Sweet Amazonia

Archive for the ‘Economy’ Category

Because public coffers are empty and leading-edge innovation is desirable, the private sector needs to take the front-line role in financing, building, and operating the information highway, but there are many differing views on where the business opportunities lie. In the nineteenth century, when railways were built across the North American continent, investors found that the most profitable aspects turned out not to be passengers (the population was too thin) but the millions of acres of real estate that went with the right- of-way. The information superhighway may be just like that. As Joel Birnbaum of Hewlett-Packard puts it: “In a gold rush there are two ways to get rich—digging for gold and supplying the infrastructure for the gold diggers.”
There are so vigorous debates regarding the nature of the highway. For example, will it be based on the telephone networks, cable systems, satellites, digital radio, or other transmission media? What will be the most important applications—business, education, entertainment, shopping, health care, interpersonal communications? What will be the economic model—that is, how will users pay for using the Net? And how can companies make money? Right now there appear to be more prophets than profits on the Net. What will be the structure of the I-Way—an open network of networks like the Internet, or some other model?
An emerging consensus is that more competition and less regulation are necessary to stimulate private-sector investment and innovation. In such a world, governments act as referees to safeguard the public interest rather than controllers of how technology will evolve. Perhaps the first inkling of this change came in 1984 with the government-ordered breakup of AT&T and the creation of the so-called Baby Bells. The resulting competition in the residential long-distance telephone market is widely credited with driving down costs, improving quality and stimulating innovation.
For example, in 1987 AT&T said it would take more than two decades to convert its network to superior digital technology. But the competitive pressure from companies such as MCI and Sprint forced AT&T to achieve the conversion in just four years. In the past decade American residential long-distance costs have dropped 50%.