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CHAPTER II - The Current Environment

To provide additional context for the conference discussions, Kevin Werbach, Associate Professor at The Wharton School, catalogued the current tech environment and some of the associated policy issues likely to demand attention in the near future. The landscape he described is highly dynamic and marked by numerous disruptive forces.

Werbach began by pointing out the emergence of new network-based digital technologies and business models that are likely to challenge existing regulatory schemes. For example, while cable and cellular network operators are now the primary broadband access providers, new players and new business models are emerging that could challenge their dominance. Companies such as Google and Facebook, which have been largely exempt from traditional telecom regulation, are rapidly becoming access providers in their own right by investing in the development of nontraditional delivery channels, while OTT (Over-the-Top) providers are also creating new channels for content delivery. And just as the large ad-supported platforms like Google and Facebook are becoming carriers, traditional telecom companies are moving into content, with Verizon acquiring AOL and Yahoo, and AT&T announcing its intention to acquire Time Warner, further shifting the boundaries between industry participants. One important decision for the new administration will concern its attitude toward anti-trust law and whether it intends to challenge such mergers.

At the same time, entirely new forces are appearing. Supposedly neutral digital algorithms are becoming more powerful and pervasive, threatening to embody discrimination in new, more subtle forms and intrude more deeply into personal lives, requiring a rethinking of traditional approaches to protecting privacy. The blockchain distributed ledger (the basis for crypto-currencies like Bitcoin) will offer powerful capabilities that pose new regulatory challenges along with exciting opportunities for innovation. Meanwhile the openness of the Internet’s architecture and of social media is raising difficult questions about the limits of free speech and the need to provide protections against malicious actors. And autonomous vehicles and the Internet of Things are creating new issues around safety and security related to the convergence of digital networks with real-world objects.
Amidst all this change, Werbach noted that some constants remain. Mobile traffic continues to grow at an exponential rate, driving a seemingly insatiable demand for more bandwidth for wireless communications. And the fundamental economics of networks continue to be anchored in the equation of high fixed costs (capex) and low variable costs (opex). Even as variable costs for digital communications (the price per bit transmitted) continue to fall toward zero, the question of how to price access to information remains problematic: Does information want to be free or to be expensive? Depending on circumstances, the answer to both questions can be “yes.”

In offering his prognostications for the future, Werbach noted that it is always difficult to escape the limits of our ability to look ahead. There are no “future facts,” and it is always safer to look backwards than to look forward. For example, it can be misleading to simply project past trends into the future (one must be careful how one uses a back azimuth for navigation).

Issues related to timing are particularly tricky. For example, we seem to be finally reaching the limits of Moore’s Law,i which has driven so much technological progress over the past half century. As a result, we might be “getting near the top of the technology curve” and entering a period of comparative stability. There will surely be a “next wave” at some point in the future, but is the next major “S-curve” that boosts the power of technology by another order of magnitude likely to happen in the near-term, or is it still a decade or more away? To what extent will 5G, the next generation wireless standard, due to be completed by 2020, be a game changer? How soon will we actually be riding in autonomous vehicles? Will humans be totally banned from driving cars within twenty years, as Elon Musk predicts, because they will be considered too dangerous? Will developments in AI lead to systems that not only perform useful functions but that can truly rival human intelligence?

Others suggested that we may be at a point of broadly diminishing returns on technology, in which practical considerations like improving usability, affordability, efficiency and reliability will loom larger than increases in raw performance. An equally important question is whether demand for more bandwidth will follow past trends. The recent growth of wireless traffic, for example, has been largely driven by the popularity of high bandwidth streaming video on mobile devices. But will the emergence of the Internet of Things shift demand toward networks that can support large numbers of small, bursty transmissions from millions of connected devices? As homes become smarter and more automated, will they routinely generate more data than they consume, reversing the current pattern? Finally, as bandwidth increases, what new applications will emerge that we cannot now foresee?

Still, whatever tomorrow’s “unknown unknowns” may be, today’s “known knowns” related to telecom policy (e.g., the need for more bandwidth for mobile communications, the transition to next generation 5G wireless networks, privacy and cybersecurity concerns) would seem to be sufficient to fill the agenda of any new administration. Among the big questions that will need to be addressed are:

  • Are traditional approaches to regulation becoming outdated in a broadband Internet world or can they be adapted to accommodate new realities?
  • Where does competition ensure robust markets and where is it lacking?
  • What policies are needed to support private investment and to encourage continued innovation? Are there areas where public investment is needed?
  • What telecom services are essential and which are not? Which services deserve to be subsidized?
  • Does a single national goal to provide universal access to high performance communications (e.g., broadband or the latest-generation wireless service) still make sense, or should there be different goals or distinctive approaches for different environments (e.g., urban vs. rural areas)?
  • Should more be done to accelerate the adoption and use of new technologies by individuals and by key industry segments? What might be done to expand inclusion in the ownership and control of key channels of communication?
  • Is it time—20 years after the Telecommunications Act of 1996—to update telecom regulation? How feasible is such an effort? What can be accomplished within the existing framework?
  • What needs to be done to ensure that the U.S. maintains global leadership in telecom and tech?
ENDNOTES
i Although there is an absolute physical limit to how small transistors can be that will determine the end of the shrinking of components which has been the basis for Moore’s Law, researchers keep proposing new approaches to circuit design based on unconventional materials and architectures that could allow the performance of computers to keep improving for the foreseeable future. See, for example, Tom Simonite, “Moore’s Law Is Dead. Now What?” MIT Technology Review, May 13, 2016. Available online: https://www.technologyreview.com/s/601441/moores-law-is-dead-now-what.

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