Broadband: Why Government Investment Is Justified Now

Bobbie Johnson, technology correspondent for The Guardian, was kind enough to quote me along with Vint Cerf (nice to be in good company) on the importance of building an online economy and an online government. Vint said: "You know how they say opportunity lies on the edge of chaos? Maybe that's going to be true here too."

So far our telecommunications infrastructure has largely been privately built and financed. Why should that change now? It's unusual for government to do anything as well as the private sector.

The US must become an e-nation. Network economics means that even those locations that already have decent communication gain by subsidizing the locations which do not. Everyone gains from a universal transportation or communication network; even those who already have local transportation and communication. Remember Metcalfe's law: The value of a network is proportional to the square of the number of endpoints. Even if you are already connected, you gain by having the network you are connected to become universal.

Even before we were a nation at all, Ben Franklin was appointed Joint Postmaster General for the Crown and, realizing the value of universal national communication, cut the time for mail delivery in half. Ironically, that postal service, subsidized by the Crown, was critically important in coordinating resistance to Parliament by the colonies.

The railroads that made the US a continental economy were subsidized by massive land grants and other government giveaways. Incidentally, there was massive fraud both in the private financing of the rest of the cost and in the competition to get the government money. Public financing, any financing where there is lots of money involved, is tough to get right and keep honest.

Rural electrification and the Eisenhower Defense Highway System (the Interstates) made us the country we are today. Both involved subsidies meaning that urban areas (which were already electrified and already had highways) subsidized the buildout to the rest of the country. Both the urban areas and the rural areas benefitted.

When we rebuild highways and bridges (as we must and will), we just get back to where we should have been. When we build a communication infrastructure which is both universal and the best in the world, we build a path to the future. By the way, when we rebuild the roads it would be dumb not to make them smart roads with mobile communication everywhere available; when we rebuild our electrical grid, it's got to be a smart grid with photons of information guiding the use of electrons of energy.

Government investments ought to be made counter cyclically both because they're cheaper then and because they cushion the pain of private contraction. Clearly, this is such a time. Universal high quality broadband ought to be one of those major investments for at least four reasons:

1. The private sector has failed us. We've slipped from being the world's leader in Internet access to number 15 and the slippage is still going on. IMHO that's due to lack of competition. Government subsidy of backbone and middle mile can build the highway on which competitive telecommunications providers reach retail customers.
2. We all gain from universal connectivity (see above).
3. If government and the private sector can assume that everyone will have true highspeed access at home and on the move, if we are an e-nation, then new government and private programs can be developed as e-programs assuming that connectivity. We make the lowest common denominator higher; we get better service cheaper.
4. If the US is the world's first e-nation, the we will be the place where many of the e-applications for the rest of the world are invented and first deployed. If we are not, we sacrifice the advantage of being a huge market for first deployment and cede that opportunity to the eurozone, China, and India.

See here for how the federal government should and shouldn't distribute money for a broadband infrastructure build.

Comments

[SAF:]

The private technology sector has been targeted by government as an enemy. Lyndon Johnson sued IBM in the 60's and Bill Clinton spent more money going after Microsoft than Osama Bin Laden,

We need smarter and consistent regulation and much less of it. Despite Sarbox and the SEC we have Madoff and others. Sarbox has effectively shut off lots of VC capital as well as help kill the IPO market.

Jan 02 05:02 PM

[Ricard:]

True as all of this is, most people would agree that we have quite a mess to clean up first. Hopefully this idea gains some traction once the financial system stabilizes.

Jan 02 06:15 PM

[Sol Rosenberg:]

Since most of the people who aren't yet on the Internet will get there via a mobile device, why not call for the elimination of taxes on mobile services? My wife has a $40 mobile plan, yet somehow ends up with a $55 bill when all of the taxes and fees are added in.

As for government central planning in very young industries (the commercial Internet is only 15 years old), all I can say thank heavens this didn't happen in the 1995-2000 period. Otherwise there'd be no Google and we'd all be using our government-subsidized Lycos. Central planning and subsidies always favor the incumbents.

Jan 02 07:36 PM

[mkreisel:]

It was government's over-stimulation of private consumption that led us to this mess in the first place.

The dilemma now is that it's also the only institution that can get us into a different direction unless Americans are ready for Great Depression II and perhaps World War III. But should our government succeed in turning things around (which I think it will this time), it will have burdened itself with humongous amount of debt; and if the government does not reduce the debt significantly by the time the next bubble bursts, collapse will be unavoidable.

