The Changing Nature of Telecommunications/Information Infrastructure

Steering Committee on the Changing Nature of Telecommunications/Information Infrastructure

Computer Science and Telecommunications Board

Commission on Physical Sciences, Mathematics, and Applications

National Research Council

NATIONAL ACADEMY PRESS
Washington, D.C.
1995



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The Changing Nature of Telecommunications/Information Infrastructure The Changing Nature of Telecommunications/Information Infrastructure Steering Committee on the Changing Nature of Telecommunications/Information Infrastructure Computer Science and Telecommunications Board Commission on Physical Sciences, Mathematics, and Applications National Research Council NATIONAL ACADEMY PRESS Washington, D.C. 1995

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The Changing Nature of Telecommunications/Information Infrastructure NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This report has been reviewed by a group other than the authors according to procedures approved by a Report Review Committee consisting of members of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Robert M. White is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce Alberts and Dr. Robert M. White are chairman and vice chairman, respectively, of the National Research Council. Support for this project was provided by core funds of the Computer Science and Telecommunications Board. Core support for the CSTB is provided by its public and private sponsors: the Air Force Office of Scientific Research (under Contract N00014-87-J-1110); Advanced Research Projects Agency (under Contract N00014-87-J-1110), Apple Computer Corporation, Department of Energy (under Grant DE-FG05-87ER25029), Digital Equipment Corporation, Intel Corporation, International Business Machines Corporation, National Aeronautics and Space Administration (under Grant CDA-9119792), National Science Foundation (under Grant CDA-9119792), and Office of Naval Research (under Contract N00014-87-J-1110). Additional project support was provided by Ameritech Corporation, Bell Atlantic Corporation, Bell Communications Research, BellSouth Corporation, Hewlett-Packard Company, IBM Corporation, and NYNEX Corporation. Any opinions, findings, conclusions, or recommendations expressed in this volume are those of the authors and do not necessarily reflect the views of the sponsors. Library of Congress Catalog Card Number 94-66572 International Standard Book Number 0-309-05091-X Additional copies of this report are available from: National Academy Press 2101 Constitution Avenue, NW Box 285 Washington, DC 20055 800-624-6242 202-334-3313 (in the Washington Metropolitan Area) B-457 Copyright 1995 by the National Academy of Sciences. All rights reserved. Printed in the United States of America

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The Changing Nature of Telecommunications/Information Infrastructure STEERING COMMITTEE ON THE CHANGING NATURE OF TELECOMMUNICATIONS/INFORMATION INFRASTRUCTURE GEORGE L. TURIN, Teknekron Corporation, Chair ALFRED V. AHO, Columbia University (formerly Bell Communications Research) ALAN E. BARATZ, Delphi Internet Services Corporation DEBORAH ESTRIN, University of Southern California, Information Sciences Institute IRWIN M. JACOBS, Qualcomm Inc. ROBERT E. KAHN, Corporation for National Research Initiatives DAVID G. MESSERSCHMITT, University of California at Berkeley ROGER G. NOLL, Stanford University Staff MARJORY S. BLUMENTHAL, Director LESLIE M. WADE, Project Assistant

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The Changing Nature of Telecommunications/Information Infrastructure COMPUTER SCIENCE AND TELECOMMUNICATIONS BOARD WILLIAM WULF, University of Virginia, Chair FRANCES ALLEN, IBM T.J. Watson Research Center JEFF DOZIER, University of California at Santa Barbara DAVID J. FARBER, University of Pennsylvania HENRY FUCHS, University of North Carolina CHARLES M. GESCHKE, Adobe Systems Inc. JAMES N. GRAY, San Francisco, California BARBARA J. GROSZ, Harvard University DEBORAH A. JOSEPH, University of Wisconsin RICHARD M. KARP, University of California at Berkeley BUTLER W. LAMPSON, Digital Equipment Corporation BARBARA H. LISKOV, Massachusetts Institute of Technology JOHN MAJOR, Motorola Inc. ROBERT L. MARTIN, Bell Communications Research DAVID G. MESSERSCHMITT, University of California at Berkeley WILLIAM H. PRESS, Harvard University CHARLES L. SEITZ, Myricom Inc. EDWARD SHORTLIFFE, Stanford University School of Medicine CASMIR S. SKRZYPCZAK, NYNEX Corporation LESLIE L. VADASZ, Intel Corporation MARJORY S. BLUMENTHAL, Director LOUISE A. ARNHEIM, Senior Staff Officer HERBERT S. LIN, Senior Staff Officer JAMES E. MALLORY, Staff Officer JOHN M. GODFREY, Research Associate RENEE A. HAWKINS, Staff Associate GLORIA P. BEMAH, Administrative Assistant LESLIE M. WADE, Project Assistant

