The American Interest draws a lesson from a recent article in the Harvard Business Review. TAI writes:
Is it possible to make major investments in infrastructure without taxpayers footing the bill? That’s a question worth literally billions of dollars. The Harvard Business Review analyzes a case in which the answer has proven to be a resounding “yes”:
While much of our physical infrastructure has long been either government-owned or regulated as semi-governmental utilities, nearly all of today’s digital networks, though still heavily regulated, have been privately built and privately funded. Since 1996, according to trade group USTelecom, investors have poured over $1.4 trillion into building and rebuilding the commercial internet.
In the HBR, Larry Downes, project director at the Georgetown Center for Business and Public Policy, writes,
… the U.S.’s most recent experience with jump-starting infrastructure spending, the 2009 American Recovery and Reinvestment Act, suggests a third way to get the job done, one that both parties should be paying more attention to: encouraging more private investment in infrastructure. That’s especially true for digital infrastructure, which both ties together the country and supports connections — commercial, social, cultural — with the rest of the world.
While much of our physical infrastructure has long been either government-owned or regulated as semi-governmental utilities, nearly all of today’s digital networks, though still heavily regulated, have been privately built and privately funded. Since 1996, according to trade group USTelecom, investors have poured over $1.4 trillion into building and rebuilding the commercial internet.
He cites the tremendous success of broadband development in the U.S.
Americans today stand on the brink of next-generation wired and wireless networks that will offer speeds as much as 20 times faster than today’s best connections, making possible new applications and even new industries. We’ve only scratched the surface of ideas such as the internet of things; smart cities, homes, and energy grids; autonomous transportation; and much more that entrepreneurs will think up.
Much of that success can be credited to what Congress both did and did not do as part of the Recovery Act, and in particular to the National Broadband Plan (NBP), which the Federal Communications Commission published in early 2010.
Notable is this:
Perhaps most radical of all, however, is what the NBP didn’t propose. With minor exceptions, the authors did not recommend that any of the NBP’s goals be met through taxpayer spending. Rather, they called on Congress and the White House to “unleash private investment” by reinforcing a bipartisan decision, dating back to the mid-1990s, to leave the internet alone.
…This doesn’t mean governments shouldn’t do anything to oversee our digital infrastructure. But it is clear that removing rather than adding regulation accelerated investment, exactly as the NBP recommended.
He expresses concern that in recent years government appears to be backtracking.
Even more worrisome in my view is that the FCC has in recent years taken significant steps backward in maintaining a healthy environment for continued investment, often at the urging of the White House. In the name of preserving the open internet, or “net neutrality,” the agency last year exercised the nuclear option of reclassifying broadband providers as public utilities, subject to hundred-year-old regulations written for the former Bell monopoly. It also approved an order that preempted state limitations on municipal broadband services, most of which have failed, leaving state taxpayers with the bill. (Federal courts have so far upheld the first decision but soundly rejected the latter.
The post should be read in its entirety. It provides a positive look at how private sector investment and leadership can dramatically effect positive improvement in infrastructure, with government assisting by removing impediments.
Which takes us back to the TAI extension of the concept.
Can this approach be applied to physical infrastructure? In some cases, yes. Where there are profitable assets like toll roads and bridges, for instance, numerous case studies and real-world examples suggest that rewriting regulations can unleash private investment and obviate the need for large government expenditures. Privatizing physical infrastructure remains highly controversial, but the evidence suggests it can be done in a way that benefits and protects consumers. Moreover, infrastructure concessions often promise low, but stable returns to their owners. At a time of zero interest rates and uncertainty about traditionally-reliable assets like municipal bonds, there’s a big appetite for such investments…
Stumbles notwithstanding, privatized infrastructure is improving the digital world. Policymakers should be thinking about how the same approach might work in the transportation of physical things too.
Something to consider. And to develop.
