January 16, 2014    Volume 21, No. 1

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Top Government Officials Discover There Is Little Left Of America's Telecom Equipment Manufacturing Industry; United States Has To Create A New Industry From Scratch

By Richard A. McCormack

The U.S. telecommunications industry has lost its ability to manufacture advanced telecommunications products needed by the U.S. military, according to a government committee comprised of the senior-most members of the President's cabinet.

The U.S. position in the global telecommunications equipment market is "diminishing," according to the Defense Production Act Committee's Telecommunications Industrial Capability Study Group.

U.S. manufacturers of telecom equipment have been battered by the consolidation of global carriers, "market-impacting foreign-government policies and low labor costs in foreign markets," says the committee made up of the top leaders from 17 federal agencies. "As a consequence, U.S. manufacturers face increased competition from overseas vendors and reduced profit margins."

The shift of the U.S. telecommunications hardware industry offshore "has left the U.S. with only one domestic firm in the top tier, a few medium-sized manufacturers (annual sales exceeding $500 million), and several small vendors," says the DPA Committee, which is operated by the DOD's Manufacturing and Industrial Base Policy Office. "The U.S. no longer has a wireless equipment vendor capable of producing at scale."

The result is the United States is "losing its capabilities in key equipment sectors." There are only a few American companies left for federal agencies and universities to partner with on research and development projects aimed at developing new telecommunications technologies. And the options "to successfully translate domestic innovation into U.S. telecommunications equipment are increasingly limited," says the group.

The Defense Production Act Committee is in the process of developing recommendations to foster public-private partnerships along with co-investments in wireless, optical and photonics-based telecommunications systems. "These partnerships likely involve coordinated activities related to applied R&D, technology demonstrations, scale up and facilitating government as an early adopter," says the DPAC. "Production scale-up could be implemented using DPA Title III [contracting] authorities [with technology companies] to ensure that essential government needs can be met."

Those involved in the study say that the government is now presented with a vexing challenge. Since there is hardly anything left to salvage of the U.S. telecommunications hardware industry, the only option available is reinventing the U.S. industry by investing in new technologies, such as photonic integrated circuits, that could form the basis of a new industrial capacity. A Defense Production Act Title III contract (made to industries in dire need of revival), is expected to be made this year.

Here is a list of the government personnel who signed the DPA Committee report provided to the Senate Banking Committee and the House Financial Services Committee: The Secretaries of the Departments of State, Treasury, Defense, Interior, Agriculture, Commerce, Labor, Health and Human Services, Transportation, Energy, and Homeland Security; the U.S. Attorney General; the Director of National Intelligence; the Director of the CIA; the Chair of the Council of Economic Advisors; and Administrators of NASA and the General Services Administration. The study is contained as an appendix in DOD's Manufacturing and Industrial Base Policy Office's "Annual Industrial Capabilities Report to Congress," located at http://www.acq.osd.mil/mibp/docs/annual_ind_cap_rpt_to_congress-2013.pdf.

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