Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 479
OCR for page 480
OCR for page 481
OCR for page 482
OCR for page 483
OCR for page 484
OCR for page 485
OCR for page 486
OCR for page 487
OCR for page 488
OCR for page 489
OCR for page 490
OCR for page 491
Representative terms from entire chapter:
computer industry
Page 479
56
Interoperability, Standards, and Security: Will the NII be
Based on Market Principles?
Quincy Rodgers1
General Instrument Corporation2
Background
The United States stands on the verge of a quantum leap in the
capabilities of its national information infrastructure (NII) 3. Widespread use of fiber optics is
one element of that leap, as is the incredible advance in
microprocessing, which has supported breakthroughs in digital
compression. These, when applied to video, have made it possible to
dramatically increase available communications bandwidth.
Just 5 short years ago, all-digital video was seen as impossible
before 2005, if then 4. The amount
of data or information required for full-motion video is orders of
magnitude greater than that required for voice or nonvideo data
transmissions. The data for video demands bandwidth beyond that
required for voice and nonvideo data and requires effective
compression techniques, to use the bandwidth efficiently or to meet
some existing bandwidth limitation. In June 1990, General
Instrument Corporation announced that it had solved this problem
and would present an all-digital, high-definition television (HDTV)
broadcast transmission system for consideration by the Federal
Communications Commission and its Advisory Committee for a U.S.
advanced television standard. One writer called this the technology
equivalent of the "fall of the Berlin Wall" 5.
The conversion of video into a usable digital data stream is the
third leg of the multimedia stool. The other two legs are data and
voice telephony, the first being inherently digital, the latter
having undergone a transition from analog to digital over many
years. Carriage of video, voice, and data constitutes the
foundation of the advanced broadband networks now being developed
for both telephone and cable television networks.
Behind this simple concept, however, is a roiling pot of players
and special interests, each trying to invade the other's turf or at
least protect its own. Convergence is real because digitization
breaks down the old barriers between service providers 6. It is increasingly hard to tell
computer companies from video-equipment providers. It becomes
increasingly more difficult to tell cable television operators from
local exchange telephone companies. The growing community of
Internet users adds to this mix, some of whom have an almost
religious fervor about its uses and potential.
All of these players approach the information superhighway
differently. Their perspectives and biases, at least initially,
have been parochial and have caused them to overlook matters and
issues that are important to other groups. The well-worn parable of
the blind men and the elephant is apt here. The NII presents
different characteristics and different issues, depending on how it
is approached. When these converging players sit down with each
other, they often find that they not only think or see things
differently, they even tend to use a different vocabulary. What one
set of players views as communication is mere babble to
another.
Put another way, the convergence of technology is proceeding
well in advance of the "cultural" convergence of the various
segments of the industries. The resulting different perspectives
influence the public policy debates that surround the NII. This
paper addresses some of the issues of those debates, based on the
following assertions:
•
The NII is not synonymous with the Internet;
•
Open systems do not have to be, and perhaps should
not be, nonproprietary—interoperability is not the only or
even the major public good that must be served;
Page 480
•
The private sector, not the government, should set
standards; de jure standards, whether set by government or the
private sector, are not preferable to de facto standards; and
•
Unless security and privacy are protected, the NII
will not reach its full potential as a platform for electronic
commerce.
These assertions may be controversial; many run counter to
conventional wisdom, particularly that of the Washington, D.C.,
community. However, all are market-oriented. And they are
fundamental to U.S. economic goals.
The NII: Not Synonymous with the
Internet
Entertainment is the engine that has already pulled broadband
networks into over 60 percent of American homes. Entertainment will
drive the investment necessary to upgrade those networks as well.
This is not a fact easily accepted by some Internet aficionados and
some in the computer industry. Many in those groups join millions
of other Americans who have a low opinion of much of current
television programming. Many view the Internet as a liberator from
TV's vast wasteland. But there are also other reasons why the role
of entertainment is not more widely acknowledged by the computer
world 7.
Computer businessmen are aware that today's dominant
entertainment terminal, the television set, is an extremely
cost-sensitive (and low-cost), relatively simple piece of
electronics, geared to nonbusiness consumers, with a life of over
10 years. This is a long way from their preferred business model.
The consumer electronics industry is dominated by foreign-owned
companies; the computer industry is U.S. based. The television
industry has relied on interlace scanning and sees it as important
to keeping down the cost of its investment 8; the computer industry wants
progressive scanning formats.
Likewise, those in the computer business look at other players
and find them to be quite different from themselves. The cable
television industry has only recently emerged from its "pioneer"
phase and still revels in its "cowboy" image 9. Cable operators have an obsession
with cost control, based on experience with mass consumer
marketing. Where the computer industry has traditionally sold into
the business community, cable operators have focused on residential
customers. Regional Bell operating companies (RBOCs), in contrast
to both, have previously been large, sleepy, and cumbersome
bureaucracies, typical of utilities, and the antithesis of the
computer industry 10.
The computer and Internet communities are not alone in their
suspicion of the alien cultures that have suddenly entered their
world. About 15 months ago, a high-level business manager 11 for a leading supplier to the cable
television industry told his staff, "Somebody is going to have to
explain this Internet to me!" He was reflecting not only his lack
of knowledge of the phenomenon but also his exasperation at the
whole range of new factors he had to consider as he developed his
current core businesses.
So it is not surprising that computer business managers tend to
gravitate toward an Internet model of the future NII. They will
naturally have less enthusiasm for the role of entertainment than
those who have worked in that field
12. But to recognize entertainment as the primary engine of the
deployment of advanced broadband networks does not denigrate the
role or the importance of the Internet. The NII is and should be
about a lot more than just selling pay-per-view movies or making it
possible for people to watch reruns of Roseanne or
Baywatch. The advanced broadband networks that will share the
task of serving as the backbone of the NII are about making video
an integral part of all communications. The addition of video
capability has major, positive implications for education, health,
and business efficiency.
