Larry will present in Qingdao on Sept. 20th at the 1st International Rendanheyi Model Forum and Summit in Qingdao, China. His presentation explores the application of Big Bang Disruption to the Rendanheyi model created and pioneered by Haier and its CEO, Zhang Ruimin. Larry’s earlier papers on Haier include “Open Innovation, Chinese Style,” published in Boao Review, July, 2016 with Paul Nunes and Serena Jing Qui.
Congress is considering a major spending bill to correct long-standing failures to maintain the U.S.’s crumbling infrastructure. While crumbling roads, bridges, power, water and transit systems should be the focus of any major spending, there’s a strong case to be made for devoting some funds for broadband deployment, particularly in the few remaining locations in the U.S. without service. Owing to high capital costs, these are primarily rural, mountainous, and tribal areas of the U.S., especially in the West.
But the last time Congress tried to close what remains of our digital divide in the 2009 stimulus bill, it divided the funding among three different agencies, imposed little oversight over contractors, and allowed spending in areas where broadband already existed. What’s more, network operators across the country trying to build next generation wired and mobile services are increasingly held back not by cost but by local bureaucracy, delay, inconsistency and petty corruption.
As Congress considers whether and how to address these issues, Blair Levin of the Brookings Institution and I have proposed eight guidelines for future government intervention. These are:
- Limit and carefully control direct investments. Create a broadband acceleration fund, to be used only in areas where there is currently no provider. Determine needed subsidies on a per area basis, and have one agency, preferably the FCC, be the sole administrator. Use general appropriations to fund this program rather than increases to Universal Service fees.
- Severely limit ongoing support. Change the paradigm of small capital support with uncertain on-going operating subsidies to one that strongly favors areas where initial capital would be sufficient to overcome excessively high costs. And use reverse auctions to maximize the bang for taxpayer buck.
- Extend “Dig Once.” Ensure that broadband conduit is installed whenever federal roads are dug up for any reason. Extend the policy as much as possible to state roads and rights of way.
- Address other unproductive barriers to mobile deployments. While local authorities should continue to ensure public safety and other local interests, most of what slows down installation of new equipment promotes no public interest—in fact, the opposite. Treating small cell antenna installation on utility poles and buildings as if they were full-scale cell tower builds serves no public goal. Shot clocks, uniform pole attachment policies and other “best practices” should be established at the federal level.
- Re-engineer government processes that hinder private investment. Many local processes for application, review, and inspection are ad hoc, causing unneeded delays and costs that hold back deployment. For both wired and mobile builds of next generation networks, these must be standardized. The problem is not local regulation so much as local processes—or the lack thereof. And, as Google Fiber and other innovative experiments has shown, what local authorities really need is the right incentives to do the right thing.
- Make investments technology-neutral. Next generation mobile networks and satellite-based solutions will be truly competitive in speed and reliability with fiber, cable, and copper hybrid technologies, which are also improving. Federal programs, including Lifeline, should encourage development and deployment of all broadband technologies.
- Address nonfinancial causes of the digital divide. Availability and price have largely been solved through public and private solutions. Surveys consistently show that those who remain part of the digital divide—rural, senior, and less-educated Americans—are unlikely to take broadband at any price. Public education about the relevance of broadband and training in basic computer usage may not cost much, but without them any money spent will be at least partly wasted.
- Use the bully pulpit to encourage digital want-nots. The National Broadband Plan laid out a vision of America’s broadband future which has largely come to be or will soon, but neither the White House nor the FCC used their bully pulpit to communicate that vision to digital want-nots. The FCC should take an updated plan on the road, along with start-ups and established companies who are making the vision a reality.
Larry will testify before the Senate Commerce Committee on May 3rd, 2017 at a hearing on removing obstacles to broadband deployment in the U.S. The hearing is part of the Senate’s consideration of a large-scale infrastructure bill, of which broadband initiatives, especially in rural and tribal areas, will be considered.
Video of the hearing and Larry’s testimony are available here.
