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The high price of broadband is keeping people offline during the pandemic

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Before his 190-square-foot apartment in San Francisco’s Tenderloin district was connected to the internet, Marvis Phillips depended on a friend with a laptop for his prolific letter-writing campaigns. 

Phillips, a community organizer, wrote each note by hand and mailed them, then his friend typed and sent the missives, via email and online comment forms, to the city supervisors, planning commissions, statehouse officials, and Congressional representatives to whom he had been making his opinions known for over 40 years. 

Phillips has lived for decades in the Alexander Residence, a 179-unit affordable housing building where internet access is, theoretically, available: he is just a few blocks from the headquarters of companies like Twitter, Uber, and Zendesk. But living on a fixed income that comes primarily from social security benefits, Phillips could not afford the costs of a broadband subscription or the device that he’d need to get connected. 

“I had wanted to be online for years,” says the 65-year-old, but “I have to pay for my rent, buy my food—there were other things that were important.”

For as long as the internet has existed, there has been a divide between those who have it and those who do not, with increasingly high stakes for people stuck on the wrong side of America’s “persistent digital divide.” That’s one reason why, from the earliest days of his presidential campaign, Joe Biden promised to make universal broadband a priority.

But Biden’s promise has taken on extra urgency as a result of the pandemic. Covid-19 has widened many inequities, including the “homework gap” that threatened to leave lower-income students behind as schools moved online, as well as access to health care, unemployment benefits, court appearances, and—increasingly— the covid-19 vaccine, all of which require (or are facilitated by) internet connections.

Whether Biden can succeed in bridging the gap, however, depends on how he defines the problem. Is it one that can be fixed with more infrastructure, or one that requires social programs to address affordability and adoption gaps?

The hidden divide 

For years, the digital divide was seen as a largely rural problem, and billions of dollars have gone into expanding broadband infrastructure and funding telecom companies to reach into more remote, underserved areas. This persistent focus on the rural-urban divide has left folks like Marvis Phillips—who struggle with the affordability of internet services, not with proximity—out of the loop. 

And at the start of the pandemic, the continued impact of the digital divide became starkly drawn as schools switched to online teaching. Images of students forced to sit in restaurant parking lots to access free WiFi so they could take their classes on the internet drove home just how wide the digital divide in America remains. 

The Federal Communications Commission did take some action, asking internet service providers to sign a voluntary pledge to keep services going and forgive late fees. The FCC has not released data on how many people benefited from the pledge, but it did receive hundreds of complaints that the program was not working as intended. 

Five hundred pages of these complaints were released last year after a public records request from The Daily Dot. Among them was a mother who explained that the pandemic was forcing her to make an impossible choice.

“This isn’t just about the number of people who have lost internet because they can’t afford it. We believe a far greater number of people can’t afford internet, but are sacrificing other necessities.”

“I have four boys who are all in school and need the internet to do their online school work,” she wrote. Her line was disconnected despite a promise that it would not be turned off due to non-payment. “I paid my bill of $221.00 to turn my services on. It was the last money I had and now do not have money to buy groceries for the week.”

Other messages spoke of the need to forgo food, diapers, and other necessities in order to keep families connected for schoolwork and jobs. 

“This isn’t just about the number of people who have lost internet because they can’t afford it,” says Dana Floberg, policy manager of consumer advocacy organization Free Press. “We believe a far greater number of people … can’t afford internet but are sacrificing other necessities.”

According to Ann Veigle, an FCC spokesperson, such complaints are passed onto providers, who are “required to respond to the FCC and consumer in writing within 30 days.” She did not respond to questions on whether the service providers have shared reports or outcomes with the FCC, how many low-income internet and phone subscribers have benefited from the pledge, or any other outcomes of the program. 

The lack of data is part of a broader problem with the FCC’s approach, says Floberg, since former chairman Ajit Pai recategorized the internet from a utility, like electricity, back to a less-regulated “information service.” She sees restoring the FCC’s regulatory authority as “the linchpin” toward “equitable and universal access and affordability” of broadband internet, by increasing competition and, in turn, resulting in better service and lower prices.

Measuring the wrong things

It took Marvis Phillips three months of free internet, two months of one-on-one training, and two donated iPads—upgraded during the pandemic to accommodate Zoom and telehealth calls—to get online. And since the city ordered people to stay at home to prevent the spread of the virus, Phillips says the internet has become his “lifeline.”

