Michael D. Gallagher
Deputy Assistant Secretary for Communications and Information
and Information Administration
United States Department of Commerce
Broadband Deployment and Spectrum Policy
Shidler Center for Law, Commerce & Technology
University of Washington School of Law
Series on Serving the Public Interest After the Bubble Economy
October 28, 2002
Thank you, Sharon, for inviting me here today to share the views of the Bush Administration on broadband deployment and spectrum policy. It's indeed great to be home again. The Northwest is home to many great companies, leaders in business, and, of course, universities.
To get started, I should explain a little about who we are and what we're about at the National Telecommunications and Information Administration, or "NTIA". We are a small agency that covers a lot of ground. We're located in the U.S. Department of Commerce under Secretary Don Evans. By statute, we serve as the President's principal adviser on telecommunications and information policy matters - - but we're not the regulator of telecommunications, which is the job of the independent Federal Communications Commission.
Much of our policy work relates to raising or addressing issues before the FCC, Congress, or international organizations. We have one office devoted entirely to international issues, which coordinates with the State Department and the FCC on U.S. positions at international telecommunications organizations. Supporting our policy function, we have within NTIA one of the world's leading telecommunications research laboratories located in Boulder, Colorado -- the Institute for Telecommunication Sciences (or ITS). ITS is both NTIA's chief research and engineering arm and also as a principal federal resource for other federal agencies, state and local governments, and private associations and organizations. In addition, we manage two grant programs, the Public Telecommunications Facilities Program, which is helping among other things to fund public television's move to digital service, and the Technologies Opportunities Program.
Our second major function is as manager of radio spectrum use - - the airwaves - - by Federal Government departments and agencies, including the military. We have joint jurisdiction with the FCC over spectrum allocation and use. We allocate spectrum to various services and authorize its use by Federal Government agencies, while the FCC allocates spectrum and licenses use by everyone else -- companies and states and local governments. Within our spectrum management office, we have programs devoted to public safety spectrum use and to critical infrastructure issues, which leads us into important homeland security matters.
One of the most important issues in telecommunications today is the deployment of broadband services. The dot-com boom and bust has taken its toll on our country's economy and the telecom sector. The resulting over 80 bankruptcies, over 500,000 employee lay-offs and 50 percent reduction in capital spending have had a ripple effect on almost every aspect of American commerce.
We can't overlook the role of corporations and their leaders themselves played in this downfall. It is unfortunate that the sector in which NTIA has primary responsibility has seen instances of glaring and embarrassing irresponsibility. WorldCom, for example, substantially added to current woes with the largest bankruptcy in history, not to mention the massive fraud it perpetrated on all telecom investors. President Bush has made clear that corporate responsibility is the essential foundation for building confidence in our future. Every company, lawyer, analyst and accountant has a clear duty to ensure that regulators, investors and the public can trust the accuracy of their representations and rely upon the propriety of their conduct. Nothing less can be expected. Nothing less will be tolerated. Corporate actions in this area are critical to restoring confidence in the telecom industry.
The telecom industry with its broadband future is a solid business with an enormous potential for growth -- growth based upon sound economic realities rather than hype, excess and cooked books. Your generation "gets" broadband. As law students, you are much more likely to have some kind of broadband service, probably DSL or cable modem, if not Wi-Fi, than the average American. As the President has said, the challenge to us in government is to provide a policy environment in which our country's telecom industry can prosper, innovate and advance to the benefit of us all as it deploys those services and satisfies your needs.
The starting point for NTIA's assessment of the issue is a report we co-authored with the Commerce Department's Economic and Statistics Administration earlier this year, called A Nation Online: How Americans Are Expanding Their Use of the Internet. Our study, based on a survey of 57,000 households one year ago, found that although 54 percent of Americans use the Internet (based on earlier survey figures), only 20 percent of those use broadband - - about 10% of the overall population. According to the Pew Internet and American Life Project, in a report released in June 2002, 24 million users (not households) have high speed Internet access at home. Despite this growth, we still have a long way to go before realizing broadband's full potential.
