<h1>MAKING CONTACT</h1> <h2>by Dr. Mark White<br> Partner, White & Associates</h2><br> <h4>1 February 1996</h4> <p> The costs of core digital technologies are falling by about half every year, just as they have every year since 1965 when Gordon Moore predicted that they would. Today's personal computers could not have been made in 1986, but then you could have bought the processing power of today's Pentium Pro or Power PC - if you had had about 3 or 4 million dollars to spare. Every new year, chip factories manufacture more artificial processing and communications power than mankind has built since the discovery of the telegraph.

Thanks to the dynamics behind Moore's Law, in ten years a cheap telephone will have many times the processing power of today's top-of-the-line desktop. It will listen and talk, see and display graphics, store and recall, screen and search, fit in your pocket, operate for days without a recharge, and connect wirelessly to a seamless global communications web that will offer worldwide long-distance voice-only calls for free (you'll only start paying for bandwith when you want real-time, interactive video with your new-found friends and business contacts).

There is something far more important than all the whiz-bang technology that science makes possible, though. It's the fact that every man, woman, and child in the world will be able to afford to own and use one of these telephones. Hundreds of millions of people in the world today, perhaps more than a billion, have never made a phone call (when you think about about it, you realize that at least a few of those millions who've never heard dial tone live right here in Mexico). In ten years, every last person in the world will have access to communications services far better than the most sophisticated services available today.

What do you think they'd do? Lots of important things, no doubt, but as a finance researcher, I tend to think about their buying and selling, their borrowing and lending. Imagine some slick coyote taking advantage of a campesino whose telephone automatically finds him the best price available, net of transportation costs from his milpa. Fat chance! Imagine some slothful banker charging this campesino an uncompetitive rate for his crop financing. Not very likely when the artificial intelligence in this campesino's phone checks the rate at every bank!

Middlemen and agents will have to get a lot more efficient in this brave new world. Expert agronomists will be able to offer this campesino the best financial package possible, taking into account not only the soil and climate at the milpa he owns, but what his neighbors are growing, what the seed, transport, fertilizer ,and pesticide companies are charging, and the long-term weather and price forecasts (for China exports) to boot. With the right crop, one good season might make that campesino more money than he's ever seen (at the same time that the agronomist gets rich, the Chinese get a better diet, and Mexico runs a trade surplus).

Agriculture is only one of many killer applications that could pay for a nationwide cellular network hooking together all these wireless wonders. It's my favorite, though, because I can't think of anyone else who'll benefit more than the campesino if this new technology relieves the traditional isolation that Mexico's telephone monopoly has imposed on so much of the country (although my sympathy does go out to the poor Mexican exporter who pays 20 times what his Chilean competitor does to promote his products in the US).

How I hate to say if rather than when! This technology has an enormous potential to benefit Mexico, allowing the nation to jump generations of development, yet it's not moving forward today. I only know what I read in the newspapers, but they say that Mexico's government and telephone companies are still fighting over the licensing conditions for fixed digital cellular. It seems that regulation may be standing in the way of progress.

Of course, perhaps the companies should willingly pay the government for the frequencies they'll use. I tend to think not, though, since George Gilder argues that digital radio using time, space, frequency, and code division will soon make electromagnetic spectrum abundant rather than scarce. Rather, I tend to think that the government should give away concessions, even subsidize construction, to get these benefits out to the isolated campesinos sooner. What they don't collect in fees for spectrum, they should collect in increased taxes and decreased subsidies in the countryside as the campesinos use information and intelligence to make better decisions on what and how to produce, and when and where to sell (and the poor coyotes can make theirs back by open discount stores in the pueblos).

Readers with questions or comments for Dr. White can call 011(525)595-6045, fax 011(525)683-5874, or email white@profmexis.sar.net

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