Jan 02 08:44 PM

[John Polomny:]

Have the government subsidize universal connectivity? Yes we need more porno movies in Lincoln, Nebraska and I need to be able to play World of Warcraft when I am fishing in northern MN. I am tired of people suggesting the free market doesnt work. If there is a demand for these services they will be built. We have $70 trillion in unfunded liabilities and and are careening towards a possible depression so lets have government spend money it does not have on "universal connectivity" its for the children you know. I managed to get through both High School and college without "universal connectivity" and I turned out just fine. The statement that "this nation must become an e-nation" is stupid. We need to save, invest, and make things to sell to other people that is how wealth is created.

Jan 02 11:20 PM

[bcncv:]

This is pure silliness. My broadband internet is a third of the cost of my cell phone bill. Sure, its not a direct fiber optics line, but very few people have a need for that. Unless you're downloading high definition movies or pirating music, most people don't need more than $15 DSL. The marginal benefit of cutting postal time in half is vastly different than cutting milliseconds off an email.

The primary reason that we're lagging in the connectivity rankings has more to do with demand than access. I still know a number of people that simply don't want an internet connection in their house for a variety of reasons.

The real payoff would come from investing in education instead of mindlessly laying thousands of miles of fiber.

Jan 02 11:40 PM

[mauijeff:]

If you want the government to build a better internet they will also control it's content. High speed pathways will be sold to the highest bidder. Get ready for the same stupid TV programing to dominate the internet.

Jan 03 03:36 AM

[Short Trade...:]

I absolutely agree. This is basic infrastructure, and we should have a goal of free broadband access for everyone, everywhere, and very cheap notebooks, under $100, full loaded with basic software, on the market for the US and the World. This would increase world trade, communications, media, and in the end, world peace. Now is the time, we should make this a priority. In will grow domestic GDP, help trade, and cultural exchange.

Jan 03 04:21 AM

[kruser53:]

I expect all he nay sayers to the author's suggestion think the interstate highway system is a bad idea,too.
The more people with broadband access, the more efficient commerce and government will become. I make my dinner reservations online (when I can afford to go out - a lot less than 12 months age), seldom call my town and county offices for information anymore (just log on for answers), and research what I want to buy online and locate a store before I go shopping.
Improving access to the highway and building a better highway will produce efficienct improvements and enable entrepenurial enterprise.

Jan 03 09:24 AM

[Tricky:]

I believe that the naysayers are contending that while such an initiative would make things "better", the marginal impact of "better" isn't worth the cost and energy vis-a-vis other potential initiatives that could deliver a much bigger impact on making things "better".

For instance, being able to make dinner reservations online (to use the previous poster's example) isn't a very impactful result -- particularly when I can do that now, and this initiative will just let me do that a little faster.

I would suggest that the supporters of this idea come up with more compelling examples of huge impact results from such an initiative -- such potential results were fairly obvious for the interstate highway system. The author didn't really give any compelling examples of how my life would be dramatically improved by such an initiative -- I believe the impact should be dramatic, not marginal, for the nation to invest in it.

Jan 03 10:05 AM

[Mark A. Sad...:]

Japan subsidized the development of a super high speed broadband network. Now virtually 100% of households have access to 100Mbps downloads. Some even can get 1000Mbps downloads. In the United States only about 20,000 housholds currently have access to 100Mbps, only a few percent have access to 16Mbps or higher, and most only have access to 3-6Mbps so we're way behind the times. I currently have 16Mbps which is the highest speed available here in northern Delaware.

Why get high speed broadband? Video of course. To stream MPEG2 (broadcast quality) movies adequately you need at least 6Mpbs. And there are plenty of free digital music and movies on the Internet Archive. For example the film noire classic DOA (dead on arrival) is available there free in MPEG2 format. Now suppose instead of streaming it you would prefer to add it to your digital film library (like me). The file is 3.6GB which means at 8Mbps it will take about an hour to download (about half hour for me at 16Mbps). On the other hand,,if you have 100Mpbs it will take you about 5 minutes to download and with 1000Mpbs it will take you only 30 seconds. If all you have is dial-up it will take you about a week to download it (I hope you weren't planning on using your landline to make phone calls).

In my opinion when harddrives are getting larger and larger (terabytes are not uncommon now) it's about time our internet speed got caught up. Once more and more people get used to super high speed internet they'll wonder how they ever did with out it. If you disagree with me its probably because you're Bill Slowsky

Jan 03 03:53 PM

[zayttrader:]

Alas, so many non sequiters, so little time. I like this one:

"The private sector has failed us. We've slipped from being the world's leader in Internet access to number 15 and the slippage is still going on."

You're leaping to the rather fatuous conclusion that creating the most/fastest access in the world is the best expenditure of our money. Should it really be a national priority to enable Mark Sadowski (posting above) to build his video library?

Our local high school has a 60% graduation rate. Spending money so that they can download the latest movies or Britney Spears videos at 1000mbs isn't going to do jacks**t to address that. It's just going to divert resources from decent instruction and the productive companies that might employ these kids.

