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Archive for February, 2011

EC Director-General of Research and Innovation, Robert-Jan Smits, Says Innovation Union Shows Europe Has Gotten Message about Innovation-Based Economic Growth

Last Friday, February 18th, Robert-Jan Smits, European Commission (EC) Director-General of Research and Innovation, gave a presentation on Europe’s new “Innovation Union” strategy, which is one of seven flagship initiatives of the Europe 2020 strategy for a smart, sustainable, and inclusive economy. The Innovation Union plan contains over thirty action points designed to:

  • Turn Europe into a world-class science performer;
  • Remove obstacles to innovation—including expensive patenting, market fragmentation, slow standard-setting, and skills shortages—which currently prevent ideas from getting to market quickly ; and
  • Revolutionize the way Europe’s public and private sectors work together, notably through Innovation Partnerships between European institutions, national and regional authorities, and business.

The core thrust of Director-General Smits speech was that, “Europe has come to realize that research and innovation are the key for advanced economies both to remain competitive and to secure social and economic progress.” Smits described the Innovation Union as, “a bold, integrated, strategic approach, steered at the highest political levels by European Prime Ministers, which aims to bring together supply measures like R&D funding with demand measures such as regulation, public procurement, and standards-setting to address Europe’s grand

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Scientific American’s Too Simple Solution to Internet Regulation

Scientific American played a big role on my personal career path. In September, 1977 the magazine devoted an entire issue to microelectronics which was so good it was sold as a book a few months later. I happened to read it while considering a career change that would take me from the hum-drum routine of writing software for Medicaid claims processing on mainframe computers into the emerging world of desktop computers. It seemed to me that the advances in microelectronics that Sci Am heralded would one day lead us toward a new normal in which we would all own personal computers, and that these computers would form a vast network of some kind. The network of personal computers would replace the telephone and television networks, empowering people with information and communicative power, and bring in a new phase in human society. I already knew about networks and small-scale computers, but the microelectronics insights flipped a switch regarding scale, increases in power, and lower costs year-after-year.

It’s therefore especially disappointing to read the sort of nonsense that Sci Am publishes on a regular basis about Internet regulation. I appreciate that the

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Return of the digital divide

As Yogi Berra said, “It’s deja vu all over again.”  A new report is out about the Internet which raises the concern over a digital divide.  As the Washington Post story (“Survey of online access finds digital divide”) sums it up: “A first-of-its-kind federal survey of online access found that Americans in lower-income and rural areas often have slower Internet connections than users in wealthier communities.”

This new survey of internet usage, Digital Nation: Expanding Internet Usage, was released yesterday by the Commerce Department’s National Telecomminications and information Administration.  The press release highlights the following points:

  • Broadband Internet access at home continues to grow: 68 percent of households have broadband access, as compared to 63.5 percent last year. (In the survey, broadband was defined as Internet access service that uses DSL, cable modem, fiber optics, mobile broadband, and other high-speed Internet access services.)
  • Notable disparities between demographic groups continue: people with low incomes, disabilities, seniors, minorities, the less-educated, non-family households, and the non-employed tend to lag behind other groups in home broadband use.
  • While the digital divide between urban and rural areas has lessened since 2007, it
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Presidents 2012 Budget Proposal: White House Plots Right Course for Clean Energy Innovation

Budget drama is growing in Washington D.C. as deficit hawks aggressively try to cut and burn the size of government and the President has recently added to the fray with his 2012 budget proposal. Recent budget progress – through the Stimulus and reauthorizing the COMPETES act – supporting clean energy technology is in the crosshairs. Therefore, the President, in theory, must make two choices. On one hand the President must cut the budget deficit by eliminating or reducing programs. On the other hand the President seeks to invest in a clean energy future. Many budget absolutists believe that these choices are not mutually exclusive, saying that the U.S. is so far in debt that every government program is on the table. Fortunately, the President understands that cutting the deficit should not come at the expense of supporting innovation – clean energy or otherwise. In fact, not everything should be on the cutting table because the future fiscal sanity of the U.S. relies not only on reducing spending, but also on spurring innovation and thus economic growth.

Given these realities, the President has the right idea – strategically increase important

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My Valentine’s Day with Rural Telcos: Know Hope

It is no secret that rural phone companies are not fond of the Broadband Plan or me.  (The enmity is not mutual.  I have great respect for them but think the universal service system on which they have come to depend is problematic for the country.) Thus, it was felicitous that I spent Valentine’s Day at the National Telecommunications Cooperative Association Convention, participating in a two round debate.

The first round involved debating two rural Telco executives.  My primary message–more as a former analyst than as a Broadband team member—was the debate over USF/ICC reform will probably be resolved through an industry consensus or result in a stalemate, and that a stalemate hurts them because every significant market and political trend is weakening their position.  I asked them, if not now, when?

