Universal Service and the Information Impoverished [baseball bats to the right .. djf]

[David Farber <farber () central cis upenn edu>]

Date: Fri, 15 Apr 94 11:54:28 -0400
From: shap () viper cis upenn edu (Jonathan Shapiro)
To: farber () central cis upenn edu, mnemonic () eff org
Cc: interesting-people () eff org, dancer () aurora cis upenn edu


[Mike: If you have any interest in publishing this in Effector, feel
free - Jonathan Shapiro]


There's been a lot of "hoopla" recently over the information poor.
One side says the information poor need to be subsidized.  The other
side looks at welfare, food stamps, equal opportunity housing,
illiteracy rates, and their tax returns and thinks this is crazy.


If I disagree with the tone on both sides, I have sympathize with the
anti-subsidy view.  When I add it all up, my tax rate last year was
over 47%.  I'm inclined to think that most of the subsidies would end
up in the pockets of the advocates, and I don't especially like that.


Poverty is not curable, even in principle.  It is an inescapable
consequence of competition, which is an essential characteristic of
humanity.


But as a past CEO of the Xanadu Operating Company, whose original
vision has influenced almost every part of the NII community either
directly or indirectly, I'ld like to offer a business perspective on
supporting the information poor.


The term "National Information Infrastructure" is misleading.  What we
are building might more accurately be named a National (and hopefully
international) Information *Marketplace*.


You and I do not produce much in the way of tangible goods, but we can
readily get in contact (e.g. by phone) with those who do.  Without
that ability, we would simply be adrift in a fantasy world that had no
bearing on reality.  The so-called "information poor" are the glue
that binds the information world to reality.  Without them the
information marketplace lacks relevance, and loses its economic value.


Universal Service makes sense to the National Information
Infrastructure providers for the same reasons it made sense to the
Bell System:


    o The capital investment would place the providers in a monopoly
      niche.  The established utility, transportation, and energy
      companies of the day were all built on regional monopolies.


    o The per-capita deployment costs of technology are small, even
      for the poor.


    o Demographics: poverty migrates from one place to another over
      time.  Wires do not.  In the long term, wiring up the urban poor
      and the remote was a good investment.


    o Advantages of scale:  Even if the poor could not afford to use the
      NII, their more fortunate friends and family *can*.   The
      provider makes money regardless of who dials, but only if it
      controls substantially all of the NII "telephones" in a region.


Today, even the appalachian poor have access to telephones.


Unfortunately, there are some major differences between the NII
deployment and the deployment of the telephone:


    o The National Information Marketplace is being constructed by the
      government (which is, in my opinion, unfortunate).


    o The notion of a monopoly is, in our day, distasteful.  There is
      no single player involved in the NII effort who can lead the
      way, nor would we permit them to do so if they could.


    o The access technology being deployed to the end users is not
      supported by even a short-term monopoly, which prevents
      amortizing the costs over time. (This dramatically alters the
      picture as seen by an investor.  If you can amortize the NII
      "telephone" it becomes part of your capitalization instead of a
      cost.)


Under these conditions, it is simply not possible for any one player
to economically motivate Universal Service.  Having started the game
in this fashion, it is too late to switch to the other model; there
are already to many players for any one to achieve the necessary scale
to amortize the costs of the poor, and the cost of entry into the
business is too low to act as a barrier.


Nonetheless, from a *collective* business perspective, we need the
information poor connected.  The question is not *whether* to pay for
them, but *how* to do so while maintaining a level playing field for
the competitors.




Jonathan S. Shapiro
Synergistic Computing Associates