Back in 2001, a few months before 9-11, my boss, the CEO of a major public company in the telecommunications infrastructure business, called me and said. “I need you to go to a meeting at the NYC Housing Authority. There’s gonna be a huge deal. They’re talkin’ about bringing broadband to every HUD apartment - hundreds of thousands of apartments all over the city. Talk to Lee. He knows the guy inside HUD pushing this. ”
Lee was the president of one the subsidiaries within the “High-Tech Division” I was charged with turning around. We had a good relationship. He arranged a meeting with this “HUD” guy, actually a consultant, who had convinced the housing authority that broadband could be delivered to each and every home in their housing kingdom. The idea was simple. Two competing carriers, telecom or cable companies, would be awarded access to all HUD properties. Each would install optical fiber or a competing broadband service to each unit. After some period of time, the infrastructure would become the sole property of NYCHA which could then negotiate a revenue sharing/access fee agreement for use of the infrastructure with whatever carriers it might choose.
I said nothing, but later shared my skepticism with my boss: these were people who required housing subsidies; people who were by definition, poor, I argued. What assurances does anyone have that they can afford broadband? I guess I was the only skeptic.
I went to the first big “project” meeting at the HUD headquarters across from the World Trade Center. All the heavies were there – IBM, CISCO, Microsoft, Cablevision, AT&T, Southern Bell, Verizon, Cox, SBC and others, including me. It started with a speech by a very white woman (unusual as the majority of the HUD employees seemed to be women of color) about the difficulties the poor have in NYC, about the horrible “digital” divide that was growing between the poor and those who could afford the latest in home computer, communications and entertainment technology. Then the consultant took over the podium. There were more than a few gasps as he described the sheer size of the NYCHA. By itself it would be the 10th largest city in the US. HUD owned or managed over 300,000 properties with over a million residents.
Then came the pitch: two carriers will bring broadband to every unit; NYCHA expects this to be built for free; the winning bidders will be the most credible companies who hand ownership of the infrastructure to NYCHA in the least time; questions? It took a while for all of this to sink in. I was likely the only person in the room who knew in advance that this was the proposed program. I raised my hand and asked the question everyone wanted to ask: how could such low income residents afford broadband, and given that issue, would NYCHA guarantee any minimum subscription rate among residents, which, if not met, would require at least a partial reimbursement of the costs of building this infrastructure?
This question brought dead silence to the room. Finally the original white female HUD representative spoke: the marketing of broadband services is entirely the responsibility of the selected carriers; there will be no guarantees, and finally (wink, wink, so far off the record, I’ll never admit saying this) these residents have money, from, you know, the alternative, you know, so expect good participation. So ended the first meeting. A second meeting took place some weeks later and not nearly so many folks showed up. Lee’s consultant friend saw his gravy train project dying of its own arrogance. 9-11 came and the project was allowed to fizzle out.
This entire, painful experience was for me as pure a demonstration of the sheer arrogance and mind-bending power of an out of control federal bureaucracy as could ever exist. NYCHA sought to use its power and authority, its access to residents, to build and own, the tenth largest urban broadband system in the country, for free. Upon taking possession, this would create a cash flow stream for their bureaucracy that would last in perpetuity. This expansion was not envisioned to fill a legitimate demand or create wealth for shareholders. It was simply done to grow and feed the bureaucracy. The fact that this cash flow could not exist without corruption caused them no pause at all. Broadband was justified as simply another entitlement that they were meant to deliver to the “poor” and profit from.
This all occurred in 2001, and lucky for all of us, that initiative failed. But read this. The private sector may not have fallen for this bamboozle, but the Obama Administration has no such aversion. NYCHA’s quest for free broadband infrastructure it owns and controls continues. This is yet another example of the future earnings of your grandchildren hard at work, this time bringing the new entitlement called broadband to the poor to be pedalled by a subsidized housing authority near you!