• by Diane Mermigas , December 4, 2008

There will be nothing easy or certain about Obama administration policies to advance and monetize broadband as an essential infrastructure, even as Silicon Valley's most formidable players are curtailing innovation in what economists are calling The Great Recession.

Unlike the other monumental challenges confronting president-elect Barack Obama, broadband interactivity can be an immediate, universal catalyst for commerce, communications and wide-ranging productivity. It can generate new jobs, revenue streams and profits in a better economy while requiring minimal investment. The Internet and all things interactive comprise the 21st-century's Wild West of unregulated prospects.

Still, the grim global recession has caused even Google to dramatically reduce its hallmark research and development, which is needed to take the formative digital economy to the next important level. That begs the question: What incentives can the Obama administration offer to encourage all businesses to continue innovating?

No one should appreciate the need for this more than Google CEO Eric Schmidt, who is expected to play some role in formulating media and tech policy for the new administration. "You never know where innovation will come from...open systems have this very clear promise of constant innovation and choice," Schmidt said, while campaigning for Obama.

But even Schmidt issued a cost-cutting edict that Google hunker down for a terrible 2009. Gone are Google's legendary employee perks, spendthrift ways and zealous underwriting of rampant experimentation and new product development. As Google's quarterly revenue, profits and forecasts have been diminished, so has its appetite for risk. Unlike its first decade of meteoric growth, Google is now employing Six Sigma efficiency techniques developed under former General Electric chairman Jack Welch. It is radically reducing outside investments and pacts with more than 10,000 independent contractors, eliminating borderline efforts like audio indexing, and reneging on allowances for employees to devote 20% of their time to pet projects that could eventually take flight.

The unprecedented industry-wide austerity comes just as Obama has vowed to reignite passion for developing new interactive applications and enterprises. Experts agree that much remains to be done, such as refining more intuitive Web search, online storage tools, email and social network interface, and sophisticated targeted advertising and metrics.

John Chambers--CEO of Cisco Systems, another giant in innovation-- insists that preparing for the upturn must be part of the damage control. Unfortunately, only Chambers and Team Obama are championing that goal. Most other companies are cash-strapped and paralyzed with fear.

Obama may find the answers among his tech advisers, led by Julius Genachowski--who touts that the new president "sees technology as the key part of a solution to almost every problem we face." After all, Team Obama reinvented the business model for presidential campaigning and contributions; won by connecting with and motivating a grassroots base; and grew the Democratic party astutely using new technology. Little wonder, then, that the president-elect believes providing affordable high-speed Internet service to every American home will create jobs, fuel economic growth and spark innovation.

A roadmap for accomplishing that is now in the hands of frequently feuding technology and telecommunications companies, labor unions and public interest groups that are busy contemplating tax breaks, low-interest loans, subsidies and public-private partnerships to encourage more investments in high-speed Internet networks. The new coalition announced Tuesday is headed by representatives of Google, AT&T, Cisco, Verizon, Free Press and other public interest groups.

It is unclear where the group could go with hot-button issues such as net neutrality, the ability of network operators to block Internet traffic, and whether the government should set spectrum limits for individual companies. All will be under the purview of a newly appointed Federal Communications Commission.

Support expressed by House Speaker Nancy Pelosi (D-CA) this week to earmark funds from the federal economic stimulus plan for broadband deployment underscores bipartisan concern that the U.S. is compromising its ability to compete technologically and economically in the world. The U.S. has fallen from the top 10 countries globally in broadband access, speed and pricing. At least 10% of Americans do not have broadband access. The Internet support could be part of the next $500 billion disposition of federal bailout funds, which could also be used to upgrade the national power grid, repair roads and bridges, and provide income tax cuts to working Americans.

Congress could provide hefty tax credits to cable and telephone companies that have helped to finance the rollout of broadband Internet access, provide subsidies to companies providing Internet service to rural areas, and increase aid to states for Internet services. It would also trigger special-interest infighting.

Certainly, encouraging companies to develop compelling, advanced services for an Internet recast as a national utility at a time of pervasive technology must involve tax credits for innovation and initiatives. There must be subsidies to support advanced interactive applications for public services, health and environment, and overall commerce.

Tech, Internet, content and services companies must be motivated to create new reasons for commercial interactivity. Innovation and continued digital transformation must lead the economic recovery. About half of all IT capital spending traditionally has come from financial services and industrial companies under siege.< p> Perhaps the best overriding incentives could come in a far-flung New Deal-inspired plan for broadband, bringing together private and public players and funds to build out an advanced broadband infrastructure that would serve commercial and civic interests. It would be a new deal for a new age that is barely rising.