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January 02, 2009

Why Government Investment in Broadband 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 national 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. BTW, 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 fifteen 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.

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