Assessing the Impacts of Changes in the Information Technology R&D Ecosystem: Retaining Leadership in an Increasingly Global Environment (2009)

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Summary The U.S. information technology (IT) research and development (R&D) ecosystem was the envy of the world in 1995. (See Box S.1 for a discussion of the term and its origins.) That ecosystem—encompassing university and industrial research enterprises, emerging start-up companies and more mature technology companies, the industry that finances innovative firms, and the regulatory environment and legal frameworks—remains unquestionably the strongest such ecosystem in the world today. How- ever, this position of leadership is not a birthright, and it is now under pressure. In recent years, the rapid globalization of markets, labor pools, and capital flows has encouraged many strong national competitors. Dur- ing the same period, national policies have not sufficiently buttressed the ecosystem or have generated side effects that have reduced its effective- ness. This is particularly true of such areas as IT education, federal IT research funding, and the regulations that affect the corporate overhead and competitiveness of innovative IT companies. As a result, the U.S. position in IT leadership today has materially eroded compared with that of prior decades, and the nation risks ceding IT leadership to other nations within a generation unless the United States recommits itself to providing the resources needed to fuel U.S. IT innovation, to removing important roadblocks that reduce the ecosystem’s effectiveness in generating inno- vation and the fruits of innovation, and to becoming a lead innovator In this report, the term information technology is used broadly to include computing and communications components, equipment, software, and services.  

 assessing the impacts of changes in the it R&D ecosystem Box S.1 Defining the Information Technology Research and Development Ecosystem In this study, the term ecosystem is used in the sense first introduced by James F. Moore when he applied biological concepts to the world of business.1 The con- cept of a national innovation ecosystem was further developed and ­refined by such scholars as Michael Porter and Scott Stern2 and, more recently, ­Egils ­Milbergs.3 The information technology (IT) research and development (R&D) ecosystem comprises IT researchers and scientists (and their institutions), IT businesses (both large and small), IT customers (consumers, businesses, governments), and powerful contextual forces such as regulatory and legal environments, the supply of financial and human and intellectual capital, the economic infrastructure, and the pressure of international competition, in the production of IT-based goods and services that create economic wealth, jobs, and societal benefits. See Chapter 1 in this report for further discussion of the U.S. IT R&D ecosystem, its elements, and interactions among them. 1James F. Moore, “Predators and Prey: A New Ecology of Competition,” Harvard Business Review 71(3):75-86, May/June 1993. 2Michael Porter and Scott Stern, The New Challenge to America’s Prosperity: Findings from the Innovation Index, Council on Competitiveness, Washington, D.C., 1999. 3Egils Milbergs, Innovation Vital Signs—Framework Report, Center for Accelerating Innova- tion, Washington, D.C., 2007. and user of IT. Globalization is a broad and sweeping phenomenon that cannot be easily stemmed, let alone contained. If embraced rather than resisted, it presents more opportunities than threats to the U.S. national IT R&D ecosystem. The Committee on Assessing the Impacts of Changes in the Information Technology Research and Development Ecosystem was established under the auspices of the National Research Council’s Com- puter Science and Telecommunications Board to examine these issues and make recommendations to strengthen the U.S. IT R&D ecosystem. The period from 1995 to 2007 was marked by rapid and significant change in the U.S. and world economies. From the perspective of infor- mation technology, the United States enjoyed a strong industrial base, an ability to create and leverage ever new technological advances, and an extraordinary system for creating world-class technology ­companies—all of which have been the envy of the world. Yet over this period, the IT industry became more globalized, especially with the dramatic rise of the economies of India and China, fueled in no small part by their develop- ment of vibrant information technology industries. Ireland, Israel, Korea, Taiwan, Japan, and some Scandinavian countries have also ­ developed 