President Bush, in his Technology Agenda, (available at http://www.whitehouse.gov/infocus/technology/ ), and at the Administration's economic summit in Waco, Texas, has called for an aggressive expansion of broadband, recognizing the promise of high-speed future communications. The Administration has been taking a number of steps to create incentives for investment, to stimulate demand and usage, and to remove unnecessary government impediments to competition and deployment. A few examples of efforts:
- extending the moratorium on Internet access taxes;
- successfully urging Congress to modify the tax depreciation schedules to allow companies to depreciate capital costs associated with broadband rollout over a shorter time period;
- extending the research and experimentation tax credit;
- proposing the largest R&D budget in history, over $100 billion; and
- urging, just last week, passage of legislation to prevent use of the Internet to sexually exploit and endanger children and to ban virtual child pornography. The President, in follow-up to a summit on missing, exploited, and runaway children, urged the Senate to act on legislation already passed by the House, which would reverse a recent Supreme Court decision on the issue. This is another step in making the Internet a safer place, which will in turn spur demand.
Rights of Way Issues
On the "supply" side, NTIA is also directing national attention to the issue of rights of way. It is here where, uniquely, all sectors of the broadband industry -- Bell operating companies, competitive local exchange carriers (CLECs), cable companies, overbuilders, and wireless providers -- actually share the same point-of-view! These providers are concerned that restrictions by certain municipalities, states and federal government landowners on accessing public rights-of-way and tower sites might be inhibiting or at least delaying broadband network construction.
To ensure that rights-of-way regulation is appropriate and not an impediment to broadband deployment, NTIA has among other things met with representatives of localities and their associations to identify means for improving and simplifying current processes, while ensuring sufficient flexibility for municipalities to best serve their citizens. We have also participated in rights-of-way discussions with state officials.
The largest single land owner in the United States is the federal government. Accordingly, the Administration has formed a Federal Rights-of-Way Working Group to develop "best practices" for federal rights-of-way management, particularly as it affects broadband deployment. Our tasks include streamlining and standardizing current federal rights-of-way application processes, ensuring that federal fee structures are just and reasonable, and developing appropriate policies to make certain that telecommunications providers fulfill their rights-of-way obligations. We want to see the federal government lead by example, "walk the talk" and create a model of cooperation that others can emulate.
Meanwhile, the FCC is moving ahead with proposals for broadband regulatory reform. President Bush has expressed confidence in the Commission, its leadership and its expertise to fashion the optimum framework for our broadband future. As the Commission moves forward with its efforts, NTIA will be assessing when and where its views could contribute to a better outcome for competition, deregulation, and American consumers and investors.
The FCC's actions are focused on three critical proceedings to resolve fundamental regulatory questions about broadband service:
- The Framework for Wireline Broadband Proceeding asks how broadband should be classified under the Telecom Act of 1996: either as a telecommunications service (heavier regulation) or an information service (lighter regulation).
- The Non-Dominance Proceeding asks whether incumbent telephone companies are "dominant" in the provision of broadband (heavier regulation) or whether sufficient competition exists to render them "non-dominant" (lighter regulation). And finally,
- The Triennial Review (which the FCC is required by law to do every year) seeks to determine what pieces of the network (unbundled network elements or "UNEs") incumbent telephone companies must make available to their competitors.
Spectrum Policy Issues
A second major issue area - - and the primary focus of my time since I joined NTIA about a year ago - - is that of radio frequency spectrum policy. The radio spectrum is an important part of your daily life, whether you think about it or not. If you've got a cell phone in your pocket right now it uses radio frequencies licensed by the FCC. If you're on Wi-Fi here on campus or down at the Starbucks, you are sending signals on spectrum the FCC has allocated or unlicensed use. More broadly, spectrum is the basis for over-the-air television and radio, satellite communications, and other commercial and business applications. It is crucial to the work of police and fire departments. It is essential to air and ground transportation systems, and, as important as any of these, it is used by the military for everything from two-way radios, to precision guided weapons to radars. In military terms, spectrum is a force multiplier that ensures when we send our men and women into harm's way it is not a fair fight.