Jan 03 04:46 PM

[alienation:]

I grew up using 1200 baud modems to access BBSs, and I turned out just fine. The BBSs and online services were fine just the way they were. We don't need more government intervention and waste.

The Internet was already heavily subsidized by the government, and look how that turned out. It's a free-speech mess, with many low-cost services, a low barrier to entry, and a virtual "free market" in ecommerce sites. Amazon.com destroyed the Waldenbooks at the mall. Because of Ebay, my local computer vendor no longer has a big retail storefront on the main drag. It's some kind of curio shop now. Craigslist has harmed the newspapers.

This internet government socialism totally destroyed the private online services, save for AOL, which is still hanging on. Imagine how much better off we'd be if we still had these private services, keeping their users separated on private network, so it was impossible to send email from one service to another. There'd be less spam, and more, better advertising email mediated by the online service provider.

Thankfully, the mobile phone carrier networks are rebuilding the walls between networks, raising prices, and acting as an intermediary between independent services vendors and the customer. Profits in wireless are healthy, fees are high, and capitalism is doing well again. These "app stores" may prove to be a huge boon to the wireless companies, too.

Let's not build out a universal internet that will allow rural and lower-income people to get online at higher speeds. Let's not create open wireless standards that will harm the large global telecom companies' profits, and cut into their Congressional lobbying budget. This is the slippery slope to government waste, socialism, and COMMUNISM. Just Say NO!

Jan 03 05:31 PM

[bcncv:]

The premise of laying new capacity is that there are many place that do not have access to broadband. Conversely, your statistics reference people that actually use broadband.

To justify laying new capacity, you should be using statistics relating to household accessibility to broadband. A quick google search will tell you that these statistics are not nearly as negative as your comparative usage statistics.

This suggests that money could be better spent by making computers easier to use, and providing relevant uses for people that are content without the internet.

Jan 03 06:29 PM

[Uffdah:]

Why build a wired superhighway when wireless is clearly the future. Any hotel owner who mindlessly spent tens of thousands of dollars runing high speed wires to each room knows now what a waste this was. A few $100 routers and bang--you're every room in your prpoerty is covered.

Why are no land phone lines networks being built in the 3rd world? Because they don't need land lines when wireless technonogies are making land lines obsolete.

The high-speed wireless internet technology is now available through a company called Clearwire (and perhaps others too) to cover huge territories (30 square miles plus coverage per access point--and likely to grow as the technology improves) with a single router. Northern Michigan University is now in the process of deploying such technology right here in rural Michigan.

Best to spend tax dollars on roads and bridges, as opposed to technology which will be obsolete before a high-speed wired nationwide network could ever be built out.

Jan 04 12:15 AM

[a. palmer jr.:]

In my small neck of the woods DSL isn't offered. All the cable companies either want you to bundle all their services together or rip you off on the price. I guess for now I'm stuck with this stupid 28kbs dial up. I think I'll start downloading a movie tonight...uh no phone calls for a week or so. If I go on vacation, by the time I get back it should be done!

Jan 04 12:32 AM

[Anandakos:]

Mr. Rosenberg,

I think you miss the point of the article. Mr. Evslin isn't advocating that CONTENT providers like Google and Lycos be subsidized; he's arguing that PIPES be subsidized. He's talking about the distribution infrastructure of the internet -- the links between end users and the backbone in areas already having a backbone presence and extensions to the backbone into currently un-served areas.

If net neutrality is preserved in broadband and the distribution infrastructure expanded, enlarged, and improved by ip6, EVERY content provider can benefit, as can every user whether currently served by Verizon fiber or DSL. Dialup will presumably go the way of AOL in the future he envisions.

On Jan 02 07:36 PM Sol Rosenberg wrote:

> Since most of the people who aren't yet on the Internet will get
> there via a mobile device, why not call for the elimination of taxes
> on mobile services? My wife has a $40 mobile plan, yet somehow ends
> up with a $55 bill when all of the taxes and fees are added in.<br/>
>
> As for government central planning in very young industries (the
> commercial Internet is only 15 years old), all I can say thank heavens
> this didn't happen in the 1995-2000 period. Otherwise there'd be
> no Google and we'd all be using our government-subsidized Lycos.
> Central planning and subsidies always favor the incumbents.

Jan 04 03:00 AM

[Anandakos:]

Uffdah,

WiMax (the technology to which you're alluding) CAN cover a 30 mile rural area, but once it becomes popular in a city, it's back to dial-up speeds. It does not need to be as dense a tower coverage as does WiFi, but one would need towers about every mile or so in a normal city.

And why do you assume that Mr. Evslin was suggesting building a wired system anyway? The article clearly states that he's talking about making the electrical distribution network internet friendly. What's wrong with using it to deliver the signal to WiMax towers in the country.

