Keynote Address by Commerce Assistant Secretary Nancy Victory
delivered at the
Alliance for Public Technology Broadband Symposium
February 8, 2002
CREATION OF A BROADBAND UNIVERSE: A "BIG BANG THEORY"
Good morning ladies and gentlemen. I'm delighted to speak to you about a topic that is near and dear to my heart, and yours'-- broadband deployment in the United States. Let me first thank the Alliance for Public Technology for its kind invitation to address you today. Long before the broadband bandwagon gained popularity, APT was imagining the potential of high-speed communications networks to revolutionize the ways in which we live and work. Since 1988, the organization has challenged policymakers to consider the serious implications to our global competitiveness, economic prosperity, and civil society if these networks connected some, but not all, of the nation's people. Quote. "By connecting each one to all the others, we strengthen the fabric of society. At the same time, we promote economic development and help people to strengthen their individual identities." Closed quote.
These words of APT's former Policy Committee Chair, Dr. Susan Hadden, whose memory we celebrate through the accomplishments of the Pioneer Award winners, reflect the foresight of APT's founders. The work of Congressman Bobby Rush, AFL-CIO President John Sweeney, disability rights advocate Jacquelyn Brand, and of course NTIA's own, Bernie McGuire-Rivera, makes real APT's vision of "connecting each to all." Congratulations to all the Hadden awardees for your remarkable efforts. Bernie, on behalf of myself, and your friends and colleagues at the agency, I want to convey our pride in your outstanding work to ensure that underserved communities benefit from telecommunications technologies. Thank you for your leadership and for your valuable contributions to NTIA.
As many of you know, today marks the sixth anniversary of the enactment of the Telecommunications Act of 1996. Some see the anniversary as a chance to commemorate passage of landmark legislation to deregulate the telecommunications industry and promote the rapid roll-out of new telecommunications technologies. By contrast, others are arguing whether the Act is sufficiently flexible to achieve those goals. While I am not prepared to take sides in that debate, I am sure that both sides would agree that the world of telecommunications has changed significantly since the 1996 Telecom Act became law.
In the years before the Act, the telecommunications world consisted mostly of circuit-switched analog service provided principally by incumbent local telephone companies through their wireline facilities. During that time, telephony, cable, and wireless providers delivered neatly packaged services to distinct users for distinct uses. Today, the word is convergence. Wireless companies are winning local telephone customers. Cable operators are rolling out analog telephony, and experimenting with more efficient packet-switched protocols for voice service. Telephone companies have begun limited video programming in competition with cable, as satellite providers steadily gain viewers. Meanwhile, regional Bell operating companies are demonstrating competition in local markets to gain regulatory approval to offer in-region long distance service.
Broadband is the technology now on the tip of everyone's tongue. It exemplifies technological convergence by creating high-speed, interactive services delivered across platforms. Local phone companies, both incumbents and new entrants, are offering consumers broadband using DSL, while cable, satellite, and terrestrial wireless networks are vying for their share of the advanced services market. On Tuesday, Commerce Secretary Donald Evans released a report by NTIA and its sister agency, the Economics and Statistics Administration, titled "A Nation Online: How Americans Are Expanding Their Use Of The Internet." The report is based on data from the U.S. Census Bureau's Current Population Survey dated September 2001, which covered about 57,000 households and more than 137,000 individuals across the United States. It found that 54% of Americans are using the Internet, and that about 14% of children between the ages of 3 and 4 are on-line. Some of these youngsters may be learning their e-mail address before mastering their street address. Compare that to the years before 1996, when most of us didn't even know what an e-mail address was! What a different world!
The report also reveals that roughly 20% of individuals who use the Internet use broadband connections to access the Internet. Cable modems accounted for 12.9% of this 20%, compared to 6.6% using DSL connections and 0.5% using other types of connections. Strong growth in broadband use, up 116 % during a 13-month period, coincides with wider availability of such services. According to an FCC report released yesterday on the availability of high- speed services, as of June 30, 2001, 9.6 million people subscribed to such services. At least one high-speed subscriber lived in 78% of the nation's zip codes.
As you may know, President Bush and his Administration recognize broadband's importance. These high-capacity networks and the services they support promise to improve the quality of life for all Americans. They can expand educational opportunities, improve health care, increase governments' responsiveness to its citizens, and enhance our global competitiveness. And, thousands of new jobs could result from greater broadband deployment, both directly through the network construction, and indirectly through industries related to advanced networks and services.
Consequently, NTIA has been advising the Administration as it seeks to determine the appropriate role for the federal government in facilitating the roll-out of broadband networks. NTIA has led this process by convening a Broadband Forum in the fall, requesting public comments on the issues, and extensively engaging public interest groups, industry representatives, state regulators, academics, and other interested parties in discussions on broadband issues.
Like scientists seeking to unravel the complexities of space, NTIA is exploring policies that will lead to a new broadband universe. Years ago, in trying to explain the universe's creation, scientists developed the "Big Bang" Theory. According to this theory, a cosmic explosion 10 to 20 billion years ago hurled matter in all directions. The galaxies of the universe emerged from the matter. The Big Bang, scientists speculate, was the incipient event that created the foundation for our world.
In the case of broadband, regulators are searching for the right regulatory mix or Big Bang to provide the foundation for the broadband universe. Though possibly only slightly less challenging than the scientists' job, our task is no less important because our work can propel broadband deployment, if we get it right, or postpone it, if we don't. We're still completing our research, and aren't yet prepared to announce the Administration's views on the government's role in ensuring that the entire nation benefits from broadband's "big bang." But lest you think we're lost in space, allow me to share with you what we're learning.