In today’s Washington Post, Larry writes that continued breaches involving the nascent Internet of Things is holding consumers back from fully adopting the new technology. Given the intimate relationship many smart items will have with the lives of their owners, privacy and trust are essential conditions for Big Bang adoption.
In June, Presidential candidate Hillary Clinton surprised business leaders by issuing a detailed Technology and Innovation platform. Tech issues rarely feature in Presidential campaigns, but Clinton seems determined to shore up an already strong position in Silicon Valley by promising an administration that recognizes the singular role disruptive innovation has played in driving U.S. economic growth over the last two decades.
Clinton’s plan may have been designed to deflect concern here in California and other innovation hubs about growing criticism of the tech economy from the Obama Administration and Democrats on the left. Just a day after Clinton released her plan, for example, Sen. Elizabeth Warren, who has taken an increasingly active role in the campaign, directly attacked leading technology companies including Apple, Amazon and Google, hinting that they had grown too large to escape the blunt instrument of antitrust to break them up.
Overall, the Clinton agenda is something of a dog’s breakfast, mixing unlikely promises for significantly increased federal spending in education, basic research, and infrastructure with more specific reforms in such hot-button areas as immigration, intellectual property, and tech infrastructure.
Though nearly every aspect of the plan would require a cooperative Congress, there is still much to admire in the particulars, and, more to the point, much that innovators and their investors have wanted to hear from Washington for a long time:
Immigration – Among Silicon Valley’s highest priorities, for example, Clinton promises “comprehensive” immigration reform, including a pledge to “staple a green card” to the diplomas of non-U.S. masters and PhD students in science and engineering, “enabling international students who complete degrees in these fields to move to green card status.” No technology company would object to that proposal.
Patents – Clinton also pledges to fix the badly out-of-balance patent system, although here the promised reforms are modest. Clinton endorses legislation floating around Congress that would break the stranglehold of the notoriously plaintiff-friendly Eastern District of Texas, which openly courts patent trolls and frivolous litigation. But there is no mention of larger patent issues, notably the scaling back or eliminating patent protection for software and business methods, an invention of the courts and the patent office in recent years. The consensus, even among many leading software providers, is that those new categories have done far more harm than good.
Copyright – On copyrights, Clinton promises a law that would “unlock” a ballooning number of older written and audio-visual works that, thanks to repeated and retroactive copyright extensions on behalf of Disney and other large rights holders, can’t be licensed or used because no one knows who owns them anymore. (Liberation of so-called “orphan works” would have been enabled by a proposed settlement in a case involving wholesale scanning by Google Books, but that settlement was scuttled in 2011. Google went on to win the case outright.) The Clinton plan is silent, however, on scaling back the expanding copyrights that created the orphan works problem—and others—in the first place.
The Sharing Economy – During the primaries, both Sen. Bernie Sanders and Secretary Clinton raised repeated concerns about new “sharing economy” services, including Uber and TaskRabbit, that help contractors and freelancers coordinate their work through network technologies. Sanders dismissed these services as “unregulated” and said he had “serious problems” with Uber in particular. For her part, Clinton said last year that network-based employment raised “hard questions about workplace protections and what a good job will look like in the future.”
Clinton’s Tech and Innovation plan is more measured, if non-committal, about whether she sees the sharing economy as a direct attack on unions and labor regulators. She promises only to “convene a high level working group of experts, business and labor leaders to recommend how best to ensure that people have the benefits and security they need no matter how they work.” Depending on what specific “benefits and security” her experts believe casual workers need, that could mean either an endorsement of the sharing economy or its death by a thousand regulations.
Broadband Infrastructure – The recent decision by the Federal Communications Commission, at the urging of the White House, to transform Internet access into a public utility has already spooked investors, who spent nearly $1.5 trillion over the previous twenty years continually upgrading broadband infrastructure even as America’s roads, bridges, water pipes, gas mains and electrical grid—the actual public utilities—fell catastrophically behind. (D.C.’s own Metro system, once the city’s pride and joy, is largely closed for the summer for repairs.)
