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Democratic
Digital
Infrastructure
homas M. Hanna,
T Please print on
Mathew Lawrence, Adrienne Buller recycled Paper
& Miriam Brett This PDF has been designed to
May 2020 mininimize paper and Ink use.
Produced by Common Wealth
Democracy Collaborative
and Democracy Collaborative
Common Wealth &Summary
£63 billion boost to gross value added by
Democratic Digital Infrastructure
2030 in the UK, and 360,000 tonnes fewer of
carbon dioxide emitted as a result of better
home working - are extraordinary. In order
to secure these benefits, we make the case
The global spread of Covid-19 has for democratic public ownership of the
shone a bright spotlight on both the vital foundational digital infrastructures of the 21st
need for reliable high-speed internet and century must be rooted in the following key
the inadequacies of the for-profit, corporate goals and principles:
model in delivering it. This paper, the first of
four modules on democratic public ownership 1. Provide full-fibre access to all,
in the UK and US, explores the future of digital overcoming the digital divide and
infrastructure: the core assets and services ensuring everyone is able to access
upon which the 21st century economy and high-speed, reliable, full-fibre based
its vast array of information technologies connection. Connectivity is a basic need
rely. To accelerate and democratize digital that should be met free at the point of use
infrastructure development, new approaches for all, with the foundational goods and
to ownership and control are vital. services we all need to participate fully in
society made universally accessible
While there are important differences 2. Empower citizens and workers through
explored in this paper between experiences participation, transparency, and
in the US and the UK, both share at least accountability, so digital technologies
one important common thread: a market-led can function as important tools to allow
approach to digital infrastructure development people to engage directly in decision
predominantly undertaken by, and to the making, and grant them a stake in the
benefit of, an oligopolistic set of for-profit world that the internet is helping to build.
corporations. This, in turn, has created shared 3. Reduce corporate concentration
2 problems, from prioritising shareholder and political power by replacing
returns over investing in vital infrastructures, for-profit corporations with democratic
to undemocratic ownership and governance alternatives.
of essential services and digital redlining as 4. Link digital infrastructure to ecological
companies cherry pick provision, excluding sustainability and a Green New Deal, so
poorer areas and marginalised groups. that digital technologies can play a critical
role in supporting new systems that are
The result: the UK is ranked 35th out efficient, resilient and decarbonised.
of 37 countries assessed by the OECD for the 5. Ensure that people have control
proportion of fibre connections in its total and power over their own data, to
fixed broadband infrastructure, and only 13% develop an ethical data management
of households have full-fibre connection. In strategy, which establishes limits
the US, 21.3 million people do not have access as to what data should be collected,
to the minimum speed broadband connection as well as data sovereignty, privacy,
while approximately 133 million people - encryption, and collective rights to data.
nearly half the country - do not have access to
a connection with speeds of at least 250Mbps. To secure these goals, we therefore
In both countries, sharp digital divides in propose moving in the direction of treating
access and quality of connection have been digital connectivity as a right and organising
exposed by the coronavirus lockdown. digital infrastructure – including the wireless
spectrum, cloud infrastructure, and the rollout
We need to build a digital landscape and maintenance of fibre optic connections
that provides world-class connection to all, and 5G – as a vital 21st century public good,
is sustainable, privacy-enhancing, rights- underpinned by democratic ownership and
preserving, innovative and democratic by governance. What follows are a series of
design. The economic and environmental policy recommendations for the UK and US
benefits of such a transformation - from a retrospectively to those ends.logic should be reversed; indeed,the annual
— Digital infrastructure policy savings from eliminating dividends could
proposals (United Kingdom) alone cover over 16% of the Capex required
to deliver full-fibre over 10 years. The cost of
A new public infrastructure company with public borrowing for investment is notably
a mission to deliver a nationwide full-fibre lower than for private companies, and is at
network by 2030. near-record lows; to finance the remaining
The UK government’s own analysis Capex requirements, the public infrastructure
suggests a monopoly provider would deliver company should take advantage, borrowing
a nationwide full-fibre network faster and at to invest.
significantly lower cost than via "enhanced
competition" among an oligopoly of private Just as Gladstone nationalised the
companies. [1] To that end, a new public telegraph industry and Asquith took the
infrastructure company should be created telephone sector into public ownership, to
tasked with rolling out a 100% full-fibre ensure universal coverage and access, so
network by 2030, based on taking Openreach democratic public ownership can build a
(and the parts of BT Group relevant to rolling foundational 21st century digital infrastructure
out the core network) into public ownership. more affordably, equitably, and speedily than
A mission to connect the nation should the alternatives.
be central to a post-covid recovery that
is prosperous and just, with a ‘retrofitting Decommodifying connection
revolution’ building a 21st century digital Internet access should be organised
infrastructure. A portion of funding for as a 21st century human right, recognising
investment could come from charging private it is now foundational to our ability to lead
ISP providers for access to the network, just as a fulfilling life in the digital age: to connect,
Openreach currently does. Rather than paying communicate, play and work. The effects
dividends, the company should reinvest profits ofcoronavirus - where a digital divide over
3 back into rolling out the network. BT Group access to and quality of broadband has
has paid out over £53bn in dividends since exacerbated social and economic inequalities
privatisation,[2] and over the past decade has - have underscored the need to make access
seen its fixed investment and R&D spending to broadband a right, not something delivered
fall as shareholder payouts have risen. This primarily through the market. To that end, as
The Democracy Collaborative
Common Wealth &part of an ambitious universal basic services 5G infrastructure must be planned
Democratic Digital Infrastructure
agenda, the ultimate goal should be to make strategically to support a just transition.
