Networks Need $ *and* Regulation Changes

Yesterday I wrote about how it feels to me like the economic crisis is accelerating the transition to the information society.   I believe that the government stimulus can play an important part here by investing in networks as the infrastructure for the information society.  The two key networks are high speed Internet and the electrical grid (see also Sam Palmisano’s Op Ed piece in today’s Wall Street Journal).

Our existing electrical grid is in a dismal state because regulation for many years favored investment in generation over transmission.  That means for the most part our grid today does not have enough capacity and lacks smarts.  We need the capacity to be able to route solar and wind energy from the remote places it is likely to be generated in to the places it is consumed.  And we need a smarter grid to be able to better manage demand and prevent future large-scale outages such as the one that took down most of the North-East a few years back.

At our home we can get FIOS, which brings fiber into the house.  But overall, the US lags far behind in broadband penetration and speed.  Some of that is clearly a function of the geography of the US, which has many thinly populated areas.  A fair bit of the cost of putting fiber in turns out to be manual labor, so this is an opportunity for the stimulus to create direct employment as well.

But in both cases it will be extremely important for the government to do more than spend money.  It is critical that we have changes in the regulatory framework will unleash a new wave of innovation.  For broadband this means ensuring that wireless can be a viable alternative to cable and fiber.  To that end it was encouraging to see Julius Genachowski be nominated to head up the FCC.  For the electric grid, we need a framework that encourages investment in new and improved transmission capability not just by existing utilities but also by new entrants and smart grid standards that facilitate interconnection.