wireless carriers, as well as equipment vendors offering fiber-optic, cable, and wireless connections. Telecommunications comprises all the hardware and software for the telecommunications infrastructure and the applications that run over that infrastructure. It involves communication of information in a wide array of media including voice, images, animation, video, documents, and data.

Finding 2. Without a renewed and sustained investment in telecommunications research, the United States risks losing global leadership in telecommunications and related industries, with significant consequences for the U.S. economy and society.

Should the United States be concerned if leadership in telecommunications moves offshore, as has occurred for many other entire industries? The recent fast pace of innovation, the array of new ideas to be pursued, and the substantial investment in telecommunications by other nations are all indications that telecommunications remains a high-value sector in which rapid innovation and fundamental change will continue well into the future. Far from a mature industry, telecommunications is thus one in which the United States should strive for continuing leadership. The importance of maintaining U.S. leadership is underscored by telecommunications’ critical contribution to U.S. leadership in information technology in general, its important contribution to improving productivity in nearly all industries, and its role in national security and homeland defense.

Finding 2.1. The United States faces strong and growing competitive pressures from nations that are making significant investments in telecommunications R&D.

Nations such as China, Japan, Korea, and member states of the European Union have identified telecommunications as a strategic area for economic development and have launched a variety of initiatives to enhance academic, industry, and joint industry-academic research in accord with vigorously promulgated national visions. Equipment vendors in a number of countries (such as China) now compete strongly with U.S. firms and have been very successful in emerging markets. Some nations’ active support for their domestic industries has extended beyond investment in research to include measures for protection of domestic telecommunications industries, thus placing further stress on the U.S. telecommunications industry.

Finding 2.2. The health of the U.S. telecommunications sector depends on maintaining leadership in innovation.

Telecommunications products and services generally become commoditized over time as multiple firms acquire the know-how to supply similar, competing products, and such competition has benefits in terms of lower prices for goods and services. To maintain leadership—or even a strong position—in telecommunications in the face of pressures from lower costs overseas for labor and other essentials thus requires that U.S. firms constantly focus on achieving high-value innovation as a foundation for developing non-commodity products and services. Research leadership in telecommunications by U.S. academic research institutions and government and industry labs has historically given the nation an advantage in terms of access to new technologies and the highest-caliber engineering talent.

Notable benefits have accrued to the United States as a result of its leadership in defining the Internet’s design, for example. However—by virtue of its very success—the existing Internet architecture has become difficult to change. Despite many potential avenues for significant improvements in areas ranging from security to real-time audio and video transmis-



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