Take the opportunity to extend the information revolution
03/06/02 - source-Digital Divide Network

Extending the Information Revolution: Telecommunications Infrastructure
Karen Kornbluh, Markle Fellow, New America Foundation

America has a grand opportunity to lay the foundations for a prosperous and secure future. Our task is not just reviving the weak economy or increasing security – as important as those are. Real sustainable economic growth and international security will come from expanding the information revolution to all parts of our society. Metcalfe’s Law states that the value of a network increases exponentially in relation to the number of users. The same is true for markets and economic activity. By leaving some behind – both at home and around the world, we impoverish not only those individuals; we also impoverish ourselves.

The information revolution has reached a critical juncture. It is no longer a phenomena of the dot-com bubble. Economic growth in the information age comes not from physical strength or even the creation of information technology (IT) equipment. It is the creation of knowledge and information that drives growth. In the information age, the output of workers is more likely to be an “intangible” – such as software, ideas, services, music, literature, etc. – rather than a physical good. But if the information revolution is to be wide, deep and sustained, policies and programs must create a framework in which the information revolution can thrive and all can participate.

The economic boom of the 1990's was fueled, in part, by large companies integrating data networks – and the newly commercialized Internet – into their business processes. Businesses were able to improve productivity by streamlining administrative, purchasing, inventory control and design processes. Productivity growth shot up during this period from the anemic 1.4 percent annual average growth rate before 1995 to 3 percent for the period 1995 to 2000.

But smaller businesses lack access to the same technology that allowed their larger brethren to streamline and help the economy to grow. Only 10 percent of smaller companies have access to broadband – or high-speed, high-capacity data networks. Following passage of the Telecommunications Act of 1996, $90 billion of fiber-optic cable was laid across the country.

However, 97 percent of that fiber-optic backbone remains dark; unused because so few end-users have access to it. Upgrading or replacing the existing connections that run through communities to individual homes and businesses – the “last mile” of the network – has proven expensive and difficult.

Overcoming this problem is no less important than was ensuring that critical infrastructures such as railroads, electricity, telephones, and highways were built and made accessible to all. We must begin with a clearly articulated national goal of universal broadband access similar to our previous goals of universal electrification and phone service. Reaching that goal will require a number of specific actions.

First, we must make sure that the proper incentives are in place. The Telecommunications Act requires companies who own the existing telephone network to share access to their wires with broadband companies. This law must be enforced rather than undermined. An open network has been the best guarantor of innovation and investment in the telecommunications sector in the past and certainly will be in the future. If sharing access cannot be enforced, means for separating the natural monopoly portion of the network from the more naturally competitive ones should be explored. This might include separating the physical infrastructure from the services provided on top of it in two separate divisions or companies.

Second, Congress and the Administration must free up more of the radio spectrum for “third generation” broadband mobile wireless and experiments with existing unlicensed spectrum. Wireless solutions can be far less expensive than installing new wires and can increase competition, innovation and investment in the broadband market. This will require recovering unused spectrum now held by a variety of incumbents, including television broadcasters and military users.

Finally, even with greater competition, it may be that broadband is too expensive for certain low-income users or rural communities. To make sure they are not left behind, subsidies may be needed.

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