What entertainment can do is bring this broadband capability to
every home and business. It can and will carry the major load of
the investment needed to do that. When cable television operators
begin to deploy digital decompression terminals, they will be
putting into each user's home a level of computing power that is
the equivalent of yesterday's mainframes. Far from detracting from
or conflicting with the Internet, the broadband pipes of these
networks will make Internet access via high-speed connections
available to an increasingly wider range of Americans 13.
Page 481
Achieving Open Systems
Open systems do not have to be, and perhaps should not be,
nonproprietary; interoperability is not the only or even the major
public good that must be served. For 2 years, the rallying cry has
been, "We must take steps to ensure that the new technologies
result in 'open and interoperable' networks." The General
Accounting Office has proclaimed that "interoperability will be
difficult to achieve" 14. Members of
Congress have echoed this belief
15.
But is the situation really dire? Is there really a problem
here? Is government intervention required? Thankfully, the
conclusion is "no," because the cure could easily be worse than the
disease.
Of course, interoperability is actually quite simple to achieve.
All you have to do is standardize all elements of advanced
broadband networks and the equipment that will use those networks.
This can resolve all issues of compatibility, portability, and
interoperability. Requiring compulsory licensing of any
intellectual property that underlies those standards then provides
unlimited competition in the supply of equipment for the networks.
It is that simple, at least in concept. But even laying aside the
political and legal barriers to such a program, achieving
interoperability through central planning is a daunting, even
overwhelming, technical task.
The view that interoperability is a major problem and that it
might require such stultifying and intrusive steps rests on an
outmoded view of communications capacity. In an environment of
limited bandwidth, legitimate questions have been posed about the
allocation of that scarce resource. When a cable television system
carries 36 channels, issues about who gets "shelf space" in that
system can take on major importance. Broadcasters demand
"must-carry rules," because they are worried about retaining access
to viewers. Programmers express concern that their products will
receive less favorable treatment than those developed by the
operator on whose system they seek to be carried. New services are
concerned that they must go through an established multiple system
operator to obtain the critical mass of viewers necessary for
viability.
In an environment of bandwidth abundance 16, the incentives of network providers
look quite different than they do in an environment of bandwidth
scarcity. This is particularly true where the network provider
faces competition. To pay for the network, providers have an
incentive to include as many products and services as possible.
They also have an incentive to make interconnection as easy as
possible, and to develop consumer-friendly approaches to equipment
design. For some purposes, network operators will continue to
function in a broadcast mode. As channel capacity dramatically
increases and fewer homes are served per node, each home or
business served has the equivalent of one or more dedicated 6-MHz
channels 17; this service, which
resembles carriage more than broadcast, can be expected to develop
as a result of consumer demand.
The incentives created by competition and broadband abundance
will include incentives to achieve interoperability. Moreover,
interfaces on these networks will remain open and do not have to be
nonproprietary for this to occur. Network providers will avail
themselves of the benefits of proprietary technologies but will, in
their own interest, require that they be open to ensure competitive
markets for equipment 18.
Just as the technology, by altering incentives, makes
interoperability more likely or more easily achieved, so also is it
inherently more conducive to interoperable solutions. Problems that
existed in an analog environment are more easily solved in a
digital environment.
During the early days of NII debate, Vice President Al Gore used
a metaphor that was intended to justify a government role in
setting ground rules for the NII. The vice president referred to
the need for setting standards for interfaces on the NII and drew
an analogy to the standardization of the gauges of connecting
railroads 19. Analysis of this
metaphor suggests a major distinction that tells us something
important about the digital environment.
Railroad gauges, in fact, provide the perfect illustration of
the digital environment's inherent ability to provide new answers
to old problems. The chief difficulty created by the use of
different gauges by connecting railroads was that, to move from one
to the other, freight and passengers had to be transferred from one
car to another car suitable for the different gauge. People and
goods moving in interstate commerce could not be efficiently
transported under such circumstances
20.
However, because of the essential nature of digital
communications, data can be off-loaded, reloaded, and moved from
one type of network or environment to another with comparative
ease. Indeed, this flexibility is fundamental to the digital
revolution, the foundation of convergence, and the basis of
multimedia. In this
Page 482
environment, the question of standards can often be replaced by
another set of questions that relate not so much to the difficulty
but rather to the cost of conversion. That places the matter in the
hands of the market, not of regulators.
Moreover, in the digital world, breakthroughs continue. When
addressing the issue of selecting the format for its
high-definition television system, the Grand Alliance 21 discussed whether it should employ
an interlace scanning format or a progressive scanning format. Upon
investigation, it concluded that receivers could easily and
economically convert the signals from one to the other. The result
was that the system will support six formats and provide both
interlace and progressive scanning.
A similar experience is occurring in the case of the modulation
schemes used by different networks. Satellite and cable systems use
different modulation. The Grand Alliance system currently in
testing would use yet a third method for broadcast television. The
development of multiple systems is not surprising, given the fact
that network operators want to maximize their networks for their
specific needs and use. There are actually good and sound reasons
to tolerate the lack of interoperability that this could create.
But there, it appears, potential issues may evaporate because
CableLabs has indicated that it thinks dual or multiple modulation
chips are feasible and economical
22. Thus, because of the inherent characteristics of digital
technology, there is reasonable promise of avoiding inconsistency
among networks.
Where interoperability is being addressed in the marketplace as
a result of competition 23,
incentives, and the technology's ability to support conversion, it
avoids negative costs of standardization. That is indeed a good
thing because standards are a mixed blessing.
Standards can and do inhibit innovation. The problem was
outlined in a recent speech by GI's CEO, Dan Akerson:
The lesson of the personal computer success
story is that the governmentshould not prescribetechnological
standards in dynamic industries. Such standards freeze thecurrent
level of technology inplace and they stifle the development of new
technologies. When the governmentlets the marketplaceoperate,
innovators innovate, competition flourishes, and consumers'
choicesincrease. And, finally,equipment prices plummet. When the
time is right, the technology will matureand the market will
setstandards and insist on interoperability, the need for
competitive pricing,and the availability ofcompatible equipment. 24
Where standards cannot be avoided, they should be narrowly
focused. For that reason, interface standards are preferable to
standardization of functionality, such as compression,
transmission, and transport. In effect, interface standards at
least restrict the "zone" where innovation can be stifled and
provide some opportunity for innovation to develop around them 25.
