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EXPLAINER: What Biden’s new $100B plan for broadband means

Associated Press

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What Biden's new $100B plan for broadband means

The problems with U.S. broadband networks have been obvious for years. Service costs more than in many other rich nations, it still doesn’t reach tens of millions of Americans and the companies that provide it don’t face much competition.

Now the Biden administration is promising to do something about all of those issues as part of its proposed $2.3 trillion infrastructure package. The plan, which would devote $100 billion to get all Americans connected, is more idea than policy and lacks a lot of important detail.

But it sketches out a striking new vision of activist government measures intended to improve high-speed internet service, following decades in which the government has largely left the job to private companies.

WHAT IS BIDEN’S PROPOSAL?

It would spend $100 billion to “future-proof” broadband as part of an eight-year infrastructure plan, calling high-speed connections “the new electricity” that’s now a necessity for all Americans. (For history buffs, that’s a reference to the Rural Electrification Act — Depression-era legislation that sped the extension of power lines to farms and rural communities.)

It could signal a major policy shift toward lowering the high cost of internet service, rather than just handing money to broadband providers for building out networks. “Americans pay too much for internet,” the plan bluntly states.

It pushes for greater competition that could lower prices, by encouraging and supporting networks owned or affiliated with local governments, cooperatives and nonprofit organizations. Currently, roughly 20 states restrict municipal broadband. Prioritizing such networks could give them a leg up when the government doles out money for extending service.

“The most important thing about what President Biden has done in the proposal is that he’s redefined the digital divide,” said Larry Irving, a top telecom official in the Clinton administration. “The simple act of recognizing that poverty is a bigger indicator of lack of access than geography is a huge statement.”

It’s not clear how the Biden administration plans to bring that about.

WHY IS THIS NECESSARY?

The pandemic has made clear that millions of Americans are not online, a problem that isn’t limited to rural areas but includes cities too. The White House says more than 30 million Americans don’t have access to high-speed internet at all, and millions more can’t afford it.

The divide persists even after the government has spent billions encouraging broadband providers to connect far-flung and often isolated communities. From 2009 through 2017, federal spending on such programs totaled $47.3 billion, according to a government watchdog report. An additional $20 billion is lined up over the next decade for rural broadband, and another $9 billion for high-speed wireless internet called 5G in sparsely populated regions. Billions more flowed to broadband from the three huge relief packages enacted during the pandemic.

America’s rural-internet policy has been an ongoing mistake, said Gigi Sohn, an official in the Obama-era FCC. “A lot of what we have is very slow,” she said. The White House now says it wants “future-proof” networks “in unserved and underserved areas,” so they don’t have to be rebuilt again years later because they’re out-of-date.

Exactly what those terms means for what gets built and where isn’t clear, either, and many Republicans oppose putting federal funds to work in areas that do have internet even if it’s slow — what’s called “overbuilding.”

WILL CONGRESS SUPPORT THIS PLAN?

The $2.3 trillion infrastructure plan has its detractors. Some Democrats are disappointed because they wanted more. On the other hand, Senate Minority Leader Mitch McConnell of Kentucky called it a “Trojan horse” for tax hikes.

Internet access is a bipartisan issue, but Republican leaders of the House and Senate Commerce committees called Biden’s approach on broadband wasteful.

Rep. Cathy McMorris Rodgers of Washington, the Republican ranking member of the House Energy and Commerce Committee, said Biden’s plan would “hurt private investment in our networks without actually closing the digital divide.” She called for trimming regulations on building infrastructure to help prompt investment. Sen. Roger Wicker of Mississippi, the Republican ranking member of Senate Commerce, said the proposal “opens the door for duplication and overbuilding.”

Congressional Democrats have recently introduced major broadband legislation of their own, including a $94 billion bill from Sen. Amy Klobuchar of Minnesota and Rep. James Clyburn of South Carolina, the House Majority Whip, who both said they approved of the White House’s approach.

WHAT DOES BIG BROADBAND SAY?

Republicans’ concerns echo those from industry. The cable lobbying group NCTA said the White House “risks taking a serious wrong turn … by suggesting that the government is better suited than private-sector technologists to build and operate the internet.” The NCTA also said it was worried about price regulation. The Biden document does not mention price controls.

