IT Deregulation Is Key to Economic Growth

Published April 1, 2008

Bret Swanson of the Progress & Freedom Foundation and George Gilder of the Discovery Institute predict the U.S. Internet of 2015 will be at least 50 times larger than it was in 2006.

Their report, “Estimating the Exaflood: The Impact of Video and Rich Media on the Internet–A ‘zettabyte’ by 2015?” estimates annual totals for various categories of U.S. Internet protocol (IP) traffic in the year 2015.

Here’s what it projects:

  • Movie downloads and peer-to-peer (P2P) file-sharing of 100 exabytes;
  • Internet video, gaming, and virtual worlds of 200 exabytes;
  • Non-internet IPTV of 100 exabytes, and possibly much more; and
  • Business IP traffic of 100 exabytes.

An exabyte, Gilder notes, is equal to one billion gigabytes, or approximately 50,000 times the contents of the U.S. Library of Congress.

The report expands on Swanson’s article, “The Coming Exaflood,” which was published in The Wall Street Journal on January 20, 2007.

Technology Can Revive Economy

Swanson and Gilder note the network isn’t currently designed to handle this increase.

“Internet growth at these levels will require a dramatic expansion of bandwidth, storage, and traffic management capabilities in core, edge, metro, and access networks. A recent Nemertes Research study estimates that these changes will entail a total new investment of some $137 billion in the worldwide Internet infrastructure by 2010. In the U.S., currently lagging Asia, the total new network investments will exceed $100 billion by 2012.”

This is less than the projected cost of the economic stimulus bill signed by President George W. Bush in February, which is expected to repatriate some $168 billion back to taxpayers.

While the tax cuts are certainly welcome, hardly anyone has been thinking about how to empower the telephone and cable companies to revive the economy. That would mean scrapping network neutrality legislation–which is really just corporate welfare for Silicon Valley–and eliminating discriminatory taxation of communications services.

Swanson and Gilder correctly point to a fact that’s lost on the political class:

“Technology remains the key engine of U.S. economic growth and its competitive edge. Policies that encourage investment and innovation in our digital and communications sectors should be among America’s highest national priorities.”

Deregulation Helps Growth

The question then becomes, how best can we foster this growth? In its Networked Nation: Broadband in America 2007 report, released January 31 of this year, the National Telecommunications and Information Administration (NTIA) noted the total number of broadband lines in the United States has grown by more than 1,100 percent, from almost 6.8 million lines in December 2000 to 82.5 million in December 2006, according to the most recent Federal Communications Commission (FCC) data cited in the report.

The report notes the dramatic increase in broadband investment–from $15.2 billion in 2003, to $24.4 billion in 2007, and projected to double in 2010.

The Bush administration’s deregulatory broadband policy has helped make this possible.

In addition to the deregulation of fiber networks, the administration’s most important initiative was to (1) declare cable modem services are “information services” and therefore subject neither to regulation under Title II of the Communications Act nor to regulation by the states, and (2) bring the regulation of digital subscriber line (DSL) services into parity with that of cable modem service by removing legacy regulations from DSL providers that had required them to share their networks with competing Internet service providers (ISPs), tariff their DSL services, and comply with other traditional telephone regulations.

The issue is whether we need a broadband agenda based on new taxes and more regulation, or whether the Bush administration has proven we can have more investment in broadband by reducing taxes and regulation. The NTIA report provides the answer.

Deregulation of the infotech and telecom sector is the key to growth in the next stage of the U.S. economy.

Hance Haney ([email protected]) is director and senior fellow of the Technology & Democracy Project at the Discovery Institute. Haney spent 10 years as an aide to former Sen. Bob Packwood (R-OR) and advised him in his capacity as chairman of the Senate Communications Subcommittee.

For more information …

Networked Nation: Broadband in America 2007, National Telecommunications and Information Administration, U.S. Dept. of Commerce, January 2008: