The National Broadband Plan, Jobs and Economic Development

On March 16, the Federal Communications Commission (FCC) released to the public and delivered to Congress the National Broadband Plan: Connecting America, “. . . an ambitious agenda for connecting all corners of the nation while transforming the economy and society with the communications network of the future - robust, affordable Internet.”

In a recent Washington Post OpEd, FCC Chairman Julius Genachowski explained the driving forces behind the National Broadband Plan:

“Universally deployed broadband networks can be America's engine for enduring job creation, economic growth and tremendous improvements and savings in education, health care and energy conservation.”

“This vision of world-leading 21st-century broadband networks and their benefits will not occur spontaneously.  While the United States invented the Internet, when it comes to broadband we have fallen behind as other nations have raced ahead.  Some studies show us to be as low as 15th in the world in broadband adoption; others have us higher, but none puts us even close to where we need to be.”

The Plan’s Executive Summary further observes:  “Nearly 100 million Americans lack broadband at home today, and 14 million Americans do not have access to broadband even if they want it.  Only 42 percent of people with disabilities use broadband at home, while as few as 5 percent of people living on Tribal lands have access.  Meanwhile, the cost of digital exclusion for the student unable to access the Internet to complete a homework assignment, or for the unemployed worker who can’t search for a job online, continues to grow.”

In the end, broadband is just a means to an end.  The real value of broadband is its central impact on some of the most important challenges facing the Nation, including education, health care and energy and the environment.  Broadband is particularly critical to one of America’s most urgent problems, namely economic opportunity.

Just about everyone will agree that, given our increasingly competitive global environment, one of the major challenges the US faces in the years and decades ahead is the continuous creation of well paying jobs.  There is a very close link between broadband, innovation and job creation, especially when it comes to services, - by far the largest portion of the US economy.

Services comprise around 77% of the labor force in the US.  Industrial sector jobs are over 22% of the labor force, and farming, fishing and forestry are less than 1%.  The 77% of service jobs includes 35% managerial, professional and technical; 25% sales and office; and 17% which are classified as “other services.”

What these numbers reveal is that at least 60% of the US work force has jobs that deal with information to a greater or lesser extent.  Many of them are so-called knowledge workers holding information intensive jobs, - gathering, analyzing and interpreting information.  I strongly suspect that a significant fraction of the remaining 40% of jobs also involved some degree of dealing with information.

How are new jobs created?  To help us answer this question, let’s look at the evolution of jobs over the past two hundred years as the Industrial Revolution significantly transformed the nature of physical labor, transportation, agriculture and many other human tasks.

A succession of disruptive technologies and innovations, starting with the steam engine in the late 18th century, gave rise to whole new industries, including railroads, electricity, automobiles and telecommunications.  Many new jobs were created in the process.  Over time, those jobs were reduced through automation and productivity.  The creative destruction caused by these disruptive innovations simultaneously reduced or eliminated older jobs, companies and whole industries while creating new ones.

What was the net effect on the world?  GDP per capita, a measure often used as a simple, concrete indicator of standard of living, went up significantly in the past two hundred years.  Overall, GDP per capita went up by a factor of 8.6 in the world, with different regions experiencing widely different increases.  In the US, GDP per capita increased by a factor of 21.7 between 1820 and 1998.

Services remained primarily based on labor through all this time, notwithstanding major innovations like ATMs, reservation systems and telephone exchanges.  But the situation is now changing, as we have been able to start thinking broadly about technology and innovation in services since the advent of digital information technologies in the past several decades. 

IT has been the key force behind innovation in services, much like the steam engine helped launch the Industrial revolution.  But, in my opinion, we can only seriously consider something like an IT-based revolution in services since the mid 1990s, when the Internet and World Wide Web took the world by storm.  We now were not only able to create all kinds of new digital services with our powerful computers, but now had a digital infrastructure that enabled us to make those services easily available to everyone.

These digital infrastructure will be as critical to innovation, economic development and job creation in the 21st century as railroads, electricity and roads were over the past two centuries.  Major new recent innovations like cloud computing, smartphones, intelligent sensors and mobile devices of all sorts are enabling digital technologies to penetrate just about every nook and cranny of the world’s economy.  They are leading to a massive transformation in the way information and services are delivered and consumed.

