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A strong U.S. telecommunications research capability is also important for several indirect reasons related to defense and homeland security: Skill base of engineering talent: education and training. To solve the specialized communications issues in C4I requires that the United States have the best telecommunications engineers in the world, which in turn requires that a vibrant commercial industry be maintained. Otherwise, the best engineers will migrate to countries that have protected or low-cost businesses, and ultimately U.S. security will be put at risk.


Delivery capability of government suppliers. Because meeting military requirements depends on fundamental understanding of very-high-speed optical networks, satellite communications, and support of mobility in the battlefield, it is not sufficient to have a cadre of educated and trained individuals. Corporate environments must also be available in which such individuals are trained to work together in teams on system-level designs, and to take an interdisciplinary approach.


Interconnectedness of defense systems. As more defense- and homeland security-related systems are interconnected, the pressure will increase on the United States to develop new technologies here at home, because relying on foreign suppliers for critical network components like firewalls and communications software might open the door to serious compromises of security and availability across a wide range of defense capabilities.Military superiority. In a military context, the goal is superiority over the adversary, which requires having the best research and engineering capability in the world.

Telecommunications continues to be a dynamic sector in which significant innovation is possible provided proper research investments are made. Some examples of potential payoffs from telecommunications research include the following:

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How important is telecommunications as an industry, and how important is telecommunications research to the overall health of that industry? Underlying these questions are several others. How important is telecommunications to the U.S. economy and society? To what extent are U.S. consumers likely to benefit directly from telecommunications research in terms of new products and services that enhance their lives or improve their effectiveness or productivity? How much scope for innovation is there left in telecommunications, or has telecommunications matured to the point that it is merely a commodity service or technology?


The core findings of this study—which are supported throughout this report—are that the telecommunications industry remains of crucial importance to the United States as a society, that a strong telecommunications research capability continues to be essential to the health and competitiveness of this U.S. industry internationally, and that the health of this industry strongly affects the U.S. economy in many ways.

Before the emergence of the Internet and other data networks, telecommunications had a clear meaning: the telephone (and earlier the telegraph) was an application of technology that allowed people to communicate at a distance by voice (and earlier by encoded electronic signals), and telephone service was provided by the public switched telephone network (PSTN). Much of the U.S. network was owned and operated by American Telephone & Telegraph (AT&T); the rest consisted of smaller independent companies, including some served by GTE.


Then in the 1960s, facsimile and data services were overlaid on the PSTN, adding the ability to communicate documents and data at a distance—applications still considered telecommunications because they enabled new kinds of communication at a distance that were also carried over the PSTN. More recently, of course, communication at a distance 

include data transport, video conferencing, e-mail, instant messaging, Web browsing, and various forms of distributed collaboration, enabled by transmission media that have also expanded (from traditional copper wires) to include microwave, terrestrial wireless, satellite, hybrid fiber/coaxial cable, and broadband fiber transport.

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The next generation of wireless technology (so-called 3G technology) promises to add even greater speed, capacity, and services—indeed, one recent report describes 3G as “bringing Internet capabilities to wireless mobile phones.”12 Along the way to 3G, there has also been a good deal of work on 2.5G technologies (e.g., CDMA2000, 1xRTT, and GPRS) to help bridge the fairly large gap between 2G and 3G, as well as to build out the networks and infrastructure required by the newer technologies.

One result of the divestiture of the Bell System, subsequent splits and spin-offs, and the entry of new types of telecommunications services providers was a much more competitive telecommunications industry. The cost—and retail price—of long-distance calls fell rapidly between 1984 (the initial divestiture) and 2004 (when carriers began offering voice over IP service broadly to consumers). Wireless telephony grew rapidly, reaching nearly 208 million accounts in the United States by the end of 2005.13 Broadband access to the Internet became widely available. Cable system operators started introducing their own local telephone services over their new digital, two-way infrastructure. Business data service prices fell steadily as well.


A consequence of increased competition at every level of the telecommunications value chain was that the industry players found themselves operating with tighter margins and lower revenues.


The 1996 Telecommunications Act and subsequent FCC decisions led to a further evolution of the regulatory environment. The impact of these developments on innovation and R&D—and on the industry more broadly—has been the subject of much debate. Some caution, for example, that such policies as unbundling and the use of total element long-run incremental costs in the regulation of incumbent local exchange carriers had the effect of dampening investment by the local exchange carriers because competitors could appropriate some of the investment made by the carriers. Others cite significant benefits of these policies to the consumer (reduced prices) and the market (lower barriers to market entry).


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There are elements of programs in NSF’s Computer and Information Science and Engineering (CISE) and Engineering (ENG) directorates that address aspects of telecommunications research. The CISE directorate has, for example, long been an important supporter of networking research (as noted in “The Internet,” the section above on the development of the early Internet). Over the years the ENG directorate has made investments in various areas including wireless and optical communications, and it has established several engineering research centers related to telecommunications. In the view of the committee, however, these efforts as a whole have not represented a major programmatic emphasis by NSF on telecommunications nor reflected a comprehensive, coordinated research strategy in telecommunications.


Today, as outlined above, telecommunications programs in total see only a modest level of funding. In addition, testimony provided to the committee indicated that overall proposal acceptance rates for most NSF programs related to telecommunications (in the CISE and ENG directorates) have been 10 percent or less for the past several years.19


In 2004, NSF announced a new $40 million per year program called Network Technology and Systems (NeTS), which represents a significant new investment in telecommunications research and education projects and will focus on the following four areas: programmable wireless networks, networking of sensor systems, networking broadly defined, and future Internet design.20 The program has latitude for interdisciplinary work that could also involve physical devices and could suggest a wide range of research topics in the control, deployment,


In his May 2004 testimony to this committee, Guru Parulkar of NSF indicated that proposal acceptance rates “in the single digits” were typical for CISE networking research programs.

and management of future networks. However, although the NeTS program is a welcome source of additional support and programmatic emphasis on telecommunications research, its relatively modest size is likely to have little overall impact on low proposal acceptance rates.

