Computers, Communications, and Public Policy: Report of a Workshop at Woods Hole, Massachusetts, August 14-18, 1978 (1981)

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1 INTRODUCTION During the last two decades, Americans have made a strong, if often unwitting, commitment to computer-based informa- tion technology. Combining computing and telecommunica- tions so as to allow information to be captured, retrieved, transmitted, stored, or otherwise manipulated electronic- ally has become commonplace in business, science, and gov- ernment. Countless experiments and demonstrations aimed at making new and increasingly complex applications of the technology are now under way in fields as diverse as medi- cine, mining, manufacturing, banking, and transportation. Predicting how particular applications of the technology will develop, or even which ones seem likely to become widely and firmly established, is still speculative. Tech- nological feasibility does not by itself assure extensive use. Nonetheless, for many applications the prospects for broad adoption are being much enhanced by the growing de- mand for cost-saving innovations in nearly all sectors of the society. Unlike the cost of most other types of capital goods, to say nothing of the cost of energy, raw materials, and workers, the cost of computer-based information technology has been steadily declining for more than three decades. This has been due mainly to the sharply declining cost of the computer's electronic components. In part, however, it is also a result of technological advances that enlarge the carrying capacity of the several telecommunications modalities (i.e., telephony, telegraphy, microwave, cable television, and satellites). These two developments—the ever widening availability of low-cost computing capacity and the expanding breadth and density of the communications channels that permit large-scale, efficient, and flexible use of that capacity—are creating opportunities to use computer-based information technology in ways that can be

expected to change significantly the country's economic and social life. This report is about some of the changes computer-based information technology has already prompted and, more importantly, about contributions it might be able to make if its future application took place in the context of well- chosen public policies.2 The central thesis of the report is that while applications of the technology are becoming a source of rapid and far-reaching change in American economic and social life, they are also raising a variety of new and difficult issues, both domestically and internationally. Thus, systematic research must be initiated to help public policy makers identify and resolve those issues not only in a timely manner but also in ways that allow both the tech- nology's promise to be fulfilled and its untoward side ef- fects to be neutralized. The conference from which the report emanates had two objectives: (1) to identify areas in which competent, multi-disciplinary research and analysis could help to illuminate opportunities to use computer-based information technology more extensively than has been achieved to date; and (2) to identify areas in which such research and analy- sis could expose ways of maximizing the benefits the tech- nology offers while, at the same time, avoiding, or at least minimizing, the undesirable consequences that thought- less exploitation of it might entail. Many arguments can be marshalled to support making size- able investments in research and analysis aimed at achiev- ing those two objectives. Several, however, stand out. One is the pace at which the technology itself is advancing. Another is the technology's potentially far-reaching eco- nomic and social implications. And the third is the harm- ful effects that poorly conceived decisions about the technology could have on the nation's economy, even in the short term. As to the first, there seems to be little doubt that the pace of technological advance is now so rapid that many of the conventional statutory and regulatory approaches to deciding how computer-based information technology can or should be used are increasingly unreliable. As described more fully in Chapters II and III, what were once rightly considered two technologies have now become intimately intertwined. Yet, most of the formal processes by which policy decisions about the technology are being made do not recognize the change or, if they do, are unable to take account of it. The Federal Communications Commission, for example, has been trying for more than a decade to draw

manageable distinctions between telecommunications and data processing.3 Yet, until quite recently it has been unable to propose any practical means of doing so short of case- by-case Commission examination. Today, much of the research on which government policy makers rely is performed by private parties that have size- able stakes in the choices to be made on the basis of it. When the work is of high quality, its origins can be largely disregarded. Often, however, deciding what is and is not of high quality is itself a problem. Those who contribute such empirical and analytical support usually have a strong interest in holding the recipient policy-making body to its own initial definition of what constitutes a pertinent consideration. Rightly or wrongly, many of the interested parties seem to prefer decision making based on familiar concepts and criteria to decision making that attempts to accommodate or develop new ones. Thus, they often try to avoid introducing any novel perspective or line of analysis whose exploration might shift the terms of a legislative or regulatory debate, or, worse still from their point of view, imbue its outcome with additional uncertainty. This situation can and should evoke concern. Looking to the future, however, one foresees it becoming a major impediment to sound public decision making. Indeed, if policy makers are to be freed from the confines of today's narrow approaches to the challenges computer-based infor- mation technology is raising, one doubts that they can avoid supplementing the adversary process with other sources of knowledge and expertise. Much the same can also be said when one turns to the set of questions and issues that are commonly referred to as the technology's "social implications"—!.e., the bene- fits and costs to individuals and institutions that stem from the objectives and values that are served by specific applications or application strategies. One can think of many socially useful purposes to which the technology might be harnessed—purposes such as train- ing unskilled adults for productive employment; assuring that public assistance beneficiaries are fairly treated; making affordable door-to-door transportation available to people who need it; and making it possible for handicapped persons and women with young children to work at home. Nonetheless, many responsible people worry that even some of these seemingly benign applications may have consequences which, over time, could undermine the American people's commitment to certain basic social and political values. Many, for example, believe that extensive use of the