There is yet another element to standardization that should give
pause to those public officials who would apply it to these
emerging industries. Standardization tends to commodize a product
or technology. In their book Computer Wars, an insightful
study of IBM and business strategies in the computer industry,
Charles H. Ferguson and Charles R. Morris describe the effect of
standardization:
Japanese companies, and Asian companies
generally, have succeeded, by andlarge, by being superb
commodity implementers within well-defined, stable, open,
nonproprietary standards—standards, that is, that are defined
by regulatory agencies, other government bodies, industry
standards-setting organizations, or very slow-moving incumbents,
such as IBM has been in mainframes in recent years. Nonproprietary
standard products, such as memory chips, printers, VCRs, CD
players, or facsimile machines, are brutally competitive
businesses, with high investment requirements and razor-thin
margins.
But industries that are fast-moving, where
standards are constantly evolving, and where the standards
themselves are within the proprietary control of an individual
company, are hostile environments for commodity implementers. And
the computer industry in the1990s, under the technological impetus
and creative impulse of the American start-ups, has been
transmuting into just such an industry, shifting the ground out
from under both the slow-moving Western giants and
thecommodity manufacturing-oriented Japanese giants. 26…
Page 483
The race over the next decade will be between
the Japanese and American styles of industry development. The
Japanese will drive to componentize and commoditize every sector of
industry sotheir great monolithic and lean manufacturing skills can
define the industry's future. American companies must keep
accelerating the pace of technological change to avoid giving the
Japanese a stable target to shoot at, and at the same time develop
their own manufacturing skills to the point where low-end market
share is not conceded too easily.
27
So the problem is not merely the stifling of innovation. Rather,
it is that the very industries of critical importance to the U.S.
economy are most susceptible to the negative effects of
standardization. The digital revolution is uniquely the product of
U.S. research and development. It represents a national asset, no
less because it arrived on the heels of a period of "technology
pessimism" in the late 1980s. American leadership was widely viewed
as losing technology leadership for U.S. industries. Frequently,
the problem was seen not as a failure of American invention but as
a failure to capitalize on that invention. Many saw government-led
industrial policy as the answer to regaining such preeminence.
Commoditizing the new technologies of the digital revolution
will demonstrate that we have learned nothing from that earlier
debate.
Who Should Set the Standards?
To the extent that standards are used, there is an issue about
how they should be established. Here again, among the converging
industries, differences in experience and practice create different
perspectives. The broadcasting industry, for instance, lives in a
world of government standardization, arising out of the practical
problems created by potential interference among users of the radio
spectrum 28. In addition, standards
and regulations have pushed beyond this limited rationale to govern
some features and functions of receivers. To an extent still being
debated at the FCC, Congress has applied this form of
standardization to the cable television industry as part of the
cable television rate regulation legislation of 1992 29.
Similarly, the telephone industry is no stranger to
standardization. In a unified Bell system, standardization was
achieved within the company. But it has been the history of the
telephone industry not only to live with standards but also to live
with and even thrive under goverment regulation. Tell a telephone
company executive that the government is contemplating
standardizing some new product and the first question he asks is
whether that isn't already regulated in his business; if it is, he
dismisses it as a problem and moves on to the next issue.
The computer industry traditionally takes a different view of
both standards and regulation than do the broadcast or telephone
industries. Appropriately, it devotes significant energy and
resources to remaining free of regulatory schemes and
government-imposed requirements. There are industry standards, but
they rise and fall very quickly and are constantly subject to
attack and replacement. In the words of one broadcast official and
part-time humorist: "The computer industry loves standards; it has
a million of them."
The result of these differing attitudes, springing from
different cultures and experiences, is a general policy approach
that says the government should stay its hand and take a minimalist
attitude toward standards and regulation, intervening only where
there are overriding public interest concerns. However, this merely
removes the debate to whether a given standard, regulation, or
other proposal falls on one or the other side of that line.
The vagueness of this trigger for intervention and the fact that
different biases are brought to its application by different groups
of government officials invites politicizing of technology
decisions. Thus, these issues become part of the political bazaar
of Washington, a place ill-suited to making difficult technical
choices. The private sector, not the government, should set
standards; de jure standards, whether set by government or the
private sector, are not preferable to de facto standards.
The computer industry is wise to oppose government-mandated
standards 30. Even where
congressional and regulatory officials can clearly formulate and
enunciate their policy goals, their ability to penetrate to the
next level of analysis and understand the technical ramifications
of a given set of choices is severely limited. Government
intervention is rich in the possibility for mistakes and for the
operation of the "law of unintended consequences." And government
almost always seeks compromise and consensus 31.
Page 484
In recognition of these weaknesses in government intervention,
many in the private sector, and some in government itself, have
been advocating the position that these issues should not be
addressed by government but should be left to private,
standards-setting organizations. Decisions made in this fashion are
preferable to decisions made by government officials. But there are
good and valid reasons to ask whether substituting industry
bureaucrats for government bureaucrats is, in the long run, a major
improvement. There are valid reasons to ask whether this is a
procedure that will yield the best results for the U.S.
economy.
One problem is in the multiplicity of groups vying for the
privilege of writing these standards. In the wake of the hype that
accompanied the focus on an information superhighway, there are no
fewer than 49 organizations or associations 32 claiming to have a role in the
development of standards for digital compression or for the
"set-top box" 33. Some of these
groups are established standards organizations. Others are
entrepreneurial in the Washington, D.C., sense: find an issue,
organize around it, raise some money, and exercise influence. Some
groups are national. Others are international. And in some you
cannot be sure whether participants represent a U.S. or a foreign
interest.
These different groups represent different perspectives,
depending upon whether their members come exclusively or in part
from the broadcast industry, the cable television industry, the
consumer electronics industry, the telephone industry, the
programming and production community, or the computer industry.
This level of activity is one indicator of the reality of
convergence; they are all converging on the "set-top box."