Spectrum policy is among the most technical and least understood areas telecommunications, yet as new technologies move from science fiction to the shelves of Circuit City and cockpits of F-22 fighter jets, they hold the greatest promise for increased consumer use of wireless devices and further waves of innovation in the future. And it is the one area where NTIA's broad policy role and that as spectrum manager intersect.
The use of radio has been regulated by the Federal Government since the beginning of the 20th Century. The legal framework under which spectrum is managed was established by the Radio Act of 1927 and was carried forward in the Communications Act of 1934. It has survived essentially unchanged since then. An independent Commission, the FCC, exercises quasi-legislative, executive, and judicial functions within its grant of authority, using a "public interest standard." The FCC awards limited term licenses to operate, although since 1938 it has allowed some unlicensed operation. The Communications Act, however, retained the authority to authorize Federal Government use of spectrum with the President - - which is the source of NTIA's responsibilities today. International decisions on the allocation of blocks of spectrum to types of services are generally adopted by the United States.
Although this system has served the United States well, there is a strong sense by virtually all stakeholders, government and private sector alike, that the system is in need of an overhaul. It's not that our current systems are unsuccessful. In a way we are the victims of our own success, because in the United States more than anywhere else we have a wealth of radio services, from television to cell phones to military radars and smart bombs, all working pretty well on the limited number of frequencies that nature provides. One can only look at the many colors of the spectrum chart that NTIA publishes to appreciate the varied use of the spectrum.
The problem is there just hasn't been enough spectrum available to meet the needs of existing consumer services, to satisfy the explosive growth in some services, such as mobile phones, and to provide a home for innovative new services like Wi-Fi and ultrawideband. Commercial services, like your cell phone, are becoming more important in our everyday lives, and several competing factions of industry are working to make wireless a true competitor to wired broadband.
We also live in a time when we need to devote more resources to protecting America here and abroad, and spectrum is one of those resources. Public safety agencies, for example, are clamoring for more spectrum to become interoperable and to accomplish their critical first responder missions. The Department of Defense has predicted that its spectrum usage will grow by more than 90 percent by 2005. The armed forces have used spectrum extensively in the war on terror, to the point of even using real time video links to command centers in the United States directly from drone aircraft in place over Afghanistan.
After all I just shared about spectrum and its role as the rocket fuel for innovation and as the cutting edge of national defense, you may be wondering how do we meet the challenge of new technology and augment our national defense. Is this a new challenge?
A presidential policy board examining spectrum management summed up the urgent issues in stating:
"The development of so valuable a resource as the radio spectrum is a matter of paramount importance. Despite technical and operational improvements the demand for frequencies has steadily crowded the supply within the usable spectrum. The use of this resource should have the most careful planning and administration within the United States and in cooperation with other countries. Unfortunately, guidance and administration have often been inadequate."
This statement sums up today's situation pretty well. Except it was written in 1951 by President TRUMAN'S policy board. There have been similar examinations and reports on what is almost a cicadian cycle - - about every 17 years. A Johnson Administration report in late 1968 observed the "remarkable" growth in spectrum use and resulting problems and inefficiencies caused by an inflexible block allocation system among other things. It called for greater use of economic factors, and, echoing a Commerce Department advisory board report called "The Silent Crisis," cautiously raised the idea of a market system and possibly license fees related to the amount of spectrum used. The General Accounting Office has visited spectrum issues more than once, including a report in 1974 that discussed the views of economists that advocated the use of market forces for spectrum management. And, seventeen years later, NTIA released its own comprehensive review of spectrum management, which among other things called for greater use of market forces.
These reports have been invaluable to spotting issues and offering solutions, but despite some reform and dramatically improved technology, real long term reform hasn't been achieved. Each report rediscovers the same issues and is then destined for a bookshelf, a coffee table, or these days, a URL on a website. My goal while in the public service is to not add to this country's collection of coffee table books.
