America’s “Broadband Miracle” and the Law of Unintended Consequences

by Robert Maynard 

Robert Maynard

In the midst of politicians clamoring for yet more government backed stimulus money to be spent on infrastructure projects, it is time once again to consider what economists call “the law of unintended consequences”. Often great breakthroughs, are totally unforeseen and therefore very hard to plan for. This is one of the biggest reasons why a centrally planned economy does not work. Earlier this year I wrote an article suggesting that we leave the implementation of “Smart Meters’ up to the free market.

In that article I noted the panic back in the early 1980’s when Japan jumped out to a lead in an analog version of High Definition Television. The suggestion was that the government needed to get behind a similar effort if it hoped to catch up. Instead. The American lead digital revolution ended up making the analog version of HDTV obsolete. Fortunately we did not go down the road of subsidizing an approach that new technological developments rendered obsolete.

Our current debate about the need to upgrade our broadband infrastructure is leaving me with a sense of deja-vu. This time, instead of high definition television, other countries jumped out ahead of America in the adoption of a broadband infrastructure. America’s lagging behind in this area was seen as an obstacle to competitiveness in an Information Age economy. Once again the finger was pointed at our relatively less centrally planned approach to our economy as the culprit. (Regulations inhibiting such projects did not get much of the blame) The proposed answer in some circles was to have the government get behind more broadband projects. The futility behind this approach was the subject of an article I wrote for True North last year.

Once again the development of unforeseen technological developments may be making the proposed government supported infrastructure projects obsolete. In an interview with Steve Forbes, economist and hi-tech guru George Gilder had some interesting observations on this subject:

“STEVE FORBES: With all this pessimism around, at least give us one good thing that’s happened in the last ten years. You’ve talked about the broadband miracle.

GEORGE GILDER: Well, we sure did. The irony about it is this broadband miracle that’s happened in the U.S. over the last five years or so was totally unanticipated by the people who wanted massive government programs to lay fiber to every remote farmhouse.

Instead we had a 553-fold increase in wireless bandwidth deployed over this period–completely unexpected–that thrust the U.S. into the world lead again in communications. It shows these upside surprises that are the essence of capital creativity. Creativity always comes as a surprise to us. If it didn’t, we wouldn’t need it, and socialism would work. You could plan these great new technologies.”

What kind of technologies is he talking about:

“SF: You called them “teleputers” years ago. Now we call them smartphones, tablets, iPads.

GG: I always said that your computer would not be a desktop machine; it would be as mobile as your watch, as personal as your wallet. It would recognize speech. It would navigate streets. It might not do windows, but it would do doors–open doors to your future. And these teleputers are really the force driving this massive global rollout of wireless bandwidth, which was pioneered in the U.S.”

Of course all of this is part of a paradigm shift to what has been referred to as “Network Centric Computing”, which some refer to as “Cloud Computing”. The focus is moving from the end user device to the network and computing is increasing becoming more mobile with a significant rise in wireless communication:

“SF: Let’s start with the thing called cloud computing, which I guess you’ve pointed out as Bell’s corollary to Moore’s Law.

GG: Yeah. Gordon Bell, who was one of the great figures of Digital Equipment and is now at Microsoft, propounded Bell’s Law, which is sort of a corollary of Moore’s Law that the number of transistors on a chip doubles every 18 months or so. And he projected this into Bell’s Law: Every ten years you get a hundredfold increase in computing capabilities. And this enables and requires a fundamental change in computer architectures. We’re seeing it today in the rise of cloud computing. As Eric Schmidt said, when the back plane of your computer runs more slowly than the network, the computer hollows out and distributes itself across the network. And that’s essentially what is under way today, where the actual computing is almost never done or rarely done in the device that you have in your hand or on your desk. . . .

What it means is that computing power gravitates to its optimal point geographically. And that’s the advent of cloud computing. And it’s resulted in an efflorescence of creativity and computer architectures, because everything now has to run at the speed of fiber optics, which is the speed of light.”

Perhaps it is time for government bureaucrats and politicians at all levels to step back and let the free market work its magic once again.