Another problem arises because private standards-setting efforts
are as susceptible as is the government to attempts to use the
process for some narrow end or to benefit some special interest.
After all, losers love standards. The techniques vary but the
result can be the same. Bureaucratic standards setting is slow
moving, Ferguson and Morris complained
34. Pending standards can freeze the market and delay
investment. Parties that are behind in the development process can
use this delay to catch up to the industry leader. Frequently,
those behind are numerous; the leader is, by definition, alone.
Like government, private standards-setting organizations
generally rely on consensus 35. This
kind of compromise yields a lowest-common-denominator approach 36. The fact that favoring consensus
and not innovation can harm the economy is difficult for such
groups and for the political process to comprehend; the effects are
felt over time and diffused across the economy in general.
But the major problem arises because standards setting by
bureaucratic bodies, whether public or private, is the antithesis
of entrepreneurial development 37.
The entrepreneur invents something, innovates. The product may or
may not be technical. Then the entrepreneur "undertakes" 38 to bring together all of the things
needed to take a product or service to market: financing,
distribution, and so on. The entrepreneur's idea is then accepted
or rejected in the marketplace.
By contrast, bureaucratic standards setting invents nothing. Its
conclusions are never really tested in the marketplace (although,
if they are too far afield, they might be rejected outright).
These standards-setting activities are a drain on resources for
any company that participates 39.
The smaller the company, the bigger the drain. Such activities
require the diversion of valuable and scarce engineering resources.
Thus, there is an inverse relationship between the size of the
company and its ability to stay involved and protect its interests.
Such private standards setting can work to the detriment of the
entrepreneur to the extent that it prevents or limits his or her
ability to obtain the fruits of the innovation. It can delay or
even prevent the deployment of technologies 40. And, in addition to these factors,
the entrepreneur can frequently end up outgunned and outmaneuvered.
If he or she is the inventor, the other players seek to benefit
from the invention.
In this environment, the entrepreneur gets little or no help
from his government, which tends in any dispute to favor the side
with more and larger players 41.
What is more, government worries about de facto standards because
they are messy: People might complain.
The most common argument against de facto standards is that
"… we do not want to have another Beta/VHS situation!" How
one feels about the Beta/VHS competition seems to be a matter of
perspective, akin to the way that some people look at a glass of
water. The "half-empty" crowd looks at Beta/VHS and calls it bad
because it standed investment 42.
But the ''half-full" crowd looks at the competition between Beta
and VHS and concludes that it was a good thing because it resulted
in improved VHS technology and ultimately provided consumers with
more choices.
Page 485
Rather than engaging in government standards-setting activities
or in bureaucratic standards setting activities 43, what is needed is a new willingness
(or a renewed willingness) to permit the market to work, to permit
people to strike out and establish de facto standards, and to
endure the uncertainty and even the temporary incompatibility that
this sometimes creates. In the words of Joseph Shumpeter, "Let the
gale of creative destruction blow through this industry."
Unless Security and Privacy are
Protected, the NII Will not Reach itsFull Potential as a Platform
for Electronic Commerce
The deployment of advanced broadband systems will depend upon
private investment.44 The success of
these systems will depend upon finding applications that will
support that investment.
Deployment requires two conditions:
•
A robustly competitive market for digitally based
products and services, with strong economic benefits to those that
develop the intellectual property that manifests itself in such
products; and
•
Constant innovations in technology that facilitate
this competition—innovations fueled by similar market
forces.
These are the forces that drive a system of dynamic competition
in this rapidly evolving digital world. These forces need to be
encouraged and protected. This can occur only if there is (1) a
recognition that security for protecting intellectual property is a
critical element, and (2) a recognition that security systems must
be renewed, or evolve, through continued technological innovation
if they are to keep pace with those who would seek to violate
property rights.
Based on experience over many years, there are some fundamental
facts and principles that should drive all policy:
•
No matter how good the security system is, it will
eventually be penetrated if the value of the material being
protected is great enough. For this reason, security must be
renewable. The fact that security is renewable is itself a
disincentive to attempts at signal theft;
•
For security to be renewable, government policy
must not hamper innovation in the development of new responses to
security breaches and in the development of new forms and methods
of security;
•
A single, national, uniform security standard,
which is frequently advocated under one guise or another, is a
dangerous idea. Not only does it provide attackers with a single
target with enormous return, but it also would stifle the
innovation necessary for security to stay ahead of attackers. A
single, national, uniform security standard should not be
advocated, advanced, or supported by the government;
•
Published ("open") standards for security systems
tend to weaken rather than strengthen security. Thus, unbundling
and open-interface requirements, where they are employed, should be
limited to functions that pose no threat to the intellectual
property of programmers;
•
Security functions should be placed in the hands
of those who have an incentive to protect intellectual property.
Proposals either to permit or to mandate their placement elsewhere
should be resisted; and
•
Although software-based security may be adequate
for some applications, hardware-based security may be needed for
others.
Security for and protection of intellectual property are
fundamental needs for the success of advanced broadband networks,
but no less important is the ability of those networks to protect
personal privacy—that is, the privacy of personal information.
If advanced networks are to become "platforms for electronic
commerce," they will need to support a wide variety of
applications, including delivery of electronic products, home
shopping home banking, and medical assistance. The willingness of
citizens and consumers to employ these networks for these purposes
will depend upon their sense of confidence that their personal
information is secure from prying eyes.
Page 486
Proposals to require that equipment on these advanced broadband
networks (and current cable and telephone networks, as well) be
made available at the retail level
45 are an example of the way that regulating one aspect of a
network can distort the operation of all others. In this case, the
negative implications are for security. Consumer electronics
retailers would, not surprisingly, make retail availability of
equipment the central tenet of all policy. Naturally, proponents of
this point of view ignore other problems that occur when this
happens, such as freezing technologies or interfaces or creating
problems for maintaining security. They would turn technology
decisions into political decisions.
