services by Nonprofits

As with businesses, broadband helps nonprofit organizations become more productive and save money. By reducing the time and money spent on administrative tasks, nonprofit organizations can spend more time delivering services. Broadband also increases the ability of service providers to share information about the people they service, increasing the possibility that they will be able to deliver the right service at the right time to the right person.

Broadband Promotes e-Government and e-Democracy

With ubiquitous broadband access, broadband allows all New York City residents to take advantage of the increasing number of municipal governmental services (e.g., buying a parking card on-line[38]) accessible through the Internet, saving residents time and money as well as potentially reducing the cost of government services. Also, broadband gives residents the capability to communicate with their elected officials and participate in the legislative and/or policy-making process more easily. For example, with universal and affordable access to broadband, more residents could have accessed the website[39] that the New York City Council set up that allowed users to talk amongst themselves about how to spend the Campaign for Fiscal Equity[40] monies that are owed to the New York City public school system by court order.

Broadband Enables Telemedicine

Telemedicine, as defined by the American Telemedicine Association, is the use of medical information exchanged from one site to another via electronic communications for the health and education of the patient or healthcare provider and for the purpose of improving patient care.[41] Telemedicine does not replace in-person face-to-face health care; it is a multi-faceted tool to be employed, when appropriate, to enhance the delivery of health care services.[42] With universal availability of affordable broadband, telemedicine technologies could be used to expand access to medical services and explore the delivery of more sophisticated medical services.[43] In providing flexibility, telemedicine holds the potential to greatly increase cost effectiveness:

· Its judicious use and application holds the promise of reducing the frequency and / or duration of hospital stays, reducing the frequency of physical office and home health care visits, expanding service availability to a greater number of patients at a lesser unit cost through more efficient use of provider time and facilities, and by generally supporting community wellness.[44]

Status of Broadband in New York City

Competition in Telecommunications Market

Universally accessible and affordable broadband can only happen with robust competition. However, in New York City, competition is considered tepid at best. The following paragraph describes the state of the telecommunications market in New York City well:

· “With at most two broadband providers dominating most markets, the telephone and cable industries appear to have settled into a comfortable state of ‘co-opetition’ in which both industries seek to wring as much profit out of their aging infrastructures as possible, with neither pushing the other very hard on price or quality.”[45]

Future Bandwidth Needs & Availability of Necessary Bandwidth

Industry experts have also predicted that, within the next few years, homes will need vastly more bandwidth capacity than is currently available. For example, a recent study by Jupiter Research concluded that, by 2009, average households will need 57-72 Mbps[46] of bandwidth and that ‘tech savvy’ households will consume nearly 100 Mbps. A significant amount of this bandwidth will support in-home wireless applications, as well as high definition television and other bandwidth-rich applications.[47] However, it is unclear whether New York City will get the bandwidth it needs to keep up with the rest of the world from its incumbent providers – Verizon, Time Warner and Cablevision. Verizon has embarked on a plan to deploy FTTH (or Fiber to the Home) through a service called Fios[48] as rapidly as possible across the country, including New York City. It is however unclear how successful Verizon will be in deploying fiber-optic connections to every apartment and home in New York City anytime soon. On the other hand, “cable companies, currently offering bandwidth in the single-digit Mbps range, claim that they have no plans to boost their bandwidth to any significant extent. At most, they may match the speeds offered by the telephone companies.”[49]

Involvement of City Government in Telecommunications

Municipalities are Entering the Telecommunications Market

Over two hundred cities in the U.S. an