full-fibre internet connection available to The Committee on Climate Change
all free at the point of use as a tax-funded should advise the National Infrastructure
public service. Once the UK’s full-fibre Commission on the digital infrastructure
network is complete, public ownership of needs to reach net-zero rapidly and justly.
the infrastructure - rather than by companies
organised to maximise shareholder value - can A British Digital Cooperative and
enable connection to be organised based on spectrum for the common good
universal, decommodified connection, with To build a digital and communicative
the operating and connecting costs covered sphere based on democratic and egalitarian
through general taxation. principles over oligarchic surveillance,
a British Digital Cooperative should be
Ensuring accountability and democratic established. A common property, owned
control of digital infrastructures collectively by all residents of the country, the
As developed in Common Wealth's BDC, as set out by Dan Hind, “would be tasked
2019 report "Full Fibre Future: Democratic with developing a surveillance-free platform
Ownership and the UK's Digital Infrastructure", architecture to enable citizens to interact
the extension of democratic ownership should with one another, provide support for publicly
be accompanied by steps to transform the funded journalism, and develop resources
accountability and democratic control of for social and political communication.”[3]
digital infrastructure, including:
Building a public cloud infrastructure
• A new digital platform for debating With one likely effect of Covid-19
and deciding National and Local digital being the consolidation and the reach and
priorities: With full-fibre guaranteeing power of the universal platforms, the need
equal internet access, an online platform to challenge the power of ‘Big Tech’ will be
4 called WeDecide.gov.uk could function as more urgent than ever. A critical element of
an online space for everyone living in the this is their dominance of cloud computing
UK to debate and decide priorities for how infrastructures, a source of both very
digital infrastructures are used. significant revenue and infrastructural power
• Funding and support for community over the direction of the economy. First, by
initiatives: Publicly-owned or cooperative requiring major tech companies to separate
"maker labs" and co-working spaces that off their cloud infrastructure businesses and
are broadly accessible, both to people of then regulating cloud providers as key public
different generations and socio-economic utilities. And second, a public option ‘cloud
• groups, can help bridge the digital infrastructure’ should be created and used to
divide by supporting digital skills, such host and perhaps process the vast troves of
as database management and coding, government data that already exist, and that
as well as shared access to new are continually being produced.
technologies such as 3D printing and
cutting edge software. — Digital infrastructure policy
• An expanded regulatory framework proposals (United States)
to monitor fibre-based technologies:
The monitoring of and strategy for Overturning state-level pre-emption laws
fibre roll out to ensure equity of access In order to ensure that local
should be mirrored in considerations of communities retain the authority to establish
the potential harms of the technologies publicly owned broadband networks if they
built on top of fibre networks, including so choose, we recommend passing federal
invasive surveillance, social control and legislation that ends state-level restrictions
environmental damage. on public and community owned broadband
• Digit al infr as truc tur e to dri ve networks at the local level.[4]
decarbonisation: The installation
and development of broadband and Federal funding to develop and operatemunicipal and community broadband trust dedicated to funding local, independent
networks or public media and journalism.
In order to increase access and
affordability, as well as reduce the power A public option in the wireless
and control of large telecoms corporations, communications sector
we recommend passing federal legislation In order to provide badly needed
that provides funding for communities and competition in the wireless communication
municipalities that are seeking to build public sector and provide accessible and affordable
or cooperatively owned broadband networks. wireless broadband and 5G service to all
Americans regardless of geography and socio-
State funding and technical assistance economic background, we recommend that
programs for municipal and community the federal government create its own publicly
broadband networks owned telecommunications company. The
At the subnational level, we existence of a “public option” in the wireless
recommend that state governments establish communications sector could help address
funding and technical assistance programs market failures, reduce corporate power and
to support the development of local, publicly concentration, provide competitive pressures
owned broadband networks (and at the local that would lower costs and stimulate
level, communities use these resources to innovation, and generate revenue to cross-
educate the public and create new publicly subsidize other needed public services and
owned broadband networks). The latter could investments.
include educational and organizing support
for local communities and residents seeking Break up big-tech and turn cloud
to establish public networks, planning, computing services into a public utility
project management, backroom operational We recommend developing legislation
infrastructure, and help navigating state and to break up Big Tech companies by specifically
federal regulatory requirements. Further, we mandating that companies over a certain size
5 recommend that state governments direct divest their cloud infrastructure/computing
public resources and broadband investments business. Once divested, these services
exclusively to public, cooperative, or nonprofit should be organized as decentralised and
entities. democratically governed publicly owned
utilities.
Democratic public trust funds for wireless
spectrum auction proceeds Another digital world is possible.
At the federal level, we recommend But delivering it will require moving beyond
Congress pass legislation directing that the “regulatory state” and market-oriented
most, if not all, federal revenue derived from approaches that have dominated the
wireless spectrum auctions be deposited in development of digital infrastructure in the
a democratically managed public trust fund US and UK in recent decades - and which,
or funds.[5] These funds could be organized while delivering a rich stream of dividends
like the sovereign wealth funds that exist in for private investors, have led to the slow roll-
numerous other countries (as well as several out of fibre/broadband, increased corporate
US states) and invest (with appropriate criteria) concentration and control, and a deep digital
in companies, real estate, and other assets. divide. Instead, public policy should seek to
reshape how digital infrastructure is deployed
State and local trust funds to support local and owned, moving from conditions of private
media and journalism enclosure to a digital commons.
At the state and local level, we
The Democracy Collaborative
recommend developing legislation ensuring
that any local media station or company (either The report authors would like to thank
Common Wealth &
public or private) receiving spectrum auction Miranda Hall and Sara Mahmoud; this
proceeds in exchange for shutting down or report builds on the principles and policies
consolidating operations transfer a portion of of Full Fibre Future (2019), of which Hall and
those funds into a democratically managed Mahmoud were co-authors.1
minimum broadband internet connection
Democratic Digital Infrastructure
could produce annual economic benefits of
around $22 billion ($219 billion over 15 years).