“Loneliness and social isolation is…a social justice and poverty issue,” says Cathy Michalec, the executive director of Little Brothers-Friends of the Elderly, the nonprofit that helped Phillips connect as part of its mission to serve low-income seniors. As with other solutions to isolation—bus fare to visit a park, tickets to a museum—internet connections also require financial resources that many older adults don’t have.

There are many people like Phillips in San Francisco: according to data from the mayor’s office, 100,000 residents, including many adults over 60, still do not have home internet. Meanwhile, data from Pew Research Trust shows that, in 2019, only 59% of seniors across the country have home broadband—a figure that decreases among those with lower incomes and educational attainments, and whose primary language is not English. The US Census Bureau, meanwhile, shows that 1 in 3 households headed by someone 65 or older does not have a computer

Prices for broadband plans in the United States average $68 per month, according to a 2020 report by the New America Foundation, compared to the $10-$15 that some studies have suggested would be actually affordable for low-income households and the $9.95/month that Phillips currently pays through a subsidized program. 

It’s all evidence of how broadband policy has been chasing the wrong metric, says Gigi Sohn, a distinguished fellow at the Georgetown Law Institute for Technology Law & Policy and former counselor to Democratic FCC chairman Tom Wheeler. Rather than focusing on whether people are served by broadband infrastructure, she argues that the FCC should be measuring internet access with a simpler question: “Do people have it in their homes?” 

When this is taken into account, the rural-urban digital divide begins to look a little different.  According to research by John Horrigan, a senior fellow at the Technology Policy Institute, there were 20.4 million American households that did not have broadband in 2019, but the vast majority were urban: 5.1 million were in rural locations, and 15.3 million were in metro areas. 

Little Brothers-Friends of the Elderly has helped many older San Franciscans get online with basic internet access and device training.

This is not to say that the internet needs of rural residents are not important, Sohn adds, but underscores the argument that focusing on infrastructure alone only solves part of the problem. Regardless of why people don’t have access, she says, “we’re not where we need to be.”

Broadband policies that address the adoption and affordability gaps are on the horizon. In December, Congress passed a long-awaited second coronavirus stimulus package that included $7 billion toward an emergency expansion of broadband, with almost half—roughly $3.2 billion—set aside for $50/month internet subsidies for low income households.

This is far more than the $9.25 monthly subsidy provided by the FCC’s long-running Lifeline program

Sohn says this increase is significant—and may stick around. “Once people have it [the $50 subsidy], it becomes more difficult to take it away,” she says, “so putting that stake in the ground is critically important.”

Meanwhile, changes in the senate and the White House mean there is a chance for a bill which stalled last year to get a second look. The Accessible, Affordable Internet for All Act, championed by James Clyburn, a close ally of President Biden, proposed funding for broadband buildout to underserved areas, $50 in internet subsidies, and funding to community organizations and schools to encourage adoption. It was held up in the senate, but is likely to get revisited under Democratic leadership.

“Where does the information trickle down to?”

This slow progress is happening just as the need for home internet has become more acute than ever, with signups for covid-19 vaccinations hosted on websites that are difficult to navigate or downright dysfunctional, and newly available appointment slots announced on social media. Even for those that have broadband, the process has been so confusing that, in many families, more digitally savvy grandchildren are registering on behalf of their grandparents. 

“I have dealt with 10 phone calls in the last two weeks from older adults,” says Michalec. She’s receiving questions like: When are we going to get the vaccine? I’ve heard that you have to sign up on a website, but I don’t have a cell phone or computer. What am I supposed to do?

As she scrambles to find answers, Michalec is frustrated by the lack of clear communication on what existing solutions are already out there. Neither she nor any of her seniors were aware of the FCC’s subsidy programs, she says, even though they would meet the eligibility criteria. 

Nor was she aware of the benefits that the most recent coronavirus stimulus package would provide, despite following the news closely. “Where does that information trickle down to?” she wonders. “How do we get an application into people’s hands?”

Michalec says that she’s been looking for support from some of the large technology companies now in the neighborhood, as well as the greater Bay area. She says that she has personally written to Tim Cook at Apple, as well as Google representatives, but so far, she has had no luck. 

