Cities, Technology, the Next Generation of Urban Development, and the Next Administration

Blair Levin
Brookings Metropolitan Policy Project
Kansas City Gigabit Summit
May 17, 2016

My topic today is Cities, Technology, the Next Generation of Urban Development and the Next Administration.

It’s a challenge, as we cannot know who will be the next President. One could look to prediction markets or polls but this campaign is as predictable as a game of basketball pitting the best offense in baseball versus the best defense in football. Both major party candidates will be playing in a different game than the one that got them to the final round.

Further, not in my lifetime has there been an election in which the political variation is so great. The Presidency, Congress and the Courts could all shift, with a wide ideological delta.

Nonetheless we can know some things about the next four years related to this conference.

First, we know American cities will lead the economy, as cities do around the world. Today more than 80% of the population in the United States lives in large metropolitan areas, generating more than 90% of the country’s GDP. Both those numbers are likely to rise.

Second, the cities that will lead the most are those who take the greatest advantage of the macro-trends that create economic growth, social progress.

Information, as an input to every product and service, is increasing in importance, transformed by massive improvements in data storage, computing power and communications. In this world, as the new book Connectography makes clear, economic destiny is not a function of geography as much as connections, particularly broadband connections.

But this is not really about broadband. It is really about the next generation of broadband led Urban Development. That is, just as agriculture, retail, manufacturing and every other sector of the economy—even if we don’t think of them as tech—are being transformed by technology trends, so the way cities achieve their mission of providing healthy communities in which individuals and families can thrive, is being redefined by technology. What we might think of as the Civic Internet of Things will change the way cities approach their own role in driving economic growth, social progress and civic engagement.

Third, while the current short-term, news cycle driven attention span and resulting dysfunction in DC may well continue, cities will continue to actually take long-term actions. As my Brookings colleague Bruce Katz recently wrote, “since their inception, cities have been built to invest in the future—in quality, enduring infrastructure to move people, goods, energy, and ideas; in the creation of authentic and vibrant places and destinations; and in the schooling and skilling of people to help them reach their full potential. “

We shouldn’t be Pollyannaish about this. Cities are highly constrained in terms of resources. Too often, cities use deferred maintenance on infrastructure as a budget tool. Faced with choosing to use limited dollars to plug a pothole or install new sensors, most are going to plug the hole. Still, in terms of leading governments in taking the new tools of service delivery, cities are more likely to do more sooner than the federal government.

Fourth, more cities will focus on the gigabit/connected cities opportunity.

Market forces play a big role. In 2010, we were looking at a Gigabit desert but then Google Fiber rolled out and begat AT&T Gigapower and CenturyLink’s Fiber which begat an accelerated Cable’s DOCSIS 3.1 roll-out and now it looks like we got ourselves a real Game of Gigs.

The bigger energy, however, emanates from conferences like this, a showcase of cities using the IP platform to transform how they deliver public goods.

Cities are fundamentally in the business of creating and sustaining the commons; the facilities that we share---infrastructure, parks and tourist areas, healthy economic and civic environments. As noted above, broadband, and soon the Internet of Things, will be an essential input for all these and much more.

In that light, we should set an agenda for how the next administration can move the country forward by helping the cities that want to lead in this century’s city-led, global information economy.

I will offer five ideas that come out of work I have done with the Broadband Plan, Gig.U, and the Brookings Metropolitan Policy Program. None fall neatly into a traditional red/blue divide; all are consistent with various statements of each of the presumptive nominees.

Further, they reflect something I learned directing a Presidential transition team. Rather than proposing an answer, one is better off aligning a mission with an institution, an inquiry or an investment. For many reasons, including the need to build political capital, a commitment to solve a problem with a responsible entity is more valuable than a stand-alone solution. For example, the country is currently running a complicated, dual auction (known as the incentive auction) that will likely reallocate more low-band spectrum to the critical mobile broadband market than any action ever by the government or private sector. The idea first emerged in 2008 but, by itself, gained no traction. But with the National Broadband Plan that first made clear the problem of the looming spectrum crunch, and then clarified how the incentive auction was the best of all alternatives to avoid that crunch, the idea became the centerpiece of the only telecommunications legislation to pass Congress during the Obama Presidency.

Thus, my purpose is to suggest some institutions, inquiries and investments that could lead to beneficial actions. More important, I hope this starts a conversation that leads others to have better thoughts and leads to both Presidential transition teams understanding that it is in their interest to support cities that are building, and building on, the core platform of the 21st Century Global Information Economy.

