|A Tech Boom, If We Can Keep It|
By Timothy H. Lee
Thursday, January 31 2013
In a jarring and unexpected announcement this week, the federal government reported that the nation’s economy shrank in the latest quarter for the first time since the last recession.
Fortunately, as 2013 begins in earnest, one sector of our economy remains vibrant: telecommunications and technology.
Just five years ago, for example, the mobile app industry didn’t even exist. Today, it’s a $20 billion sector that is estimated to account for $100 billion by 2015.
But that vibrancy is by no means assured or perpetual. As with any sector, the looming threat of destructive and increasingly obsolete regulations at the federal, state and local levels continues to jeopardize it as a source of innovation and prosperity.
Illustrating these realities, it is no coincidence that according to Gallup, Americans rated the tech sector most positively among 25 business and industry institutions. The least positive? That would be the federal government, which only 17% rate positively while 63% rate it negatively.
A good example of regulatory peril at the federal level is the festering matter of “Net Neutrality.”
Less than two years ago, the Court of Appeals for the D.C. Circuit – effectively the nation’s second-highest court – unanimously ruled that the Federal Communications Commission (FCC) lacks authority to enforce Net Neutrality, which aims to micromanage the way in which private service providers operate their networks and allow consumers Internet access. In similar fashion, the same court unanimously ruled last week that the Obama Administration’s actions in appointing regulators and dictating policy through the National Labor Relations Board (NLRB) were unconstitutional.
Undeterred by pesky concepts of law or Constitutional balances of power, however, Net Neutrality advocates remain relentlessly intent on imposing it.
Not only did the FCC persist in such a way as to require another D.C. Circuit ruling that will arrive later this year, but even extremist members of Congress expressly reject any willingness to moderate their agenda. Several days ago, Representative Anna Eshoo (D – California) threatened a Net Neutrality bill even if the FCC’s regulation is again legally overturned. “Should the Court overturn the FCC’s rules,” she said in a keynote speech at the State of the Net Conference on January 22, “I will be prepared to introduce legislation clarifying the Commission’s authority.”
Threats like that at the federal level only serve to undermine private investment and the type of regulatory certainty necessary for continuing telecommunications expansion.
Unfortunately, such threats exist far outside the Beltway as well. Although some states provide the type of regulatory light touch that encourages expansion, threats persist.
Telecommunications companies are investing billions in order to upgrade from antiquated copper networks to IP-based networks across the country. Just two months ago, AT&T announced that it was committing $14 billion in new investment to expand and improve its networks. Unfortunately, laws created for the rotary phone and landline era impede that effort and delay cutting-edge improvement.
For example, Carrier of Last Resort (COLR) regulations require telecom companies to provide service to any customer in a remote geographic area that requests it, regardless of the expense and economic unfeasibility. Such laws once helped enable people in poor and rural communities to obtain basic telephone service in past decades. That made sense in an era without competition, in which government itself required ubiquitous service in return for monopoly status.
But times have changed. Today, virtually all consumers, even in rural areas, can choose between multiple communication technologies, offered by multiple service providers. Voice? Today, there’s an app for that. Requiring companies to maintain miles upon miles of copper wire to areas where few, if any, residents might ultimately apply for service no longer makes sense.
Kentucky provides a vivid illustration of that dilemma, where antiquated rules continue to impede modernization. Fortunately, that state’s legislature is now considering measures to encourage broadband and wireless expansion without the burden of legacy copper line impediments.
At the federal level as well, Congress and administrative agencies like the FCC should so what they can to foster a legal atmosphere that encourages investment, including the transition to all-IP networks.
In 1787, Benjamin Franklin was asked whether the Constitutional Convention had created a republic or a monarchy. Franklin responded, “A republic, if you can keep it.” Today, we have witnessed an unprecedented degree of technological innovation and prosperity. The fact that devices like the iPhone and mobile apps have entered our lives and lexicon, even during a period in which the remainder of our economy imploded, illustrates the remarkable durability and dynamism of the technology and telecommunications sector.
With common-sense regulatory reform, that innovation and investment can continue.
A tech boom, if we can keep it.
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