These proposals to mandate retail sale of consumer equipment
used with the network are supported by dubious analogies and
assertions. One such is the attempt to apply to video distribution
and developing broadband networks the model currently used for
voice telephone service, whereby an interface specification was
developed and used to separate network functions from the functions
performed by "consumer premises equipment" 46. The telephone model is viewed as a
way to create competitive markets for equipment used to supply
broadband services 47.
A major problem is that these proposals ignore the fact that
voice telephone service requires only access control; video
providers have traditionally (and for good reason, given the
problems of theft of service) insisted on scrambling as well.
Nevertheless, there are indications that the markets will develop
such separation, and probably more quickly, without government
interference 48. Another claim made
by proponents of this type of government intervention is that new
"smart-card" technologies are available. They cite draft (not even
finalized) Electronics Industry Association standards for such
security systems 49 and seem
oblivious to the contentiousness regarding the adequacy of such
standards and what features are needed to bring them up to
acceptable levels of security
50.
The principle that underlies these proposals is that the
government can and should determine how much security is adequate
and that that determination will bind owners of intellectual
property and network providers. That principle is unacceptable 51.
Owners of intellectual property and those acting for them should
have the right to determine the level and method of security
appropriate for their needs. These decisions should be made on the
basis of business needs and realities, not by government.
As network providers experiment with different types of
broadband networks 52, some of which
have different implications for security requirements, the
government should let these technologies work themselves out in the
marketplace, free from the distortions that could be created when
the government picks out one factor
53 among the many that must be considered, thereby affecting
all other choices 54.
Conclusion
The assertions set forth here have in common a faith in and a
reliance on market forces. The role of entertainment in driving
deployment of advanced broadband networks and the need for security
for those networks are related. Given adequate government
recognition of the rights of property, and given government
restraint from imposing other regulations that undermine those
rights, these networks can develop. This will not happen
instantaneously but will proceed incrementally over the next
decade. The end result will be the extention of new broadband
capabilities to all parts of the country.
Interoperability issues would also benefit from an understanding
of the way markets are working to address problems far more rapidly
than government or even private-sector standards organizations can
accomplish. Market resolution recognizes the importance of
incentives that motivate entrepreneurs. Failure to understand these
markets and these incentives can have negative consequences for the
economy and for international competitiveness. Conversely, if the
government refrains from micromanagement and can successfully
provide sound macroeconomic policy, the revolution that is the
information age could bring a period of progress on the scale of
the industrial revolution.
Page 487
NOTES
1. Quincy Rodgers manages government
affairs for General Instrument Corporation (GI). A graduate of Yale
College and the Yale Law School, he served as Executive Director,
Domestic Council Committee on the Right of Privacy during the Ford
Administration. He has also practiced law in New York City and
Washington, D.C., and has served on the staff of the Senate
Judiciary Committee.
2. GI is a world leader in broadband
transmission, distribution, and access control technologies for
cable, satellite, and terrestrial broadcasting applications. In
1990, GI was the first to propose and, in 1991, the first to
deliver an all-digital HDTV system for testing in accordance with
FCC procedures. GI has delivered all-digital compression systems
for broadcast, satellite, and cable systems.
3. The national information infrastructure
has been recognized as a separate subject for policy attention for
at least 20 years. See National Information Policy, Report to
the President of the United States, submitted by the Staff of
the Domestic Council Committee on the Right of Privacy, Honorable
Nelson A. Rockefeller, Chairman, National Commission on Libraries
and Information Science, Washington, D.C., 1976.
4. This was the conclusion of at least one
respected and generally knowledgeable business leader in the
entertainment/communications industry. Japanese and European HDTV
systems were apparently based on this false premise. The Japanese
analog MUSE HDTV system was outmoded even as it was launched. The
implications of this experience for government-led "industrial
policy" are beyond the scope of this paper. See Cynthia A. Beltz,
High Tech Maneuvers, Industrial Policy Lessons of HDTV, AEI
Press, Washington, D.C., 1991.
5. Mike Mills, "A Digital Breakthrough,"
Congressional Quarterly, January 15, 1994, p. 66.
6. Computer Science and Telecommunications
Board, National Research Council, Keeping the U.S. Computer and
Communications Industry Competitive: Convergence of Computing,
Communications, and Entertainment, National Academy Press,
Washington, D.C., 1995.
7. Of course, entertainment includes
games, and the computer community is very much a part of that
product line.
8. Some television executives and
engineers believe that interlace provides a better picture than
does progressive, although admittedly not for text.
9. "Cable-TV Industry Loudly Likens Itself
to Wild, Wild West," Wall Street Journal, May 10, 1995, p.
B2.
10. Former FCC Commissioner Ervin Duggan,
now president of PBS, captured the cultural diversity of at least
two players in the converging arena when, on a panel at a Cable
Television Show, he said that, despite their size and cash,
telephone companies posed no danger to the current Hollywood and
programming communities because telephone executives "still sleep
in their pajamas." Bell executives may yet prove him wrong as they
make major investments in creative material. Are the Bells going
Hollywood? See "Staid Phone Giants Try Marriage to Hollywood,"
Wall Street Journal, May 24, 1995, p. B1.
11. Who will remain anonymous.
12. Following are some important
differences between the computer and the entertainment worlds:
computer is point-to-point communications, carriage,
password-oriented access control where most messages have little
intrinsic value; entertainment is point-to-multipoint, broadcast,
and scrambled on broadband, and the material transmitted has great
intrinsic value.
13. "Datacom Emerges As Next Wave,"
Multichannel News, May 15, 1995, p. 1.
14. Information Superhighway, An
Overview of Technology Challenges, Report to the Congress, U.S.
General Accounting Office, Washington, D.C., January 1995, p.
31.
15. H.R. 3626 (103rd Congress, 2nd
Session), Section 405; S. 710 (104th Congress, 1st Session).
16. George Gilder, "When Bandwidth Is
Free," Wired, September/October 1993, p. 38; George Gilder,
"Telecosm: The Bandwidth Tidal Wave, Forbes ASAP,
Supplement, December 5, 1984, p. 163.
17. Speech by Daniel F. Akerson, Chairman
& CEO, General Instrument Corporation, at Lehman Bros.