SUMMARY  strong niches within the increasingly globalized industry. Today, a product conceptualized and marketed in the United States might be designed to specifications in Taiwan, and batteries or hard drives obtained from Japan might become parts in a product assembled in China. High-value soft- ware and integrated circuits at the heart of a product might be designed and developed in the United States, fabricated in Taiwan, and incorpo- rated into a product assembled from components supplied from around the world. As the logical starting date for its study, the committee adopted 1995, a year that marked the emergence of the Internet as a commercial entity and the beginning of a period of turbulence in the IT sector. The technolo- gies that developed around the Internet and the services that it enabled generated a period of euphoria characterized by exuberance, burgeoning enrollments in IT programs, rising valuations, the suspension of fiscal prudence, and a stock market in the stratosphere between 1995 and 2000. The period of the late 1990s witnessed the unusual convergence of three trends: the move to deregulate many parts of the nation’s telecommunica- tions system (with implications for network connectivity), the rise of the World Wide Web as a technology platform, and the commercialization of the Internet from what had been the ­government-funded, research-only National Science Foundation Network (NSFnet). These trends were most strongly embraced in the United States, and the U.S. IT ecosystem reaped many benefits. The year 2000 is noted not only for the calendar problem faced by older computer systems but also for the realization that “the Emperor had no clothes” with respect to the plans of many Internet-based businesses. Greed turned to fear as the stock market dropped, the technology-heavy NASDAQ (National Association of Securities Dealers Automated Quota- tions) plummeted, and the boom turned to bust. Many of the fledgling firms born in the Internet euphoria failed. Both fledgling and established firms were driven to conserve cash in order to survive, and all sought lower-cost ways to continue to develop and manufacture their products. These events had the effect of accelerating the rise of Indian and Chinese IT industries. This period was also marked by the spectacular bankruptcies of highly visible companies such as Enron Corporation and WorldCom. The regulatory response—notably the passage of the Sarbanes-Oxley Act of 2002 (Public Law 107-204), commonly called SOX—established new standards for U.S. public company boards, management, and accounting firms with respect to the visibility of and responsibility for the financial dealings within U.S. public companies. In the wake of the passage of SOX, these companies faced significant new requirements to implement and assess internal controls over financial reporting. For young IT companies 

 assessing the impacts of changes in the it R&D ecosystem seeking to go public in the United States, SOX Section 404 (pertaining to the certification of the integrity of the financial control structure of a firm) has proved disproportionately costly relative to the limited resources of these young companies. Companies’ emphasis on cost reduction over growth investments during this period fueled interest in outsourcing and offshoring. Also, firms that might have sought capital in U.S. markets increasingly began to seek capital in overseas markets such as the London Alternative Invest- ment Market (AIM), or sought to be acquired by larger companies—a trend that for some companies may have had as much to do with cost pressures as with the availability of capital in the United States. These developments fueled a perception that jobs in the IT industry in the United States were being shed and that future prospects were bleak, even though this is not necessarily the case: according to a 2006 study of data from the Department of Commerce, there were more professional IT workers in the United States than ever before. The shock of September 11, 2001, refocused the nation on home- land defense and affected research priorities, and national attention and resources were redirected to combating new threats. The funding for IT research at the nation’s universities underwent major shifts as the priori- ties of the Defense Advanced Research Projects Agency shifted and time horizons shortened. In the meantime, industry increased its support for university research. Yet starting in 2005, the pendulum began to swing back in a posi- tive direction, with the emergence of new technologies such as multicore p ­ rocessors, new programming languages and environments, Internet data centers, and new applications that capture the phenomenon of social networking. Technology companies once again were able to launch suc- cessful initial public offerings (IPOs), and funding for new ventures began returning to pre-boom levels. Enrollments in the IT fields in U.S. universi- ties started to rise again. Today, there are signs that the U.S. IT R&D ecosystem is in recov- ery. The continued global spread of IT and its overwhelmingly positive impacts on people’s daily lives are quite evident in the developed world and increasingly so in the developing world. The widespread use of Outsourcing is the practice of purchasing work, formerly done in-house, from an outside vendor. Offshoring is the practice of moving work to developing nations. Association for Computing Machinery Job Migration Task Force, Globalization and Off- shoring of Software: A Report of the ACM Job Migration Task Force, W. Aspray, F. Mayadas, and M. Vardi, eds., Association for Computing Machinery, New York, N.Y., 2006. 

