Bridging the Gap: The Correlation between African Americans, Broadband Usage, and the Success of the Telecom Industry

by Maurita Coley on April 11, 2014

The following was derived from remarks Maurita Coley delivered at the State of Black New Jersey Conference held by the African American Chamber of Commerce of New Jersey on March 28th.

African American Businessman ComputerI commend the African American Chamber of Commerce of New Jersey for having a “State of Black America” conference, because too often we [African Americans] miss out on opportunities by virtue of not being aware of the state we are in.  For example, some of us think we are in the state of New Jersey, when we are really in a state of crisis and confusion, leading to our missing out and being late to the party of opportunity.

But more often than not, structural barriers are the cause of our missing out on opportunities, because we don’t find out about them soon enough to participate, and because we have barriers such as access to capital that limit the timing and level at which we can participate.  An example is the home ownership bubble – a disproportionate number of African Americans got in on the home ownership bubble just in time for the bust.  And when the bubble burst, we were hurt the worst, because we got in late in the first place.

And so it is in the media and telecommunications sector; in an industry sector that is makes up 1/6th of the national economy, African American ownership of FCC-licensed television broadcast stations has declined from a high of 21 stations, to just three.   This is despite statutory requirements for diversity and inclusion in the use of the public airwaves.

At MMTC, it is our mission to care about how African Americans and other people of color are represented in the media and telecommunications industries. Founded in 1986, MMTC is the leading national organization advocating for diversity and inclusion in media and telecommunications.  What that means on a day-to-day basis is that we spend a lot of time in the halls and on the “8th Floor” of the Federal Communications Commission (FCC or the Commission), trying to get the attention of the five presidential appointees and their staffs, about issues and opportunities that uniquely impact businesses and people of color. We represent as many as 80 other minority organizations that participate with us on matters that are of significance to their constituents and look to us for our guidance in our areas of specialization:  media and telecommunications policy.

While we have long advocated for increasing minority ownership of licensed broadcast television and radio facilities, as communications technologies have converged and emerged, our advocacy has expanded to explore matters such as:

  • How policies that advance minority entrepreneurship can help stimulate economic opportunity, generate wealth, and enhance innovation in the communications industries, and
  • How universal broadband adoption can create jobs, promote STEM education, and enable the creation of diverse content and applications for telehealth, digital education, and entrepreneurship.

Conference Theme:  Bridging the Gap

Now, let’s talk about your theme for this conference, “Bridging the Gap—The Correlation Between African Americans, Broadband Usage and the Success of the Telecom industry.”  Your theme resonates for me because it’s the same theme we used at our 5th Annual Broadband and Social Justice Summit in Washington, DC, in January 2014; our Summit theme was:  “Bridging the Gap: Infrastructure, Education, & Equity in the Digital Economy.” We convened approximately 400 policymakers, innovators, entrepreneurs, and investors, to explore the biggest issues affecting MWBEs and underserved communities in communications.

What exactly is all this talk about bridging the gap—the wealth gap, the income equality gap, the health gap? These “gaps” we are referring to represent disparities between how African Americans show up in certain statistics as compared to our representation in the overall population.  For instance, there are approximately 40 million African Americans in the United States, representing 12 percent of the U.S. population, so logically you’d think that we have 12 percent of the wealth and opportunity in America.  Instead, we face a 20:1 gap or disparity between white and black wealth, and an income equality gap of 38 percent.

As business owners, many of us in this room found ways to bridge the gap for ourselves; but we find that we aren’t comfortable leaving all the other brothers and sisters, and nieces and nephews, and sons and daughters on the other side of that chasm.  Or somewhere down in the gulch.  While many African Americans may have found ways to achieve personal success for ourselves, we’re not comfortable being the “haves” or the one percenters, because the people we love are mostly in the 99 percenters.

Your Chairman, John Harmon, mentioned that my bio reflects my experience at Black Entertainment Television, and I am proud to have served under the leadership of then-founder and CEO Bob Johnson’s reign.  I was there in the 1990’s during the six years in which BET was a public company whose stock was traded on the New York Stock Exchange.  I had the privilege of watching the company’s founder maximize the hand he was dealt, turning a start-up cable network into a major brand, and a cash cow, and trailblazing the way for other black-oriented media companies to follow.  Bob had a vision of building a billion dollar black-owned company.  And true to his vision, after over 25 years of black ownership, Bob and his investors sold the company to Viacom for $3 billion dollars. A serial entrepreneur, Bob immediately moved on to create more opportunity and more wealth in the hotel and investment banking and other industries. Bob became wealthy, and he created wealth for many others. He helped bridge the gap.  So why is it that Bob Johnson is always talking about bridging the 20:1 wealth gap between black wealth and white wealth? He even created a rule – the RLJ Rule – to help to bridge the gap. The reason is because, like many of you in this room, Bob’s not comfortable being on the other side of that gap, knowing he could have been there.