Conference, San Francisco, California, April 28, 1994, Slide 5:
Fiber Optics Plus Compression = Personalized
Channels Per Home
Bandwidth (MHz)
Homes/Node
Compression Ratio
Channels
Channels per HP
550
20,000
1:1
80
0.004
750
500
1:1
110
0.02
1,000
200
10:1
1,500
7.50
Page 488
… By compressing 6 digital channels into the space of 1
analog channel, you can get 660 channels per today's node of 500
homes—or one personalized channel for each home. By further
compressing at 10-to-1 ratios, using compression technologies such
as GI's digicipher, a broadband system can provide 7 personalized
channels per home. At this level of service, the consumer has the
ability to be online from multiple TVs and PCs in the home.
18. General Instrument Corporation's
digital television technologies are licensed under terms of
agreements that it has with cable television operators. GI has
licensed three U.S.-owned manufacturers (Scientific Atlanta,
Zenith, Hewlett-Packard) to build its complete systems, including
access control (security). GI has also indicated that it is
prepared to more widely license its digital decompression
technology. Parenthetically, the case seems strong for more narrow
licensing of security technology than for other technologies.
Although these licensing arrangements were established, in the
first instance, as a result of vendor agreements, there are also
strong economic incentives for vendors to license their
technologies in order to drive their acceptance in the market.
Charles H. Ferguson and Charles R. Morris, Computer Wars,
Time Books, Random House, New York, 1993, p. 143 (hereinafter
Computer Wars). In addition, the complexity of digital
communications systems requires that someone perform the functions
of disseminating information, answering questions relating to the
system, and conducting compliance and interoperability testing.
GI's licensing program addresses these needs.
19. Remarks prepared for delivery by Vice
President Al Gore, Royce Hall, UCLA, Los Angeles, California,
January 11, 1994.
20. Imperial Russia turned this
shortcoming into an asset by maintaining gauges different from
those of its Western neighbors as an additional deterrent to
invasion. Lessons for the NII to be drawn from the experience of
the U.S. railroads do exist: "Between 1865 and 1873, 35,000 miles
of track were laid, a figure that exceeded the entire rail network
of 1865, and inspired a boom in coal and pig iron production
… and the rapid spread of the new Bessemer process for
making steel. Railroads opened vast new areas to commercial
farming.… Their voracious appetite for funds absorbed much
of the nation's investment capital … contributed to the
development of banking … and facilitated the further
concentration of the nation's capital market.…" Eric Foner,
Reconstruction: America's Unfinished Revolution,
1863–1877, Harper & Row, New York, 1988, p. 461.
21. The Grand Alliance is made up of the
companies and organizations that were proponents of HDTV systems as
part of the FCC's Advisory Committee on Advanced Television Service
(ACATS) program for developing an advanced television standard.
Participants were AT&T, General Instrument, MIT, Philips,
Sarnoff, Thomson, and Zenith. AT&T and Zenith jointly submitted
a progressive scan system for testing. Philips, Thomson, and
Sarnoff jointly submitted an interlace system. GI and MIT jointly
submitted two systems: one progressive and one interlace.
22. "Universal Demodulator Handles QAM,
VSB and NTSC," Communications Technology, December, 1994, p.
100.
23. An interesting paper prepared for the
American Enterprise Institute calls into question much of the
conventional wisdom about interoperability. Milton Mueller has
taken a historian's look at the development of the telephone
companies in the United States and examined the effect that
interconnection requirements had on the rollout of telephone
service in the late nineteenth and early twentieth centuries.
Mueller maintains that the absence of interconnection requirements
was an important element of the rapid penetration of telephone
service in the United States. The inability of competing telephone
systems to interconnect with each other, according to Mueller,
forced competition between the Bells and independent telephone
companies to focus on providing access. In the absence of
interconnection, the desire of potential customers to have access
to telephone service and to communicate, not with everyone or
anyone, but with specific groups of other users, became the central
focus of competition. This resulted in more rapid penetration of
service, driven by suppliers of that service. It became a race
between the Bells and other providers to see who could sign up the
most customers and most rapidly expand the network. This thesis may
have implications for public policy and the rollout of new, digital
services. Milton Mueller, "Universal Service: Competition,
Interconnection and Monopoly in the Making of the American
Telephone System," prepared for the American Enterprise Institute
for Public Policy Research, working paper presented March 31,
1995.
24. Remarks by Daniel F. Akerson, Chairman
and Chief Executive Officer, General Instrument Corporation, at the
Washington Metropolitan Cable Club Luncheon, Washington, D.C.,
April 11, 1995. See also Peter K. Pitsch and David C. Murray, "A
New Vision for Digital Telecommunications," A Briefing Paper, No.
171, The Competitiveness Center of the Hudson Institute,
Indianapolis, Indiana, December 1994.
In addition, see Stanley M. Besen and Leland L. Johnson,
"Compatibility Standards, Competition and Innovation in the
Broadcasting Industry," Rand Corporation, November 1986, p. 135.
According to Besen and Johnson, "The government should refrain from
attempting to mandate or evaluate standards when the technologies
themselves are subject to rapid change. A major reason for the
Commission's difficulty in establishing the first color television
standard was the fact that competing technologies were undergoing
rapid change even during the Commission's deliberations. It is
Page 489
only after the technologies have 'settled down' that government
action is most likely to be fruitful, as illustrated in the TV
stereo case."
