The media frenzy surrounding the dotcom implosion continues to divert attention from the fact that the promise of the Internet is still in its infancy. While this is regrettable, the truly unfortunate reality is that the Internet’s potential will not be realized anytime soon unless the public and policy makers become committed to ubiquitous broadband deployment.
Assuring expeditious broadband rollout will be expensive and will require extraordinary political determination. But to remain complacent will not just delay the economic and social benefits of more fully integrating the Internet into our lives. It also will assure the deterioration of America’s technological and economic leadership as other countries move ahead with more ambitious build-out programs. Government, academia and industry must come together and approach this challenge as we would other paramount issues of national and economic security.
Economists at the Federal Reserve Bank and other organizations attribute much of the economic boom of the last decade to growth in worker productivity, which nearly doubled in the late 1990s to 2.6% annually, from an average of 1.4% over the previous 20. Fed Chairman Alan Greenspan linked this increased productivity to the growth and proliferation of data networks among companies, which increased the efficiency of their computer and other information technology capital investments.
While the current economic malaise has a variety of causes, speeding up broadband deployment-which, last year reached only between 10% and 12% of U.S. households and businesses-clearly would be a powerful tool to return to growth and prosperity. Any individual who doubts the power and promise of broadband need only return to a dial-up line for an afternoon of e-mail and web searches. Broadband, of course, will be much more important to our economy in ways other than support for basic e-mail and web searches. Widespread broadband deployment throughout our economy will allow for the growth of new products, services and a return to high productivity growth rates.
Despite the obvious benefits to our economy from the spread of data networks in the past decade and broadband’s promise to bring us to a whole new level, ubiquitous high speed Internet access remains stubbornly elusive. The bottleneck is largely the product of bad public policy.
The current debate in Washington on how to secure broadband deployment is mired in the vagaries of the 1996 Telecommunications Act. Members of Congress and perhaps the Federal Communications Commission would change the regulations promulgated by the Act to encourage private sector broadband build out, but the various proposals-most notably the so-called Tauzin-Dingell bill-run the risk of solidifying the market position of the players that are already in homes and offices (the so-called Baby Bells and the cable companies) to the detriment of competitiveness and innovation. Technologies that could leapfrog these problems-wireless, fixed wireless, etc.-are advancing but, as yet, have limited capabilities and reach and have their own set of policy problems.
While policy makers in Washington wrestle with this confusing mess our international competitors are racing ahead. According to a June 2001 study by the Organization for Economic Cooperation and Development (OECD), the United States had slipped to fourth in broadband deployment among industrialized countries. Korea has the highest broadband deployment in the world due to an aggressive five-year, $7.5 billion build-out program. Since the OECD survey, other studies have indicated that the U.S. lead has slipped even further. As we all know, capital, talent and innovative ideas gravitate to where they are best utilized. As an industry, an economy and a country, our complacency will be our undoing.
What, then, is to be done? The first step is to educate the public and, more importantly, policy makers on the critical role broadband deployment will play for our economic future. Going forward, all of us, whether or not we are directly involved in telecom, need to get the message across that assuring high speed Internet access will be the engine that pulls all other trains. The ultimate answer may be a combination of regulatory reform, tax incentives, and subsidies to ensure that broadband reaches each home and business in America.
It is said that part of the inspiration for building the U.S. interstate highway system, which started in the 1950s, came from Dwight Eisenhower’s frustration as a young army officer in trying to move large numbers of troops around the United States. While the cost and political effort to build that system were enormous, no one can refute its value to our economy over the years. We stand at a similar juncture with regard to the Internet. Policy makers in the 1950s had the vision and commitment to build the system that has helped assure our economic and social strength for decades. We must encourage today’s policy makers to follow their example.
William R. Stensrud is Managing Director and General Partner of Enterprise Partners Venture Capital in La Jolla, Calif. He is a member of the NVCA Board of Directors.