October 7th, 2007

Asia: Broadband and US: 700Mhz

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I met up with Dewayne two weeks ago in San Jose. Part of our conversations are (somewhat) confidential so I won’t talk about it here. But two things I like to share here.

1. There is a general mis-perception that broadband is cheaper in Asia than US. ITU recently publishes the cost of broadband on a per 100kbps basis and Wired made a pretty picture.

The picture made by Wired clearly shows that broadband prices in US aren’t as bad as it perceived to be. In fact, it is one of the cheapest broadband, far cheaper than many part of Asia.

US still have one of the cheapest bandwidth wholesale rate (transit cost) in the world, as low as $15/mbps and peering cost is almost negligible. In Asia, you would be lucky to get US$100/mbps transit and local peering is non-existence except a handful of country.

Broadband is cheap in Asia despite these because of a handful of exceptional country, like Japan and Korea and China. Traffic in these country are mostly local since their users consume local content – hence, cheaper to provide high speed Internet access.

2. The debate on 700mhz auction is heating up. GigaOm has a great intro article on 700Mhz. It is extremely attractive because (1) 60Mhz is up for grab and (2) 700Mhz has great propagation property which makes it very good for wide area wireless deployment.

Beside the carriers, Google has expressed their interest to bid for 700Mhz. The min bid is US$4.6B and it is expected to go up as high as US$10B per carrier. FCC can expect to get as much as US$30b from this auction.

Google has fought for open access on the spectrum as part of the auction rule. Eventually FCC puts in a waterdown requirements on open access in the auction rules. Verizon decided to sue FCC last month on the inclusion of open access.

Okay – they are suing FCC for a rule that is so vague that you can drive a van through, for a condition that is not yet enforced, for a spectrum that has not be deployed and for an auction that has not being held. The (economic) liberal in me say “Heck, if you don’t like the rules, don’t bid!”

The question then is WHY did they sue?

The answer become clearer if one assumed that Verizon don’t expect they will win the lawsuit. With an uncertain lawsuit hanging over 700mhz, the auction is going to be difficult to proceed – FCC would hesitate to call for the auction and potential bidders would be concerned over the outcome if the auction would be invalidated by the lawsuit.

By working the legal system, Verizon could drag this lawsuit to go on for years. They already “won” the moment the file the lawsuit.

On the bright side, I rather not see this auction happens under a Republican FCC Chairman so derailing the auction isn’t that bad idea for now.