Intro
[7][8] Current infrastructures are not enough.
Put simply: a future of shared prosperity will
depend on building a 21st century digital
infrastructure - universal, affordable, and fast,
Digital infrastructures are the core based on a full-fibre network.
assets and services upon which the 21st
century economy and its vast array of However, in the UK and US, market-
information technologies rely. They are the oriented approaches to the development of
modern equivalent of the interstate highways, full-fibre infrastructures, with expansion led
railway tracks, telephone networks, and by private investment, has led to slow rates of
electricity systems that were the backbones fibre deployment and a deep digital divide that
of 20th century economic activity. Foremost limits economic development and exacerbates
among these are local, regional, and national regional, social, and economic inequalities.
fibre networks. These are critical pieces of Covid-19 has cast this digital divide in stark
infrastructure that enable the transmission relief: income and home Internet access are
of large quantities of information (including correlated, with high income, high speed
those related to the internet, telephone, and Internet households the most able to stay at
television) at high speeds over long distances, home during lockdown.[9]
far outperforming copper wire-based digital
infrastructures. In the United States, 21.3 million
people do not have access to the minimum
The global spread of Covid-19 has speed broadband connection; meanwhile,
shone a bright spotlight on both the vital around 133 million people - nearly half the
need for reliable high-speed internet and country - do not have access to a connection
6 the inadequacies of the for-profit, corporate with speeds of at least 250Mbps/25Mbps.
[10] Moreover, even when high-speed internet
model in delivering it. As entire towns, cities,
and regions are locked down, tens of millions is available, it is often unaffordable. For
of workers have been shifted to teleworking instance, nearly 30 percent of households in
status, millions of students are now attempting some urban areas do not have any internet
to continue their studies from home, while connection, primarily due to cost.[11] In such
people of all ages are increasingly reliant on areas, this lack of access disproportionately
the internet to socialise and communicate affects people of color, exacerbating and
during isolation. widening economic and digital divides.[12] On
top of this, the internet in the United States is
The e c onomic b enefit s of a far slower and more expensive than in most
transformative upgrade in our digital other advanced countries. According to
infrastructures are immense: the Centre for recent estimates, the United States may be
Economics & Business Research estimates as low as 15th in the world when it comes to
that in the UK a nationwide 100% full-fibre average speeds, and 56th when it comes to
would provide a gross value added uplift of cost per Mb.[13]
£63 billion by 2030, enable an extra million
number of new home workers relative to 2019 Unavailable or unaffordable internet
baseline, and help almost half a million people places certain industries, regions and
to find work. A full-fibre network would also socioeconomic groups at a disadvantage. For
have vital environmental benefits, with 300 instance, a recent article in the Washington
million fewer commuter trips a year in the UK Post revealed that many students in rural
and 360,000 tonnes fewer of carbon dioxide areas in the US, along with those in low
emitted as a result.[6] income families, will likely be unable to
access remote learning opportunities set up
Similarly, studies in the United States by school districts in response to the Covid-
suggest that universal access to even a bare 19 epidemic (and that some districts will notimplement digital learning at all due to the distributions impact the speed of full-fibre
large percentage of children who do not have development, the UK lags significantly behind
internet access).[14] If school closures persist, many other European countries in terms of
these students will likely fall even further full-fibre coverage to households.[23] What’s
behind their wealthier peers.[15] Preliminary more, around half of households in the country
data from the Covid-19 epidemic in the United “receive their internet from early 20th century
States is already revealing stark racial and infrastructure,”[24] but “growing data demands
socio-economic disparities concerning who is are pushing the limits” of this copper-based
affected medically, economically, and socially infrastructure.[25]
by the virus.[16] The lack of affordable and
accessible internet is only likely to exacerbate Left to profit-maximising telecoms
these inequalities. firms, development of various types of vital
digital infrastructure is likely to be designed
Moreover, the Covid-19 shut downs to meet the needs of "surveillance capitalism",
are likely to put increased demand on focused on generating behavioural data that
broadband networks, exposing older and can be translated into insight, intervention, and
inferior networks to increased congestion, profit - a business model that will not deliver a
bottlenecks, and slow-downs. As broadband digital landscape that is sustainable, privacy-
expert Christopher Mitchell writes, “the rich enhancing, rights-preserving, innovative and
will get richer… [and] historic inequities will democratic.[26] While this report will focus
be exacerbated – people that have been primarily on full-fibre broadband, we will touch
able to afford the high-quality networks will on two other key areas of digital infrastructure:
probably see very little disruption and those cloud computing infrastructure and the
who have older networks may be effectively wireless spectrum.