SUMMARY  ­ ellular telephones (now nearly 3 billion subscribers worldwide) and the c rising number of Internet users (more than 1 billion) illustrates the size and scope of these developments. Today, “information at your fingertips” is largely a reality, made possible by leading Web sites such as Google, Yahoo!, and Microsoft Live. And Amazon, eBay, and many others have changed the way we shop and swap. Notable recent technology IPOs such as Google (2004), Riverbed Technology (2006), and VMware (2007) indicate that great technologies and solid businesses can still attract investors. Venture investment in information technology has rebounded to the pre-boom levels. Active consideration is being given to ways of easing such frictions in the U.S. IT ecosystem as the unintended consequences of the Sarbanes-Oxley Act for small companies, and there is serious discussion of patent and intel- lectual property litigation reforms. Technology continues to evolve and even accelerate: radio-frequency identification, grid computing, dynamic Web pages, social networking and Web 2.0, open-source development, and the emerging shifts toward IT-enabled services represent exciting opportunities. Much remains to be accomplished in applying information technol- ogy for the benefit of humankind, in terms of improved health, better education, and more social opportunity. As other industries are becoming increasingly IT-intensive, information technology is intimately entwined with virtually all economic activity. Given this context, this study was charged with answering some fun- damental questions. Has the nation’s ecosystem for IT R&D emerged as strong as it was before the boom and bust? Is it sufficiently healthy today to continue generating the innovative concepts, products, and services that have made the U.S. information technology industry the envy of the world? The global landscape in 2007 is quite different from what it was in 1995. The globalization of the world’s economy is a fact that cannot be ignored. India is a strong presence in software and services. China is the world’s manufacturer. Moreover, those nations represent fast-growing markets for information technology products, and both are likely to grow International Telecommunication Union (ITU), “Worldwide Mobile Cellular Subscribers to Reach 4 Billion Mark Late 2008,” Press release, ITU, Geneva, Switzerland, September 25, 2008. Computer Industry Almanac, “Worldwide Internet Users Top 1.2 Billion in 2006,” Febru- ary 12, 2007, available at http://www.c-i-a.com/pr0207.htm; accessed December 31, 2008. As this report was being prepared for publication in late 2008, a new major shock to the ecosystem came in the form of a global credit crisis. The duration and implications of the crisis are unclear, but decreased access to capital (both equity and debt) for young IT com- panies and decreased robustness of end-user markets are among the likely effects. 

 assessing the impacts of changes in the it R&D ecosystem their IT industries into economic powerhouses for the world, reflecting both deliberate government policies and the existence of strong, vibrant private-sector firms, both domestic and foreign. To thrive in this landscape, the United States should play to its strengths, notably its continued leadership in conceptualizing the idea- intensive new concepts, products, and services that the rest of the world desires and where the greatest increments of value added are captured. Toward this end, it is necessary for the United States to have the best- funded and most-creative research institutions; to develop and attract the best technical and entrepreneurial talent among its own people as well as those from around the world; to make its economy the world’s most attractive for forming new ventures and nurturing small, innovative firms; and to create the environment that will ensure the deployment of the most advanced technology infrastructures, applications, and services in the United States itself for the benefit of the nation’s people, institu- tions, and firms. The findings and recommendations of the committee presented in the sections below are organized according to four broad objectives. The numbering of the objectives and the related numbering of the findings and recommendations reflect the logical flow of the committee’s argu- ments, not necessarily temporal or other priorities. The objectives are as follows: • Objective 1. Strengthen the effectiveness and impact of federally funded information technology research. • Objective 2. Remain the strongest generator of and magnet for tech- nical talent. • Objective 3. Reduce friction that harms the effectiveness of the U.S. information technology R&D ecosystem, while maintaining other impor- tant political and economic objectives. • Objective 4. Ensure that the United States has an infrastructure for communications, computing, applications, and services that can enable U.S. information technology users and innovators to lead the world. These objectives are discussed in some detail below. objective 1. strengthen the effectiveness and impact of Federally Funded Information Technology research Measures of “research” generally fail to distinguish between explor- atory research that leads to wholly new technologies and applications, and work that yields advanced prototypes and proofs of concept. University 