“I’m sure they get letters like that all the time,” she says, but adds, “We don’t need the newest devices. I know…[they] have devices lying around.”

Marvis Phillips, meanwhile, continues his community advocacy from his iPad. These days, his emails have homed in on the contradictions of covid-19 health orders. 

“I just sent an email about having to go out to get your test, get your vaccine,” he says. “How can you ‘stay at home’ if you have to go out to do everything?”

He tries to keep on top of the constant shifts in news and rules on vaccine availability, and then passes that information on to others in the community who are not as digitally connected. 

He wishes that health workers could simply go door-to-door in administering vaccines, so that medically vulnerable populations—like almost everyone in his building—could truly stay protected at home. 

He continues to email everyone he can think of to enact such a policy, but he is relieved, at least, that he can use the internet to access his health provider’s web portal. Eventually, he says, it will give him the alert to schedule an appointment. “As of Thursday … still doing 75+ but that could change this coming week,” he shared over the weekend. “I check every other day or so.” 

He’s still waiting for the taxi voucher that he’ll be provided to go to and from the vaccine site, so when the notification pops up, Phillips hopes that he’ll be ready.

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Tim Hortons marks two years in China with Tencent investment

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Tim Hortons, the Canadian coffee and doughnut giant, has raised a new round of funding for its Chinese venture. The investment is led by Sequoia China with participation from Tencent, its digital partner in China, and Eastern Bell Capital. The round comes two years after Tim Hortons made its foray into China’s booming coffee industry.

Tim Hortons didn’t disclose the amount of its latest fundraise but noted in a social media post that the proceeds will be used for opening more stores, building its digital infrastructure, brand presence, and more.

Tencent, the Chinese social media and entertainment behemoth, first backed the 57-year-old Canadian coffee chain last May. At the time the tie-up was seen as Tencent’s move to counter archrival Alibaba’s alliance with Starbucks to deliver coffee and help the American coffee titan go digital in China.

Tim Horton’s collaboration with the WeChat parent is in a similar vein. It has so far accumulated three million members through its WeChat mini program, a type of lightweight app that runs within the instant messenger. To appeal to young Chinese consumers, Tim Hortons opened an esports-themed cafe with Tencent, China’s biggest gaming company.

Two years into operating in China, Tim Hortons says it has reached storefront-level profitability with a footprint of 150 locations across 10 major cities. It plans to add more than 200 locations in 2021 and reach 1,500 stores nationwide in the next few years.

The dramatic rise and fall of coffee delivery startup Luckin brought the prospects of China’s coffee market to the forefront. Despite the investment frenzy around Luckin and other coffee businesses, coffee drinking still has a relatively low penetration in China compared to countries like the United States and Germany. On the other hand, coffee consumption is growing at a much faster rate of 15% in China, well above the global average of 2%, and is projected to reach 1 trillion yuan ($150 million) in 2025, according to a 2020 report by Dongxing Securities.

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Bessemer Venture Partners closes on $3.3 billion across two funds

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Another major VC firm has closed two major rounds, underscoring the long-term confidence investors continue to have for backing privately-held companies in the tech sector.

Early-stage VC firm Bessemer Venture Partners announced Thursday the close of two new funds totaling $3.3 billion that it will be using both to back early-stage startups as well as growth rounds for more mature companies.

The Redwood City-based firm closed BVP XI with $2.475 billion and BVP Century II with $825 million in total commitments.

With BVP XI, it plans to focus on early-stage companies spanning across enterprise, consumer, healthcare, and frontier technologies. 

Its Century II fund is aimed at backing growth-stage companies that Bessemer believes “will define the next century,” and will include both follow-on rounds for existing portfolio companies or investments in new ones.

BVP XI marks Bessemer’s largest fund in its 110-year history. In October 2018, the firm brought in $1.85 billion for its tenth flagship VC fund. This latest fund is its fifth consecutive billion-dollar fund, based on PitchBook data. 

Despite being founded more than 100 years ago, Bessemer didn’t actually enter the venture business until 1965. It’s known for its investments in LinkedIn, Blue Apron and many others, with a current portfolio that includes PagerDuty, Shippo, Electric and DocuSign. Exits include Twitch and Shopify, among many others.

With more money than ever before available for backing startups, the challenge now for VCs is to see how and if they can find (and invest in) whatever will define the next generation of tech. 

