National information infrastructure

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Policy in Action

There never has been a specific plan or timetable for implementation of the NII initiative in the U.S., mainly because government cannot dictate actions or their timing to the private sector. Although the Clinton Administration's role in the NII is limited to that of regulator, user, promoter and protector, the Administration had planned to spend $1-2 billion annually in promotion and use (IITF, 1993). However, proposed legislation for such spending for the NII initiative failed to pass in Congress two years in a row in 1993 and 1994, and federal spending was limited to what the Administration could achieve through rearrangement and enhancement of existing programs within the federal government. Such rearranged spending amounts to over $1.5 billion annually, with about $500 million in “new” money. The total government support for all the various programs is shown in Table 1, by year. While substantial, the foregoing federal spending of $1-2 billion annually pales in comparison to the $50 billion spent annually by the private sector. In order to unleash that private spending, deregulation of telecommunications was part of the Administration’s NII initiative. However, the Administration’s proposals were only the opening shot in a battle that is mainly being waged within the U.S. Congress and the information industries.

[Insert Table 1 here.]

The major categories shown in Table 1 correspond to the government’s NII strategies excepting telecommunication reform. Government action can be summarized as follows:

· Research and development The federal government is attempting to support R&D related to the NII through continuation of existing programs such as the NREN and HPCCI. These programs are variously administered by the Advanced Projects Research Agency, the National Science Foundation, the Department of Energy and the Department of Commerce which make funds available to universities, federal research laboratories and private industry as well as consortia comprised of these groups. Federal R&D funding for these programs has increased from $666 million annually in 1992 to $1.6 billion in 1994 (Table 1). Also, the government, through the Department of Commerce’s NIST (National Institute of Standards and Technology), is sponsoring research into technological issues such as standards for interoperability and security. The Department of Commerce (DOC), the National Science Foundation, the Department of Education and the Department of Health and Human Services are also supporting demonstrations of new applications such as digital libraries, electronic commerce, medical diagnosis, medical record sharing and distance education.

· Government applications Vice President Gore has been promoting the use of computers and communications technology to streamline government operations and to experiment with new ways of providing information and services throughout the executive branch of government. Current spending is being redirected from its traditional focus on back-office operations to service delivery, and experimentation is underway with whole new ways of delivering services to the public. For example, the U.S. Government Printing Office, the National Technical Information Service and the Library of Congress are developing ways to make more of their information accessible in electronic from. The Internal Revenue Service is encouraging electronic filing of income taxes and offering immediate tax refunds as an incentive to filers.

The government also is promoting broader application of computers and communications within the government and society. The administration budgeted $96 million in 1994 (but $156 million was eventually allocated) to develop and apply high performance computing and communications and high speed networking in the fields of health care, education, libraries, manufacturing and the provision of government services. For example, THOMAS, which is named after former President Thomas Jefferson, is a Congressional Web site ( that provides information about the activities of the U.S. Congress, including the names and addresses of all the members, the full text of bills including their supporters and status, and the Congressional Record. Such Web sites exist for the White House, the Senate, the House, federal agencies and departments, and national boards and commissions (An overview of these and other governmental Web sites is provided in Internet World, August 1995: 29-48).

Support of Users The Department of Commerce’s Information Infrastructure Technology and Applications program, has provided about $75 million in 1994 for demonstration projects carried out in response to proposals received from state and local government, public and private partnerships, and community organizations. The projects have been variously concerned with developing connections or “on ramps” to the Internet, creating Web sites, developing special interest groups, providing information about public services, and delivering services. First year proposals to the program exceeded funds available by ten times and the administration proposed increasing funds for the program. Not only were the funds denied by the new Republican Congress, but it also introduced legislation to abolish the DOC.

Other Support The Clinton administration supports policymaking, regulation, spectrum allocation and standard setting for information infrastructure through federal institutions such as the Federal Communications Commission (FCC), National Telecommunications and Information Administration (NTIA), and the National Institute of Standards and Technology (NIST). This is not really new spending, except for a small portion devoted to the Information Infrastructure Task Force (IITF)—the citizen-government body that helped to launch the NII initiative.

Telecommunications Reform

Telecommunications reform is a key part of the NII initiative, especially since information infrastructure currently is being constructed under a 19th-century statute for regulating railroads.90 As explained by Roger Noll (1995:111), this is not “...the result of stupidity, corruption or inattentiveness on the part of government, but a highly significant example of a fundamental feature of U.S. governance. The United States operates under a system that is based on a deep skepticism of government intervention in economic affairs and that makes rational national planning of industrial development extremely difficult.”

On February 1, 1996 both houses of the U.S. Congress passed landmark legislation to restructure communications regulation with the explicit aim of stimulating greater competition in the information industries and speedy development of the NII. The sum and substance of the legislation involves five elements. First, restrictions against entry into local exchange service, including prohibitions against entry by cable television and other utility companies, are eliminated. Second, restrictions against the movement of local exchange carriers into long distance and manufacturing, and of long-distance carriers into local access are eliminated. Third, restrictions against local and long distance carriers moving into cable and other information services are eliminated. Fourth, cross media ownership is permitted up to 35% of the market (vs. 25% previously). Fifth, foreign ownership of the media is permitted up to ...... (vs. xx% previously).

Thus, the consensus expressed in the legislation is that local access, just as long-distance service, ought to be unregulated and competitive. In addition, the present reality is that more than half of investments in telecommunications networks are now being made for local systems other than the traditional monopoly local exchange network. Moreover, the political system has pretty much reached accord that this diversity should be facilitated rather than retarded (Noll, 1995:114).

The direction of the recent deregulation appears clear. It is to promote competition among all the providers and therefore to eliminate or greatly reduce barriers to entry.

The legislation is expected to lead to greater concentration of production and distribution in the information industries. However, it is difficult to say whether this will be the case. For example, there are merger discussions between the Walt Disney Companies and Capital Cities/ABC Broadcasting on the one hand and Time-Warner and Turner Broadcasting on the other (Table 2). The latter merger would create the world’s largest media company with around $20 billion in revenues annually (Sterngold, 1995). However, these mergers appear to be a response to new market opportunities, including those created by deregulation, and do not depend on deregulation per se.

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While integration is occurring on the content side (movie/cable TV/broadcasting) of the industry, there is disintegration on the telephone and computer side as firms break-up, disintegrate and downsize themselves. AT&T, which announced its second break-up in 1995, is separating into three companies for equipment manufacturing, telephone services and information services, and seeking to sell the latter. In January 1996, AT&T announced it is downsizing by 40,000 employees. IBM has disintegrated itself from a single, vertically integrated firm into seven more or less independent companies and has downsized from 450,000 employees to around 250,000 worldwide. These actions also appear driven largely by business and market conditions, and only indirectly by deregulation.91 To reinforce this point, entirely new entrants are emerging on the content side clearly in response to new market opportunities. For example, Microsoft and NBC have announced partnership in a 24-hour cable TV news channel that will compete with CNN by offering subscribers interactive capabilities related to news stories.92 The Dream Works partnership of Steven Spielberg, Jeffrey Katzenberg and David Geffen has raised $2 billion in capital to build an entirely new digital studio on 100 acres in Los Angeles for movie, television, music and CD-ROM title production, with MCA Inc. to distribute its movies, music and CDs and Hasbro Inc. to make its toys.

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