disconnected.”[17]
The first refers to the hardware and
In the UK, where the target is to build software needed to support cloud computing
7 a nationwide gigabit capable network by processes, that is: the use of distributed
2025, the building of a full-fibre infrastructure or shared resources to store, manage,
is primarily being undertaken by private and process data. This includes physical
investment organised through a competitive equipment such as data centers, servers,
market, though the UK Government has routers, and wires, as well as various pieces
committed £5 billion for connecting the of software that utilizes this equipment to
“hardest-to-reach” 20% of premises that are construct virtual networks.[27] Increasingly,
not commercially viable.[18] This approach individuals and companies alike rely on cloud
has failed to deliver substantial progress. infrastructure to store, transfer, and process
Only an estimated 13.6% of UK households vast quantities of data.[28]
had full-fibre connection as of May 2020,[19] a
figure which marks sharp regional and income In each of these companies, cloud
digital divides: more than half of all of the UK’s computing services represent just one
650 constituencies have below 5% full-fibre component (albeit a lucrative component) of a
coverage, while just 10 constituencies have much larger corporate structure that is quickly
coverage of greater than 60%.[20] Strikingly, extending into all aspects of the economy and
just 47% of those living on a low income use society. And control of cloud infrastructure
broadband internet at home, defined as those allows these companies to extend and
with 70% of the median household income entrench their economic dominance in
before housing costs, adjusted for the size of various ways, including buying up or blocking
household.[21] potential new competition.[29] The Covid-19
The Democracy Collaborative
epidemic threatens to exacerbate many of
Overall, the UK was ranked 35th out these issues and grow power of these large
Common Wealth &
of 37 countries assessed by the OECD for tech corporations. Recently, The Economist
the proportion of fibre connections in its total noted that the crisis has benefitted big tech in
fixed broadband infrastructure,[22] and factors various ways while at the same time crushing
such as different geographies and population many smaller tech competitors (to say nothingof brick and mortar small businesses). “All away from reliance on Amazon, Google and
Democratic Digital Infrastructure
this,” The Economist suggests, “will make it Microsoft’s cloud computing systems, citing
easier for the big firms to hire the best talent.” the European Union’s Open Science Cloud as
Moreover, “collapsing firms could be snapped one model for providing a publicly funded and
up by the tech giants,” further consolidating operated cloud infrastructure.[34]
the market.[30]
T h e s e c o n d a r e a o f di gi t a l
Increasingly, commentators and infrastructure we focus on is the
policymakers from across the political electromagnetic spectrum, or rather
spectrum (and around the world) have begun particular frequencies and bands within it.
to take on the question of the giant tech All wireless communication, from phone
monopolies. Often, this has taken the form of calls to radio broadcasts to mobile internet,
suggesting that big tech companies should be consists of transmitting data through the
broken up. In the United States this has been air on a particular frequency, and in most
proposed or discussed by politicians ranging cases those frequencies must be exclusive.
from Senator Elizabeth Warren to President [35] In other words, two radio stations
Trump (though the latter seems motivated cannot broadcast over the same frequency
primarily by his personal feud with Amazon or there would be interference. The same
CEO Jeff Bezos).[31] In the United Kingdom, applies to mobile phone companies and
a similar antitrust strategy was proposed anyone else transmitting data wirelessly. The
by Vince Cable while leader of the Liberal electromagnetic spectrum, specifically the
Democrats. Cable proposed that “Amazon radio frequency (RF) portion of it, is a relatively
[could be] split into three separate businesses: unique piece of digital infrastructure insofar
one offering cloud computing, one acting as a as it is recognized as a common or public
general retailer and one offering a third-party asset, akin to a finite, yet renewable natural
marketplace.”[32] resource (i.e. there are limited frequencies on
the spectrum, but each frequency can be used
8 However, efforts to break up the large over and over again).
tech firms and separate their cloud computing
services from other functions have thus far In the UK, the allocation and regulation
gone nowhere on either side of the Atlantic, of spectrum in the UK is undertaken by Ofcom,
and the Covid-19 epidemic has both focused the UK's communications regulator. As set out
attention elsewhere and muted some of the in the Communications Act 2003, a key duty
momentum around antitrust approaches of Ofcom is to secure the optimal use of the
on privacy grounds, particularly in Europe. radio spectrum for the public. Ofcom uses an
Moreover, the history of traditional antitrust auctioning process to allocate spectrum, with
approaches, especially in the United States, commercial actors bidding for bands of radio
suggests that in this corporate capitalist frequency spectrum.[36] Auction regulations
system, even if large corporations are broken are set out in the Wireless Telegraphy (Licence
up they will quickly reconsolidate, as has Award) Regulations 2018, including limits on
happened with the communications sector the amount of spectrum that individual mobile
more than 30 years after AT&T was broken operators are able to hold after auction.[37]
up.[33]
In the US, this asset is managed on
Both due to the failure of antitrust behalf of the public by the federal government,
strategies and a growing realization that cloud which keeps some frequencies for public
infrastructure is an important basic need in purposes (government agencies and services,
modern society, there have, in recent years, for instance) and leases others out to various
been increasing calls for public ownership types of communications companies. The US
of foundational digital infrastructures. For Federal Communications Commission (FCC)
instance, Nick Srnicek, a lecturer in digital has, since 1994, conducted spectrum auctions
economy at King’s College London, recently by which certain frequencies not being used
suggested that we could “imagine computing by the government are leased to the private
as a basic 21st-century utility,” and move sector.[38] These auctions have generatedtens of billions for the government, which are also become a relatively mainstream political
deposited in the US Treasury. While revenue issue, especially within the Democratic
generation is one of the objectives the FCC is Party. When in office, President Obama
required, by law, to consider when conducting supported local, publicly owned broadband,
these auctions and leasing frequencies, it is as have numerous presidential candidates
also required to consider competition, excess in the most recent electoral cycle (including
concentration, and “preventing the unjust Elizabeth Warren, Bernie Sanders, and Pete
enrichment of any party.” Over the years, many Buttigieg). In 2015, the FCC issued a ruling
observers have suggested that the FCC’s that attempted to use federal regulatory
spectrum auctions, as currently practiced, authority to overturn the state preemption
often do not meet these additional “public laws impeding the establishment of publicly
interest” requirements.[39] owned networks. However, the Sixth Court of
Appeals overturned the FCC ruling in 2016,
The launch of 5G networks will ruling that only a direct act of Congress could
substantially boost demand for fibre in stop state level preemption laws.[41]
both the UK and US, meaning control of
this infrastructure will grow in economic Alongside preemption laws, corporate
importance. Critically, while 5G will be an lobbyists have attempted to block publicly
important part of a thriving digital future, it owned networks from receiving state
is less reliable than full-fibre, which is crucial investment funds for broadband development
for fibre-fed 5G. It is not a case of either-or (preferring instead that the funds be directed
- the two combined can deliver 21st century to the large corporates).[42]
connectivity.
