ARE TELECOMMUNICATIONS FACILITIES INFRASTRUCTURE - IF THEY ARE, SO WHAT

It is obvious that modem telecommunications networks possess at least some of the attributes of what we commonly call 'infrastructure'. They are essential to modern commerce and, indeed, to modern living. It is essential that all subscribers be able to connect to most other subsc ribers, but perhaps not through the same network but through interconn ected networks. These networks may even have natural monopoly characte ristics and may generate substantial externalities. Nevertheless, the speed of technological change in electronics and communications provid es a strong argument against government programs to develop or build m odern telecommunications infrastructure. The choice of any network arc hitecture is fraught with risk and could require the investment of $10 00 or more per subscriber that could easily be obsolete as soon as it is completed. Rather than providing grants of monopoly and relying on the ensuing regulation of network architecture, governments should ope n their telecommunications sectors to competition, allowing private fi rms to shoulder the risk of building these expensive new networks. Ind eed, the United States has recently moved strongly in this direction a fter a quarter century of selective telecommunications liberalization that has seen private networks flourish. The evidence on the effect of new telecommunications infrastructure on economic growth is too weak to justify a conclusion that this infrastructure has already created l arge externalities. As networks proliferate, with private and public s ystems competing with each other and complementing each other, it will be even more difficult to demonstrate these externalities. Thus, the case for government support and direction of telecommunications infras tructure investment remains very weak. (C) 1997 Elsevier Science B.V.