technology in managing large-scale public and private enterprises can affect the way power in the society is dis- tributed, altering not only the relationships between in- dividuals and public and private institutions, but also the relationships among those institutions themselves. Concern is being expressed about the technology's impact on the relative autonomy of each of the three branches of government, on the balance of power between the federal government and the states, and on the future distribution of wealth among private organizations and social groups. • Will certain applications of the technology make it more or less easy for legislatures to oversee the adminis- tration of executive branch programs? • Will the courts be able to handle the case loads generated by more efficient and effective law-enforcement operations? • Will the technology make it more or less difficult for small businesses to compete with large ones? • Will certain taken-for-granted conveniences, such as bank accounts and retail credit privileges, become more or less costly for some segments of the population? • Will some individuals be permanently relegated to second-class citizenship by virtue of the information the technology could allow organizations to bring to bear on decisions affecting their rights, benefits, or opportunities? These types of questions are being asked more and more frequently today, and yet remarkably little is being done to answer them. A few years ago, more than a dozen inde- pendent study commissions were working on some of them, but now only two or three sources of leadership or funding remain, and of those none is in a position to carry the needed work forward at a level of effort commensurate with its importance. Finally, it is essential to recognize the extent to which partially informed or narrowly framed decisions about the technology could harm the nation's economy even in the short term. As shown in Table I, the U.S. "information industry," in 1978, contributed more than $80 billion to the Gross National Product. That figure, however, is based on the narrowest possible definition of the industry (i.e., one limited to commercial producers of computer and telecommuni- cations equipment and services.)1* If, as some economists now urge, one broadens the industry definition to include government users and certain large businesses that could not operate without computer-based information technology

TABLE I. 1978 Estimates for Selected Information Related Industries (in billions of dollars) __ INDUSTRY (SIC+ Code(s)) PRODUCTION EXPORTS IMPORTS Telephone and Telegraph Services (481l, 4821), 50.la * * revenues Telephone and Telegraph Equipment (3661), 7.33 0.3 0.2° shipments Computers and Related Equipment (3573), 13.23 3.6 0.3C shipments Computer Services and , Software 6.9 1.3S * revenues "•"Standard Industrial Classification. *negligible U.S. Department of Commerce 1978 U.S. Industrial Outlook, (Washington, D.C.: U.S. Government Printing Office), January 1978. Projected from 1977 amounts of 0.3 and 3.3 respectively, in U.S. Department of Commerce (Bureau of the Census), Exports, Commodity by Country, Publication FT 410, Schedule B, Current Industrial Report Series (Washington, D.C.: U.S. Department of Commerce), December 1977. f* Projected from 1977 amounts of 0.1 and 0.3 respectively, in U.S. Department of Commerce (Bureau of the Census), Imports, Commodity by Country, Publication FT 246, TSUSA, Current Industrial Report Series (Washington, D.C.: U.S. Department of Commerce), December 1977. Projected from 1977 amount of 5.9 in International Data Corporation, "Review and Forecast," EDP Industry Report, vol. 13, nos. 21 & 22 (Waltham, MA: International Data Corporation), May 19, 1978, p. 8. Derived from 1976 ratio of exports to U.S. production as given in Philip S. Nyborg, Pender M. McCarter, and William Erickson, Information Processing in the United States, a Quantitative Summary (Montvale, N.J.: AFIPS Press), October 1977, p. 11.