Idea #1. A PCAST for Cities

The federal government has the gravitational force and scale to attract attention and support from the brightest minds in a number of fields, particularly technology. This is done in a variety of ways, but most notably through a Presidential Council of Advisors on Science and Technology (PCAST) that serves to identify trends, risks, and opportunities emanating from science and technology that the federal government should understand and act upon.

Cities generally lack the scale for such independent advice but are in no less of a need for such advice, as is evidenced by a recent PCAST report on cities and technology. A single report, however, is not the same as a sustained effort. We need a long-term institution dedicated to helping cities understand the impact of where science and technology is heading.

We should also build on the Smart City initiative done in collaboration with the Departments of Commerce, Transportation, Homeland Security and Energy and the EPA and National Science Foundation. That effort is great but should not be a one-time event.

To bring a constant focus to the opportunity, someone in the Administration, (arguably the next Secretary of Housing and Urban Development as the institution is closest to the concerns of Mayors) should convene a Mayors’ Council of Advisors on Science and Technology that similarly serves to identify trends, risks, and opportunities for cities. As mayors approach the traditional tasks of delivering safe communities, education, job training, housing, and utilities, they should understand how technology offers the opportunity to deliver each of these faster, better and cheaper. And while there are many related efforts to attempt to evangelize a best practices approach, an MCAST would have the ability to both analyze the opportunities and disseminate information in a way that current, fragmented efforts cannot.

Of course, the real payoff is not just providing the advice but also in using the advice to change urban policy. This will require, as the Smart City initiative did, moving grants and programs to be consistent with the new opportunity. We need, however, a group to provide the insight that can lead to those concrete changes.

Idea #2. An Access Initiative

Two lessons we tried to communicate through the Plan and Gig.U process was first, that while there are many public benefits of abundant, affordable bandwidth, from an investment perspective the only ones that matter are those which improve the return for the investor.

Second, the current math does not justify that investment; otherwise we would already have it. The deployment of faster, better, cheaper networks requires a new capital allocation decision, generally by a private sector party. This can be stimulated by a government decision that lowers capital expenditures, operating expenditures, and or risk, and increases potential revenue and competition.

If one looks at the agreements between private sector fiber providers and cities, the documents are chock full of ways the City will affect those five factors in the right way.

This has historically been true of all investment cycles in communications networks. One common link is government providing some kind of access to an essential facility that has the economic impact just described. For example, while cable was funded by private investment, the big deployment period followed the government granting regulated access to utility poles and broadcaster programming (as well as granting them local monopolies.) The rise of the long-distance industry followed an antitrust action and judicial decree in which the government granted the industry certain access to incumbent facilities and number parity. The rise of DBS only occurred after it was provided non-discriminatory access to cable programming.

It is a challenge for government to evaluate how best to provide such access. There are three basic categories: government-controlled inputs, such as spectrum at the federal level and rights of way at the local level; quasi-public essential facilities such as utility poles and to certain kinds of intellectual property developed through standards-setting bodies; and private assets that have become essential. Examples of these include the cable programming noted above, the unbundled network elements at the heart of the 1996 Act, and the business data services facilities currently being debated at the Federal Communications Commission (FCC).

This is not a simple task. While as a general rule, the government should always provide liberal access to its own facilities and be careful about the economic incentives it creates in allowing access to the properties of others, history shows that the general rule is a good starting point but not a good ending point. Rather, the government, at various times has to determine both what is essential and what should be no longer considered essential. Just as the FCC is taking a fresh look at what access should be provided for business data services, a broader access agenda might become important.

Indeed, Congress specifically asked the FCC for such a proceeding. In Section 706 Congress told the FCC that it was responsible for the deployment of advanced communications networks and it should “take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment.” That implies to me that if the FCC thinks such deployment is too slow, and the current Commission clearly believes that, it ought to have a periodic broad inquiry as to whether there are barriers that ought to be removed.

I don’t know what the answer would be but based on my observations of the efforts of various new entrants to provide facilities based competition, I suspect such an inquiry should, at a minimum, look at poles, entry to Multiple Dwelling Units (MDUs), and a new set of spectrum and data issues.

As to poles, there is some level of regulation. What has emerged from the efforts of some new entrants, however, is that the cost of attaching to the poles, and the time needed to do so, create obstacles to new deployments. The current rules often result in multiple construction crews to do what one crew arguably could do, adding costs and delaying new competition and services. Just as both national and local governments are wisely adopting “dig once” policies for deploying below streets, we ought to explore a similar vision of “climb once” or “one touch” policies.

