All countries’ implementation plans call for broadband communications capable of two-way voice, data and video communications connecting businesses and households. Most assume fiber optic communications in a single network or a network of networks to the building and the block if not to the household itself. The plans generally call for the technology to be in place in 10 to 20 years for major urban areas if not countrywide. Only France has a 20-40 year horizon, which seems to reflect a lower export orientation, the need to fit in with European Union plans, the difficulty of privatizing France Telecoms, and the desire to protect French culture by moving slowly on the road to the information society.
Most countries’ plans call for speeding up implementation of the NII in order to achieve the economic benefits faster. As mechanisms to speed up implementation, country plans call for stimulus spending, government use, promotion of societal applications and telecommunications reform. However, as will be discussed more fully below in “Realities,” many countries, and particularly the information service providers, both public and private, have recently scaled back their ambitions regarding the technologies, timing and role of government since the earliest plans appeared in 1993.
Models for NII development
Country plans call for private sector implementation of the NII. However, the country studies illustrate that NII plans and discussions do not seriously engage the question of models for NII development as a matter of public policy concern. They assume that appropriate models will emanate from private competition and that users will have wide choice. The Internet and the worldwide web have turned around the idea of distribution from the providers to the users, to that of user-to-user distribution; yet this is not the model usually found in private sector plans. The model of NII in existing commercial ventures, mergers and acquisitions and evolving strategic alliances is that of interactive TV and commercial on-line services such as Prodigy, America Online and Compuserve. These are “gateway” models which posit control over content and its distribution to the service providers who bundle content and distribute it through their own conduit. In contrast, the “common carrier” or “peer to peer” model illustrated by the Internet in the United States and Minitel in France is seldom put forth as a model of how commercial information services will be provided. The failure to set forth preferred models, or to ensure that at least these two basic models exist, might lead to frustration of economic and social goals.
The prospect that this might happen is heightened by promoters of liberalization. As illustrated by private debates in the United States between Gilder, Toffler and Gingrich on the one hand and Daniel Burstein on the other, the promoters of liberalization as an NII strategy make the happy assumption that free competition will invariably lead to the common carrier model. Even if oligopoly should develop, they argue that it will be undone by the next wave of technological innovation. The problem with these happy assumptions is that major technological innovations are likely to occur in fifty year rather than five or ten year cycles thereby frustrating both consumer interests and the broader public interest in open, easy access to the NII.
NII services and user needs
Who is going to use the NII? It is clear that businesses and professionals are going to be the first users of the NII because they have the clearest need and the money to pay for the last mile. Japan already has wire to the building in central Tokyo and other major cities, and Singapore and Hong Kong also have wire to the building in their small, dense city states. The last mile to the home is telephone and/or cable in all five countries. All of the NII visions assume there is a need for a high speed, high bandwidth wire into and out of households. In fact, the need for high bandwidth is only into the home in order to receive high quality images, large databases, etc. that can be downloaded to PCs or other information appliances. This same need does not exist at the output side because the speed of inputting data at the household level is essentially limited by typing speed and dealt with adequately by existing telephone lines. Moreover, there might not be a need for any kind of wire to the household in the future. Cellular, low orbiting satellites and video techniques might allow speeds and bandwith needed for fast, quality reception.
The initial euphoria and rosy forecasts for NII implementation are giving way to a host of realities which have the net effect of slowing down implementation. Technology is a key factor in the slowdown everywhere and has two very different aspects. The first is continual change in the technology which makes available new options not possible before. This is illustrated by current thinking that wireless technology supported by low orbiting satellites might provide high quality broadband communications, thereby eliminating the need for the very expensive last mile wire to the home and wire-based services to rural and remote areas. It is also indicated by the current realization that high bandwidth might be needed coming into the home in order to quickly download high quality video and broadcast images, but that existing wires might be adequate for communications coming out of the home.
The second technology aspect affecting the slowdown in implementation is disappointment with the results of technology trials which raise serious questions about user interest and willingness to pay for the new services envisaged early on. These disappointments are causing some information service providers to scale down, drop, or radically change their early implementation plans. In the United States, for example, AT&T and the seven regional Bell operating companies surprised federal officials in January when they opted not to participate in the auction for a new satellite TV service. AT&T chose a more modest route of investing in an existing satellite TV service. Similarly, the regional Bells have grown cool to the idea of providing video to consumers other than through a traditional cable TV system. As put by one observer, “more deals seem to be unraveling than coming together.”
Benefits and costs of NII
The country cases all illustrate that the major players in NII development assume that the benefits of NII will be positive, immediate and direct if one is an early adopter and the consequences will be dire if one fails to adopt. There is a bit of hysteria about the claims for and threats of NII which appears intended to mobilize domestic political support for policy and action. This hysteria is seen most directly in the case of Japan, but it is present in the other country case studies too. The United States particularly is posed as a giant competitive threat despoiling others’ domestic industries and culture if the countries do not “get on board the NII train which is leaving the station.” The premises underlying the benefits and threats are not seriously assessed in any of the NII studies, policy statements, or discussions. They are not examined either in terms of past experience or current developments.
In contrast to the rhetoric, prior research and the evolving experience with NII trials and demonstrations indicate that NII effects are likely to be a complex mix of positive and negative outcomes, require a long time to be felt and occur indirectly. One example is the economic and employment benefits. Japan and Korea both claim extraordinary revenues and jobs from the NII but do not substantiate these claims with serious analyses. The United States estimates the incremental benefits of large government spending aimed at speeding up private development of the NII without considering opportunity costs.
Another example is network externalities. It is clear that the greatest benefits of NII will occur when the vast majority of business and household users are interconnected. However, realistic estimates place this at 20-40 years in the future rather than the five to fifteen years assumed by the various countries as illustrated in the case studies. In the short term, benefits will accrue primarily to large businesses, professional users and wealthy, educated households because they will be best equipped to use and pay for NII services. Small businesses, remote areas, inexperienced users, poor households and even the majority of households will be left out of the more advanced systems and applications unless major technological breakthroughs should develop that are now unforeseen. In short, the rhetoric of benefits and costs are not seriously examined and are generally unrealistic.