(businesses such as banking and insurance, for example), the industry's annual GNP contribution grows to 25 percent of the nation's total output5 (or almost $500 billion in 1978). Add to that another 21 percent that might be at- tributed to the products of manufacturing operations and other enterprises in which the technology plays merely an important role and one begins to see how high even the short-term economic stakes can be. Furthermore, one must remember that the United States has historically been the leading producer of information technologies and services for the rest of the world. Re- ferring again to Table I, the nation's computer equipment manufacturers alone contributed more than $3 billion to the 1978 balance of payments. The figures for the telecommuni- cations industry are sharply lower, but may soon grow, since several industry giants, including AT&T, are cur- rently bidding for a share of the rapidly expanding markets for telephone systems in developing countries. Such a sizeable balance-of-payments contribution is one of the reasons why many industry spokesmen have begun to voice concern about the way public policy decisions, or nondecisions, may constrain innovative uses of computer- based information technology, both in this country and abroad. As they point out, the U.S. lead in developing and applying the technology has not been a gift of nature. The initial seeds were planted by government research and de- velopment investments during and immediately after the Second World War, but the government's role has since re- ceded to a shadow of what it once was. Indeed, the indus- try for many years has financed its own research and development programs and has done so on a substantial scale. Computer equipment manufacturers, for example, in- vest from their own, private, resources about $2 billion a year, or 11 percent of all industrial research and devel- opment funded by U.S. firms.9 Presumably that level of investment could be shouldered indefinitely if the indus- try's markets remained strong. Today, however, many con- tend that policy making bodies both in the U.S. and other countries are about to curtail the freedom to innovate that nourishes the U.S. industry's market lead and thus, indi- rectly, its ability to finance its research and development programs. Whether that contention is well founded may itself be a candidate for extensive study. Nonetheless, it points to a problem of potentially great magnitude, since it involves other countries' efforts to develop and control their own indigenous information industries, as well as regulatory

and antitrust obstacles to innovative exploitation of the technology here at home. Most observers agree, moreover, that the U.S. government today is neither institutionally nor programmatically equipped to deal with such a problem in ways that take account of the interplay between its domestic and international dimensions. A PROPOSED AGENDA FOR POLICY RESEARCH To recapitulate, then, there are at least three compelling arguments for making sizeable investments in policy research and analysis at this time. One is the pace of technologi- cal change itself—a pace so rapid that the issues it poses challenge virtually all of the premises, perspectives, and expectations that heretofore have guided decision making about how the technology can or should be used. The second is the technology's potentially profound economic and so- cial consequences, and the third is the effects that poorly conceived decisions about the technology could have on the nation's economic health, even in the short term. These three arguments provide the rationale for much of what follows in this report. As indicated earlier, the re- port is an agenda for research rather than an argument on one side or the other of any issue currently in controversy. Thus, the topics it addresses and the order in which it addresses them reflect a judgment as to what may be use- fully researchable rather than a view about the priority that should be given to each of the broad areas in which research recommendations are made. The report's discussion is divided into five parts. Chapter II, provides a general frame of reference by delin- eating some key concepts and outlining recent trends in the development of computing and telecommunications technology. For the lay reader, in particular, this chapter should be helpful in understanding Chapter III, which examines some of the regulatory issues that technological change has already posed and suggests why problems of even greater complexity should be anticipated in the future. In Chapter IV, the discussion moves from domestic issues to international ones. Among other aspects, Chapter IV explores possible relationships between "media" regulation in the developing countries and computer and communications regulation in the industrialized nations. Finally, Chapter V examines the U.S. government's own use of computer-based information technology for domestic program purposes, with particular stress on identifying

8 ways the technology can be used to improve the efficiency and effectiveness of the executive and legislative branches. The report is at best a start toward strengthening our society's ability to handle the challenges that computer- based information technology poses. One hopes, however, that even this modest effort will demonstrate why strength- ening that ability is essential. Depending on the policies that govern its application, computer-based information technology will bring about changes for the better or worse; there is nothing inevitable or foreordained about its effects. On the other hand, only deliberate policy, with specific objectives and well conceived instruments, can assure that the technology's potential for economic and social betterment will be fully realized.