On that front, the Clinton agenda gets a mix grade. On the positive side, the candidate strongly endorses reducing regulatory barriers (largely at the state and local level, however) that unnecessarily deter more and more efficient private infrastructure, including “dig once” and “climb once” policies to encourage faster deployment of, respectively, fiber optic cable and next-generation mobile equipment.
But at the same time, and even as the Clinton plan waves in the direction of continued Internet self-governance under the multistakeholder process that has worked so well, Secretary Clinton “strongly supports” the idea that Internet access should be closely regulated as a utility. As I’ve argued before, that approach is bound to slow both the speed and size of investments in continued infrastructure improvements.
Radio Spectrum for 5G Networks – On the plus side of the ledger, Clinton promises to continue President Obama’s support for next-generation mobile networks, known as 5G, which utilize densely-packed cellular antennae and higher-band radio spectrum to offer as much as 100 times the speed and capacity of today’s wireless Internet. Secretary Clinton promises to release spectrum warehoused by the federal government itself, and to support a mix of licensed, unlicensed, and shared new frequencies that will accelerate nascent 5G applications including the Internet of Things and autonomous vehicles, as well as increasingly high-definition video.
Internet Adoption – The Clinton plan also promises to expand broadband entitlement programs aimed at closing what remains of the digital divide. But these programs, including the troubled Broadband Technology Opportunities Fund, have had limited (if any) success. So far, they’ve produced little besides wasted taxpayer billions and corruption.
While everyone shares the goal of universal broadband adoption for all Americans, the solution doesn’t come from raising taxes on consumer phone bills (currently approaching 20%!) to fund poorly-managed programs to subsidize rural and low-income communities. Among those who do not have a broadband connection at home, as repeated surveys make clear, availability and even price are rarely cited as the principal reasons.
Non-adopters—especially older Americans—don’t have a broadband connection, it turns out, largely because they don’t want one. Rightly or wrongly, digital hold-outs don’t see the Internet as having any relevance to their life. That was a problem identified as long ago as 2010 in the visionary National Broadband Plan, from which the Clinton agenda cribs frequently without acknowledgment. And it’s one problem government could play a crucial role in solving through public education and the President’s bully pulpit. But not from throwing more money at federal contractors.
As Secretary Clinton’s wish list suggests, what Silicon Valley really wants from both presidential candidates is not more government, but less. In many cases, much less.
That desire, of course, distinguishes tech from most special interests, and Clinton’s team deserves praise for getting it at least partly right. For years, I’ve watched visiting politicians looking to partner with the venture community grow disappointed to hear from tech leaders across the political spectrum that they don’t actually want new federal programs or legislation aimed at promoting innovation.
What they really want most is to be left alone; to be allowed to continue to practice the kind of largely unregulated experimentation that the Mercatus Center’s Adam Thierer calls “permissionless innovation.” That wise policy has been strongly supported by a bi-partisan coalition since the mid-1990’s. It has done more than any grant or subsidy could to promote U.S. leadership in the Internet and other emerging technologies, in sharp contrast to Europe, where centralized innovation planning and micromanagement have had the opposite effect.
But Washington’s commitment to permissionless innovation has been under attack, particularly in the last few years. As the innovation economy increasingly becomes the economy, lawmakers can’t help but refocus their attention there. Law enforcement and intelligence operations, at the same time, are increasingly wary of open networks and encrypted communications (about which the Clinton plan hedges), generating some very public fights with innovators in the name of both consumer privacy and national security.
The closer the next President–whoever it turns out to be–can hew to the U.S.’s longstanding if battered commitment to let a thousand Silicon Valley start-ups bloom, the better off everyone will be, in the short as well as the long run. Political pandering aside, what the innovation ecosystem really needs is a reboot of the 1990’s promise to leave the Internet “unfettered by Federal or State regulation” – a policy that now needs expansion to equally high-potential disruptors in energy, materials, robotics, genomics, health care, transportation and manufacturing.
That, in any case, is the lesson of the last election in which innovation policy played a major role—the election, that is, of that other Clinton.