OPEC 2.0

[David Farber <dave () farber net>]

________________________________________
From: Ted Dolotta [Ted () Dolotta ORG]
Sent: Wednesday, July 30, 2008 10:57 AM
To: David Farber
Subject: OPEC 2.0

Dave,

Interesting analogy.

For IP?

Ted Dolotta
=============================================================
By TIM WU

Published: July 30, 2008

AMERICANS today spend almost as much on bandwidth - the capacity
to move information - as we do on energy. A family of four
likely spends several hundred dollars a month on cellphones,
cable television and Internet connections, which is about what
we spend on gas and heating oil.

Just as the industrial revolution depended on oil and other
energy sources, the information revolution is fueled by
bandwidth. If we aren't careful, we're going to repeat the
history of the oil industry by creating a bandwidth cartel.

Like energy, bandwidth is an essential economic input. You can't
run an engine without gas, or a cellphone without bandwidth.
Both are also resources controlled by a tight group of
producers, whether oil companies and Middle Eastern nations or
communications companies like AT&T, Comcast and Vodafone. That's
why, as with energy, we need to develop alternative sources of
bandwidth.

Wired connections to the home - cable and telephone lines - are
the major way that Americans move information. In the United
States and in most of the world, a monopoly or duopoly controls
the pipes that supply homes with information. These companies,
primarily phone and cable companies, have a natural interest in
controlling supply to maintain price levels and extract maximum
profit from their investments - similar to how OPEC sets
production quotas to guarantee high prices.

But just as with oil, there are alternatives. Amsterdam and some
cities in Utah have deployed their own fiber to carry bandwidth
as a public utility. A future possibility is to buy your own
fiber, the way you might buy a solar panel for your home.

Encouraging competition is another path, though not an easy one:
most of the much-hyped competitors from earlier this decade,
like businesses that would provide broadband Internet over power
lines, are dead or moribund. But alternatives are important.
Relying on monopoly producers for the transmission of
information is a dangerous path.

After physical wires, the other major way to move information is
through the airwaves, a natural resource with enormous
potential. But that potential is untapped because of a false
scarcity created by bad government policy.

Our current approach is a command and control system dating from
the 1920s. The federal government dictates exactly what
licensees of the airwaves may do with their part of the
spectrum. These Soviet-style rules create waste that is worthy
of Brezhnev.

Many "owners" of spectrum either hardly use the stuff or use it
in highly inefficient ways. At any given moment, more than 90
percent of the nation's airwaves are empty.

The solution is to relax the overregulation of the airwaves and
allow use of the wasted spaces. Anyone, so long as he or she
complies with a few basic rules to avoid interference, could try
to build a better Wi-Fi and become a broadband billionaire.
These wireless entrepreneurs could one day liberate us from
wires, cables and rising prices.

Such technologies would not work perfectly right away, but over
time clever entrepreneurs would find a way, if we gave them the
chance. The Federal Communications Commission promised this kind
of reform nearly a decade ago, but it continues to drag its
heels.

In an information economy, the supply and price of bandwidth
matters, in the way that oil prices matter: not just for gas
stations, but for the whole economy.

And that's why there is a pressing need to explore all
alternative supplies of bandwidth before it is too late.
Americans are as addicted to bandwidth as they are to oil. The
first step is facing the problem.

Tim Wu is a professor at Columbia Law School and the co-author
of "Who Controls the Internet?"

Copyright 2008 The New York Times Company




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