With MDUs, we have banned exclusive access agreements but we still have many MDUs where as a practical matter the residents cannot exercise free choice. Some states have wisely adopted rules that clearly provide that if a resident wants a service, the MDU owner cannot deny access to the service provider (subject to reasonable limits such as on space, compensation and the cost of letting them in the buildings) but unfortunately many of these only apply to cable, not other video providers or broadband providers. The FCC should consider whether the failure to provide residents such a right creates a barrier to broadband deployment, in violation of Section 706.

A third inquiry involves unlicensed spectrum and the Civic Internet of Things. Multiple parties, including cities, use unlicensed spectrum for a myriad of purposes. In the near future, we will have to assure that the access to the spectrum, as well as locations for antennas and perhaps even certain kinds of data, is fair and serves the public interest. In some sense this is what the controversy between Wi-Fi and LTE-U is about; how do we retain the zone of permissionless innovation when that zone has transformed from being as unoccupied as the wild west to the density of modern-day Manhattan?

Again, my point is not to propose an answer to any of these, but rather to propose that the federal government view the answering of them, after an open and transparent process, as part of the challenge it should undertake to assure timely deployment of next generation networks.

Idea #3. A Tax/Next Generation Network Investment Deal

There is a bi-partisan consensus that our tax code needs updating to reflect changes in the economy since the last comprehensive reform thirty years ago.

The chances for such a bill are not high; neither are they non-material. In that light, cities should advocate that any such effort ought to be used to accelerate investment in next generation, long-term infrastructure.

There are many ways to do so. One traditional way for private investment is accelerated depreciation of certain kinds of investment, such as investment in capital facilities that achieve certain next generation capabilities. This should be broadly defined so that it includes both the underlying fiber but also other elements, such as sensors.

Another way, unique at this moment, is the opportunity to cut a deal in which some of the $2 trillion currently offshore be allowed to be repatriated, on the condition that some of the repatriated funds are invested in next-generation infrastructure. As many of those funds belong to tech companies who will benefit from next generation network investments, there is an alignment of interests that might make that which today seems impossible, inevitable.

As with any tax debate, we’ll need to address issues of fairness and efficiency. Further, there are a number of other issues that are likely to be discussed that will affect technology and cities such as sales taxes on e-commerce.

But let’s not kid ourselves. If cities don’t have ideas about how such legislation will help them obtain affordable, abundant bandwidth, the legislation will, on that score, be unfair and inefficient. As noted in the hit musical “Hamilton”, cities have to be “in the room where it happens” with ideas for how to drive capital into building the infrastructure they need.

Idea #4. A Government IP Transition with an Adoption Surge

The FCC recently reformed the Lifeline program, which provides support for low-income individuals to stay on critical information networks.

But this is not just about helping low-income people. It helps everyone.

As a group of cities wrote in support of the reforms: “Getting more low-income households online will help modernize delivery of public services - facilitating more responsive and effective governance while lowering overheads for local governments. E-government delivery also saves the public the expense of visiting government offices in person - a particular concern for low-income households. Taking advantage of e-government frees public beneficiaries from losing wages if they are paid hourly, and it allows easier and more ubiquitous access to opportunities and resources….Putting broadband in reach for more low-income households will help us deliver better services community-wide, and foster opportunity for more of our residents.”

In short, getting everyone on creates an opportunity to create a more effective and efficient city government.

The same would be true for federal government. In fact, a hi-tech CEO group estimated the savings of transitioning the federal government to a more efficient digital platform, over 10 years, to be $1 trillion.

We should do so through a Commission with the same structure as a base-closing Commission. It should be given a mandate and make a series of recommendations that Congress can only vote on an up or down basis. The federal government taking the leadership role in making such changes will accelerate market forces that will make it easier and cheaper for cities to do the same.

But as we make this transition, it is critical that we get everyone who wants to be on the network. Thus, the recommendations have to include that the government dedicates, in advance of the actual savings, using a portion of those savings to accelerate adoption, such as through funding a higher Lifeline subsidy, as well as a temporary digital literacy service corps that would help those lacking the skills to benefit from on-line services.

The next administration should be the one to move the United States to the top tier in e-government delivery and broadband adoption. In doing so, it would lay the groundwork for improving the performance of every municipal government.