Governments and enterprises around the world are waking up to the challenge.  In a recent Wall Street Journal OpEd, IBM’s CEO Sam Palmisano observed: 

“Appreciating the issues at stake here begins with an understanding of the emerging digital economy . . .  hidden treasures buried in the world's information are being unlocked.  But that potential value could be choked off - and America's competitiveness could be severely hampered - if we don't have the infrastructure to handle the huge resulting data streams” 

“Congress and the administration need to recognize something that industries like IT and telecommunications understood two decades ago.  They were transformed by smarter systems that rely on broadband technology.  Now sectors where much of our future growth lies, and where the government tends to play a large role - such as energy, health care and transportation - need to jump on the bandwagon.”

In his Washington Post OpEd, Chairman Genachowski succinctly summarized the challenges that lie ahead:

“Our nation is at a high-tech crossroads: Either we commit to creating world-leading broadband networks to make sure that the next waves of innovation and business growth occur here, or we stand pat and watch inventions and jobs migrate to those parts of the world with better, faster and cheaper communications infrastructures”

“History teaches us that nations that lead technological revolutions reap enormous rewards.  We can lead the revolution in wired and wireless broadband.  But the moment to act is now.”

Comments

[Chris Ward]

There was a time when IBM owned and operated a worldwide communications network (and sold the use of it to clients). It went by the name of IBM Global Network, latterly Advantis, and was sold to ATT in the 1990's (I think). With the money received, IBM bought Lotus Development Corporation. Nowadays, whenever IBM needs network service for its internal business operations, it buys it (usually from ATT).

So, high-bandwidth broadband-to-the-home may be a significant necessity for the USA in the 21st Century. But it doesn't seem likely that the domestic consumer will be able to buy it from IBM. IBM doesn't seem likely to buy, or build , the kind of infrastructure you would need.

So which businesses will do it ? Where will the partnerships, the value chains, establish themselves ? I know that IBM can manufacture and market many of the silicon chips you would need; it's 'Playstation, Xbox, and Wii volume', and that IBM can do.

But manufacturing, installing, and maintaining the fiber to the home ? Handling retail billing and consumer warranty ? Putting 'ten cents off' discount deals into 80 million mailboxes across the USA ?

It's got to be opportunity for someone.

[Tom Foremski]

I remember chatting with Vivek Ranadive, CEO of Tibco Software, a few years back, and he quipped that India was the killer application for broadband. And I think he's right.

Has IT in combination with the Internet created a disruptive combination of technologies, or has it merely enabled many services jobs to be done elsewhere for less money...? I'm not convinced that it has, I think Mr Ranadive may be right. Either way, the ability to use broadband to deliver low cost services from India, or Ukraine, sets a high bar for the disruptive technologies of IT and the Internet. I think it's difficult to see which is which right now.

South Korea has ridiculously high bandwidth for very low rates. How come South Korea hasn't gained a significant advantage with its near ubiquitous 100 MBps broadband, which we will be lucky to get by 2020?

[Irving Wladawsky]

Tom, very good point. As with other technologies, 100 MBps broadband is a means to an end, not the end in itself. If the applications are primarily games, video exchanges etc - there is likely to be no enduring economic value. Perhaps this is the case with South Korea. But, I am sure you will agree with me that there are very exciting applications to be developed once you have that kind of bandwidth to the home, and a reasonable fraction of it to mobile devices.

I also suspect that the bandwidth comes first, then the applications. So, it is quite possible that in South Korea and other countries with considerable bandwidth, you will see young people, who are now getting trained with games and other forms of entertainment, eventually put their training to work on more "serious" applications.

[Lenny]

So which businesses will do it ? Where will the partnerships, the value chains, establish themselves ? I know that IBM can manufacture and market many of the silicon chips you would need; it's 'Playstation, http://www.rapidskunk.com Xbox, and Wii volume', and that IBM can do.

[Shane Mcgrath - IT manager from Mortgage Report]

Our government in Australia has made a statement the other day that they liken the broadband infrastructure like the roads and rail of the previous century we need to invest in the new infrastructure for tomorrow or we will come to a stop.