2
This is par ticularly impor tant
because lawmakers at the federal level
are currently considering including large-
Recent
scale investments into digital infrastructure
9 (including broadband) as part of their
interventionist response to the Covid-19
develop-
epidemic. “Expanding digital infrastructure,
like broadband internet and 5G, and access
to clean water are on Democrats' wish list
ments
as the coronavirus pandemic has forced
much of the globe to function remotely from
the safe confines of one's own home,” one
report on the legislative negotiations stated,
before noting that “upgrading America's
In the US, due to the spread and
technology infrastructure, lawmakers argue,
success of publicly owned broadband
networks (detailed below), the large
telecommunications corporations have
made it a priority to preserve their current
dominance and hinder further such efforts.
In recent years, 19 states have enacted
“preemption laws” that impede or impair the
establishment of publicly owned broadband
networks.[40] These may include outright
bans or complicated legal and financial
requirements that don’t apply to the private
The Democracy Collaborative
companies.
Common Wealth &
At the same time, supporting local
communities in their attempts to create
publicly owned broadband networks haswould also better serve tele-health and public organisations in broadcasting, and a
Democratic Digital Infrastructure
remote classroom teaching.”[43] As with state digital sector dominated by a few tech giants,
funds, these potential federal investments along with some more established media
could be diverted into the coffers of major organisations.”[47]
telecommunications corporations, leaving
communities only marginally better off The FCC is moving ahead with
than they were before in terms of access, extremely lucrative public auctions while at
affordability, and speed. Alternatively, they the same time the wireless communication
could become a transformative resource that sector continues to consolidate among fewer
allows and enables communities across the corporate hands (for instance, the success of
country to build and control their own high- the Sprint-T-Mobile merger will leave just three
speed internet networks, and seize control of corporations in control of the vast majority of
their economic future. the mobile telecommunications market). Most
recently, this relates to the C-Band spectrum
When it comes to the wireless currently used by satellite providers. At the
spectrum in the United States, as wireless end of 2019, legislation was introduced in
communication has become increasingly Congress that would direct the FCC to pursue
data-heavy with the advent of smartphone and a public auction of the C-Band and allocate up
tablet technology, the FCC has sought to make to 50 percent of the proceeds to compensate
more spectrum available to the large mobile existing users and up to 50 percent to the US
phone corporations (especially the mid-band Treasury. A subsequent amendment changed
spectrum that is the most valuable). The three this formula to include a 10 percent allocation
strategies it is pursuing are: leasing spectrum for rural broadband development.[48]
that was previously used by government
agencies; setting up “incentive” auctions While the 5G Spectrum Act has
that allow radio and television broadcasters not yet been voted on, the FCC has moved
to sell their licences in exchange for a cut forward, announcing that it will pursue a
10 of the proceeds; and repurposing various public auction of the C-Band spectrum at the
frequencies on the spectrum (blocks) for end of 2020 (rejecting efforts from the satellite
mobile use.[44] companies to conduct a private auction
and return proceeds to the government at
These strategies are controversial their discretion). Essentially, this means the
for a number of reasons, including that FCC will take spectrum previously leased
they are enabling further concentration to satellite providers and auction it off to
and extension of corporate power in the wireless companies to develop 5G. The
communications sector. For instance, the satellite companies will receive compensation
US broadcast incentive auction that ended in for their licenses as well as payments to
2017 resulted in 133 local television stations incentivize the transition to other parts of the
either relinquishing their broadcast licences spectrum. The process has drawn criticism
(closing their operations) or consolidating with from various experts, including several FCC
another station.[45] In the current era of mass Commissioners, who among other things
disinformation, distrust of large-scale media argue that the compensation and incentive
outlets, and the collapse of local news and payments for the satellite companies are
journalism, these closures and consolidations excessive and or unnecessary, and divert
are of particular concern. As Victor Pickard valuable public funds to corporate interests.
writes: “the US media system stands out [49]
among democracies for its commercial
excesses. Many sectors are dominated by Lastly, as previously noted, while
corporate oligopolies, producing content with there has been considerable discussion in
few public interest protections.”[46] In the UK, policy making circles about “breaking up” big
as the media theorists Tom Mills and Dan Hind tech companies like Amazon and Google and
argue: “Our current media system combines a separating their cloud computing services
partisan plutocracy in the print media, a mixed from other functions, there have been few
economy of well-regulated commercial and concrete policy advances on this front. Oneexception is the plan released by Senator powers to take action”. [53] The Scottish
Elizabeth Warren in March 2019 while running Government has some power over how UK
to become the Democratic presidential funding for broadband is used, for example
nominee. The plan called for federal legislation by managing broadband initiatives,as well
to be passed designating certain large tech as some power over additional funding.[54]
companies (those that “offer to the public an Local authorities are also often involved in the
online marketplace, an exchange, or a platform delivery of broadband infrastructure projects,
for connecting third parties”) platform utilities. such as planning regarding street works.
