The book, “The Politics of Abundance,” (Odyssey Editions 2012) was published soon after the President won a second term last year. Its broad ambition and optimism are well-captured in its subtitle: “How Technology can Fix the Budget, Revive the American Dream, and Establish Obama’s Legacy.”
Authors Reed Hundt and Blair Levin argue from a unique vantage point, with deep immersion in both the policy and business end of technology deployment. Hundt is a former Chairman of the Federal Communications Commission and is now CEO of the non-profit Coalition for Green Capital. Levin was the principal author of the FCC’s 2010 National Broadband Plan and is currently executive director of Gig.U, a consortium of universities working to encourage deployment of ultra high-speed broadband networks in university towns.
According to Hundt and Levin, it was the technology-friendly policies of the Clinton-Gore White House that “enabled” the creation of the Internet economy. “Pursuant to the growth strategy of the Clinton-Gore Administrations,” the authors write, “wireless and the Internet became the platforms for innumerable firms as well as not-for-profit organizations.” (Hundt was appointed Chairman of the FCC by Clinton, where Levin was his chief of staff.) And despite stock market setbacks in 2000 and 2007, those policies led, according to a study by consulting firm McKinsey & Co. cited in the book, to the creation of 2.6 new jobs for every one job lost to efficiency gains.
Now the authors are calling on the Obama Administration, in its second term, to commit itself to similar growth-oriented policies, stimulating private investors to rebuild the nation’s communications and power infrastructures to deliver orders of magnitude more capacity and efficiency; to “double down on what is doubling up” as they put it. With abundant communications and abundant power, they argue, entrepreneurs will be inspired to invent the next generation of killer apps, jump-starting the economy and catapulting the U.S. back to the top in key measures of economic and technological progress.
The high optimism of Hundt and Levin stands in sharp contrast to a lingering dyspepsia in current economic theory. Neo-Malthusians argue that key economic resources remain limited and that market behavior continues to be oriented around maximizing profits by managing scarcity. The authors note specifically the work of economist Robert Gordon and journalist Thomas Byrne Edsall. Gordon, for example, argues that the growth bump of the information age has largely finished. And Edsall’s recent book “The Age of Austerity,” equated increasingly rigid partisan politics with growing scarcity for key resources, including energy.
These pessimistic views—what the authors call the politics of scarcity--have even infected some Silicon Valley leaders. PayPal co-founder Peter Thiel, for example, has argued since the most recent stock collapse that only dramatic new breakthroughs in energy and food production technologies will save the economy from an extended period of Malthusian zero-sum behavior.
Hundt and Levin, at least, fully expect those breakthroughs will arrive, if only the government can create the right incentives for private investors to create the kinds of platforms entrepreneurs require to unleash their creativity.
I’m certainly in their camp on the first half of that equation, at least as far as the information technology revolution. (I’m not qualified to comment on the energy sector or the book’s ambitious recommendations for saving it). Moore’s Law has made it possible to build capacity well ahead of demand at ever-lower costs, leaving entrepreneurs free to concentrate on serving customers rather than worrying about the cost or design of infrastructure needed to deliver their products and services. Which is to say that demand always catches up, and new supply is always available. At least so far.
The authors provide impressive data on the undeniable benefits to consumers of this continuing information revolution. And in that regard, “The Politics of Abundance” also stands in stark and welcome contrast to increasingly noisy doom-and-gloom from both legal academics and self-styled consumer advocates, who argue implausibly that our current communications ecosystem has fallen into 19th century monopolist stagnation, leaving the U.S. wallowing in disgrace with regard to use of technologies largely invented here.
Selectively abusing data (when they bother with data), the “America-last” crowd compare U.S. broadband deployment, pricing, and adoption to that of countries with small geographies, concentrated urban populations, and a long history of government-owned and/or subsidized telecommunications industries. Somehow, contrary to what every consumer with an Android phone, iPad or unfathomable access to diverse programming content experiences every day, they find nothing but misery and despair.
(What’s especially galling about these fantastical arguments is that the real data isn’t even hard to get. Start with the Organization for Economic Co-Operation and Development’s Broadband Portal to see just how the U.S. really stacks up, assuming national comparisons are even the relevant metric. At the end of 2011, for example, the U.S. had over 85,000,000 fixed and mobile broadband subscriptions, nearly as much as the next three countries—Japan, Germany and France—combined. And that is by no means the only measure on which the U.S. ranked a distant first.)
Delicately plucking the jingoistic heartstrings of lawmakers, the doomsayers call on the White House, Congress, the FCC and state and local regulators to save us from our broadband backwater by taking firm control of the reigns of the Internet ecosystem. Some even argue in favor of nationalizing existing infrastructure, in hopes that doing so will magically build out next generation networks with unlimited mobile bandwidth and fiber optic connections to 100% of the U.S. population, whatever the cost.
Hundt and Levin, however, are having none of this. Twice the percentage of Americans, they note, use the Internet as do the Chinese, and ten times the percentage in India. Every relevant measure of price has declined: “The price of transmitting bits has steadily dropped, as indicated in the falling cost of Internet transit,” they note. The U.S. leads the world in high-speed mobile broadband, with almost twice the number of users of second-place Japan.
And cable providers, the supposed Standard Oil of the 21st century, have “upgraded their networks so that they can now provide 1000 megabits per second to 82 percent of all homes, roughly 40,000 times the speed of narrowband Internet access provided by a telephone line in 1994”-- despite the presumed lack of competitive pressure.
