5 Top Tech Policy Issues

NEW YORK ( TheStreet) -- The dust has barely settled on last week's midterm elections but already, industry observers are weighing the implications for the tech sector.

From service providers such as ComCast ( CMCSA) and AT&T ( T) to security firms like Symantec ( SYMC) and Sourcefire ( FIRE), a shifted political climate in Washington could mean a new technology landscape.

Experts cite different tech priorities in the aftermath of the midterms. "The big one is the classification of broadband services," said Ron Gruia, principal analyst at tech research firm Frost & Sullivan. "Net neutrality is the centerpiece of Obama's broadband agenda."

"Probably the big three things are going to be alternative energy, technology jobs, and the trade balance," added Rob Enderle, principal analyst at research firm Enderle Group.

The spotlight is certainly on U.S. trade this week, evidenced by President Obama's high-profile tour of Asia. Speaking in Mumbai on Monday, the president announced that the U.S. will be lifting controls on high-tech exports to India, which has its own booming technology sector. Indian Prime Minister Manmohan Singh welcomed the decision, citing a growing level of trust and confidence between the two countries.

China is also likely to be on the technology agenda over the next few years, seen as a lucrative export market as well as a growing economic rival.

Read on for more about tech's top 5 political issues.

Net Neutrality

The issue: Net neutrality, a key mantra of the Obama tech strategy, aims to ensure that broadband providers treat Web traffic "equally" so that all traffic will travel at the same speed.

Where it's at: In September, a final draft of a net neutrality bill was led by Democratic Representative Henry Waxman, but lack of support quickly killed this effort.

Companies impacted: Cable firms and wireless providers including Comcast, Time Warner, Cablevision, AT&T and Verizon

The Republican majority in the House is viewed as a positive for cable stocks like Comcast, Time Warner Cable ( TWX) and Cablevision ( CVC), with takeover likely hindering the progress of any further net neutrality regulations.

Telcom giant AT&T, which should also benefit from the new House majority's likely stance on the issue, is one of many voices arguing that wireless broadband networks should be free from net neutrality regulations.

"In order to provide consumers with the high quality wireless broadband services that they demand, wireless carriers must be able to dynamically manage traffic and operate their networks in an environment free from burdensome, arbitrary and unnecessary regulations," wrote Joan Marsh, AT&T's vice president of federal regulatory affairs, in a recent blog posting.

AT&T's arch-rival Verizon ( VZ) has also weighed in on this issue, joining forces with Google ( GOOG) to propose a legislative framework on net neutrality. Critics, however, have slammed Verizon and Google, accusing the companies of paying mere "lip service" to the concept of an open Internet.

Long-term, it looks like Obama's dream of net neutrality may remain just that. "With the Republican gains, we're less likely to see stringent regulation of the Internet, and service providers are more likely to get what they want," Ron Gruia, an analyst at Frost & Sullivan told The Street.

The analyst, however, predicts that FCC Chairman Julius Genachowski will be frantically working behind the scenes to engineer some sort of compromise. "This is also an issue where a compromise could be reached," he added. "Consumers need to be protected, but service providers have got to be able to charge for differentiated services."

Tech Jobs

The issue: Creating and bringing back jobs to the U.S., which continues its attempt to chip away at the 9.6% unemployment rate.

Where it's at: There has been some growth in tech jobs: Computer systems design and related services jobs increased by 8,000 in October, according to the BLS. China and India, though, are ramping up their outsourcing efforts.

Companies impacted: Firms that outsource a lot of operations, like HP ( HPQ).

Last week's Senate race in California hammered the issue home when Democrat Barbara Boxer successfully attacked Republican Carly Fiorina over job losses and offshoring during her tenure as HP CEO.

"The technology industry has been pretty flexible with regard to where the jobs are going," said Rob Enderle, principal analyst at research firm Enderle Group. " And clearly, that killed Carly Fiorina's chances."

Now, however, Enderle predicts a big focus on technology job creation. "I think there will be a major effort to get companies that are operating here to focus on creating jobs here and not overseas," he said. "I think that there will be financial incentives for companies that are creating jobs here, and probably, restrictions covering government contracts for companies using overseas labor."

The outsourcing trend of recent years continues to linger, even casting a shadow over President Obama's trip to Asia. However, some big-name tech companies have already focused their attention on the U.S., such as Intel ( INTC), which recently announced a $6 billion to $8 billion investment in manufacturing facilities in Arizona and Oregon. These are expected to create up to 1,000 high tech jobs and as many as 8,000 construction jobs.

