The Telecommunications Challenge Changing Technologies and Evolving Policies: Report of a Symposium (2006) / Chapter Skim
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I. Introduction
I. Introduction
Pages 1-26
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These symposia have examined key issues related to semiconductors (the base technology driving the pace of technological development) as well as computers, software, and telecommunications.
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economy, it is estimated to be responsible for generating about ten percent of the nation's economic growth.2 A key policy question, therefore, is how to sustain or improve on this multiplier of ten, even as new technological innovations are ushering a major shift from a vertical model to a horizontal model of production and distribution in the communications and entertainment industries.3 This task of adapting policies and regulations regarding the communications industry to new realities is made more challenging given its long legacy -- one that goes back past Alexander Graham Bell to Benjamin Franklin, the first postmaster of the United States. This introductory essay highlights selected issues discussed in the course of STEP's conference on Telecommunications and the New Economy.4 The conference emphasized two transformations in communications: First, it emphasized the potential and challenges in the diffusion of broadband and Voice over Internet Protocol (VoIP)
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Finally, we highlight some of the policy challenges that emerge with "end of stovepiping" as information technologies and communications networks converge. MEASURING TELECOM PRICES How do new information and communications technologies translate into prices and hence consumer welfare?
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fiber, adding that the price of gear used to transmit information over fiber fell, on average, by 14.9 percent a year over this five-year period. The fast speed of technological change makes the job of tracking prices complex because the capabilities of the equipment change dramatically under the same rubric of "computer" or "router." Whereas money spent on telecommunications was relatively easier to track 25 years ago when most purchases were of telephone switches, today's telecommunications equipment includes a wide array of technologies related to data, computer networking, and fiber optics.
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COMMUNICATIONS TECHNOLOGY: A VISION OF THE FUTURE Moore's Law, which in its modern interpretation anticipates the doubling of the number of transistors on a chip every 18 months, has spurred the modern revolution in digital technologies for over forty years.9 It is likely to continue for another ten to twenty years, according to experts in the semiconductor industry.10 This pace of ever faster and cheaper semiconductors and semiconductor related technologies is likely to continue to have significant impacts, not least on communications technologies. As William Raduchel noted at the conference on telecommunications and the New Economy, the endurance of Moore's Law means that "the most powerful personal computer that's on your desk today is going to be in your cell phone in twenty years." Technologies for display, storage, and transmission of data are also expected to show rapid improvement, he added, though their rates of improvement are likely to abate sooner than that of semiconductors.11 8Mark E
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As we see next, enhancements in packet switching capabilities are already making such novel technologies as Voice over Internet Protocols and Grid Computing technically and commercially feasible for widespread use.14 VoIP (Voice over Internet Protocol) In Internet telephony, voice is broken into digital packets by a computer and conveyed over the digital network to be reassembled at the other end.
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But equally powerfully, he contended, are opportunities that come from using software to provide a variety of services for the consumer. For example, by marrying it with the computer, phones could be programmed to control who can call through and when.15 Grid Computing Grid computing, which allows users to share of data, software, and computing power over fiber optic networks is expected to be another major development in information and communications technology.
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As Nelson predicts, "Soon we will have trillions of sensors, and that is what we really rely on the `Net for." The predicted arrival of Grid computing means that firms in the computer industry have an enormous stake in the future of telecommunications networks. With the Grid, the future of computing lies in complex network-based technologies, such as web services, which tie together programs running on different computers across the Internet, and utility computing to provide computing power on demand.
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Charles Ferguson of the Brookings Institution noted that while many foresee what a "radiant future" should look like, there exists an enormous gap for many between this vision for broadband-based technologies and the lack of adequate high-bandwidth access to a broadband network. The Global Broadband Gap Indeed, as many conference participants pointed out, the United States is falling behind other nations in access to high-bandwidth broadband.18 Jaffe drew 16Individuals and businesses today variously connect to the nation's fiber-optic network through telephone lines (via digital subscriber lines or DSL)
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had likely since fallen to fifteenth place in broadband penetration. Citing the ITU figures for 2003, Ferguson reported that the penetration of digital subscriber lines (DSL)
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as had the cable system's growth rate in respect not only to connections but also to bandwidth levels. Ferguson observed that bandwidth constraints rather than computer hardware frequently dominate the total cost of adoption of a new network computing application.