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Telecommunications enables participation and development. Telecommunications plays an increasingly vital role in enabling the participation and development of people in communities and nations disadvantaged by geography, whether in rural areas in the United States or in developing nations in the global society and economy.


Telecommunications provides vital infrastructure for national security. From natural disaster recovery, to homeland security, to communication of vital intelligence, to continued military superiority, telecommunications plays a pivotal role. When the issue is countering an adversary, it is essential not only to preserve telecommunications capability, but also to have a superior capability. There are potential risks associated with a reliance on overseas sources for innovation, technologies, applications, and services.


It is difficult to predict the future impact of telecommunications technologies, services, and applications that have not yet been invented. For example, in the early days of research and development into the Internet in the late 1960s, who could have foreseen the full impact of the Internet’s widespread use today?


An implication of defining telecommunications broadly is that every layer involved in communication at a distance becomes, at least partially, part of the telecommunications industry. The broad range and large number of companies that contribute to the telecommunications industry are evident in the following list of examples:


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Networking service providers across the Internet and the PSTN, wireless carriers, and cable operators. Examples include AT&T, Comcast, Verizon, and DirecTV.


Communications equipment suppliers that are the primary suppliers to service providers. Examples include Cisco, Lucent, and Motorola.


Networking equipment suppliers selling products to end-user organizations and individuals. Examples include Cisco’s Linksys division and Hewlett-Packard (local area networking products).


Semiconductor manufacturers, especially those supplying system-on-a-chip solutions for the telecommunications industry. Examples include Texas Instruments, Qualcomm, Broadcom, and STMicroelectronics.

The telecommunications industry, which once consisted mainly of the telephone companies and their equipment vendors, has expanded greatly. It now includes a broad set of service providers, including telephone companies, cable operators, Internet service providers, and wireless carriers, as well as equipment vendors offering fiber-optic, cable, and wireless connections. Telecommunications comprises all the hardware and software for the telecommunications infrastructure and the applications that run over that infrastructure. It involves communication of information in a wide array of media including voice, images, animation, video, documents, and data.

Without a renewed and sustained investment in telecommunications research, the United States risks losing global leadership in telecommunications and related industries, with significant consequences for the U.S. economy and society.

There are many promising avenues for telecommunications research, and renewed U.S. investment would yield major dividends, as indicated by the following possible results:

An enhanced Internet architecture that goes beyond incremental improvements to deliver capabilities such as greater trustworthiness in the network core and in customer networks, improved addressing and routing, and end-to-end quality-of-service provisioning;

More trustworthy networks that can better cope with the rising frequency, sophistication, and severity of attacks and the complexities and interdependencies associated with the convergence of voice and data networks;

Telepresence and telecollaboration environments that reproduce at a distance a local space with the fidelity needed to allow people to work in concert;

Public safety networks that offer greater mobility, interoperability, adaptability to harsh and changing conditions, and increased resiliency to damage; and

Adaptive and cognitive wireless networks that enable higher-performance communications and more efficient use of radio spectrum, allowing them to provide capabilities that rival and complement those associated with wired networks.


Should the United States be concerned if leadership in telecommunications moves offshore, as has occurred for many other entire industries?


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These changes have yielded many benefits, including a much broader array of telecommunications services, a more diversified and competitive market, and an environment in which new innovations move more quickly to the marketplace. But they have also led to decreased industry support for long-term telecommunications research and a general shift in research focus from the long term to the short term. As has been observed by many others, there has been an overall downturn in many areas of U.S. industry research.1 Along similar lines, a report released earlier this year by the National Academies concluded that the nation’s commitment to basic research in science and engineering needs to be sustained and strengthened.

The Bell System ended in 1983. Divestiture resulted in the separation of the local Bell System operating companies (which provided local telephone service to large regions of the United States) from the long-distance parts of the network (known as long-lines communications) and ended the license fee arrangement through which the regional operating companies supported Bell Labs. At the time of the separation, Western Electric (the equipment manufacturing part of the Bell System) was assigned to the part of the company that would be called AT&T), along with most of the research and development resources of Bell Labs. The regional Bell operating companies (RBOCs), the providers of local phone service, formed an R&D consortium called Bellcore (Bell Communications Research, later renamed Telcordia Technologies) and agreed to fund Bellcore to do the majority of the R&D needed to support them— at least for an initial period on the order of 5 to 7 years. Subsequently the RBOCs sold Bellcore to SAIC, causing the new lab to seek support outside the RBOCs and subsequently make radical changes in the scope and direction of its research program.


As a result of divestiture, the fundamental split in the Bell System propelled AT&T (and its R&D arm Bell Labs) into a competitive landscape for the first time, with aggressive competitors such as MCI and Sprint seeking to compete for long-distance services—for both residential and business customers. Thus although a tax on telecommunications revenue remained as a source for funding R&D at Bell Labs, the prospects for increased competition, lower telecommunications prices, and decreasing telecommunications revenues for AT&T, as well as the regulatory pressures to lose market share to new competitors, led to the beginning of the reduction in the long-term, unfettered, fundamental research done at Bell Labs.

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