Each new spectrum challenge arrives tangled like the proverbial Gordian knot. One after another we are faced with competing claims to use spectrum bands, with issues with so many complex layers that people say there is no way that they can be solved. I'm pleased to report as I stand here that in the last year NTIA and the FCC teamed up successfully to find answers to two of these "impossible" spectrum challenges.
We took demonstrable action to untie the knot. The two issues are Third Generation (or 3G) wireless, and ultrawideband (UWB). Although the specific issues were different, both were textbook cases of the current predicament that we find ourselves in with respect to spectrum. Both are cases in which new technology has the potential to support relatively high speed high bandwidth services. Both raised questions of whether their development would limit or harm important Federal Government systems, including military applications and the global positioning satellite, or "GPS" system. In a contest between economic security and national security, it is easy to simply choose one or the other. The challenge of leadership is to find solutions that advance both.
Third Generation, or 3G, is the generic name for advanced telecommunications services that may form the basis for high speed, mobile, commercial wireless services. It has been called "broadband to the hand," with speeds of up to 2 Mb/s. Proponents of these services say 3G is to wireless mobile communications what DSL or cable modems are to wireline services.
For NTIA, 3G posed the question of whether and how the Federal Government could make frequencies now used for a variety of crucial military operations available for advanced commercial wireless services. The debate had started in earnest in 1993, was amplified following an international conference in 2000 that identified certain military frequencies for 3G services. Twice the previous Administration tried to answer the 3G call, to no avail. And, after last September 11, there was a general consensus that the Department of Defense's needs in the war on terrorism would make the transfer of any spectrum from DoD to the private sector impossible. The road had gotten even steeper.
Although the Government had already promised, with predictable flash and pizzaz, to make available some of the frequencies at issue, the real work of forging an agreement directing WHICH military systems had to move from WHAT specific frequencies in WHAT time frame was wholly incomplete. NTIA worked together with industry, government agencies, and the FCC over eight months. In July we released a plan for the transfer of 90 MHZ - - 40 percent more spectrum that the industry has today. The result was driven by detailed research and analysis conducted by NTIA, the FCC, the Defense Department, and other Executive Branch agencies. And most importantly, the leadership provided by President, Secretary Evans, Secretary Rumsfeld and Chairman Powell dictated that it had to be done. We have more details to complete in the next year, but the road to 3G is now clear.
Ultrawideband, or UWB, posed different challenges. Ultrawideband technology is unlike traditional radio use in that rather than operating within a few frequencies or a relatively limited band of frequencies, it sends radio energy across a huge swath of frequencies. Its backers envision a host of potential new services, from devices that can "see" objects underground to wireless LANs that make today's Wi-Fi seem slow. For example, the fastest 802.11 technology today, 802.11(a), operates at peak speeds of 54 mbps, while UWB version 1.0 will operate at 100 mbps. The FCC proposed in 2000 to amend its rules to accommodate UWB devices in the radio spectrum without causing harmful interference to governmental operations (including critical air traffic control, weather warning systems, and national defense systems) or commercial communications systems (including TV and radio broadcasting, domestic and international commercial satellites, cellular telephones). NTIA tested and analyzed UWB effects on a number of governmental systems and the satellite-based global positioning system (GPS). We worked closely with the affected Federal agencies, including DOD, and the FCC to ensure that the FCC's rules will protect critical Government uses of the spectrum.
The effort took about three and a half years and review of more than 900 written comments. Yet, again we did what many said was impossible. The FCC and NTIA were able to meet the challenge and develop a technically sound set of regulations for the safe and effective authorization of UWB technology while preserving public safety and national security. As with 3G, we came to a conclusion by working with the FCC and other relevant agencies as a team, and with a strong focus on the technical truth about UWB technology. Underlying that work was a shared goal of finding a solution that let UWB technology get its chance to shine, without impairing crucial services. It's future success is far from guaranteed, but I think it is one of the most promising technologies to which I've been exposed. Just as important as whether UWB succeeds, however, is that it will be given an opportunity to succeed. The Bush Administration is committed to policies that advance new, world-leading U.S. wireless technologies.