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The Changing Nature of Telecommunications/Information Infrastructure COMMISSION ON PHYSICAL SCIENCES, MATHEMATICS, AND APPLICATIONS RICHARD N. ZARE, Stanford University, Chair RICHARD S. NICHOLSON, American Association for the Advancement of Science, Vice Chair STEPHEN L. ADLER, Institute for Advanced Study SYLVIA T. CEYER, Massachusetts Institute of Technology SUSAN L. GRAHAM, University of California at Berkeley ROBERT J. HERMANN, United Technologies Corporation RHONDA J. HUGHES, Bryn Mawr College SHIRLEY A. JACKSON, Rutgers University KENNETH I. KELLERMANN, National Radio Astronomy Observatory HANS MARK, University of Texas at Austin THOMAS A. PRINCE, California Institute of Technology JEROME SACKS, National Institute of Statistical Sciences L.E. SCRIVEN, University of Minnesota A. RICHARD SEEBASS III, University of Colorado LEON T. SILVER, California Institute of Technology CHARLES P. SLICHTER, University of Illinois at Urbana-Champaign ALVIN W. TRIVELPIECE, Oak Ridge National Laboratory SHMUEL WINOGRAD, IBM T.J. Watson Research Center CHARLES A. ZRAKET, MITRE Corporation (retired) NORMAN METZGER, Executive Director

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The Changing Nature of Telecommunications/Information Infrastructure Preface In 1992 the Computer Science and Telecommunications Board (CSTB) of the National Research Council (NRC) decided to convene a workshop to assess the extraordinary changes in the nation's telecommunications/information infrastructure since the divestiture of AT&T and to address related questions of technology and policy. These questions have provoked a stirring national debate about the best way to move forward in establishing a national information infrastructure. Government officials, representatives of the telecommunications and computer industries, users, and public interest groups have taken often-contradictory stands. CSTB hoped to bring to the debate the neutral and dispassionate platform offered by the NRC. In planning the workshop, CSTB's steering committee faced two fundamental questions: What, in fact, is the telecommunications/information infrastructure? Definitions range from raw physical connectivity, on the one hand, to connectivity plus a vast array of network and end-user services and software, on the other. It was decided not to prejudice the workshop with a limiting definition, but rather to leave the definition open to debate. On what issues should the workshop focus? Possible foci were the exploration of potential applications as the driving force behind infrastructure development, and examination of the processes by which various players in its development can efficiently encourage and respond to new applications, no matter what they are. It was decided that the workshop's focus would be on processes, since no one can foresee which applications will prove to be important. To make sure that the meeting was a workshop, not a series of set speeches, the committee agreed to limit attendance to about 75 people—invited from various government entities, large and small companies, and universities and "think tanks"—active in analysis or development of the telecommunications/information infrastructure. A substantial amount of time was scheduled for discussion from the floor. The workshop took place in Washington, D.C., on October 12–13, 1993, and was composed of three panels that ran consecutively. Panel 1 set the stage for the workshop by characterizing infrastructure trends and applications, while Panels 2 and 3 addressed issues of policy. Panel 1 addressed such questions as: What is the infrastructure now, technologically and institutionally? How did it get to that state? What are the states to which it might evolve in the next decade? In connection with the last question, the needs of several large user communities—finance, health care, education, and libraries—were specifically addressed, not because these applications will necessarily drive infrastructure development but because they are a sample of