Jonathan Spalter, CEO of the lobbying group USTelecom, said that prioritizing investments in government-owned broadband is “exactly the wrong approach” since taxpayers will get the bill if such networks fail. He also claimed that broadband prices are already falling.

The Labor Department says pricing for telephone services, which includes internet plans along with phone service, has dropped about 7% over the past decade. Internet service costs, which include things like web hosting, have risen 2%. A think tank with a lot of tech-industry funding, New America, says prices are higher in the U.S. compared with Asia and Europe.

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SK Telecom to be split into two, holding company to oversee non-mobile biz

Karim Hussami

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SK Telecom to be split into two

South Korea’s largest mobile carrier SK Telecom Co. will split into two separate entities. It said it will create a new holding company for its non-mobile subsidiaries to accelerate growth in promising fields and tighten its grip on its chipmaking unit, SK Hynix Inc.

The horizontal spin-off is aimed at increasing enterprise and shareholder value, the operator said. The plan will leave the surviving company focused on its telecom business (tentatively named ‘AI & Digital Infra Company’) and the spin-off company taking over the memory business and new ventures (tentatively named ‘ICT Investment Company’).

Surviving entity

After the spin-off, SK Telecom will be divided into a surviving entity that will succeed its telecom business as a mobile network operator (MNO), and a new entity that is essentially an investment firm to seek new opportunities in non-telecom sectors.

The telecom operator’s spinoff plan had been widely expected after CEO Park Jung-ho said in a shareholders meeting last month that the company would overhaul its governance structure amid a slump in its share price in recent years.

SK Telecom’s share price had been in stalemate at the end of 2020 from the previous year at 238,000 won.

While SK Hynix has made active investments in the past, such as acquiring Intel’s NAND memory business in October last year for US$9 billion, its parent SK Group wants to tighten its grip on the chipmaker and help it aggressively expand investments.

The remaining entity will focus on the mobile carrier’s traditional telecom business and expand to new sectors, such as artificial intelligence and data centers.

The mobile carrier said it will decide on the details of the spinoff within the first half of this year.

Areas of interest

SK Telecom’s surviving entity will focus on artificial intelligence (AI) and digital infrastructure in addition to its current mobile and network businesses.

The entity will have SK Broadband Inc., the Internet service provider, as a subsidiary and will continue the current telecom and IPTV businesses.

The surviving company will also expand into a number of new areas such as cloud, data center and AI-based subscription segments. 

No merger

The latest announcement comes as the mobile carrier’s non-mobile subsidiaries have rapidly grown to account for 24 percent of the company’s total operating profit last year.

The subsidiaries have also formed global partnerships to boost their presence in the local market, with T Map Mobility joining hands with U.S. ride-hailing firm Uber Technologies Inc. to form a taxi-hailing joint venture in South Korea.

11Street has teamed up with Amazon.com Inc. with plans to offer the U.S. retail giant’s products to South Korean consumers.

SK Telecom is also preparing initial public offerings for app market unit ONE Store as well as security firm ADT Caps Co.

While analysts have speculated that the corporate revamp would eventually lead to a merger between SK Inc., the holding company for SK Group, and SK Telecom’s new holding company to elevate the status of SK Hynix in the conglomerate, the mobile carrier rejected the claim.

“There are no plans for a merger,” SK Telecom said in a statement.

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Italy to increase EU broadband funding by 60 percent

Karim Hussami

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broadband

Italy aims to spend almost 7 billion euros ($8.33 billion) in European recovery funds on ultra-fast networks, up to a 60 percent increase from a previous goal, as ministers lay out alternatives to a long-delayed single national broadband plan.

The total funds for boosting digitalization amount to some 49 billion euros, up from a previous 46.3 billion euros, including investments in public administration and grants for small and medium-sized companies, one of the sources added on condition of anonymity.

The government of Mario Draghi, which took office in February, is revising a national Recovery and Resilience Plan (RRP) that would entitle it to some 206 billion euros by 2026 from an EU program to help nations hardest hit by coronavirus.

Rome planned to raise the amount spent on 5G and broadband satellite infrastructure to 6.7 billion euros from 4.2 billion euros earmarked in January by the previous government.

In addition, the government is also devising alternatives to a previous plan to merge the fixed-line access network of former monopoly Telecom Italia (TIM) with those of smaller rival Open Fiber.

TIM has repeatedly said it would not agree to owning less than 50 percent of any combined entity – something that could trigger regulatory issues.

