A Bet on Virtual Gambling Could Pay Off in Technology
There’s nothing wrong with America’s nascent information highway policies that a little gambling couldn’t cure. You can bet on it.
While the feds struggle to deregulate the Baby Bells, re-regulate the cable industry and guarantee every resident “universal service,” the states have a unique chance to load their policy dice in ways that could accelerate public acceptance of new network technologies. If they play their cards right, states such as California and New York could simultaneously raise revenue, promote the rapid deployment of new-media technology and accelerate economic development--all without raising taxes.
What it takes is the courage and creativity to put their lotteries on-line.
The raw economics alone are compelling: Two-thirds of the states run lotteries that together bring in more than $12 billion a year. The California lottery will have generated roughly $670 million for the fiscal year ending June 30.
What if people could pick their lucky numbers on a virtual lottery ticket by logging on at home? What if people who bought paper tickets could--for a small extra fee, of course--pick another number or two if they also purchased the digital version? There are all kinds of innovative ways of bundling paper and electronics to stimulate sales and improve everyone’s chance of winning.
Add in revenues from parimutuel betting and card rooms and we’re talking another $5 billion nationwide. Go the whole virtual casino route--how about virtual poker or blackjack games?--and market size could leap an estimated $10 billion. That’s real money.
States all over the country are weighing the issues associated with legalized gambling. Many Native American tribes want to establish Las Vegas-like casinos on their reservations, and any number of economically challenged locales are convinced that letting people play the odds is the best way to achieve economic development through tourism. Some states are distributing video gambling machines in stores, and others are looking at riverboat gambling for their waterways.
The economic-development argument will work just as well for virtual gaming in a revenue-hungry state as for a real casino in a city with a dilapidated boardwalk. Which investment better reflects the future? These are issues Vice President Al Gore and his blue-ribbon committee on information infrastructures aren’t touching. More than vague promises of universal service, on-line betting would offer a populist appeal for members of any economic class.
Sure, gambling--like any other economic vehicle--has some serious drawbacks. But if we really care about having policies that promote universal service and make new technologies more accessible and affordable, shouldn’t states be encouraged to explore on-line betting? With rigorous monitoring, it could provide one of the least expensive, most creative ways for a state to help define the networks of tomorrow.
Why doesn’t some enlightened state--California?--recognize the terrific opportunity here?
To be sure, there would be important network, data integrity and security issues to resolve. Should there be special IDs? Would people have prepaid accounts? Or would they all be billed on a per-transaction basis? How would all this data be encrypted? Who would get access? These are tough design and implementation questions--the kind that promote ingenuity and innovation.
For instance, a state offering on-line wagers might rightfully insist that the cable or telephone company providing the service provide its betting technology to everyone. Needless to say, the specifications for that technology could assure that it is capable of transactions more sophisticated than scratching lotto numbers or betting Pimlico in the fifth. The point is that, carefully managed, on-line betting could drive market innovation and acceptance of new technologies.
“There is little doubt that the public would embrace this kind of interactivity,” says George R. Andersen, who runs Minnesota’s $335-million lottery. “Lotteries are the most popular form of public participation, even above ATM machines right now. The state could be a driver of this.”
Andersen should know. Three years ago, he proposed an on-line lottery that would be offered through home Nintendo game machines. The idea was shot down in a political firefight.
Today, Andersen is trying to enhance the state’s conventional lottery network by getting it to handle such public service items as hunting licenses and voter registration. Andersen believes the states will be “followers and not the leader” in encouraging on-line wagering.
Nevertheless, Andersen points out, the history of lotteries has shown that if one state takes the plunge, others will follow.
“We (in Minnesota) could see the traffic going across the bridges to Wisconsin on jackpot nights,” he recalls. “When we matched them, the border crossing slowed down.”
With networks, however, geography is less relevant. There, a state lottery or poker game could just as easily be national, and being first could bring huge benefits. With competition among the states, we could see dozens of innovative on-line games of chance and skill. Does anyone doubt that would accelerate the creation and adoption of new technologies? Isn’t that what we want?
It’s time to roll the dice. Let the chips fall where they may.
