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| Electrifying rural South Dakota |
The strategic goal of infrastructure is not to derive economic benefit from the asset itself, but to generate economic benefit by maximizing the use of the asset. Steve Song.
Eric Yuan, CEO of the Zoom teleconferencing service, stated that the average number of daily meeting recipients increased from 10 million in December 2019 to 200 million in March 2020 in a webinar last month. I've been teaching 21 students using Zoom as a result of the COVID-19 pandemic and the audio and video are smooth and switching between speakers is seamless. Offhand, I cannot think of any technology that has scaled so well so fast.
When I teach, I use transport offered by Charter, Amazon, and others to reach Zoom’s application on a server in an Amazon data center in Virginia. (Zoom has servers in 16 data centers around the world). Zoom's rapid expansion would not have been possible without the transport and application-service infrastructure provided by private investment.
It is a remarkable success story, but imperfect.
Two of my students have been unable to participate in our Zoom meetings because they cannot afford fixed Internet access at home, the campus labs are closed and data caps limit their participation with mobile phones. I can afford home connectivity, but Charter is the only broadband provider on my block, so I must pay whatever they decide to charge me. That is the situation in Los Angeles and there are rural areas in the US and many locations in other nations where broadband connectivity is not available at any price. (Amazon has competition but their dominant infrastructure position provides them with opportunities to be "be evil" if they are not monitored).
The Federal government funded the research, development, and procurement that led to the Internet then turned to private companies like Amazon and Charter to create the infrastructure Zoom and others use. The COVID-19 pandemic with its attendant substitution of communication for transportation highlights the fact that Internet access is as much a necessity today as access to sidewalks, roads, and highways.
Can publically-owned infrastructure fill the Internet infrastructure gap?
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| Singapore ISP equity, June 2000 |
China seems to follow a semi-public strategy of funding private companies and allowing them to compete against each other while retaining political control rather than equity. They followed this strategy in developing terrestrial Internet infrastructure and applications and are doing the same with satellite broadband. Community networks, where the users own and operate the network, are another form of quasi-government ownership.
I don't mean to imply that public ownership is inherently superior to private ownership. Public ownership may lead to cronyism and bureaucracy. For example, Cuba has a bureaucratic government-monopoly Internet service provider and Cuban infrastructure and access lag behind other Latin American and Caribbean nations, content is controlled and they recently confiscated SNET, a large and successful community network (that was not connected to the Internet).
There is no simple, optimal public/private policy and whatever we do needs to be continuously monitored and adjusted as people learn to game the system, but the proposal for the creation of a National Investment Authority (NIA) by Cornell University law professors Saule Omarova and Robert C. Hockett is a good place to begin the discussion.
The NIA would bail out citizens and critical organizations during a crisis like COVID-19 and invest in socially valuable collective goods like rural broadband, renewable energy, affordable housing, and clean water during stable times. An independent NIA governing board would set development goals and strategies but would not make investment decisions. Those would be made by a National Infrastructure Bank (NIB) and a National Capital Management Corporation (NCMC).
The NIB would buy and securitize bonds that municipalities and other public and private actors issue and the NCMC would seek investors in a collection of socially valuable investment funds the way a privately owned asset management/venture capital firm like Blackrock does.
But, why would a private investor invest in an NCMC fund that was focused on long-term social return instead of a fund of a private asset management firm that seeks to maximize financial return? The government would guarantee an attractive, relatively short-term return on investments in NCMC funds. It would convert the expected long-term return to society into a reasonable short-term return to private investors.
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| A partial explanation for the popularity of active industrial policy Source |
Lest this seem an impossible dream in today's divided political environment, check out Tucker's long Twitter thread with examples of congressional House and Senate candidates -- including some Republicans -- who won while running on an industrial policy "focused mainly on building up the nascent industries that policymakers want to see grow" like "domestic semiconductors and 'infant industries' like green hydrogen and floating offshore wind." (Be sure to click on "show replies" since the thread is in three parts).
A democratic industrial policy would allow the public to have a say in which industries should survive and thrive and Omarova and Tucker cite several historical and current examples of such policies and the organizations that implement them including the "more ambitious and strategic National Investment Authority" described above.