Idea #5: In-Q-Tel4Equity

When the mass market Internet emerged 20 years ago, many had great hopes it would lead to both great economic growth and social equity.

Whether it had that economic impact is much debated but I want to focus my last idea on the question of social equity.

It was not irrational for us to believe that a medium in which the cost of distribution is zero could lead to a world in which the best for one becomes available to all.

After all, the Silicon Valley billionaire and any impoverished child with Internet access probably use the same search engine and same apps. As Wired magazine noted, refugees fleeing Syria often have the same smartphone as those in the 1%.

But we would have to be blind to believe social equity has improved in the last 20 years. As a recent New York Times article on the velvet rope economy noted, there are signs everywhere of an economy for the wealthiest that is separated from the economy in which nearly half of all Americans could not scrape together $400 dollars in the event of an emergency.

We could argue about the causes. Indeed this presidential campaign cycle has featured a robust, if not always fact-based, discussion of those causes. We could, as the White House recently did, point to the ways Big Data might exacerbate some of the trends of inequality.

I think, however, the big truth is that while there is no velvet rope economy of apps, the app economy did not produce the kind of equity that we had hoped for.

In that light, I hope the transition team for the next President will see, as a core mission of the first term, curbing the slope of the line dividing the digital haves from the digital have nots.

There are a variety of ways to do this and I hope many offer proposals. Let me suggest one. After 20 years of hoping market forces would produce such apps, perhaps it is time to be more intentional. When the CIA came to believe they needed to be more intentional about the direction of technology, they created a VC fund called In-Q-Tel, opened an office in Silicon Valley and began to provide venture capital in an effort to tap commercial technology. The Pentagon recently followed that model with its own Silicon Valley office to help stimulate technology that can be used to develop more advanced weapons and intelligence systems. In a sense, they are investing in technology they are interested in buying and thus both make money on the investment side and accelerate the deployment of technology they want.

The Federal Government should do the same to tap developing technology to address the needs of low-income communities in health, education, job training and other areas. While there are good, existing efforts to do so on a voluntary basis, nothing concentrates the entrepreneurs’ mind like some old fashion venture capital. Indeed, if the Departments of Education, Health and Human Resources, Labor (for job training), Housing and Urban Development and Veterans’ Affairs were to set aside a minuscule percent of their budget for a fund to invest in technologies that would improve their achieving their mission, they could help focus the attention of some of the best minds on how technology can be used to lift up all.

Some may argue that the government should not be in the business of making such venture investments. I understand the political appeal of the argument but I think upon analysis, the argument that government should not invest in new applications falls apart. First, government is the biggest buyer of services for low-income persons. In every other sector the biggest buyer invests in ways to improve their outcomes. Second, while many individual private sector investments fail, the private sector continues to invest in start-ups because over time, they pay off. Third, the likely critics have not been critical of investments in the defense realm. Why shouldn’t the same logic that compels our security sector to be engaged in technology development at an early stage also compel our safety net sector to do the same?

This effort should be thought of as part of a three-legged stool. The MCAST, described above is the leg that provides thought leadership. Superpublic, a recently announced innovation lab, provides a place for governments to come together to develop products and services to improve cities. In-Q-Tel4Equity is the third leg, allocating capital for those who can turn thoughts and early developments into sustainable providers. All three make the other elements stronger and more productive.

In closing, let me say that I cannot predict which of these ideas—or which better ideas will gain currency.

I can predict that ideas that are not in the water table by the conventions are unlikely to be considered by the winning transition team.

If not considered by the transition team, they are unlikely to be part of a hundred day agenda.

If not in that agenda, they’re unlikely to be adopted in the first term.

So the time to start generating ideas, and support for ideas, is now.

The opportunities that affordable, abundant bandwidth and the civic Internet of things brings should bring to mind Chairman Wheeler’s favorite Lincoln quote: “As our case is new, so we must think anew and act anew”.

Getting the next administration to understand how to think and act anew to respond to those opportunities is no small challenge. But to paraphrase my favorite Rabbi, if not us, who? And if not now, when?

Thank you.

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Blair Levin serves as a non-resident Senior Fellow of the Metropolitan Policy Project of the Brookings Institute. He also serves as the Executive Director of Gig.U: The Next Generation Network Innovation Project, an initiative of three dozen leading research university communities seeking to accelerate the deployment of next generation networks. From 2009-2010, Mr. Levin oversaw the development of the FCC’s National Broadband Plan. From 1993-1997 Levin served as Chief of Staff to FCC Chairman Reed Hundt.