SUMMARY  research is focused largely on the former and industrial research concen- trates on the latter, which means that much of the feedstock for long-term innovation is to be found in the nation’s universities. As a result, support for university education and research is essential to generating the stream of innovations that nourish the rest of the ecosystem. Measures to enhance the productivity of university research funding, as well as that of other R&D funding, would increase the payoff from these investments. Information technology and its impact on the economy continue to grow in size and importance. According to estimates of the Bureau of Eco- n ­ omic Analysis, for 2006 the IT-intensive “information-communications- technology (ICT)-producing” industries accounted for about 4 percent of the $13,247 billion U.S. economy but contributed more than 14 percent of real gross domestic product (GDP) growth. (As a point of reference, fed- eral funding in fiscal year 2008 for computer sciences research was around $3 billion, less than 0.025 percent of GDP.) This substantial contribution to the economy reflects only a portion of the overall long-term benefits from IT research investments. It is in the nation’s interest for these benefits to continue to grow and accrue. Although the advances of information technology over the past 50 years have been truly breathtaking, the field remains in its relative infancy, and continuing advances over the coming decades can be expected as long as the IT R&D ecosystem’s capacity to sustain innovation is preserved and enhanced. Among the impacts anticipated from advances in IT during the coming decades are, for example, safer, robotics-enhanced automobiles; a more scalable, manageable, secure, and robust “new Internet”; enhanced information storage devices for personal use with improved search and retrieval capabilities; personalized and collaborative educational tools for tutoring and just-in-time learning; and personalized health monitoring. Current decisions about how the nation should make federal invest- ments—both civilian and military—in basic IT research do not seem to reflect the full impact of IT on society and the economy. For example, data collected for the President’s Council of Advisors on Science and Technology (PCAST) indicate that the United States lags behind Europe Thomas F. Howells III and Kevin B. Barefoot, “Annual Industry Accounts: Advance Estimates for 2006,” Survey of Current Business, Bureau of Economic Analysis, Washington, D.C., May 2007, Tables A, B, 1, available at http://bea.gov/scb/pdf/2007/05%20May/0507_ annual_industry_accounts.pdf; accessed August 28, 2007. Intersociety Working Group, AAAS Report XXXII: Research and Development FY 2008, American Association for the Advancement of Science (AAAS) Publication Number 07-1A, AAAS, Washington, D.C., 2007, Table I-9, p. 57, available at http://www.aaas.org/spp/rd/ rd08main.htm; accessed December 31, 2008. 

 assessing the impacts of changes in the it R&D ecosystem and Japan in civilian funding for IT R&D. Regaining a lead position will require aggressive action, including ambitious targets for increased R&D investment. The European Union and China—the latter a strong emerging competitor—have aggressive plans for strengthening their global posi- tions in IT through substantial and increasing IT R&D investments. In its August 2007 report Leadership Under Challenge: Information Technology R&D in a Competitive World, PCAST noted that the European Union is pursuing the goal of strengthening its position in information and communication technologies through increased cooperative R&D investment (roughly $12 billion) through 2013.10 The PCAST report also noted that by 2006, China’s overall R&D spending had exceeded that of Japan and amounted to about 1.4 percent of its GDP—on a path to achieve a national goal of 2.5 percent of GDP by 2020.11 As China, Japan, and Europe aggressively increase their targeted IT R&D investment levels, it is appropriate and necessary for the United States to adjust its own federal IT R&D spending level correspondingly, just as individual businesses, following best practices, track their global competitors’ business models in order to avoid falling behind in global market share. Increased federal investment in IT research would reflect the importance of IT to the nation’s society and economy as a whole and would allow the United States to build and sustain the already large posi- tive impact of IT on the economy. The desirability of increased federal investment in IT R&D has also been recognized in the 2007 report of the National Academies, Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future,12 and, to some extent, by provisions in the subsequently passed America COMPETES Act of 2007 (Public Law 100-69).13 Moreover, in its August 2007 report, PCAST found an imbalance in the current fed- eral R&D portfolio in that more long-term, large-scale, multidisciplinary R&D is needed. PCAST concluded that current interagency coordination processes for networking and IT R&D are inadequate for meeting antici- President’s Council of Advisors on Science and Technology, Leadership Under Challenge: Information Technology R&D in a Competitive World, Executive Office of the President, Wash- ington, D.C., August 2007, Table 4.3. 10Ibid., pp. 13-14. 11Ibid. 12National Academy of Sciences, National Academy of Engineering, and Institute of Medi- cine, Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Eco- nomic Future, The National Academies Press, Washington, D.C., 2007, Actions B-1 and B-4. 13The America Creating Opportunities to Meaningfully Promote Excellence in Technol- ogy, Education, and Science Act (America COMPETES Act) became Public Law 110-69 on August 9, 2007. 