Their message for me was that rate of return regulation had worked well and ought to continue unchanged.  When I pointed out that it resulted in 7 million homes without broadband at the same time that we were spending $20,000 a year for a single home in some areas, they responded that it was only $17,000, while also

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Time for Washington to Think Like a State


I often think that the best thing that could happen to Washington is if it started thinking and acting like a state, instead of the largest economy in the world. States understand that they are in competition and that unless they can export products and services that the rest of the world buys they won’t create jobs and prosperity. That’s why all states, regardless of whether they are led by Democrats or Republicans, have economic development strategies. In contrast, Washington still thinks like it did 50 years ago when the U.S. economy was not in competition with the rest of the world and when our companies were dominant in industry after industry.

We see this regularly. When ITIF released our report Effective Corporate Tax Reform for the Global, Innovation Economy, I briefed a group of prominent tax economists on the report. The group included leading tax economists for Congress, Treasury, OMB and other government agencies. The report laid out 6 key principles to guide corporate tax reform efforts. When I got to the principle number 4—“In a globally competitive economy nations need competitive corporate tax regimes”—several hands shot up.

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Love the Goal; the Speech, Not So Much

Apparently, I am quoted in the trade press as saying I didn’t like the goal in the National Broadband Plan of 100Mbps to 100 million homes.  Actually, what I thought I said was that I liked the goal but didn’t like the speech that announced the goal because of how it defined the Plan.  But here is the relevant part of yesterday’s talk, as prepared for delivery, which explains why I thought the speech was counterproductive and that the President’s speech yesterday did a much better job of defining a vision that will lead our country in the right way.

“The President’s speech today, perhaps the most significant speech ever delivered by a President on the subject of communications, demonstrates his understanding of the priority we must give to make sure we have a good mobile communications highway everywhere, as well as advanced applications.

Not everyone understands this and frankly, the roll-out process for the Plan bears some of the blame.

Unfortunately, during the rollout of the Plan, one speech—which established a goal of 100Mbps to 100 million homes—attracted a great deal of attention.

I didn’t have a problem with

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2 + 2 does not = 20; or why I’m glad I’m not an equity analyst

It was fun, in a wonky but not a theatrical sense, listening to Tuesday’s FCC meeting on Universal Service and Intercarrier Compensation Reform.   All five Commissioners eloquently described the need for reform.  The framework, which came out of the National Broadband Plan (which borrowed much from the work over the last decade by many others, including Chairmen Kennard, Powell and Martin) is commendable.  It’s progress that concepts, such as using reverse auctions or setting up a cap-ex fund, once controversial, are garnering a consensus.  While I haven’t read the NPRM, I know the staff filled in many of the details the Plan did not cover and made adjustments as the math merited; both to their credit.  It’s a big step forward.

But like the dog in the Sherlock Holmes story whose lack of bark was the critical clue, what didn’t happen was the most interesting part.  I heard what each thought was wrong but I didn’t hear how they would each make the necessary trade offs or prioritize addressing different needs.  To illustrate my point, take Commissioner McDowell’s statement that we have to shrink the size of the fund.  Given

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Shortage of Scientists

A question  regarding the shortage of scientists in the US.  NSF data shows (in constant 2010 dollars) that the median salary for S&E occupations was $72,432 in 1993 and $73,888 in 2008. if therewas a shortage, wouldn’t we expect salaries to go up as companies bid against each other for scarce S&E talent?   Life sciences, aerospace engineering and biomedical engineering were the only fields with significant increases, each going up between 10-12%. Other fields were largely flat.  I’ll post the data seperately.  

One explanation is that companies are substituting foreign for US scientists, another is that we’ve overstated the problem.  If companies can substitute foreign scientists, their performance won’t be affected (it may even be improved if the foreign scientists are cheaper).   There could however, be damage to  innovation in America (as opposed to innovation by American companies). 

Another question: if  we artificially increase the supply of American scientists, does that mean their salaries would fall?   If we increase the supply of scientists and didn’t also increase the supply of dollars to fund their resaerch, does that mean we have more scientists chasing the same research dollars and by implication,

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Obama Innovation Strategy – and doing more

Last week, the White House released their updated Strategy for American Innovation.  This is part of the Administration’s new push on innovation, jobs and competitiveness.  As the Fact Sheet and the White House blog posting make clear, this is an expanded version of their earlier document.  To quote from the fact sheet, this latest version includes 5 new initiatives:

  • The Administration’s proposed Wireless Initiative, helping businesses reach 98% of Americans with high-speed wireless access within five years, accelerating wireless innovations, and substantially expanding, by 500 MHz, the development of new wireless spectrum for commercial use.  Expanding new commercial spectrum is critical to avoid “spectrum crunch” and facilitate the rapidly growing wireless technology revolution.
  • patent reform agenda, working to overcome the enormous backlog at the patent office and improve patent quality.  Legislative and administrative initiatives can allow the USPTO to adequately fund its operations through user fees and implement new initiatives to improve patent quality.  The overall agenda will reduce the average delay in patent processing times from 35 months to 20 months, and to less than 12 months where applicants prioritize their applications.
  • A commitment to
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