25. Even interface standards have the
potential to inhibit development. The Consumer Electronics Group
(CEG) of the Electronics Industry Association and the National
Cable Television Association (NCTA) have been struggling over the
development of a decoder interface specification to be adopted by
the FCC. This standard is seen by the Commission as a solution to
issues of compatibility between televisions/VCRs and cable
television systems. The proceeding is a response to the Cable Act
of 1992 (Cable Television Consumer Protection and Competition Act
of 1992, P.L. No. 102-385, 16 Stat. 1460 (1992), Section 17). NCTA
and some cable industry suppliers are seeking an interface that can
utilize a more extensive command set and more connector pins,
maintaining that this will be needed to support future services,
including QWERTY keyboards, an air mouse, and other
yet-to-be-developed but envisioned capabilities. Alternatively, the
cable side has argued that the interface should permit the "pass
through" of consumer remote control commands so that the consumer
can utilize all features of the network. CEG is resisting these
requests, arguing, inter alia, potential interference with the
features its members provide in consumer electronic equipment. Both
sides have made extensive filings with the Commission in an ever
growing record (In the Matter of Implementation of Section 17 of
the Cable Television Consumer Protection and Competition Act of
1992; Compatibility Between Cable Systems and Consumer Electronics
Equipment, FCC ET Docket No. 93-7). Recently, elements of the
computer industry have entered the proceeding, voicing concerns
over the adequacy of the proposed interface and at least one
feature previously agreed to by CEG and NCTA. A Silicon Valley
company has mounted a campaign against the proposed solution,
charging it can become a bottleneck.
26. Computer Wars, pp.
113–14; see also fn. 17. During the early days of the Clinton
Administration, this book was reportedly widely read in the White
House. Current public policy debates provide a rich set of
opportunities for the Administration to heed its lessons.
27. Computer Wars, p. 221; see also
fn. 17.
28. Even this long-standing and "hallowed"
justification for government regulation is being called into
question. See Adam D. Thierer, "A Policy Maker's Guide to
Deregulating Telecommunications, Part 1: The Open Access Solution,"
Heritage Talking Points, The Heritage Foundation, December 13,
1994; Paul Baren, ''Visions of the 21st Century Communications: Is
the Shortage of Radio Spectrum for Broadband Networks of the Future
a Self-Made Problem?," keynote talk transcript, 8th Annual
Conference on Next Generation Networks, Washington, D.C., November
9, 1994.
29. Cable Television Consumer Protection
and Competition Act of 1992, P.L. No. 102-385, 16 Stat. 1460
(1992), Section 17.
30. Computer Systems Policy Project,
"Perspectives on the National Information Infrastructure: Ensuring
Interoperability," white paper, February 1994; Alliance to Promote
Software Innovation and the Business Software Alliance, "The
Information Marketplace: The Perspective of the Software and
Computer Industry," special focus paper, Spring 1995.
31. Government standards, like all
standards, need to take into account the international
circumstances in which the standard will operate. The U.S. market
remains the world's most attractive, thus giving a U.S. standard
additional impetus. In the digital video arena, however, there are
signs that Europe or Japan or both may gang up and try to protect
their domestic industries by promulgating a standard different from
that used in the United States. At a recent meeting in Melbourne of
DAVIC, a group working on an international cable standard for
digital video, the Japanese and European representatives joined
forces in opposing the position of most U.S. representatives. It is
too soon to tell whether this kind of activity will ultimately
undermine the leadership position that the United States has held
as the home of digital development.
32. This number was used by FCC Chairman
Reed Hundt in a speech to the National Cable Television Association
Annual Cable Show, May 9, 1995.
33. The origin of this term is unclear.
Some early commentator made the statement that the square foot on
the top of the television set was the most valuable piece of real
estate on the information superhighway. This immediately caught the
attention of at least one member of Congress who worried that it
could become a bottleneck. It also brought the attention of many
companies that announced that they planned to make "set-top boxes,"
long before they had thought through what functions the set-top box
would perform or what applications consumers wanted. The term
"set-top box" is almost certainly derived from the model of current
cable television converters. The convenience that the use of the
term provides is more than offset by the way it misdirects focus
from the real issue, which is where different functionality is to
be performed in a network.
34. Computer Wars; see also fn.
17.
35. Sometimes these efforts operate on a
principle of unanimity. At other times, minority views are outvoted
and rejected. Some groups are incredibly undemocratic; prudence
requires not identifying them here, now. The United
Page 490
States government should acquaint itself with the
characteristics of such organizations prior to embracing or
affirming their policies.
36. "… The bureaucratic solution is
most frequently 'one size fits all.'" George Gilder, speech at the
Virtual Democracy Conference, Progress and Freedom Foundation,
January 10, 1995. In remarks also applicable to this subject,
Gilder said that the answer to NII development lies not so much in
competition as in diversity.
37. "… Most entrepreneurs who make
breakthroughs are almost by definition psychologically uninterested
in working in a dull, slow process in which most of your time is
spent listening to people who don't know as much as you do."
Speaker of the House of Representatives Newt Gingrich, speech at
the Virtual Democracy Conference, Progress and Freedom Foundation,
January 10, 1995.
38. Translation provided by Speaker
Gingrich, in remarks to the Computer Science &
Telecommunications Board, Washington, D.C., May 15, 1995.
39. From a slide offered by CableLabs at a
recent Cable/IT Convergence Forum (and, one hopes, intended only to
wake up the participants):
Membership Requirements:
•
Subordinate your company's interests to those of a
large consortium.
•
Waste hundreds of man/hours in unproductive
meetings in distant locations.
•
Lock in your development process with a rigid set
of technical standards.
•
Spend money on large, unaccountable dues.
•
Engage in complex, stressful political maneuvers
with people in competing companies.
40. General Instrument Corporation's
DigiCable product, which will allow cable systems to offer the
equivalent of 350 to 500 channels, is approximately 1 year late to
market. Six months of this is attributable to technical problems
that the company and its vendors encountered; these digital
consumer decoders are the most sophisticated pieces of consumer
electronics hardware ever deployed. But 6 months of the delay was
caused by a redesign to meet the specifications under development
by the Moving Picture Experts Group for MPEG-2, even though MPEG-2
does not constitute a complete transmission system while DigiCable
does. "Digital Compression: The Holy Grail," Cablevision
Magazine, March 6, 1995, p. 22.
