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Reason's wobbly reasoning

by Malcolm Matson posted at 2007-01-08 21:24

Last evening  I was at an old friends birthday party ('old' as in 'ancient' and  'old' as in 'longstanding').  A distinguished former BBC TV producer and now a professor at a US University, few of his other guests had any idea of our common current link through the OPLAN Foundation - of which he is a member of the Council of Reference.  So when asked, "What do you do",  I respond with reference to this current link I have with our birthday boy host.   It evokes the inevitable response, "..and what does OPLAN  stand for?"   I  would like to think that this is an invitation to start extolling the nature and benefits of open access networks, but I know it is not and that it is a simple request to unpack the acronym.  "It stands for Open - Public - Local -Access-Networks".   I feel like following this up with, "...and like the renowned British TV commercial for the wood-dye, Ronseal - they do exactly what it says on the tin!"  

Although there is no hard and fast definition of an OPLAN, I choose carefully and specifically when applying these 5 words to denote the key charateristics of this new paradigm of digital network deployment.  You will find a more comprehensive list of key defining characteristics OPLANs here.  And last but not least in that list, is the proposition that an OPLAN, "is funded by the private sector - not a backdoor to re-nationalisation or state control".

It is time take a look at this important element, especially as so many municipalities, cities and local public authorities around the world are in the vanguard of considering how to bring to their local communities greater benefits from the digital technologies than is available from a continued commitment to the outdated, vertically integrated business models of the cable and telco sectors.   These local, democratically accountable public bodies are quite right to be concerned that their citizens derive full benefit from these technologies, but they should focus on ensuring that this is delivered through free and open market activity and most important of all, that they as one of the largest potential 'users' of an OPLAN, are 100% dedicated to doing so up and down and throughout their organisations.   We consistently argue that the superficial competition that now exists between former state-created telecom monopolies and their more recently formed and public-policy sustained, 'me-too' vertically integrated competitors is a long way from "free and open market competition" which would be characterised by new, innovative and highly destructive (to the vested interests) business models deploying this 'next genus' infrastructure.   But that is no reason for the local public sector to try and appropriate to itself the task.   As my old grandmother taught me - "two wrongs don't make a right".   I have had many a vigorous discussion with Jim Baller (one of the leading US lawyers advising cities on how to realise their muni-wireless dreams) and others on what I regard as the flawed direct involvement of the local public sector in directly developing broadband infrastructure initiatives or providing 'free intermet access for all'.  Dianah Neff who acquired fame from her former pioneering role as CIO of the City of Philadelphia (and is also a member of the Foundation's Council of Reference) is someone I greatly admire for her stance but it is worth watching this ZDnet extended interview Dianah gave in August 2005, to see the extent of the direct participation of the public sector which she advocates - a position with which I do not agree. 

Well, now we have some interesting, well researched evidence on the impact of these direct local government interventions in this sector.  The Reason Foundation ('free minds and free markets'), the respected US free market think-tank published in November 2006 a report entitled, "A Dynamic Perspective on Government Broadband Initiatives", witten by Jerry Ellig and Adrian Moore.  It is worth reading on two scores.  Firstly, it sets out some strong evidence and arguments against the benefit of direct public sector involvement in the deployment of local broadband infrastructure.  Secondly, it is an infuriatingly inadeuate piece of research in that it unquestioningly accepts the vertically integrated structure of the current telco/cable sectors as if these are the natural out-workings of a free-market, rather than the bad-fruit of decades of state intervention, vested interest lobbying and flawed regulatory regime and swallows the telco story that 'internet access' is the one and only topic on the local broadband network agenda.    The authors rightly state that,  "Policymakers need to consider some unique problems when a government enterprise enters a dynamic market such as the provision of internet services", but fail to acknowledge, let alone examine, the fact that the today's status quo and 'apparent' competition is through and through, state created and controlled.  If you have limited time or interest, then I suggest you restrict yourself to reading the summary.

A refreshingly enlightened and far more informed consideration of the proper role and limits of government participation in stimulating 'next genus' broadband infrastructure is contained in the paper, "America's Technology Future at Risk: Broadband and Investment Srategies to Refire Innovation" written by Clyde Prestowitz, President of the Economic Strategy Institute in Washington DC, USA.  This has been available on the OPLAN website for some time now but it has not received the attention I believe it deserves.  I can strongly recommend this as a 'must read' for anyone wishing to gain an informed understanding of the interface between government public policy and the deployment of disruptive technologies and business models around the world.  It is worth quoting here from the Executive Summary of Clyde Prestowitz's work( Page XV):

"...It is also clear that new business models will have to be developed. The question is what role the government should play in that development. Now that real, facilities based competition has emerged, there need be less concern than previously with whether the market is sufficiently competitive. In view of that, and in view of the largely counter-productive regulatory role of the FCC over the past then years, the objective now should be to allow market forces to do their work.  Policy makers and legislators need to assure that investment and technology deployment are no longer being deterred by artificial regulations and that regulators are not trying to favor particular sets of participants. Free and fair competition should prevent both abuse of market position and restrictions on the free flow of information over the telecommunications networks. On the other hand, it is possible that competitive forces will not always be operative. Thus, part of a new FCC mandate in the context of new business models should be to monitor competition and market power abuse. All participants have pledged that they will not restrict information flows.  The FCC’s role should be to hold them to those pledges with any abuse of market power being subject to special anti-trust action triggered by the FCC."
 
Just so!  As we concluded in our study for the World Bank, it is too early to find conclusive and concrete statistical data of the socio-eocnomic benefit of OPLANs but there is now some evidence of the negative impact of direct local government intervention in the provision of local networks - not to mention the macro impact refered to in the above quote and frequently bemoaned by me and others.  We need to ensure that the debate progresses and does not as a result of research such as that to have come out of the Reason Foundation, fall back into an unquestioning acceptance of the state-sustained status quo which is preserving the survival of vertical integration and closed networks.  That would short change our citizens as much as would taxing them to pay for the well meant but foolish direct government broadband projects that are springing up in various cities - mostly in the US.  Read again 'what it says on the tin' and let's focus on ensuring that the market is free enough to permit the successful entrepreneurial investment in what the world really needs - disruptive technologies deployed under radical new business models - in a word, OPLANs.


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