[50]
The regulation of the privatised
Companies would be prohibited broadband market is controlled by a UK
from owning both the platform utility and regulatory body called Ofcom, which defines
other companies using the platform, and and enforces the conditions by which
they would be required to separate and broadband and other telecoms companies
spin off certain business lines (for instance, must operate by. This includes the power
Google’s ad and search businesses would to intervene to challenge the power and
be separated). Additionally, Warren’s plan behaviour of dominant market operators
envisioned appointing regulators that would where.
use traditional antitrust strategies to unwind
various tech mergers and acquisitions (for The development of a gigabit-capable
instance, Amazon’s purchase of Whole Foods). full-fibre broadband infrastructure has been
Importantly, Warren’s plan did not explicitly a consistent focus of UK broadband policy:
mention cloud infrastructure/computing. Theresa May’s Government had a target to
As business columnist Kevin Roose wrote build a UK-wide full-fibre network by 2033,
in the New York Times, this was surprising while Boris Johnson's Government has a
given that it is “one of the clearest examples new target of “gigabit-capable broadband”
of oligopolistic behavior in the tech industry.” nationwide by 2025 (though this commitment
11 Roose went on to suggest that “an effective is neutral on whether it would be a full-fibre
breakup proposal could require companies network). [55][56] To reach its targets, the UK
like Amazon, Google and Microsoft to spin government policy is that “full-fibre or gigabit-
their cloud-computing divisions off into stand- broadband infrastructure will be mostly built
alone businesses, in a manner similar to the by private investment,” with the government
one Ms. Warren proposed for breaking up “committed to provide funding for areas that
e-commerce marketplaces.”[51] are not viable for commercial investment.”[57]
Their aim is for the majority of the UK’s future
In the UK, powers regarding broadband digital infrastructure to be built by for-profit
policy are largely reserved to Westminster companies operating in a competitive
but partially devolved to other governments, market - a market that government policy has
with the “practical delivery of broadband roll- actively sought to create. Funding for areas
out … led by local bodies in England and the not reached by commercial investment will
devolved Administrations in Scotland, Wales follow an “outside in” approach, with the areas
and Northern Ireland.”[52] The UK government hardest to reach targeted first.
sets, for example, wider funding and regulation
of broadband services and coverage targets, To that end, £5 billion of public
while both devolved administrations and local investment was announced in the March
authorities have a key role in the delivery 2020 Budget focused on connecting the
of broadband infrastructure projects. For 20% of premises that are not commercially
Northern Ireland, telecommunications is viable; this money appears to be subsidising
The Democracy Collaborative
reserved to Westminster, but Northern private companies, such as Virgin Media, to
Ireland’s Department for the Economy has connect households they otherwise would
Common Wealth &
limited powers to intervene where there not. This funding accompanies two UK-wide
is evidence of market failure. In Wales, Government programmes to deploy full-fibre
broadband is similarly not devolved, but the networks delivered by Building Digital UK: The
Welsh Assembly does have “some other Local Full Fibre Networks Programme,[58] acombination of a voucher scheme for SMES
Democratic Digital Infrastructure
and grants to public sector bodies, and The Regarding the development of 5G,
Rural Gigabit Connectivity Programme.[59] reports in October 2019 indicated that Boris
Johnson would be allowing Huawei to help
The primary response to the slow to develop 5G network capabilities in the UK.
deployment of full-fibre from Ofcom and the The sections of the network which Huawei
UK government has been to funnel more would be involved with have been variously
funding toward private actors to connect described as “non-contentious” or “non-core.”
otherwise commercially non-viable premises, Subsequent to that, the government
encourage the roll out of FTTP (fibre to the announced it is taking forward three
premises) networks as an alternative to BT’s measures from its Telecoms Supply Chain
fibre to the cabinet (FTTC) approach, create Review regarding network safety and strategic
more network-based competition, and to interest. First, stronger regulation, with a new
relax planning rules. This has encouraged security regime regarding the design and
the growth of alternative networks such as operation of the UK's telecoms networks;
Virgin Media, the only ISP provider with its second, steps to improve the diversity in
own fibre network, and new players such supply of equipment, which is currently
as CityFibre and Hyperoptics – companies dominated by three major players dominating
that often have highly concentrated, private the telecoms networks, and finally a new set
ownership structures, which are now central of tests for network providers deemed ‘high
to the government’s fibre roll-out plan. risk’.[62] It remains unclear which sections
that would involve, and what kind of data
The reliance on these players access that could provide the company. As it
risks turning a vital piece of infrastructure stands, the government has argued that UK
into a source of further rent-seeking and firms lack the technical capacity to develop a
financialisation in the economy. working 5G network and that it is necessary to
contract Huawei to help build those elements
12 Even with a new wave of smaller of the network.
providers coming on line, there are substantial
issues concerning equity, security, and cost. Prior to the privatisation of the UK’s
CityFibre, an alternative provider of wholesale telecoms market, spectrum allocation was
fibre network infrastructure which is central straightforward: it was given to the state-
to the government’s strategy for delivering owned operator. With the rise in competition,
fibre network, was acquired this year for an auction process was introduced, with
£538m by Antin Infrastructure Partners and companies bidding for exclusive use of a
West Street Infrastructure Partners, a fund spectrum license. In 2000, the 3G spectrum
managed by Goldman Sachs. [60] Seven auction raised £22bn, though subsequent
financial institutions have backed the first auctions have raised far less; the UK’s four
phase of CityFibre’s UK investment plan with biggest mobile operators spent almost £1.4bn
a £1.12bn infrastructure debt package, with to secure 5G spectrum in April 2018. [63]
the company seeking to acquire FibreNation, Ofcom manages the UK spectrum allocation,
another full-fibre provider owned by TalkTalk. including through spectrum auctions, works
[61] to ensure sufficient spectrum is available for
5G, and has a statutory duty to ensure it is
Vital parts of the UK’s infrastructure used in the most effective way, as set out in
are therefore in the hands of substantially the Communications Act 2003. Ofcom release
unaccountable corporate actors, operating to spectrum for new uses as well as developing
the rhythm of financial over social needs. Their policies to ensure spectrum is used efficiently.
current structures and incentives - opaque,
financialised, focused on maximising returns The experiences of both the US and
for investors over investment - are likely to UK demonstrate that the current status
reinforce the behaviours and outcomes that quo, and a policy environment that favors
private control of digital infrastructure has private development as the primary strategy
already generated. for expanding digital infrastructure is, atbest, insufficient, both in terms of speed of share buybacks rather than investing in
rollout of new technology and for ensuring vital infrastructures.
universal and affordable access. To speed • Undemocratic ownership and governance
and democratize digital infrastructure of essential services as the management
development, new approaches to ownership of public utilities and services are
3
and control are necessary. undertaken by weakly accountable private
players.
• Digital redlining as companies cherry
Why the
pick provision, excluding poorer areas
and marginalised groups, reproducing
13 race, gender, regional, and class-based
market
inequalities.
• Oppressive systems of surveillance
and social control that amplify existing
falls short
inequalities and forms of oppression.
• The proliferation of carbon-intensive
technologies as industry competes
to develop infrastructures of hyper-
connectivity, enabling as much data as
T hough the p ar t s of digi t al
possible to be mined from people and
infrastructure we are considering in this
places for monetisation.
module – fibre/broadband, cloud computing
• Increased corporate economic and
services, and the wireless spectrum – have
political power.
important differences in the US and the UK
due to geography, historical development,
Corporate concentration in the
and a host of economic and political factors,
telecommunications sector is a major cause
they share at least one important common
of many of these problems and a reason that
thread: a market-led approach to provision
often workers, families, and communities
predominately undertaken by, and to the
are left with inferior or unaffordable digital
benefit of, an oligopolistic set of for-profit
access and service. For many areas, this lack
corporations. This, in turn, has created similar
of affordable high speed internet is especially
problems in both the US and UK:
The Democracy Collaborative
critical as a lack of economic opportunity is
a major factor in the outmigration of people
• Under-investment, poor coordination, and
Common Wealth &
to larger cities (and their suburban areas)
rentierisation[64] with corporate earnings
where jobs are more prevalent.[65] In the areas
and debt increasingly funnelled toward
that these workers and their families leave,
shareholders in the form of dividends and
this leads to a downward spiral of lower taxrevenues, service cuts, and further population the country – especially in rural areas.
Democratic Digital Infrastructure
loss that has left many communities in both However, as a group of seven prominent
the US and the UK struggling to survive. economists and business school professors
explained in early 2020, “it’s part of CEOs’ job
In the United States, both the wired and descriptions to be persuasive, especially when
wireless sectors are dominated by a few large it concerns future plans. There is nothing
companies.[66] Harvard’s Susan Crawford that holds them to what they say in court.”
writes that “most Americans probably believe Furthermore, “the vast majority of economists
the communications sector of the economy believe that the elimination of Sprint as a rival
has room for innumerable competitors, but to other carriers will result in less competition,
they may be surprised at how concentrated higher prices, and lower quality in phone
the market for the modern-day equivalent of service,” they wrote.[71]
the standard phone line is. These days what
that basic transmission service is facilitating In other words, even in the unlikely
is high-speed access to the Internet. In that event that the new, mega company does
market, there are two enormous monopoly follow through on its pledges to dramatically
submarkets – one for wireless and one for expand mobile broadband access, there is no
wired transmission. Both are dominated by guarantee it will be affordable. To the contrary,
two or three large companies.”[67] as the market continues to concentrate into
the hands of a few for-profit corporations ,
Moreover, the sector is becoming it is likely that costs will increase. Recently,
ever more consolidated as mergers and Jonathan Sallet, a Senior Fellow at the Benton
acquisitions continue apace. For instance, in Institute for Broadband and Society, explained
2018 AT&T completed its mega-deal to acquire that “competitive choices have generally
Time Warner – which went ahead despite years been declining over the years as broadband
of litigation and attempts by the government to technologies—and consumers’ bandwidth
block the deal on antitrust grounds.[68] More requirements—have evolved,” and that
14 recently, the FCC, the Justice Department, “the implications of limited competition are
and US courts (which largely deferred to obvious”, with service users ending up paying
the opinions of the government agencies) more.”[72]
approved a merger between T-Mobile and
Sprint, recently the third and fourth largest Similar market concentration and
mobile communications companies in the US corporate control exists in cloud infrastructure.
respectively.[69] Recent estimates suggest that just three
American companies (Amazon, Microsoft,
As previously mentioned, mobile and Google) account for around 60% of the
phone corporations like T-Mobile, Sprint, global cloud infrastructure market – with
and AT&T are often the major players in, Amazon Web Services alone accounting
and beneficiaries of, the FCC’s spectrum for 33%.[73] Some of the implications of this
auctions. Yet, there is considerable debate as concentration were discussed earlier in the
to whether their needs justify the aggressive introduction, however it is worth reiterating
action the FCC is taking to free up spectrum here. A recent report in the New York Times
from government and broadcast sources. illustrates how Amazon has used its near
In 2011, for instance, Citigroup stated that monopoly position in cloud infrastructure and
their market analysis showed that “too much computing to decimate smaller competitors
spectrum is controlled by companies that are and extend its corporate power, “lifting
not planning on rolling out services or face other people’s innovations, trying to poach
business and financial challenges.”[70] their engineers and profiting off what they
made… choking off the growth of would-be
Part of the justification for the competitors and forcing them to reorient how
government in giving its blessing to the they do business.” [74]
T-Mobile-Sprint merger were a number of
commitments made by the companies to The development of the UK’s digital
expand mobile broadband availability around infrastructure has also been market-ledand undertaken by a handful of powerful coverage under such conditions achievable
companies, with this market-based approach only with significant government intervention,
stalling the deployment of a full-fibre network. including subsidies and franchisement for
In the 1980s, BT - then a publicly owned areas which are uneconomic for private
company in the process of being privatised companies to reach. The capital cost of
- began a massive drive to digitise the deployment via “enhanced competition”
network, replacing copper wires with fibre. to reach 100% coverage is estimated to be
As a result, the UK briefly had more fibre per £32.3bn. By contrast, the analysis suggests
capita than any other nation and two factories a monopoly provider would deliver universal
manufacturing the components for systems coverage faster and at a lower cost than
to roll out to the local loop. But in 1990, then enhanced competition market conditions,
Prime Minister Margaret Thatcher decided with nation-wide full-fibre deployment
BT’s rapid and extensive rollout of fibre achievable within 15 years at an undiscounted
optic broadband was "anti-competitive" and deployment Capex of £20.3bn.