41. The tendency of politicians to count
noses can work against important national resources. As foreign
companies locate plants in the United States, they bring valuable
employment to Americans. However, jobs are not the only
contribution that technology makes to national wealth. In
particular, U.S. ownership of and benefits from research and
development activity are an important component of economic
investment. Among senior advisers to the Clinton Administration,
the relative merits of these factors have been the source of
debate. See Robert Reich, "Who Is Us?" Harvard Business
Review, January–February 1990, p. 53; and Laura D'Andrea
Tyson, "Strong U.S. Firms Key to Healthy World Economy," Los
Angeles Times, December 9, 1990, p. D2. To oversimplify, Reich
thinks that foreign firms that provide jobs should be considered
American; Tyson thinks that they must do R&D in the United
States to qualify. Neither expresses concern about foreign
ownership in the context of national and international standards
setting; European governments and European multinationals, in
particular, have demonstrated an all too frequent tendency to use
standards to protect domestic industries.
42. Providing a government entitlement or
backward compatibility protection for early adapters who purchased
Beta machines for $1,000 and more would not seem to be a major
national priority; presumably they got something for their early
purchase, namely to be the "first ones on their block.…" In
any case, the economy provides winners and losers. This author
maintains an extensive collection of Beta tapes and offers to buy
used Beta machines in good working condition for $25 to $35 and $10
to $15 for those in need of reasonable repair. Thus, a secondary
market, of sorts, has already developed.
43. Or, worst of all, joint
government/private-sector standards-setting activities!
44. Much of the material in this section
is drawn from testimony of Richard S. Friedland, president and
chief operating officer of General Instrument Corporation, before
the NII Security Issues Forum, July 15, 1994.
45. H.R. 1555, Sec. 203 (104th Congress,
1st Session); H.R. 1275 & S. 664 (104th Congress, 1st
Session).
46. The telephone specification was well
established before regulatory rules and separation were imposed.
Moreover, the installed base of telephones was huge, covering over
90 percent of the population. The current installed base of digital
video equipment is minuscule by comparison and is exclusively
one-way satellite. The technical complexity of voice telephone is
orders of magnitude less than that of video networks. There is
simply no comparison, a fact that did not inhibit members of
Congress who showed up at a press conference announcing this
legislation with antique, black, rotary-dial telephones.
47. The market for such equipment is
currently highly competitive and has numerous providers, including
General Instrument, Scientific Atlanta, Panasonic, Zenith, and
Philips, among others. In anticipation of its potential
Page 491
growth from the introduction of digital transmission and the
advent of telephone company video services, others such as
Hewlett-Packard, Thomson, Sun, and Sony have said they would enter.
Today, telephones, like most consumer electronics, are produced by
offshore companies, although many telephones carry the Bell
label.
Retail sale proposals are advocated as consumer friendly and, as
such, are supported by the organized public interest consumer
groups. Retailers do not propose to cut off the right of network
providers to also provide equipment, by sale or lease, but would
prevent it from being bundled. Techniques such as those used so
successfully by cellular telephone companies, whereby deep
discounts for equipment allow more people to take advantage of
service, would be barred. There are legitimate questions as to how
"consumer friendly" it is to deprive consumers of the option of
low-cost entry to these new services. Likewise, lease of equipment
is likely to be an important component of the introduction of new
services. It is one thing to buy a telephone for $15 to $100 from
Radio Shack, knowing that the chances of its becoming obsolete are
minimal. Indeed, it will almost certainly break before then. It is
another thing to expect consumers to rush down to Circuit City to
buy a $300 to $500 digital entertainment terminal and bear the risk
of obsolescence and perhaps the risk that it will not work properly
with the network.
48. Bell Atlantic, Nynex, and PacTel have
issued an RFP for equipment, including separation of a network
integration module (NIM) and a digital entertainment terminal
(DET). The NIM would include network functions, including access
control and decryption. The DET would be available for retail sale.
See Chris Nolan, "The Telcos' Set-tops," Cablevision, April
3, 1995, p. 56. However, earlier this year, AT&T and VLSI
Technologies announced a program that runs counter to the thrust of
separation. See "AT&T, VLSI to Embed Security into Set Top
Chips," Broadcasting & Cable Magazine, February 6, 1995,
p. 36. AT&T customers, like GI customers, who are developing
products, tend to focus, laser-like, on maximizing security. It is
doubtful how many are aware that some in government have different
plans for them.
49. Congressional Record, 104th
Congress, 1st Session, April 4, 1995, p. S5143.
50. Although it is generally acknowledged
that smart card technologies will be easier to develop and more
secure in a digital environment, the experience in the analog
environment is that security has been badly compromised. Satellite
systems are badly compromised in Europe. See "Sky War Over 'Smart'
Pirates," Sunday Mail, Financial Section, United Kingdom,
October 9, 1994.
51. Interesting questions would be posed
by such a government determination: What happens if
nontechnologists in the Congress and or in the bureaucracies (or
even qualified technologists, for that matter) turn out to be wrong
and the technology is defeated by theft-of-service pirates? Since
the government has chosen this technology, would or should the
government be liable for the losses incurred as a result of the
defeat of this technology? If the technology were defeated, could
retailers be liable for losses incurred thereby? Would that
liability require a showing of negligence, such as the failure to
maintain secure warehouses for the equipment? Given that
maintaining the security of these systems is a matter of concern to
the government (the success of our communications networks and the
investment in those networks depend upon their ability to maintain
security and privacy), would it be appropriate that punitive
damages be available in the case of a break against a party,
including a retailer, whose negligence caused a break? Should tort
reform legislation contain an exception for punitive damages in
such cases? Could a manufacturer refuse to make products available
to a retailer who failed to sign an agreement in which the retailer
promised to maintain adequate security procedures or an agreement
in which the retailer promised to indemnify against losses from a
breach of security?
52. Hybrid fiber coaxial cable systems
(HFC) seem the preferred model for cable television operators and
some telcos. Other telcos are indicating a preference for switched
digital networks (SDN). Ultimate choices will be worked out in the
marketplace over time, as network providers experiment with
different delivery models. Cost will be a fundamental issue.
53. For example, retail sale, or even
including security considerations advanced without regard to cost
or convenience.
54. Retail sale has implications for other
values as well, such as innovation. To the extent retail sale is
used to justify standardization, it can negatively affect continued
development.