Spectrum Management Reform
We can't rest on our laurels. What we have accomplished so far seems simple compared to the overarching challenges that face spectrum management as a whole. Aside from addressing immediate demands for spectrum, we need to consider larger changes to the way we do "the business of spectrum management." In June, FCC Chairman Michael Powell commissioned his spectrum management task force to chart the FCC's path to improved spectrum management. The report of the task force is due out at the end of this month. For our part, NTIA in April hosted its "Spectrum Summit," and what we gathered from the summit will lead to reform proposals later this year from us.
Reform can come in many shapes and sizes. Many of the most ambitious reforms are the market-based reforms long advocated by academics and others. Given that most of the spectrum is occupied already, albeit more heavily in some geographical areas than others, a large part of the problem is figuring out how to make spectrum use more efficient and whether and how to make encumbered spectrum available to new uses.
The traditional way to address these issues, as the Truman-era report indicates, is through government planning and oversight -- the "command and control" approach. Surely, there is a continued need for government involvement in providing its services as well as developing reliable technical data. At the same time, there has been a movement, nurtured by academic theorists, to move towards the market-based system that earlier government reports so gingerly raised - - and that is conveniently featured in the business page of today's Seattle Times!
The FCC in the last decade or so adopted some market-based reforms with success: competitive bidding (or auctions) adopted and used by the FCC for assigning licenses, and flexibility for many commercial licenses, including PCS services. Today, many call for us to grant greater rights to users, such as to lease or trade all or part of the assigned rights, or would like to see fees on commercial, even government users, based on the amount of spectrum used as is being done or proposed in other countries. What these proposals have in common is the notion that the government can encourage more efficient use of a resource through incentives. It is rooted to the notion that there is a quantifiable value in spectrum rights that can be measured and that can form the basis for market-oriented transactions.
Chairman Powell has signaled support for further developments based on this approach.
One proposal is contained in the FCC's proceeding on creating secondary markets for spectrum use. The proposed rules would permit parties to "lease" their spectrum to others with minimal government involvement - encouraging the development of secondary markets, which would allow spectrum to flow to its most efficient use. If fully developed, it could even lead to dynamic trading of spectrum rights among parties in real time, on an "as needed" basis. In March, 2002, the Bush Administration endorsed the FCC's secondary markets efforts and continues to urge them to complete their work on that order.
Flexibility can also provide incentives in an unlicensed, low power environment for innovative, new services. We are seeing today the results of such an approach in the development of Wi-Fi high speed Internet access, using the 802.11(b) standard in unlicensed spectrum, everywhere from college campuses to coffee bars. The unexpected, grass roots, growth of Wi-Fi is truly amazing. The electronics industry tells us over 1.5 million units of Wi-Fi gear are being sold every month. To some, the incentives - based market principles and unlicensed approaches may seem at odds, because market-based proponents regularly call on the government to grant exclusive rights to users, while unlicensed operations follow a "commons" approach. It is my view, however, that they compliment each other. In making Wi-Fi possible, the FCC expanded unlicensed spectrum use from simple gadgets like cordless phones, baby monitors and garage door openers to more advanced wireless services in separate spectrum. The industry developed standards allow many users to operate without walking all over each other. Wi-Fi is the epitome of what can happen if the government, through good management, takes away artificial barriers of central control and lets users come up with a self-governing system.
Let me conclude by saying that I am proud to be working within this Administration for a small agency that can make a huge difference in how telecommunications and Internet services develop, and therefore can improve our economy and the lives of the American people. The telecommunications sector is going through a tough time, but the Government is doing its part to help us get through it. The experience I've gathered working over the years with leading Northwest companies, law firms, and academics is serving me well. And, combined with the leadership of our President and Secretary Evans, I am very optimistic about the progress we are going to make in the coming months and years.