By Larry Irving - 04/09/14 06:03 PM EDT
There is a growing fascination with publicly funded broadband networks, and I don’t understand why. If history has taught us anything, it is that private-sector investment is to be preferred strongly in building telecommunications networks.
I’ve been through this debate before. Back in the early 1990s while I was serving in the Clinton administration, there was considerable consternation that President Clinton and Vice President Gore used the phrase “building a bridge to the 21st century” when describing their technology policy. Some industry leaders were concerned that the newly inaugurated president intended to use public dollars to build the “information superhighway,” as we then called the Internet.
Since the 1990s, representatives of the U.S. government have traveled across the globe preaching the gospel of private-sector investment in and ownership of essential telecommunications and Internet networks. We preached it because we believed it. We helped to convince most of the world that privatization and competition is preferable to government ownership and control of communications networks. And the reason is simple: private sector ownership generally is more effective and efficient, promotes innovation, and helps assure freedom of speech and open networks.
Our broadband networks are not perfect, but with the exception of bringing or improving service to remote geographies, I don’t see many problems that government-owned or -operated broadband networks will solve.
Conversely, the specter of governments operating broadband networks in competition with the private sector, or of state or local governments serving as both regulators and owners of competing broadband networks, could stifle investment or reduce private-sector access to capital.
Since the passage of the Telecommunications Act of 1996, the private sector has invested more than $1.2 trillion dollars in our nation’s wired and wireless broadband networks. As President Obama’s chief economic adviser, Jason Furman, noted, the top two telecommunications companies invest annually more than the top five oil and gas companies and nearly four times as much as the Big Three automakers combined.
We are going to need at least another trillion dollars of investment in our wired and wireless networks over the next 10 to 15 years as we attempt to increase capacity, improve speeds and ensure networks are more ubiquitously available. Are cash-strapped states, cities and municipalities the optimal source for that investment in our networks? If there are dollars in cities and states available for infrastructure investment, should those dollars be spent on broadband networks, where considerable private capital already is at work and more is available, or should it be used for other needed infrastructure investment?
In its most recent report card looking at the overall infrastructure needs of America, the American Society of Civil Engineers gave the nation a grade of D+ and, without considering or including broadband, estimated that investments of $3.2 trillion were needed by 2020 to improve our domestic infrastructure. Rationally, city and municipal governments should invest in roads, railways, ports, bridges, parks and the like where governments are the primary or only investors, rather than divert limited public resources to broadband.
Investments in broadband are not one-time-only investments. Once built, broadband networks need to be maintained and upgraded continuously. Network operators don’t just build networks, they invest in innovation to drive evolution and development of future networks. Does anyone really believe that we will get more innovation in network design, configuration and engineering from public-sector deployment than from private-sector investment?
The critical questions we should be asking with regard to broadband are, “What are we are trying to achieve?” and “What’s the best way to achieve it?” The public interest group Public Knowledge provided a set of principles that serve as a useful starting point for discussion. Those principles include service to all Americans; competition and interconnection; consumer protection; network reliability; and public safety.
Government-owned or -operated networks are unnecessary to promote those principles, except for the provision of broadband service in some geographic areas where market forces won’t bring investment. Targeted investment likely is the fastest and most effective way to bring broadband to isolated, remote or rural regions.
Twenty years ago, the Clinton administration believed that the principal role of the government was promoting private-sector investment through appropriate tax and regulatory policies. Today, after trillions of dollars of private-sector investment, we have seen an explosion of broadband-enabled activities, products and services, and millions of Americans are connected to the Internet. We got the policy right in the ’90s, and private-sector investment continues to be the right path going forward.
Irving is the CEO of the Irving Group and served for almost seven years as assistant secretary of Commerce for Communications and Information and administrator of the National Telecommunications and Information Administration (NTIA).