NOTES AND REFERENCES 1. The term "computer-based information technology" con- notes, for the purposes of this report, any combina- tion of the tools of computing and telecommunications that, when deployed and operated in association with one another, allows information to be captured, stored, compared, retrieved, or otherwise manipulated elec- tronically. 2. The term "public policy" as used here refers either to the deliberate action or the conscious inaction of public authorities. Conscious inaction is included because, if public authorities are aware of issues and consequences and either choose not to take or are un- able to take new policy actions, they are, in effect, allowing the existing structure of public rules or private policies, or both, to continue operating. Increasingly, and especially where major technolo- gies such as computing and communications are involved, public policy on significant issues has these char- acteristics: (1) It requires and is executed through a com- bination of actions taken by public authorities at different levels of government (federal, state, and local), and, at each level, by a mixture of execu- tive, legislative, regulatory, and judicial agencies. Overlap and competition among public authorities is therefore commonplace. (2) It takes a variety of directive forms, from legal prohibition or regulatory plan to relaxation of controls (e.g., suspension of anti-trust rules or enforcement), as well as stimulative actions (subsidies, research contracts, tax-benefits, and so on). (3) Public policy can also be made by investiga- tive oversight, publicity, and exhortation by government leaders, in which a combination of offi- cial requests and warnings of potential regulatory measures amounts to a statement of public policy. (4) Public policy also involves a complex inter- play of public authority and private (industry and consumer) decisions. Predicting the costs and di- rection of private responses to public action is crucial. (5) Finally, while the public policy-making pro- cess has its rational aspects and empirical

10 foundations, it inevitably also involves matters of personality, political party, and organizational self-interest. This makes the identification and clarification of values, interests, and options for public policy a "political" matter in the larger sense of that term. 3. For further discussion of the FCC's "Computer Inquiry I" and "Computer Inquiry II," see below, pp. 27-35. 4. The conventional definition of the "information indus- try" includes all manufacturers and suppliers of com- puting equipment; all commercial data processing service bureaus; AT&T; the nation's l,590 independent telephone companies; Western Union; the "international record carriers"—Western Union International, RCA Global Communications, ITT World Communications, TRT Telecommunications, and French Telegraph; the Communi- cations Satellite Corporation; the Microwave Carriers— primarily MCI Communications and Southern Pacific Communications; Telenet, Tymnet, and Graphnet—the so-called "value-added" carriers, which lease their communications lines from others; the several domestic satellite carriers—Western Union, RCA, American Satel- lite, Southern Satellite, and the fledgling Satellite Business Systems Corporation; mobile radio carriers and suppliers; retailers of acoustical couplers, computer- ized switchboards, and the like; cable television companies; and all local radio and television stations plus the national networks. To this list, moreover, the Xerox Corporation and other manufacturers of fac- simile equipment should probably be added. 5. Marc Uri Porat, The Information Economy: Definition and Measurement, OT Special Publication 77-12(1), Of- fice of Telecommunications, U.S. Department of Commerce. Washington, D.C.: U.S. Government Printing Office, May 1977, pp. 6-8. In his expanded "industry" defini- tion, Porat includes advertising agencies, printers and publishers, broadcasters, film producers, manufac- turers of office supplies, banks, insurance companies, the U.S. Postal Service, government agencies generally, and research institutions. 6. Ibid.

11 7. These figures are only the roughest measures of indus- try performance. The economists responsible for them have had to glean them from GNP statistics that do not recognize the "information industry" as a discrete category for national accounting. The precision of the numbers, however, and the adequacy of the methods used to develop them, are less important than the relative size of the industry's contribution, no mat- ter how it is calculated. 8. Paul Sturm, "Cairo Calling," Forbes, December 1l, 1978, pp. 64-69; and Peter J. Schuyten, "Blanketing the Globe with Phones," The New York Times International Economic Survey, February 3, 1980, pp. 18, 21. 9. Willis H. Shapley and Don I. Phillips, Research and Development, AAAS Report IV. Washington, D.C., 1979 pp. 122-123, Table C-l. The 11 percent figure cited is for 1977. 10. Examples of public-policy action or inaction inhibit- ing innovation would include the seven-year delay that occurred in the commercial application of domes- tic satellites—while industry structure was being proposed, analyzed, debated, and challenged; a similar delay in the application of mobile telephone technol- ogy at 800 MHZ—while an analysis of spectrum utiliza- tion was being made and disputes between dispatch-type and mobile telephone-type services were being contested; the delays that have occurred in the introduction of cable television due to effective political opposition by broadcasting interests; and the attenuated contro- versy over government regulation of data communica- tions, the so-called "hybrid services," discussed below, pp. 30-35.