wanted American cable companies providing
the same service to increase competition. The undiscounted fixed deployment
The factories were sold to Fujitsu and HP Operating Expenditures (Opex) for the two
and with it the expertise. Consequently, in scenarios (National Monopoly and Enhanced
1991 roll out was stopped and the UK fell far Competition) are roughly equivalent, though
behind in broadband speeds and coverage.[75] slightly lower under monopoly provision
To this day, the UK’s deployment of full-fibre at £22.8bn compared with £23.7bn under
infrastructure has never properly recovered. conditions of government-subsidised
[76] 'enhanced competition.[80] In other words,
monopoly provision would deliver a universal
The current policy approach is “to full-fibre network faster and at a lower cost
promote private investment by encouraging than the baseline scenario or under conditions
a competitive market to deploy fibre of “enhanced competition.”
15 infrastructure.”[77] This is distinct to the
roll-out of superfast broadband, where This reflects the fact that a wholly
Openreach - the wholesale network provider market-led, for-profit model is ill-suited to
that maintains the telephone cables, ducts, building and maintaining vital infrastructure
cabinets and exchanges that connect nearly and universal, accessible utility services like
all homes and businesses in the UK to the the full-fibre network. This infrastructure
national broadband and telephone network, is characterised by high fixed costs and
and is a functional division of BT, albeit economies of scale that make deployment
divested into a legally distinct company - unprofitable in rural or poorer areas and
dominated due to its ownership of the copper leads to underprovision. Indeed, deployment
network; Virgin Media “is the only major of full-fibre exhibits classic market failures:
infrastructure competitor to Openreach for cherry-picking, the failure to deliver universal
superfast broadband.”[78] service without expensive public subsidy,
and damaging short-termism. The sector also
Yet analysis suggests the deployment suffers from poor coordination of investment,
of a comprehensive full-fibre network in the with costly and excessive duplication of
UK via market-led competition is neither the infrastructure deployment in profitable areas,
quickest nor most affordable route. A July and severe under-provision in others. And the
2018 report from Frontier Economics for the telecoms sector as a whole exhibit rentier-
National Infrastructure Commission analysed like behaviour: from 2006 to 2018, wholesale
a set of different approaches for building a line rental costs went down over 40%, but
The Democracy Collaborative
100% full-fibre network in the UK.[79] Their broadband corporations put prices up 40%.[81]
analysis suggests that in a baseline scenario,
Common Wealth &
FTTP connectivity would reach just 75% of Simply put, companies owned by
the UK in 20 years time. Under conditions investors seeking to maximise returns are
of “enhanced competition,” coverage would structurally ill-equipped to deliver universal
reach just 80% within 15 years, with 100% infrastructure efficiently and equitably, withtheir focus on maximising shareholder value providers exhibited similar or significantly
Democratic Digital Infrastructure
over investing in the infrastructure needs of higher rates of shareholder payouts, with Sky
the UK. For example, the level of investment and TalkTalk paying out 46% and 175% relative
in the telecoms industry over the past 20 years to total pretax income between 2010-2018,
has been relatively flat in nominal terms, with respectively.[86] In other words, corporate
the sector ‘sweating’ existing assets rather cash that could be invested in improving
than "significantly expanding the capital digital infrastructure and accelerating the
stock."[82] To take one example, over the past deployment of full-fibre has instead been
20 years, BT Group – including Openreach, increasingly funnelled toward private
the UK’s main network provider – paid an investors.
average annual dividend of over £1bn, for a In both the US and the UK, many
total of £53bn since 1985 (all figures adjusted analysts and experts agree that oligopolistic
for inflation).[83] Strikingly, £1.5bn in dividends power in the hands of for-profit corporations
was paid out to shareholders in 2019 alone. is a major factor in the lack of affordable
broadband internet.[87] These corporations
Between 2010 and 2018, BT Group have little incentive (outside of insufficient
maintained an average profit margin of 10%. public subsidies and incentives) to invest in
During this time, total shareholder payouts expanding or improving networks in rural
(including dividends and share buybacks) and low-income areas. Instead, their profit
averaged just under half of BT Group’s model is based on raising prices as much
pretax income, rising substantially from 36% as possible in high-density areas where they
relative to pretax income in the first half of have a market monopoly (or duopoly). The
the decade to 57% in the latter half.[84] At incentive structure of shareholder-owned
the same time, as shown in Figure 1, BT’s businesses then means that shareholder
fixed investment (Capex) fell as a proportion payouts consume an increasingly significant
of pretax income, from over 260% in 2010 to part of corporate cash, in lieu of other uses
just shy of 140% in 2019.[85] Other telecoms such as R&D investment or infrastructure
16
Figure 1: Shareholder Payouts and Fixed Investment (Capex) Relative to Pretax Income, 2010-2019.
Source: Common Wealth analysis of data from Thomson Reuters Refinitiv Eikon. Accessed May 2020.You can also read