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The Changing Nature of Telecommunications/Information Infrastructure the national "grand challenges" currently much in vogue. They illuminate issues of process and access underlying infrastructure development. Panel 2 examined the role, if any, that the nation's regulatory apparatus can play in helping direct the development of the telecommunications/information infrastructure. Traditionally, the role of regulation has been to allocate resources equitably and to level the competitive playing field or tilt it toward a socially desired objective. In the past decade, the encouragement of market efficiencies has been a goal of regulation. Panel 2 grappled with the roles that regulation might play in the future. The underlying question it addressed was how regulators can simultaneously encourage infrastructure development; protect the interests of all stakeholders (including the public); and do so at social, technical, and economic costs that are substantially outweighed by the benefits. Panel 3 considered government investment policies. The federal government has long been active in promoting growth of the telecommunications/information infrastructure through various direct and indirect means of investment: support of research and development, implementation of pilot networks, direct user subsidies, and purchasing policy. Panel 3 also debated such questions as: What is the range, in the 1990s, of public investment options? How does public investment affect market forces and are these effects desirable? The workshop was as lively as the steering committee and CSTB had hoped. There was broad audience participation, some of which is recorded in this volume. CSTB believes that its primary goal of shedding light on fundamental issues and tensions in the national debate on the telecommunications/information infrastructure was achieved. Thanks are due many people for their hard work and support in making the workshop a success. The steering committee laid the groundwork for the workshop, designing its content and format. A subset of committee members who became the panel chairs—Alfred Aho, Roger Noll, and David Messerschmitt (who succeeded Deborah Estrin as chair of Panel 3 when she had to give up that role)—worked assiduously in helping choose keynote speakers and panelists, in convincing them to participate, and in bringing together their respective parts of this volume. And without the determined work of the CSTB staff—Marjory Blumenthal, CSTB's director; Leslie Wade; and Renee Hawkins—nothing would have been accomplished. The anonymous reviewers prompted the steering committee and several panelists to strengthen the written record of the workshop. Finally, a special word of thanks goes to the following organizations for their financial support specifically for this project: Ameritech Corporation, Bell Atlantic Corporation, Bell Communications Research (Bellcore), BellSouth Telecommunications Inc., Hewlett-Packard Company, IBM Corporation, and NYNEX Corporation. George L. Turin, Chair Steering Committee on the Changing Nature of Telecommunications/Information Infrastructure

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The Changing Nature of Telecommunications/Information Infrastructure Contents     Introduction and Overview   1 PART 1— SETTING THE STAGE         Introduction to Part 1 Alfred V. Aho   23     The Evolution of the Telecommunications Infrastructure Robert L. Lucky   25     The Search for the Holy Paradigm: Regulating the Information Infrastructure in the 21st Century Charles M. Firestone   34     Current and Future Uses of Information Networks Colin Crook   63     The Changing Nature of Telecommunications and the Information Infrastructure for Health Care Edward H. Shortliffe   67     Can K-12 Education Drive on the Information Superhighway? Robert Pearlman   74     Future Roles of Libraries in Citizen Access to Information Resources through the National Information Infrastructure Clifford A. Lynch   86     Discussion   98 PART 2— REGULATION AND THE EMERGING TELECOMMUNICATIONS INFRASTRUCTURE         Introduction to Part 2 Roger G. Noll   107     Government Regulation and Infrastructure Development Robert W. Crandall   118     State Regulatory Policies and the Telecommunications/Information Infrastructure Robert G. Harris   125

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The Changing Nature of Telecommunications/Information Infrastructure     The Prospects for Meaningful Competition in Local Telecommunications Dale N. Hatfield   142     Regulation and Optimal Technological Change: Not Whether, But How Nina W. Cornell   148     The Future of Telecommunications Regulation: The Hard Work Is Just Beginning Thomas J. Long   153     Costs and Cross-Subsidies in Telecommunications Bridger M. Mitchell   159     Economic Ramifications of the Need for Universal Telecommunications Service Eli M. Noam   161     Discussion   165 PART 3— PUBLIC INVESTMENT IN TELECOMMUNICATIONS INFRASTRUCTURE         Introduction to Part 3 David G. Messerschmitt   175     Government Investment in Telecommunications Infrastructure Walter S. Baer   179     Federal Investment Through Subsidies: Pros and Cons Bridger M. Mitchell   195     Telecommunications Infrastructure from the Carrier's Point of View Charles L. Jackson   199     An Information Provider's Perspective on Government Investment in the Telecommunications Infrastructure William F. Gillis   204     Economic Dividends of Government Investment in Research and Technology Development Robert E. Kahn   207     Perspective of the Noncarrier Transport Provider Laura L. Breeden   215     Discussion   218 Appendix: Contributors and Participants   227