Guideposts for Inciting Broadband's Big Bang: Developing Federal Broadband Policy
Our efforts have yielded much information about broadband and the extent of advanced network deployment in the United States. This information has helped us to develop some guideposts for determining the proper role of government in facilitating broadband deployment:
- First, the market, not government, should drive broadband's roll-out. Government's role is to remove the regulatory roadblocks that impede efficient capital investment. Then, whether carriers choose to deploy networks and services and consumers choose to subscribe to them are marketplace decisions.
- Second, rational facilities investment should be a goal of any policies we pursue. Facilities-based competition has always been a desired means for achieving a robustly competitive market. Obviously, there should be reasonable opportunities for resale competition as well. The tragic events of September 11th, however, demonstrated the network reliability and security advantages of diverse facilities-based carriers competing in the marketplace.
- Third, where possible, we should promote competition through a technology-neutral paradigm. As you all know, broadband services can be deployed over telephony, cable, wireless and satellite platforms. The differing histories and regulations surrounding each type of platform makes absolute regulatory parity difficult to achieve, but it is important to try to regulate comparable services in a manner that does not interfere with marketplace outcomes.
- Fourth, we should recognize that the market might not always work as well or at the same pace in all areas, particularly in rural and certain urban areas. In developing a policy, we should be aware of the differing forces and needs in those areas.
- Finally, once we establish the right regulatory framework, effective enforcement is critical to making it work. Regulations must have teeth and penalties must deter non-compliance.
With these guideposts in mind, we reviewed the comments in our proceeding to obtain more specific information to aid our development of a national broadband policy. It is clear from the comments that issues related to broadband are complex and multifaceted. An important recurring theme in the comments was the necessity for us to take a holistic look and develop a broadband policy that is comprehensive, yet has all of its various elements coordinated and in balance. Commenters urged us to examine supply issues, demand issues, laws and regulations at the federal, state, and local level, and the respective regulatory treatment of all potential broadband providers -- telcos, cable companies, wireless providers, satellite operators, and any others that emerge.
As a general matter, much of the broadband debate has focused on whether current regulation is impeding deployment. Many of the comments we received address whether and how to deregulate new high speed infrastructure to spur investment in broadband facilities and services. Many commenters raised unbundling issues, with some parties advocating the relaxation of UNE requirements for certain new broadband infrastructure. Other parties argued for the adoption of different unbundling regimes for "new" and "old" incumbent telco facilities. Still others are adamant that relaxing the unbundling requirements would inhibit, rather than promote, competition. Pricing was another critical issue -- specifically, whether to transition away from the FCC's current pricing mechanism -- the controversial TELRIC regime. Other commenters discussed detariffing of broadband services provided by incumbent telcos in markets where multiple providers of comparable services exist.
The comments also addressed the issue of open access obligations for cable, satellite, and wireless broadband providers. Some see open access as necessary to ensuring consumers' ability to chose how they access the Internet and as critical to the competitive viability of small niche companies that are not vertically integrated. In others' view, marketplace interaction and not blanket government mandates will most readily achieve open access.
A number of commenters noted a need for financial incentives. On this score, the Bush Administration has already taken some important actions. First, the President signed an extension of the Internet tax moratorium, which will prevent new access taxes from increasing the cost of Internet services for consumers and businesses. Second, the President's economic security package makes an important step toward modern tax depreciation schedules, which will remove obstacles to new investment in information technology and broadband infrastructure. It is unfortunate that the Senate has not yet passed these important reforms. Third, the President has proposed permanently extending the research and experimentation tax credit to promote increased investment in the development of new technologies. President Bush also has proposed broadening access to the research and experimentation tax credit (which the Clinton Administration restricted in its last days) to make it easier for companies to deduct many costs of developing new technologies and drugs. It is essential that Congress enact these critical legislative proposals so that we can begin to enjoy their beneficial effects on the deployment of broadband and other new technologies.
Just as importantly, a well-grounded and coordinated policy cannot be limited to a review of supply-side regulations. While many Americans have access to cable modems or DSL service today, only about 10 percent of American consumers have subscribed to broadband service. Thus, the government and the private sector need to look at demand issues, such as digital rights management and productivity-enhancing applications. NTIA raised these issues in our Broadband Forum in October, including discussions about ways to aggregate demand and the impact of "killer applications" to stimulate broadband use. Then, in December, the Technology Administration, which is taking a closer look at demand issues, held a forum on digital rights management. That gathering generated questions like: Who will set the technical standards for digital rights management -- industry or government? Who will enforce the standards? What impact will digital rights management have on the consumer electronics industry? How will content be protected? What types of applications will emerge once these intellectual property issues are resolved? Reviewing and answering these questions is crucial to addressing demand side issues that affect the full realization of broadband's potential.
I know that APT has been a strong proponent of Section 706 of the 1996 Act. The provision obligates federal and state telecommunications regulators to encourage reasonable and timely deployment of advanced telecommunications capabilities to all Americans. APT also advocated for establishment of the Federal State Joint Conference on Advanced Services to share best practices, and monitor broadband deployment. NTIA shares APT's recognition of the necessity for effective federal, state, and local cooperation and coordination to achieve the widespread broadband deployment envisioned by the Telecom Act and supported by President Bush. Accordingly, we have invited the states to help us develop policy on a number of important issues, including localities' management of public rights of way.
As the prospect of a broadband universe unfolds, policymakers are searching for the "Big Bang" that will facilitate deployment of the high-speed, advanced networks that can revolutionize our lives. Striking the proper balance is critically important in this effort, and NTIA applauds APT's past help in this process. I encourage you to continue debating these complex issues and offering us your ideas about creating a broadband universe. Future generations may one day look back at work our work together and thank us for undertaking the exploration that led to their converged world of sophisticated communications. I thank you for your attention this morning and congratulations again to each of today's Hadden honorees.