I WISH you Republicans were not so reflexively anti anything collectively based. It's just as stupid for you to reject group action in some things as it is for the looney left to rail against free-market retailing. Utility infrastructure should NOT be owned by private parties, and the government should NOT run department stores or banks.

Mr. Evslin obviously considers internet access to be an essential utility, and I completely agree. I have Comcast and think they give great service, but if Clark Public Utilities provided reasonable service through a BPL system, I'd sign up in a minute. I'd rather have whatever marginal profit that accrues from my surfing Huffington Post, the Economist, and Common Dreams to go to them instead of the Roberts brothers.



On Jan 04 12:15 AM Uffdah wrote:

> Why build a wired superhighway when wireless is clearly the future.
> Any hotel owner who mindlessly spent tens of thousands of dollars
> runing high speed wires to each room knows now what a waste this
> was. A few $100 routers and bang--you're every room in your prpoerty
> is covered.
>
> Why are no land phone lines networks being built in the 3rd world?
> Because they don't need land lines when wireless technonogies are
> making land lines obsolete.
>
> The high-speed wireless internet technology is now available through
> a company called Clearwire (and perhaps others too) to cover huge
> territories (30 square miles plus coverage per access point--and
> likely to grow as the technology improves) with a single router.
> Northern Michigan University is now in the process of deploying such
> technology right here in rural Michigan.
>
> Best to spend tax dollars on roads and bridges, as opposed to technology
> which will be obsolete before a high-speed wired nationwide network
> could ever be built out.

Jan 04 03:15 AM

[Anandakos:]

AlieNation,

EXCELLENT post! Perfect, subtle irony; you really had my blood boiling until about the fourth paragraph. Then it dawned on me that you were dog whistling when you
advocated for "more, better advertising email mediated by the online service provider." NOBODY wants more "advertising email", not even Karl Rove.

So you had to be yanking people's chains.

Very well done!


On Jan 03 05:31 PM alienation wrote:

> I grew up using 1200 baud modems to access BBSs, and I turned out
> just fine. The BBSs and online services were fine just the way they
> were. We don't need more government intervention and waste.
>
> The Internet was already heavily subsidized by the government, and
> look how that turned out. It's a free-speech mess, with many low-cost
> services, a low barrier to entry, and a virtual "free market" in
> ecommerce sites. Amazon.com destroyed the Waldenbooks at the mall.
> Because of Ebay, my local computer vendor no longer has a big retail
> storefront on the main drag. It's some kind of curio shop now.
> Craigslist has harmed the newspapers.
>
> This internet government socialism totally destroyed the private
> online services, save for AOL, which is still hanging on. Imagine
> how much better off we'd be if we still had these private services,
> keeping their users separated on private network, so it was impossible
> to send email from one service to another. There'd be less spam,
> and more, better advertising email mediated by the online service
> provider.
>
> Thankfully, the mobile phone carrier networks are rebuilding the
> walls between networks, raising prices, and acting as an intermediary
> between independent services vendors and the customer. Profits in
> wireless are healthy, fees are high, and capitalism is doing well
> again. These "app stores" may prove to be a huge boon to the wireless
> companies, too.
>
> Let's not build out a universal internet that will allow rural and
> lower-income people to get online at higher speeds. Let's not create
> open wireless standards that will harm the large global telecom companies'
> profits, and cut into their Congressional lobbying budget. This
> is the slippery slope to government waste, socialism, and COMMUNISM.
> Just Say NO!

Jan 04 03:20 AM

[granger:]

Thanks for the article, good stuff.

Jan 04 07:46 AM

[David H. Deans:]

Tom, I hope this message finds you well. Happy New Year.

I have to agree with Tricky's comments, who said "I would suggest that the supporters of this idea come up with more compelling examples of huge impact results from such an initiative -- such potential results were fairly obvious for the interstate highway system."

There's very apparent reasons why the "bigger bandwidth" mantra has not gained traction. That said, who is the leading spokesperson for this cause, and have they finally organized the various public and private stakeholders into a coalition?

My point: what has actually changed since I wrote the following related column back in 2001? BTW, while I agree with Vint about it being a delicate balancing act, I'd also add that sceptics expect more than finesse -- they want substantive arguments which address issues that non-techies appreciate.
www.internetnews.com/b...

Jan 04 04:04 PM

[E Thomas St.:]

The choice to either adopt or embrace a rural lifestyle should not be subsidized by the likes of everyone that has adopted or embraced a suburban or urban lifestyle and enjoys the benefits of economies of scale along with the drawbacks of smog, traffic, crime, local news, . The difference between the infamous and fallacious "Welfare Queen" living in the South Bronx and people clinging to an unsustainable way of life in Fairfield, Montana is indistinguishable.

Jan 13 09:32 PM