The Obama Administration's stimulus package to jump-start the American economy should include a crucial and relatively inexpensive program to improve the country's communications infrastructure. This would ignite long-term growth throughout the economy and close a serious technology gap between the U.S. and many other countries.
The U.S. desperately needs to catch up with global leaders in two areas of high-speed broadband communications. The first is extending the current world-class wired broadband service now used by big business, smaller companies, and consumers across America. The second is increasing the transmission speed and reach of wireless service to nearly everywhere in the nation. Achieving these two goals would bridge the digital divide between city and country and provide a powerful productivity tool to all sectors of society: private enterprise, nonprofit organizations and institutions, and every level of government. A federal stimulus plan should do more than just add jobs in the telecommunications industry.
U.S. Missing Out on Productivity Gains
In many countries, including Australia, broadband service is available to a much larger percentage of the population than in the U.S. Many have much faster and more versatile third-generation, or 3G, wireless broadband networks—what much of the rest of the world calls the "mobile Internet." On the wired side, many countries have a lead in the penetration of robust fixed-line networks that their businesses are using to innovate and create new opportunities. The greater power and penetration of their networks means their businesses can reach more customers. Result: Companies in other countries are leveraging broadband and the Internet to operate more efficiently and create game-changing competitive advantages. Their governments are also using high-speed broadband technologies to reach more citizens and lower the cost of services in health care, education, and public safety. America is missing these productivity gains at a time when it needs them most.
Based on what I have seen as CEO of media and telecommunications companies on three continents, I believe the U.S. should use a small portion of its stimulus spending as seed money for the nationwide deployment of high-speed broadband networks, wireless and wired, capable of transmitting data at speeds of 100 megabits per second (Mbps), compared with speeds of one or two Mbps that are common today. But it's important that the right policy mix be in place to encourage the private sector to invest the additional capital necessary for these networks.
Japan, South Korea, and Europe have been well ahead of the U.S. for a while. China just approved a measure to upgrade to 3G wireless service at an estimated cost of $41 billion. And Australia, with territory nearly as large as the continental U.S. and a very similar population distribution, has wireless network speeds of 14.4 Mbps to cell phones, laptops, and other wireless devices on a mobile Internet that reaches 99% of the population. This speed, many times faster than the best U.S. wireless networks, enables Australians to transmit real-time video, photos, MRI images, and other data that cannot yet be delivered by American wireless systems. Our network is ready to operate at 21 Mbps and, in the next year or so, we will double Australia's network speeds to 42 Mbps—providing bandwidth fast enough to download a two-hour movie to a laptop on a beach in four minutes. That's faster than all but a tiny fraction of U.S. wireline broadband connections.
Economists who say productivity gains based on digital technologies have peaked have not seen the future as it is playing out in other countries, particularly on the wireless front. In Australia, for example:
Construction companies download drawings to remote sites and coordinate jobs in real time without sending managers on the road.
Medical technicians transmit mammograms, MRIs, and glucose screenings from rural stations and mobile vans to central interpretation facilities in minutes, cutting days of transport time and increasing the efficiency of radiologists and the quality of patient care.
Farmers use wireless telemetry to manage remote irrigation systems and avoid driving hundreds of miles daily, saving thousands of dollars of fuel, water, and time over the course of a growing season, while simultaneously reducing carbon emissions.
In the U.S., improving health care by cutting duplication and waste and enhancing quality of care will require better management of patient data and more robust networks. In addition, manufacturing and retailing need the data-mining capabilities that high-speed broadband enables. Furthermore, research and development is directly dependent on analyzing and moving immense quantities of data. The networks the U.S. now has are just too slow and not pervasive enough.
Aside from missing out on innovation, the U.S. also is missing opportunities to better manage its infrastructure: bridges, roads, tunnels, elevators and other facilities. With ubiquitous, reliable data networks, video surveillance can monitor facilities 24/7, microtelesensors the size of an aspirin can be used to gauge heat, stress conditions, or aberrations that signal infrastructure is at risk. Minnesota might have avoided any loss of life if monitors had been used on the interstate highway bridge that collapsed into the Mississippi River.
Provide Incentives for Industry Investment
I believe that if the government primes the pump and provides the right regulatory environment, the telecommunications industry will invest the $20 billion to $30 billion needed to build complementary wireless and wired broadband networks that reach at least 90% of the American population. This would include expanding the number of wireless towers, upgrading their capacity, expanding fiber networks, and upgrading cable TV boxes from analog to digital to expand bandwidth on existing cable systems. I urge the government to put up $10 billion to $15 billion in a combination of low-interest loans, tax advantages including accelerated depreciation, and other incentives for companies to invest in the telecommunications "plumbing" that will deliver end-to-end high-speed service to many more Americans. One step should be consumer subsidies to help people upgrade their cable TV boxes. If the investment climate is right, industry will employ private capital to create the powerful and pervasive communications infrastructure our country needs. Government assistance can help finance extending the service to sparsely populated and low-income areas where it is not economically viable.
But building telecommunications networks is different than building highways because newer, less-understood technologies are involved. In such cases, history has shown that corporations are better suited to make the crucial technological decisions and risk capital than more risk-averse government agencies. A high-speed Internet cannot be mandated or regulated into existence. The key is to give the private sector incentives to invest. But policies and regulations must be predictable and technology-neutral. No one, least of all the government, has perfect vision as to what technologies will yield the right combinations of capability and affordability.
Some of the right policies are decidedly old-fashioned—the private sector would need investment tax credits and the right to accelerate depreciation, for example.
Getting the right policy mix also would require shattering the myth of net neutrality. It may seem like a high-minded ideal to argue that everyone should have unfettered access to telecom networks at a discounted rate. But one low price for unlimited use destroys telecommunications companies' incentive to invest the tens of billions of dollars needed to create and maintain networks. For them to earn an appropriate rate of return on their investments, they must be allowed to charge rates based on usage. People who consume massive amounts of bandwidth, by distributing movies online, for example, would pay more than small users. Net neutrality works directly against the goal of unleashing private capital and know-how to build a nationwide, high-speed mobile Internet. Regulatory clarity must be in place before the private sector will risk capital.
It should not take much time to sort out all these issues. The place to begin is by recognizing a simple reality: America is seriously behind other countries in some of the future's most important infrastructure capabilities. But if America clears the obstacles to bold investments in telecommunications, it will provide a foundation for innovation and competitiveness and help its battered economy to rebound.
Trujillo is chief executive of Telstra, the largest Australian media and telecommunications provider.