SUMMARY  pated national needs and for maintaining U.S. leadership in an era of global competitiveness.14 A strategic reassessment of national R&D priorities is needed—an analysis meriting the attention of first-tier scientists and engineers from academia, industry, and government. (According to a 2006 National S ­ cience Foundation study on R&D by funding sector, industry invest- ments in R&D overall were more than double those of the federal govern- ment.15) A strong focus on IT will be important because of the unique role of IT within science and engineering. Toward that end, a means of delivering to the highest levels of the U.S. government the best possible advice on the transformational power of information technology would help ensure that the nation invests at appropriate levels in IT research and that these investments are made as efficiently and as effectively as possible—in part through improved coor- dination for federal R&D investments. This advice could be provided in a number of ways, including the augmentation of the current presidential science and technology advisory structure, the establishment of a high- level IT adviser to the President, or the reestablishment of an IT-specific presidential advisory committee (such as the President’s Information Technology Advisory Committee, which operated from 1997 to 2005). Finding 1.1. A robust program of federally sponsored research and development in information technology (IT) is vital to the nation. Finding 1.2. The level of federal investment in fundamental research in information technology continues to be inadequate. Recommendation 1.1. As the federal government increases its investment in long-term basic research in the physical sciences, engineering, mathematics, and information sciences, it should care- fully assess the level of investment in IT R&D, mindful of the economic return, societal impact, enablement of discovery across science and engineering, and other benefits of additional effort in IT, and should ensure that appropriate advisory mechanisms are in place to guide investment within the IT R&D portfolio. 14President’s Council of Advisors on Science and Technology, Leadership Under Challenge: Information Technology R&D in a Competitive World, Executive Office of the President, Wash- ington, D.C., August 2007, pp. 14, 37. 15National Science Foundation, US R&D Continues to Rebound in 2004, NSF-06-306, January 2006, available at http://www.nsf.gov/statistics/infbrief/nsf06306/; accessed December 31, 2008. 

10 assessing the impacts of changes in the it R&D ecosystem objective 2. remain the strongest generator of and magnet for technical talent There is cause for concern that an undersized and insufficiently pre- pared workforce for the information technology industry will accelerate the migration of higher-value activities to other nations. This report does not address the entire array of technology-sector wage and job-security issues. However, without a workforce that is knowledgeable with respect to technology and that has sufficient numbers of highly trained workers, the United States will find it difficult to retain the most innovation-driven parts of the IT industry. Despite the demand for such workers, the number of students specifying an intention to major in computing and informa- tion sciences has dropped significantly in the past 6 years. The problem of declining enrollments in the computing disciplines (as compared with the projected demand) is compounded by the very low participation of underrepresented groups in IT.16,17,18,19 The United States should rebuild the national IT educational pipe- line, encouraging all qualified students, regardless of race, gender, or ethnicity, to enter the discipline. Without sustained, amplified interven- tion, the United States is unlikely to produce an educational pipeline yielding a revived and diverse IT workforce over the next 10 years. To achieve the needed revitalization, the United States should pursue a mul- tipronged approach: it should improve technology education at all levels from kindergarten through grade 12; broaden participation in IT careers by women, people with disabilities, and certain minorities, including African-Americans, Hispanics, and Native Americans; and retain for- eign students who have received advanced degrees in IT. Immigrants have been especially significant in high-technology entrepreneurship; for at least one-quarter of the U.S. engineering and technology companies started between 1995 and 2005, mostly in software and innovation and in manufacturing-related services, at least one of the key founders was born outside the United States.20 16National Center for Education Statistics, Integrated Postsecondary Educational Data System (2005-06), U.S. Department of Education, Washington, D.C., May 1, 2007. 17S. Zweben, “Record PhD Production Continues; Undergraduate Enrollments Turning the Corner,” Computing Research News 19(3):7-22, 2007. 18Bureau of Labor Statistics, Current Population Survey, Annual Averages 2000-2006, U.S. Department of Labor, Washington, D.C., 2006. 19College Board, 2006 College Bound Seniors: Total Group Profile Report, 2006, available at http://www.collegeboard.com/prod_downloads/about/news_info/cbsenior/yr2006/ national-report.pdf; accessed July 2, 2007. 20Vivek Wadhwa, AnnaLee Saxenian, Ben Rissing, and Gary Gereffi, “America’s New Immi- grant Entrepreneurs: Part 1,” Duke Science, Innovation, and Technology Paper No. 23, January 4, 2007, p. 19, available at http://ssrn.com/abstract=990152; accessed December 26, 2007. 