Under this project, TIM would not fold its primary network – connecting switching center to street cabinets – into the venture, preventing the former phone monopoly having a majority stake.

Draghi’s ministers are discussing an alternative plan to use EU funds to roll out fast broadband networks across Italy’s 20 regions using the best technologies available, including Fixed Wireless Access (FWA) systems, the sources said.

Italy ranked fourth to last in the European Union for digital competitiveness in 2019, the Digital Economy and Society Index (DESI) compiled by the European Commission found.

Open Fiber is jointly controlled by Italy’s biggest utility Enel and state lender Cassa Depositi e Prestiti (CDP). CDP is TIM’s No. 2 shareholder behind France’s Vivendi

Both options under discussion leave the door open to co-investment schemes allowing operators to build their own networks in some areas and have commercial agreements elsewhere.

TIM has repeatedly said it would not agree to owning less than 50 percent of any combined entity – something that could trigger regulatory issues.

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Japan’s Toshiba president steps down amid acquisition talks

Associated Press

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Japan's Toshiba president steps down amid acquisition talks

The president of Toshiba Corp. stepped down Wednesday, a week after the the Japanese technology and manufacturing giant said it was studying an acquisition proposal from a global fund where he previously worked.

Nobuaki Kurumatani tendered his resignation at a board meeting, and the board accepted, effective Wednesday, Tokyo-based Toshiba said in a statement.

Kurumatani headed the Japan operations of CVC Capital Partners, which proposed the acquisition last week, before taking his post as chief executive of Toshiba in 2018.

Some questions had been raised, both within and outside Tokyo-based Toshiba, about Kurumatani leading the board discussions on the acquisition.

Kurumatani did not attend the online news conference, where two board members explained his resignation and fielded questions.

A company official read his statement that said the resignation was for personal reasons.

“Toshiba is a wonderful company and is Japan’s precious wealth. I love Toshiba deeply,” Kurumatani said in his message.

The CVC deal is estimated to be worth 2 trillion yen ($18 billion) and will turn Toshiba private. Toshiba had said it was giving it “careful consideration.” Osamu Nagayama, a board member, told reporters the proposal lacked details and could not yet be evaluated.

Trading in the company’s shares was suspended when the news hit last week. Shares of Toshiba, whose sprawling business includes making elevators and railways, shot up on the CVC news and have been trading at nearly 5,000 yen ($46).

CVC is a European private equity firm, based in Luxembourg, which has committed nearly $162 billion in funds, managing more than 300 investors. It has declined to comment on the acquisition proposal or the president’s resignation.

But speculation has been growing other funds may offer better prices.

Kurumatani will be replaced as chief executive and president by his predecessor, Satoshi Tsunakawa, who remained on the board, first as COO and currently chairman.

Tsunakawa oversaw some of the recent financial challenges at Toshiba. Before becoming CEO, in his previous stint from 2016, he had headed Toshiba’s medical systems business, now a group company of Japanese camera and equipment maker Canon.

Tsunakawa told reporters Toshiba was ready to embark on growth as “an infrastructure services company.” He promised to work in the interests of shareholders, employees and society overall, and continue to strengthen governance.

“We stand behind the principle of ‘Do the right thing,’ ” he said, delivering the motto in English.

Toshiba, founded in 1875, was long revered as one of Japan’s respected brands, developing the nation’s first radar and microwaves, electric rice cookers and laptop computers.

It also invented flash memory, the ubiquitous computer chips that store and retain data for digital cameras, cell phones and other gadgets. Toshiba no longer makes laptops, and it has sold its computer chips division.

The company’s fortunes began to crumble over its heavy investment in nuclear power. After the March 2011 nuclear disaster in Fukushima, costs of the business ballooned because of growing safety concerns. Some nations are turning toward sustainable energy.

Toshiba also had massive losses from the nuclear power operations of U.S. manufacturer Westinghouse, which Toshiba acquired in 2006. Westinghouse filed for bankruptcy protection in 2017.

In Japan, Toshiba is decommissioning nuclear plants, including the one in Fukushima, where the tsunami 10 years ago set off multiple reactor meltdowns.

In 2015, Toshiba acknowledged it had been systematically falsifying its books since 2008, as managers tried to meet overly ambitious targets. An outside investigation found it had inflated profits and hid massive expenses.

TOKYO (AP) — BY Yuri Kageyama

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