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Implications of the Broadband Gap If broadband can serve as an engine for the nation's future growth and competitiveness, as emphasized by several participants at the conference, a lack of an adequate access to the broadband network may lead to a loss of this economic opportunity.19 Assessing the impact of the broadband gap, Charles Ferguson noted that the "local bandwidth bottleneck" is having a substantial negative effect on the growth of the computer industry and of various other portions of the information technology hardware and software sectors. While conceding that computing an estimate of this impact in a rigorous way would be extremely difficult, he nevertheless asserted that "you can convince yourself easily that this effect is something on the order of one-half of 1 percent -- or even up to 1 percent -- per year in lost productivity growth and GNP." Commenting on the national security implications of the broadband gap, Jeff Jaffe reminded the audience that the 9/11 Commission had recommended that the nation's digital infrastructure be prepared to deal with simultaneous physical and cyber attacks.
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In the new inter-networked model, it was the Internet Protocol's job to make all that was specific to a single network disappear and to permit only those things common to all networks come to the surface. Since the Internet ignores whatever is specific about a single network, including features that had formed the basis of competition for the telephone or cable companies, these companies have little to sell beyond access, he argued, and therefore faced little incentive in providing the public access to high-bandwidth broadband.
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The 1996 Telecom Act created considerable uncertainty for the unbundling broadband services. See, for example, the press release of April 8, 2002 by the Telecommunications Industry Association, "TIA Tells FCC That Unbundling Rules Discourage Broadband Investment," which recommends that the FCC not apply its network unbundling rules to new facilities used for the provision of broadband and high-speed Internet access services, and to apply them to legacy systems including copper loops, so as not to inhibit investment in wire-line broadband networks.
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Thompson objected, however, arguing that large telecom and cable companies are not passive recipients of federal and state regulation and that, moreover, the current regulatory environment are greatly affected over the years by the power of incumbents on all sides. To the extent that incumbents influence regulation, the current uncertainty in regulation may well reflect the uncertainties that major cable and telecom providers are facing in coming up with a viable business model that allows profits in an arena that has been transformed by new technologies.
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For example, he said that the Chinese government had made it clear to the country's principal telecommunications providers that broadband deployment was a major national priority. The situation was similar in Japan and Korea, adding that government encouragement in Canada and the Scandinavian countries had also enabled those countries to surge ahead of the United States in high-bandwidth broadband penetration.22 For the United States, Ferguson recommended a variety of policy measures to bridge the broadband gap.
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These partnerships would serve as a utility, lighting fiber but not provide any service on that fiber except those municipal services that the town or community base chose to provide. The network would be open to any and all service providers with an Internet Protocol basis -- be they telephone companies, cable companies, software companies, or others providing online entertainment -- and it would be used by all under the same terms and prices.
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In the digital age, however, basic technologies like digital sampling and packet switching enable the commoditization of voice, data, and images into digital packets that resemble each other. These packets can be sent over the Internet with no distinction as to what they are, to be reassembled at the intelligent ends of the network.
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aConsider, for example, the FCC's Video Dialtone initiative in the 1990s, which attracted substantial investment from incumbent telephone companies until it was determined that some portion of the bandwidth had to be made available to competing content providers. For a wider discussion of the limitations of open access cable, see Thomas W
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The significance of the Internet Protocol, he said, is that it makes all networks look the same and allows interoperability. It was for this reason that the telecommunications world could be expected to move to one set of interconnected webs, he said, predicting that "5 to 10 years from now, we will be online all the time." This convergence is challenging the traditional business models of firms in these industries.
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Addressing this challenge requires: · Developing legitimate markets for copyrighted materials over broadband; · Providing greater security for delivering content to an end-user including measures to ensure that the income-generating potential of material going into the pipe did not vanish forever; · Creating a usable legal framework to protect the technological measures used to control access to copyrighted material in the network environment; · Focusing enforcement of piracy problems on organized criminal groups as well as dedicated amateurs who play a role in making the system insecure; and · Improving public education to make consumers aware that certain types of file sharing is illegal and the need to secure permission to avoid copyright infringements. Cooperation, Mr.
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The FCC's agenda, he said, was to guide and propel the journey from a slow, conventional analog world to a digital world with significant opportunities for faster, more reliable, higher quality information and communications, with the overall goal of providing substantial benefits for American consumers. CONCLUSION Concluding the conference, Dale Jorgenson noted that the New Economy had witnessed a huge shift from a vertical model to a horizontal model in the computer, semiconductor, and communications industries.
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Taken together, these issues provide a robust agenda for further study and consideration about the New Economy -- which, he noted, has been a central aim of the National Academies' Board on Science, Technology, and Economic Policy.
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