“As venture capitalists, we pay too much attention to pattern recognition and matching when in reality, the biggest opportunities exist where those patterns break,” the firm wrote in a blog post today. “Our job is to make perceptive bets on the future, especially those that others will dismiss and ridicule. We are fundamental optimists and strong believers in the power of innovation; our life’s work is putting our reputation, time, and money to help entrepreneurs realize a different future. They’re the ones pioneering something entirely new and obscure – a technology, a business model, a category.

In addition to announcing the new funds, Bessemer also revealed today that it’s brought on five new partners including Jeff Blackburn, who joins after a 22-year career at Amazon, alongside the promotion of existing investors Mary D’Onofrio, Mike Droesch, Tess Hatch, and Andrew Hedin.

Most recently at Amazon, Blackburn served as senior vice president of worldwide business development where he oversaw dozens of Amazon’s minority investments and more than 100 acquisitions across all business lines – including retail, Kindle, Echo, Alexa, FireTV, advertising, music, streaming audio & video, and Amazon Web Services.  

“Having been part of Amazon for more than two decades, I’m excited to begin a new chapter helping customer-focused founders build breakthrough companies,” said Blackburn in a written statement.  “I’ve known the Bessemer team for many years and have long admired their strategic vision and success backing early-stage ventures.” 

With the latest changes, Bessemer now has 21 partners and over 45 investors, advisors, and platform “team members” located in Silicon Valley, San Francisco, Seattle, New York, Boston, London, Tel Aviv, Bangalore, and Beijing. 

“At Bessemer, there’s no corner office or consensus; every partner has the choice, independently, to pen a check. This kind of accountability and autonomy means a founder is teaming up with a partner and board director who thoroughly understands your business and can respond quickly and decisively,” the firm’s blog post read.

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Daily Crunch: Twitter announces ‘Super Follow’ subscriptions

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Twitter reveals its move into paid subscriptions, Australia passes its media bargaining law and Coinbase files its S-1. This is your Daily Crunch for February 25, 2021.

The big story: Twitter announces ‘Super Follow’ subscriptions

Twitter announced its first paid product at an investor event today, showing off screenshots of a feature that will allow users to subscribe to their favorite creators in exchange for things like exclusive content, subscriber-only newsletters and a supporter badge.

The company also announced a feature called Communities, which could compete with Facebook Groups and enable Super Follow networks to interact, plus a Safety Mode for auto-blocking and muting abusive accounts. On top of all that, Twitter said it plans to double revenue by 2023.

Not announced: launch dates for any of these features.

The tech giants

After Facebook’s news flex, Australia passes bargaining code for platforms and publishers — This requires platform giants like Facebook and Google to negotiate to remunerate local news publishers for their content.

New Facebook ad campaign extols the benefits of personalized ads — The sentiments are similar to a campaign that Facebook launched last year in opposition to Apple’s upcoming App Tracking Transparency feature.

Startups, funding and venture capital

Sergey Brin’s airship aims to use world’s biggest mobile hydrogen fuel cell — The Google co-founder’s secretive airship company LTA Research and Exploration is planning to power a huge disaster relief airship with an equally record-breaking hydrogen fuel cell.

Coinbase files to go public in a key listing for the cryptocurrency category — Coinbase’s financials show a company that grew rapidly from 2019 to 2020 while also crossing the threshold into unadjusted profitability.

Boosted by the pandemic, meeting transcription service Otter.ai raises $50M — With convenient timing, Otter.ai added Zoom integration back in April 2020.

Advice and analysis from Extra Crunch

DigitalOcean’s IPO filing shows a two-class cloud market — The company intends to list on the New York Stock Exchange under the ticker symbol “DOCN.”

Pilot CEO Waseem Daher tears down his company’s $60M Series C pitch deck — For founders aiming to entice investors, the pitch deck remains the best way to communicate their startup’s progress and potential.

Five takeaways from Coinbase’s S-1 — We dig into Coinbase’s user numbers, its asset mix, its growing subscription incomes, its competitive landscape and who owns what in the company.

(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)

Everything else

Paramount+ will cost $4.99 per month with ads — The new streaming service launches on March 4.

Register for TC Sessions: Justice for a conversation on diversity, equity and inclusion in the startup world — This is just one week away!

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.

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