For years we have been discussing the significance of the explosion of bandwidth capabilities and what it will mean to businesses and the economic growth of the world. We have argued that as bandwidth proliferates there will be a commensurate benefit to productivity and that its promise had been sidetracked by a series of policy mistakes (volatile Fed policy) and malinvestment (dot.com, housing/mortgage and commodities) over the last several years.
But while the advantage to economics has been less pronounced, the fact is we have seen an explosion of bandwidth since 2000 and it has already started to work its way into economic behavior most notably with the rise of social networking applications and mobile devices that are linked to the Internet.
Bret Swanson of Entropy Economics (see previous posts referencing Bret, here) describes the progression of this phenomenon in his recent piece "Bandwidth Boom: Measuring U.S. Communications Capacity from 2000 to 2008". Swanson points out that while there is a school of thought that believes a "digital Dark Age" has "starved us of communications power", the facts don't show that to be the case and the best is yet to come in terms of what advantages this "Exaflood" will give us.
Of particular importance, Swanson points out how it was onerous regulation that almost killed this expansion and brought about much of the "technology crash" of the early 2000s. He points out that "a series of technology breakthroughs, new business models, and a very helpful relaxation of harmful regulations complemented one another and produced a bandwidth boom."
We certainly hope that the current regulatory environment which seems to be leaning towards ever more government involvement in the affairs of business does not find its way to hinder the march of technological progress! This is important to growth investors because this "exaflood" is producing significant investment opportunities for those that are adept at identifying not only businesses that are driving the technology behind the bandwidth boom, but those that are developing business models geared towards exploiting it.
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for later posts on this same subject, see also:
- "Have you heard of this company? HITT" 07/06/2010.
- "Have you heard of this company? IIVI" 08/05/2010.
- "On the verge of something important" 09/29/2010.