From: Zhang, Yangkun (Yangkun.Zhang@FMR.COM)
Date: Fri Oct 20 2000 - 13:35:49 PDT
"With each Web device draining as much as a megawatt-hour a year, a
billion always-on Internet computers -- together with the factories that
build them and scores of billions of watt-hungry embedded processors -- will
account for an estimated total of four thousand trillion watt-hours, or
close to half of the world's current electricity use."
-- damn, I better start buying stock in fuel-cell makers (e.g., Ballard),
HTS vendors (e.g., American Super Conductors) et all! Gilder's made me a lot
of money with his techno-prophesies (I subscribe to the Gilder Tech Report)
in the past (NT, GLW, JDSU, ENE, SUNW et all) -- maybe that's why he's now
publishing The Digital Power Report (see, http://www.powercosm.com/).
----------------------
October 20, 2000
Commentary
Internet in the Balance
By George Gilder. Mr. Gilder, author of "Telecosm: How Infinite Bandwidth
Will Revolutionize Your World" (Free Press, 2000), is an investor in
Internet and wireless stocks.
A few weeks back, Al Gore, mocking his own penchant for hyperbole, bantered
with David Letterman's "Late Show" audience: "I gave you the Internet -- and
I can take it away." This is no joke. While Republicans waste time with
captious critiques of the straight-arrow Gore's credibility and character,
the real threat posed by the Democratic candidate is utterly ignored. Mr.
Gore's policies would impose an energy, tax and regulatory garrote on the
Internet.
The Kyoto Treaty alone would be devastating to the Net. At a time when
global temperatures are significantly lower than they were 1,000 or 3,000
years ago, Mr. Gore would impose an energy clamp on the U.S. economy over
the next decade. Yet billions of new Web servers and Web devices are
scheduled to come onto the Net during this period, while billions of
now-poor Asians will also be drastically increasing their energy usage.
With each Web device draining as much as a megawatt-hour a year, a billion
always-on Internet computers -- together with the factories that build them
and scores of billions of watt-hungry embedded processors -- will account
for an estimated total of four thousand trillion watt-hours, or close to
half of the world's current electricity use. With the restrictions
negotiated in Kyoto, a global broadband Internet cannot happen.
Tax Gouges
On the tax front most attention focuses on direct sales taxation, but the
key taxes imposed on Internet expansion are income taxes. Mr. Gore's most
passionate commitment is to bar all tax reforms that reverse the Clinton era
income-tax gouges. Mitigated by the one-time effect of the collapse of
inflation and thus of real capital-gains tax rates, the Clinton tax hikes
have so far had a mild impact.
But inflation cannot collapse twice. Mr. Gore's adamant hostility to
tax-rate reductions is already inhibiting Internet growth by halting stock
market expansion. With new sieges of taxation and spending, Mr. Gore would
create not a delusory "lock-box" for Social Security, but a "lock-out" of
the entrepreneurial economy on which the Internet subsists.
Perhaps most menacing is the threat of Gore regulatory policies and
attitudes on the advance of wireless technology. Wireless access will fuel
the next phase of Internet growth.
But the environmental and regulatory passions central to Mr. Gore's entire
career are now driving wireless innovation overseas.
As Eli Noam of Columbia has said, "If we can agree to oppose government
industrial policies to subsidize telecom, cannot we also agree to oppose the
levying of huge special taxes on the industry?" Yet the proudest achievement
of Mr. Gore's favorite agency, the Federal Communications Commission, is a
vast new tax on the wireless Internet.
That tax is the spectrum auction process, and it is already driving wireless
development out of the U.S. and to countries, such as Japan, Korea and
Finland, that lack the tax. Spectrum auctions are scheduled to collect a
cumulative total of some $50 billion (more than twice the industry's total
annual wireless investment) and to compound the existing controls on the
industry's spectrum use with ever more encompassing financial regulation.
In replacing the previous political assignment of spectrum, Congress was
attempting to limit the power of FCC bureaucrats and introduce market
discipline. But under Mr. Gore and his friends, any regulatory opportunity
becomes an arena of endless meddling and industrial policy. The auctions
manage a "market" in which most spectrum is free, governed by capricious
rules, and devoid of effective aftermarkets. When some small proportion is
auctioned off at exorbitant prices because the government has made scarce
what is naturally abundant, the result has nothing in common with free
enterprise. Predictably the auctions have become a briar patch in which only
bureaucrats and telopolies can thrive.
Recognizing that start-ups are the font of much technological innovation,
however, Congress specifically told the FCC to reserve some spectrum for new
entrants, chiefly to what came to be known as "C-block" companies. Embroiled
in endless politics, the C-block auction became a disaster. Between the end
of the bidding and the agency's actual award of licenses the revenue-proud
and pettifogging FCC flooded the market with spectrum and constantly changed
the rules. Prices predictably plummeted, making it impossible for the
C-block companies to attract financing and consummate their bids.
By now, though, some of the original "winners" are ready to emerge from
bankruptcy, pay their obligations in full, and move forward toward
deployment. The FCC has flatly refused to accept payment. Instead -- to the
cheers of incumbent carriers fearful of new competitors (and finagling for
the spectrum for themselves) -- the agency said it would confiscate the new
entrants' spectrum and give it to the incumbent carriers. Undeterred by
adverse rulings -- including a U.S. Bankruptcy Court decision that
caustically termed the FCC's actions "repossession by ambush" -- the agency
is litigating this issue in U.S. courts of appeal in the 2nd, 4th, 5th, 7th,
10th and District of Columbia circuits.
As with all forays into industrial policy, the predictable result is to
subsidize the past in the name of progress, enlisting government firmly on
the side of the largest and most moribund companies and thwarting innovation
and entrepreneurial energy. The danger of Mr. Gore is not the quasi-populist
hostility to big business he pretends. It is his technical conceit and his
all too real lust to control -- and take credit for -- what he did not
create.
Cock-a-doodle-doo
In the new economy as in the old, property rights are indispensable for the
investment-intensive development of any technology. But when the
government's guiding ethic is "what's mine is mine and what's yours is
negotiable," companies cannot summon the massive investment required to
bring new technology to life. Regarding property rights as everywhere
subservient to regulatory caprice, Mr. Gore and his associates live and
breathe in the regulatory state. Thus, like the cock crowing at the sunrise,
Mr. Gore imagines that his legislative incantations about "information
superhighways" were crucial to the creation of the Net in the first place. A
cock-a-doodle-doo policy cannot bring innovation, but capricious regulation
can bring Internet growth to a halt.
Yet another area where the Gore mentality is menacing to Internet growth is
the issue of the health impact of cellphones. There is no evidence that
users of cellphones suffer any damage from them. But cellphones inexorably
use microwave radiation and antenna towers opposed by Mr. Gore's followers
and implicitly condemned by Mr. Gore's book, "Earth in the Balance."
Microwave chip factories are dense with poisonous chemicals, and nearly all
Internet devices are manufactured with materials deemed unacceptably toxic
by some. A Gore administration will be filled to the brim by people who
regard an occasional Erin Brockovich anecdote as more persuasive than global
statistics of longevity and epidemiology improving everywhere that the new
economy spreads.
With Silicon Valley already suffering power brown-outs as a result of the
energy fears and chemo-phobias promoted by Mr. Gore, a Gore presidency will
be predictably deadly for the American electronics, energy and chemical
industries that enable the Net. While foreign countries move rapidly forward
with nuclear power and breeder reactors, the U.S. will remain mired in
Luddite loathing of radiation and industrial technology. Mr. Gore's policies
put the Internet in the balance.
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