In addition to Intel, Google is also creating jobs as it continues its aggressive data center building plan across the U.S. Last month Google predicted that its data center in Mayes County, Okla., will employ around 100 people when it is fully operational at the end of next year.

With Indian IT leaders estimating that some 350,000 jobs have been outsourced to the subcontinent over the last decade, however, it will take a significant U.S. government effort to stem this flow.

Rare Earth

The issue: China holds a monopoly on production of rare earth metals, or materials used in a variety of next-generation technologies like electric car batteries and smartphones.

Where it's at: China slashed its export quotas earlier this year and said it would trim rare earth exports in 2011, which raises concerns about the impact on U.S. businesses and the defense sector.

Companies impacted: Consumer product firms including Apple and RIM.

Rare earth elements are said to feature in a slew of consumer products, including Apple's ( AAPL) iPhone and Research In Motion's ( RIMM)BlackBerry, as well as in the manufacturing of computer displays and hard disk drives.

Earlier this year the Government Accountability Office highlighted China's dominant position in the rare earth market, particularly in relation to the U.S. military. The elements play a key role in defense technologies such as night-vision goggles and tanks, with rare earth oxides said to feature in Lockheed Martin's ( LMT) Aegis Spy-1 radar system, although the defense giant has not yet confirmed this to TheStreet.

"China's shot across the bow this fall will recast rare earth (quite properly) as a fundamental security and competitiveness issue," explained David Birdsell, dean of Baruch College's School of Public Affairs, in an email to TheStreet.

Officials at the Department of Defense are preparing a report which will measure the impact of rare earth elements on U.S. national security.

Tech and the Balance of Trade

The issue: U.S. export policies

Where it's at: Washington is coming under pressure to ease export restrictions on key technologies, both from overseas governments and American businesses.

Companies impacted: Any firm that exports its products, especially security technologies like encryption.

"The Republicans, in particular, want to remove a lot of the restrictions about exporting technology and bringing in new revenue," said Enderle. "They are very much 'let's remove the restrictions and let the market dictate what they can sell.'"

As ever, China looms large in America's tech future, and the Chinese government urged Washington to revamp its high-tech trade restrictions earlier this year. Some U.S. business figures, such as Doug DeVos, president of marketing giant AmWay, have also called for looser restrictions on high-tech exports. Washington's recent decision to allow exports of C-130 cargo planes to China, though, has been welcomed by Beijing, which is hopeful that the U.S. will further soften its position on exports.

U.S. security companies such as Symantec and Sourcefire will be following this issue closely, given that encryption technologies are often deemed critical to U.S. national security and competitiveness. In 2006, for example, Israeli security specialist CheckPoint ( CHKP) abandoned its attempt to acquire Columbia, Maryland-based Sourcefire in the face of intense opposition on Capitol Hill.

President Obama, however, eased controls on U.S. technology exports to India earlier this week. The President, who is on a high-profile economic mission to Asia, also praised the Indian government's efforts to extend IT into remote rural areas during his trip.

Alternative Energy

The issue: Alternative energy production

Where it's at: The Obama administration vowed to double production of greener energy by 2012.

Companies impacted Most tech titans, including IBM, Ford and Google.

Tech giant IBM ( IBM) has been making a song and dance about smart energy grids as part of its Smarter Planet initiative, and Google is also getting in on this act. Last month the Internet bellwether announced that it is investing in a major wind turbine project off the Mid-Atlantic coast. When built, the Atlantic Wind Connection (AWC) backbone will stretch from New Jersey to Virginia, providing enough power for 1.9 million households, it said.

Both IBM and Google see opportunities for green within green technology. For IBM, alternative energy represents an opportunity to sell additional services to customers, while Google is on a mission to find alternative energy sources for its power-hungry network of data centers.

Rob Enderle also thinks that specific aspects of the government's alternative energy strategy may shift during the coming years, particularly with the GOP wielding more power in Washington. "Solar panel stuff requires a lot of subsidization, so it may be scaled back -- the focus may shift from subsidies for purchase to subsidies for manufacturing and R&D," he said. "At the moment, a lot of the technology in electric cars is built overseas, but there may be more of a focus on building the technology that goes in the cars within the U.S."

Building electric car technology within the U.S. addresses more than just a green issue, according to Enderle. It also addresses trade, jobs and revenue issues, he added, potentially impacting companies such as Ford ( F) and GM.

The Department of Energy has already highlighted electric car R&D as a key area, and officials recently outlined a strategy whereby U.S. factories will eventually provide electric batteries and components for 500,000 cars annually.

--Written by James Rogers in New York.

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