(From Reed Hundt and Blair Levin, “The Politics of Abundance”)
Indeed, according to a report today in the Wall Street Journal, the cable “monopoly” is facing increased competition in ultra high-speed broadband from new entrants including Verizon, Google Fiber, and a start-up called Gigabit Squared, which is working closely with Levin’s Gig.U. According to the article, “in addition to Verizon FiOS, which is available to 17 million people, primarily in the Northeast, more than 700 rural telephone companies that used to provide slow-speed Internet over copper wires have reinvested in building fiber-to-the-home network.” All without the need for radical government intervention, thanks very much.
We can quibble about how much the Clinton-Gore policies and related legislation, including the largely-deregulatory 1996 Communications Act, actually contributed to the growth of the Internet ecosystem. But Hundt and Levin are surely right that the combination of deregulation and wise use of the executive branch's bully pulpit played a key role. The moral of the story is also clear: there is much that governments can do to stimulate more innovation with little direct cost to taxpayers.
These include setting an example for industry by being early adopters of more efficient technologies, and of stimulating new thinking with modest challenge grants and prizes. In this regard, the authors include several detailed recommendations, many of which fall into the category of common sense:
- Shift government services to the Internet as quickly as possible.
- Set “race to the moon goals” for education and health care – using digital technology to deliver a customized educational environment for students and personalized health care for patients.
- Allocate some Universal Service funds for challenge grants to encourage better use of grants already used for Internet access in schools and libraries.
- Build a robust public safety network using $7 billion allocated last year by Congress, and lease unused capacity to private networks to generate needed revenue to fund on-going operations and improvements.
- Encourage more competitive projects along the lines of Google’s high-speed fiber deployment in Kansas City, which generated over a thousand applications.
- Reallocate part of the Universal Service “high cost” fund to offer prizes “for firms that find new ways to deliver faster, cheaper broadband to rural areas.”
- Consolidate all government spectrum holdings under a single agency, perhaps the Office of Management and Budget, making it easier to determine which frequencies are unused or underutilized.
Hundt and Levin are fully aware of the current budget stalemate and the austere climate in Washington. But the proposed expenditures, at least in communications, are modest. They suggest, for example, $1 billion for states to implement broadband assessment and measurement tools, $3.8 billion for training new computer engineers, and $500 million in subsidies for small businesses who buy employee broadband in high cost areas.
Proposed revenue from other recommendations would more than offset these costs. The authors, for example, encourage the government to go beyond existing plans to recover radio frequencies from broadcast television and auction them for use by mobile networks. Consistent with the National Broadband Plan, they believe it essential to reclaim an additional 200 MHz. of spectrum. And auctioning that additional spectrum could raise $40 billion for the treasury.
Those of course are only the direct revenues. The bigger point is that nudging Americans into next-generation networks for communications and power will unleash profound entrepreneurial growth, creating jobs and revitalizing the economy. Refilling depleted tax coffers at the federal, state and local levels would be little more than a happy side-effect.
But the authors, unfortunately, have less to say about ways governments large and small can jump-start growth by eliminating existing regulations that no longer contribute any value, but which increasingly slow the very investments in infrastructure for which Hundt and Levin argue so convincingly. Even as the Centers for Disease Control reported last week that less than half of all American homes still have a landline telephone, for example, legacy carriers continue to operate under costly and inefficient “dominant carrier” rules that were developed when landline phone service was a legal monopoly of the Bell System.
Carriers eager to retire legacy copper networks in favor of the fiber and wireless solutions that would natively transmit all information using Internet protocols may still need FCC permission to change or discontinue services even when better and cheaper alternatives are being offered. Hundt and Levin don’t mention it, but it’s no surprise that in its roll-out of fiber-based services in Kansas City, Google recently dropped plans to offer phone service over the new infrastructure, citing regulatory rather than technical obstacles.
“We looked at doing that,” said the Google VP for Access Services. “The cost of actually delivering telephone services is almost nothing. However, in the United States, there are all of these special rules that apply.”
"Special rules" indeed--more like pointless rules. And such overheated regulation isn't limited to communications. In judging the competing entries from local communities, Google earlier noted that oppressive environmental reporting requirements disqualified every application from cities in its home state of California.
(The FCC has recently begun a process to facilitate rather than impede the transition to what I’ve called “Internet Everywhere.” It has also created a new task force to look for opportunities to accelerate the final stages of Internet convergence. These are small and much-delayed steps in the right direction.)
Beyond the unnecessary cost of legacy regulations, Congress and the FCC must also do more to rein in the inefficient and sometimes corrupt practices of local zoning regulators, who delay or deny applications for new infrastructure investments essential to meeting the exploding demand of mobile broadband users. Not only do these authorities impede efforts by private parties to add additional cell towers, they also unreasonably delay requests to upgrade equipment on existing towers and on the roofs of buildings.
Indeed, the U.S. Supreme Court recently granted review of a lawsuit brought by some local authorities challenging the efforts of the FCC to impose a modest “shot clock” on pending infrastructure applications. If the FCC loses, it will be up to Congress to take action to keep the mobile revolution going.
As Hundt and Levin note, private investors “spent more than $1 trillion to build the digitized, packet-switched, wireless and wired platforms” over the last decade, including increased spending during the worst years of the recession. They would have spent more, had governments and regulators let them do so.
If President Obama is really interested in establishing a “legacy,” as the authors hope, the easiest way would be to get slow-moving governments out of the way of technology innovators who are trying to reinvent the American dream for a new generation.
That, at least, would be the policy agenda with the fewest costs and the greatest benefits.
Follow me on Twitter @LarryDownes.