SUMMARY 11 Finding 2.1. Rebuilding the computing education pipeline at all levels requires overcoming numerous obstacles, which in turn por- tends significant challenges for the development of future U.S. IT workforce talent. Finding 2.2. The participation in IT of women, people with disabili- ties, and certain minorities, including African-Americans, Hispan- ics, and Native Americans, is especially low and is declining. This low level of participation will affect the ability of the United States to meet its workforce needs and place it at a competitive disadvan- tage by not allowing it to capitalize on the innovative thinking of half of its population. Recommendation 2.1. To build the skilled workforce that it will need to retain high-value IT industries, the United States should invest more in education and outreach initiatives to nurture and increase its IT talent pool. Finding 2.3. Although some IT professional jobs will be offshored, there are more IT jobs in the United States than at any time during the dot-com boom, even in the face of corporate offshoring trends. Recommendation 2.2. The United States should increase the avail- ability and facilitate the issuance of work and residency visas to foreign students who graduate with advanced IT degrees from U.S. educational institutions. objective 3. reduce friction that harms the effectiveness of the u.s. Information Technology R&D ecosystem The committee is concerned that such factors as intellectual property litigation and corporate governance regulations have become sources of increased friction in the conduct of business in the United States and that such burdens can have the effect of making other countries more attrac- tive places to establish the small, innovative companies that are an essen- tial component of the ecosystem. The committee recognizes that these issues are not simple—for example, in the case of corporate governance, the dampening effects of increased regulation have to be weighed against the benefits of restoring and maintaining public confidence in equity mar- kets. But the committee believes that it is vital to keep the United States attractive for new venture formation and to sustain the nation’s unrivaled ability to transform innovative new concepts into category-defining prod- 

12 assessing the impacts of changes in the it R&D ecosystem ucts and services that the world desires; the committee emphasizes that in considering new measures or reforms in such areas as corporate gov- ernance or intellectual property litigation, the potential impacts on the IT R&D ecosystem should be heavily weighed. Finding 3.1. Fewer young, innovative IT companies are gaining access to U.S. public equity markets. Recommendation 3.1. Congress and federal agencies such as the Securities and Exchange Commission and the Patent and Trade- mark Office should consider the impact of both current and pro- posed policies and regulations on the IT ecosystem—and especially on young, innovative IT businesses—and consider measures to mitigate these where appropriate. objective 4. ensure that the united states has the infrastructure that enables U.S. information technology users and innovators to lead the world The United States has long enjoyed the position of being the largest market for IT; global demographics and relative growth rates suggest that this advantage is unlikely to endure. Fortunately, although a healthy domestic IT market is an important element of a healthy domestic eco- system, market size is not the only factor in leadership. The environ- ment fostered by leading-edge users of technology—including those who can leverage research, innovate, and create additional value—­creates the essential context for technology’s next wave and its effective applica- tion. In such an environment, all sectors of society (including consumers, businesses, and governments) exploit and make the best use of advanced information technology. The committee is concerned that the United States has lost its leadership in the use of information technology. In par- ticular, the U.S. broadband infrastructure is not as advanced or as widely deployed as that in many other countries. Should this situation persist into the future, the United States will no longer be the nation in which the most innovative, most advanced technology and highest value-added products and services are conceptualized and developed. Moreover, in addition to broadly fostering research and commer- cial innovation, government-sponsored R&D can help meet particular government demands. Although the government is no longer a lead IT user across the board, it continues to have an appropriate leadership role where federal agencies’ requirements are particular to their missions and commercial analogues are scarce or nonexistent. 

SUMMARY 13 Finding 4.1. The most dynamic IT sector is likely to be in the coun- try with the most demanding IT customers and consumers. Finding 4.2. In terms of nationwide availability, use, and speed of broadband, the United States—the inventor of broadband technol- ogy—has been losing ground compared with other nations. Recommendation 4.1. The United States should establish an ambi- tious target for regaining and holding a decisive lead in the broad deployment of affordable gigabit broadband services. Federal and state regulators should explore models and approaches that reduce regulatory and jurisdictional bottlenecks and should increase incen- tives for investment in these services. Recommendation 4.2. Government (federal, state, and local) should foster commercial innovation and itself make strategic investments in IT R&D and deployment so that the United States can retain a global lead position in areas where it has particular mission requirements.