“I’m Luke Skywalker, I’m here to rescue you.” Luke Skywalker, Star Wars (1977).
What’s the difference between innovation and investment? I find myself pondering this question frequently these days. Over the past ten years or so, the FCC focused on encouraging “investment” in “infrastructure” based on the previously fashionable view that the United States needed to build more broadband infrastructure. Lately, however, the FCC seems more concerned about “innovation” than the other two little “i” words, investment and infrastructure. So the FCC has decided to rescue “innovation” through prescriptive net neutrality rules.
But, what is “innovation” (and is it really in trouble)? The dictionary included with OS X says innovation is “a new method, idea, product, etc.” In other words, an “innovation” is anything that is “new.” For the pro-net neutrality folks, however, innovation isn’t defined nearly so broadly. No, for the pro-net neutrality folks, innovation means new Internet applications. In their way of thinking, the billions of dollars of investment being made to develop and deploy new OFDM-based (WiMAX and LTE) wireless broadband infrastructure is not innovative. Let me show you what I mean.
Footnote 144 of the net neutrality NPRM quotes net neutrality proponent Professor Lessig, who says, “[i]f the principle of end-to end is abandoned . . . innovators must now include in their calculation of risk the threat that the network owner might either block or tax a particular application. That increased risk will reduce application investment.” (The emphasis is mine.) However subtle it may be, this quote attempts to equate “innovation” with “applications” by substituting the term “innovators” for “investors.” Another example is the text in footnote 146, which, through linguistic nuance, equates “innovation” with applications, content, and services, and “network operators” with, well, discriminatory copycats. Throughout the NPRM, investment in applications is equated with “innovation,” but investment by network operators is just plain old “investment.” The way the NPRM reads, one would think the network operators were developing and deploying analog radios rather than an entirely new generation of extraordinarily advanced wireless technologies.
If I were trying to rescue the Internet, I’d be worried about investment in infrastructure, not software.
The sleight of hand is particularly subtle when the NPRM discusses “investment.” In paragraph 68 of the NPRM, the FCC states: “Investing in innovative Internet content, applications, and services is risky, and firms will not invest unless their expected revenues exceed their expected costs.” The FCC appears concerned that, if enough network operators charge fees, Internet content, applications, and service providers could be driven from the market. This is, of course, the same argument that the previous FCC used to justify a de-regulatory approach to broadband Internet policy (just substitute “infrastructure” for “content, applications, and services”) – except that the previous FCC was concerned about infrastructure investment rather than software. See, for example, the order classifying wireless broadband Internet access as an information service.
Although the effort to equate investment in “innovation” –i.e., something “new” – only with investment in Internet applications and content is impressive, this new take on broadband isn’t supported by the data. An enormous amount of investment in new – i.e., innovative – technologies will be required for our wireless networks to evolve in the next several years, and I’m willing to wager that the amount of required investment in infrastructure dwarfs the need for investment in application development. Why? Infrastructure is vastly more expensive to deploy than software is to develop. At the September 29, 2009, FCC meeting, the broadband task force estimated that it would take approximately $350,000,000,000 to build a monopoly fiber infrastructure to every home in America. If I were trying to rescue the Internet, I’d be worried about investment in infrastructure, not software.
“That’s some rescue.” Princess Leia, Star Wars (1977).
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broadband LTE net neutrality wireless