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Internet Industry Expert: U.S. Policymakers Must Focus On Private Investment

October 19, 2016

Blue and red fibre optical cablesIn a Harvard Business Review article posted last week, Internet industry analyst Larry Downes argues that local, state, and federal policymakers should focus on building and improving U.S. digital infrastructure through private investment.

 Note: private investment.

While Downes argues for non-government investment in all types of infrastructure, including infrastructure that’s typically been funded by taxpayers, he notes “nearly all of today’s digital networks, though still heavily regulated, have been privately built and privately funded.”

Downes credits the Federal Communications Commission (FCC) for preserving this investment model in its National Broadband Plan (NBP), published in 2010. Downes notes, “With minor exceptions, the [NBP’s] authors did not recommend that any of the NBP’s goals be met through taxpayer spending.” Instead, the authors “called on Congress and the White House to ‘unleash private investment’ by reinforcing a bipartisan decision, dating back to the mid-1990s, to leave the internet alone.”

This policy of non-intervention has worked. Downes explains, as a result of it, “[P]rivate investment in the broadband ecosystem grew, particularly in mobile infrastructure and fiber connections, tying wired and wireless networks together for a coming 5G revolution.” Additionally, the United States is home to the most broadband connections and the most high-speed mobile subscriptions in the world and it “leads in innovation for apps and new services, and is home to the vast majority of internet market leaders, creating trillions of dollars in new value in the last two decades.”

Today, broadband private capital expenditures are around $70 billion a year and new providers are entering the market all the time.

Instead of direct funding by taxpayers—Downes argues taxpayer-funded networks have “delivered very little if any value”—Downes says, cities should “streamline bloated permitting processes, provide rights of way to existing infrastructure and access to government facilities, and appoint a single point of contact in city government to resolve bureaucratic tangles” as a platform to unleash private investment.

Downes worries that policymakers, especially at the FCC, are slowly abandoning the successful policy set forth in the NBP and argues they should not. He concludes that “it is clear that removing rather than adding regulation accelerated investment” in the nation’s digital infrastructure and that “fast-changing digital networks, at the very least, don’t need vast government support from an infrastructure bank, whether funded through tax increases or borrowing” because “providing policy incentives that encourage private investment” have been proven “to be the far superior approach.”