Bob Johnson’s story is one of several stories of entrepreneurs in the communications industries who bridged the gap and paved the way for others to follow.  Recently, at MMTC we dedicated a major white paper on minority ownership of wireless communications spectrum to the memory of another one of our heroes: Herbert P. Wilkins, Sr., an icon in the minority venture capital world, invested half a billion dollars in over 150 minority, largely African American and Hispanic-owned, businesses in the communications industries. A Harvard MBA, Herb could have chosen to go to Wall Street, but he spent his life “bridging the gap” by investing in the dreams of men and women who were repeatedly turned down by “mainstream” lenders and investors.  A major example is Cathy Hughes, founder of publicly traded Radio One, Inc., who was turned down by THIRTY banks before Herb and his Syncom Venture Capital Funds came along.

I commend each and every member of the New Jersey African American Chamber of Commerce, because having worked alongside a black man who was building a major business enterprise, I know that, because of the systemic obstacles that confront minority business owners, you’ve often had to be superhuman to achieve your goals, and from the stories I’m hearing today, many of you have done just that. Mike Ricketts, President of Quality Package Specialists International, took $30,000 from his 401K and turned it into a multi-million dollar business enterprise employing 1,500 people.  Michael Dennis of Big Green Group, LLC, faced the corporate glass ceiling and left to start his own business in the wireless and broadband construction sector, creating opportunity for himself and for many others.

Last year, we worked with the staff of the U.S. Senate Committee on Small Business and Entrepreneurship as they compiled a report on closing the minority wealth gap through small business growth.  The Senate Wealth Gap Report cites the average net worth of various groups in America as follows: $110,000 for Caucasians; $89,339 for Asians; $7683 for Hispanics; and $6314 for African Americans.  The Report says that this wealth gap hinders our ability to start, maintain and grow our businesses, which negatively impacts the overall economy.  It also reports that small business is an engine for job creation, having created six percent of all new jobs between 1993 and 2011. In 2010, small businesses employed 55 million Americans.

I urge you to read the Senate Wealth Gap Report which highlights various issues that impact the ability of minority small businesses to serve as a wealth-creating tool, such as: access to capital, contracting, counseling, homeownership, asset diversification, education, generational wealth transfers, lending inequalities, professional networks, unemployment, language barriers, and our subject today:  broadband Internet access.

African Americans Lead in Smartphone Adoption – Good, but Not the Silver Bullet

I understand that your choice of topic today was stimulated by your interest in a Joint Center report that, contrary to most of the statistics on African Americans and technology, when it came to use of smartphones, African Americans used smartphones in higher numbers than the general population.  At MMTC, we celebrated this data as the “minority wireless miracle.”

Now, a few years have passed since the news about African Americans’ lead in smartphone adoption, and other groups have narrowed the lead.  But I don’t want to dwell on that smartphone adoption issue much longer anyway, because African Americans persistently lag in the rate of home broadband adoption.  According to the Pew Research Internet Project, 74 percent of whites have broadband at home, but just 62 percent of African Americans and 56 percent of Hispanics have it.  So while smartphone adoption is great for many things, our children can’t do their homework on a smartphone. And while Internet access at schools and libraries and McDonald’s is great, we need to focus on bridging the home broadband adoption gap.

Home broadband adoption has many benefits, such as improved health outcomes, expanding digital learning, and expanding small business opportunities, such as using audience and advertising analytics to help you to obtain financing to launch or to grow a business, and these are just a few.

Over one-third of our population (37 percent) are people of color, and statistics project that by the year 2060, minorities will constitute 60 percent of the U.S. population. If you look at the many developed nations that outrank the United States in competitiveness, in education, and in quality of life, you’ll notice that those nations’ economies are not being dragged down by the gross economic inefficiency of a lack of broadband at home and inadequate STEM education, which prevents certain citizens from unlockng their full potential in the workforce and in entrepreneurship.

What We Do to Bridge the Gap Called the “Digital Divide”

Let’s clearly understand what the digital divide is. Former NTIA Director Larry Irving coined the name for this in 1999:  the “digital divide.”  We believe it is the greatest threat to first class citizenship since segregation, because it perpetuates systemic and structural inequalities that are fueling a 38 percent racial income inequality gap and a staggering 20:1 racial wealth gap.

To bridge these gaps, we need minority businesses such as you to be successful.

Minority Business Does Not Have to Mean “Small Business”

Our President says small business is the engine for job creation, and we heartily agree. But as business owners, keep in mind that minority business does not necessarily mean small business.  And in the communications industries, being small is often an impediment that prevents you from participating in the major opportunities, particularly in owning and deploying wireless spectrum.

And while we strongly encourage innovative startups, there is nothing, absolutely nothing, about being a minority business that requires being small.  If anything, minority businesses really must think big if we’re going to close the income gap and the wealth gap, create thousands of new jobs, and pull the minority community out of structural and cross-generational poverty.  To do these things, we need minority businesses that have scale – businesses with market caps in the billions, not millions.  Here are some of the things we do at MMTC to make that happen.

Merger Conditions and Changes in the FCC’s “Designated Entity” Rules Can Create Opportunities for Diversity and Inclusion

Over the past several years, we’ve witnessed an extraordinary number of mergers and acquisitions in the communications industries.  And there are sure to be more to come.  Yet very few of these major transactions have incorporated any diverse partnerships or demonstrated any real consideration of diversity and inclusion.

We advocate with other civil rights groups for merger conditions in the communications industry’s mergers and acquisitions.  We advocate that, in the midst of consolidation and spectrum aggregation, with all of the opportunity they bring for wealth creation, the FCC should require the applicants to include specific factors promoting greater minority inclusion in these transactions, such as partnerships and spinoffs.  We believe greater minority participation will ultimately drive more competition, promote the delivery of new and innovative services, and help create a more robust economy for all Americans.

For instance, in the acquisition of NBC Universal by Comcast, we worked with other civil rights groups to create greater programming diversity from that merger; as a result, Comcast/NBC Universal agreed to support the creation of 10 new minority networks, two of which have already launched – Magic Johnson’s Aspire Network and Sean Combs’ RevoltTV Network.  Comcast also launched a special $9.95 per month home Internet service called Internet Essentials to help qualified low-income consumers to have broadband Internet at home, and the FCC now has a program that encourages others to do the same.

One of our biggest issues this year is to encourage the FCC to change its rules for bidding on the electromagnetic spectrum in upcoming wireless auctions.  By law, the FCC is required to insure that the system of competitive bidding that it uses for auctioning the public spectrum “promot[es] economic opportunity and competition and ensur[es] that new and innovative technologies are readily accessible to the American people by avoiding excessive concentration of licenses and by disseminating licenses among a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women.”  While minorities and women, so-called “designated entities,” were successful in past auctions, rule changes that occurred in 2006 have made it difficult for us to participate.  We want to prevent the outcomes of the recent auction that resulted in no participation by minority bidders by getting the FCC to change the rules concerning bidding credits, attributable material interests, and fulfillment of the public interest standard.

Often, we frame the primary mission of minority businesses as being the suppliers of goods and services through corporate or federal procurement programs.  To be sure, procurement is very important, and many of you in this room have spoken of your successes with federal and corporate procurement contracts. But we advocate that, in the telecommunications sector, selling stuff to spectrum owners and being a leading consumer of wireless spectrum is not enough:

People of color should also be spectrum owners, not just consumers and suppliers, and the public interest requires this.

You can find many of our recommendations for improving Designated Entity participation in the upcoming spectrum auctions in our white paper.  We are working closely with the Commission to urge them to adopt strong new rules to strengthen the Designated Entity program, which Congress created in 1993 to promote competition and ownership diversity, including minority and women ownership.

What You Can Do to Bridge the Gap

As one of the 60,000 African American business owners in the state of New Jersey, you are already bridging the wealth and other gaps that impact African Americans.  So I say to you, keep doing what you are doing – keep growing, keep collaborating, and keep current on the value of technology in your business.  But in addition to doing what you are already doing, let me close by flagging several specific things we can and must do to help bridge the gap.

  • Be owners – not just consumers – of technology infrastructure, applications, products, and services.  It’s great to be the leading consumers of broadband devices, but ownership will help us to create jobs and finance the next generation of entrepreneurs.  Silicon Valley is not funding black Mark Zuckerbergs; we have to finance the dreams of the next generation.
  • Be innovators – broadband is powerful.  Use it to grow your businesses; start small but get big.  Use the telehealth applications to monitor diabetes and chronic health issues, but own them as well.
  • Be benefactors – train the next generation by supporting STEM education and STEM careers.  At MMTC, we work with Startup Middle School, formed by two African American tech entrepreneurs with a passion to train the next generation.  At our January Broadband and Social Justice Summit, they brought us six kids from the Howard University Middle School for Mathematics and Science, where the kids have been working on building several mobile applications. They are learning how to create, protect, market, and finance their applications. They are learning about copyrights and trademarks, crowdfunding, angel investing, and venture capital finance – in middle school.  Let’s support STEM education.

In closing, if we are to bridge the gaps that leave African Americans locked out of opportunity, we must invest in our own dreams, and we must also invest in the dreams of the next generation.  Then we can move from being digital consumers and digital sharecroppers, to owning the whole farm.

    • Maurita ColeyMaurita Coley, Vice President and Chief Operating Officer of MMTC, is the former Executive Director of Capital Area Asset Builders and a former Partner at the Davis Wright Tremaine Law and Cole Raywid & Braverman law firms. She earned her law degree from Georgetown Law where she was a recipient of the 2011 Paul R. Dean Award, and she holds a BA in Communications from Michigan State University. Coley served on the BET executive management team in the 1990s.

 

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