Remarks by Assistant Secretary Rohde to the Federal Communications Bar Association

The 2000 Agenda for NTIA - Promoting Universal Service, Competition and Innovation
February 17, 2000

Speech by Assistant Secretary Gregory Rohde
Federal Communications Bar Association
Feb. 17, 2000
Washington, D.C.

The 2000 Agenda for NTIA - Promoting Universal Service, Competition and Innovation

Introduction:

Thank you, Jean for that welcome and thank you for inviting me to address FCBA. The last FCBA event I attended was the Chairman's dinner. Either I am much less of a draw or your membership is shrinking. I doubt the latter.

With me here today are some members of my staff.

Although I have only been at NTIA for a couple of months, I have learned quickly that when I appear in public I should take a few moments to point out the differences between NTIA and the Federal Communications Commission. I am discovering that drawing distinctions between myself and the FCC has many advantages.

Earlier this week I spoke to the NAB. With them, the more distinctions the better.

I ran into Congressman Tauzin the other day. When I reminded him that NTIA has no merger review authority, he was really quite pleasant with me.

NTIA is located near a metro stop and we actually have several nice restaurants within walking distance. When was the last time you had lunch at the Portals?

I have been told that many Taxicabs drivers have never heard of the Portals. That could be because it is new. Eddie Fritts said that taxicabs don't like picking people up at the Portals because lobbyists don't tip on the trip back to their offices - they feel less prosperous when they leave.

Jokes aside, NTIA takes seriously its assignment as the telecommunications policy branch of the Administration. While the FCC is an independent regulatory body, NTIA assists the President in developing Administration telecommunications policy and advocating that policy before the FCC and around the world. I am dedicating myself to making certain that NTIA plays a pivotal role in telecommunications and broadcasting issues and I would like to talk with you about for a few moments about how I view NTIA's role in the next year.

Observations:

Before getting into a discussion of some of the priorities of NTIA this year, I want to make a couple of observations which, in my mind, help form the basis of these priorities.

First, the rapid pace of change of communications technologies is having a profound effect on policy making. This could not be overstated.

I will give you a current example. I was sworn in as the Administrator of NTIA the very night that the Senate was debating a unanimous consent agreement to consider legislation that would help small and rural markets get local-into-local over satellite systems. The irony of that debate was not lost on me. I told Secretary Daley that night that in 1993 when my predecessor was sworn into office, there was no such thing as Direct Broadcast Satellite offering multichannel video services in the United States. Nobody would have conceived a debate in the Congress at that time to occurred just 6 years later about how small rural markets would get local broadcast signals over satellite systems. It is amazing how quickly technology changes things. One of the blessings of that change is new policy challenges - such as the challenge as to how small and rural markets will get local-into-local over the "new" DBS technology. The emergence of the technical capability of carry local-into-local over satellite systems poses new questions about multichannel video competition, must carry, what should be the role of government - if any - to ensure that all markets receive this service.

Another example of how new technologies affect how we address telecommunications issues relates to the explosion of wireless technologies. In 2 years, the number one computing device through which most people in the world will access the Internet will be a cell phone. Not a lap top or work station computer that most of us have in our offices and homes. But a cell phone. As we all wrestle with issues such as expanding access to the Internet in high cost or under served areas, we need to remain mindful of the new mobile communication devices that can help us achieve our goals of universal access.

When Merriweather Lewis sent his mid-trip report from the Knife River Indian Village in North Dakota where the Corps of Discovery wintered in 1805, it took five months for that report to reach Jefferson's desk in Washington, D.C. Today, a student in Stanton, North Dakota - which is adjacent to that historic site - can send a message to me at the Commerce Department in the blink of an eye by e-mail.

In the 1960's, Star Trek characters used a small wireless communications device that looked something like this (Star Trek communicator). This is a small version (flip open). Who would have thought then that wireless phones would be common enough to be used by about a quarter of the population?

Remember the Batmobile starting and stopping by voice command? The industry is moving in that direction with cars that respond to some voice commands.

In recent days, I've seen reports that a drivers will be able to receive Internet broadcasts through their car radios, and that a virtual, computer-generated newscaster, is on the horizon. These are all exciting developments.

The deployment of broadband capability through phone and cable networks - as well as through terrestrial wireless and satellite systems - is forcing policy makers to re-think the traditional regulatory models. The distinctions between cable, broadcast, telephone, and computers are becoming more and more blurred. Indeed, perhaps one of the biggest regulatory challenges is simply defining services and determining what is or is not a telecommunications service.

A second observation I would make is the acceleration of the globalization of our economy through electronic commerce. E-commerce is turning small shops on main street into global marketplaces.

Let me give you an example. Nordic Needle is - or was - a small craft store in Fargo, North Dakota. It was started by a group of ladies who loved hardanger - an ancient Norwegian embroidery technique and wanted to share their hobby with others. These ladies used to just sell their products in a small shop in downtown Fargo. A couple of years ago, however, they decided to create a web site and sell hardanger products over the Internet. They are now an international business and can hardly keep up with their orders which come from around the world.

Small businesses can now market to the world - almost overnight. This reality not only demonstrates the powerful impact on previously isolated individuals and communities but it also raises demand and expectations about the rollout of high speed Internet access. For e-retailers, competition is no longer just down the street or across town at a shopping mall. Competition is now just a click away.

A third observation I would make is that I believe we are at a critical juncture in the life of the Telecommunications Act of 1996. Besides the fact that it has guaranteed employment for hundreds of Washington's communications lawyers for years to come, the Act is having a profound effect on the industry and consumers. Nobody can reasonably question that competition is on the move. One only has to drive the streets of Washington, D.C. and other major metropolitan areas to see the streets being torn up by various telecommunications companies laying facilities and engaging in competition to deploy better, more advanced services to more and more businesses and consumers. Certainly, many of us who had the privilege of working on the Act in the Congress had hoped to see more progress in the roll out of competition. But, it is happening and more importantly, it is growing.

There are however, serious decisions that will or may be made in the next year or year and a half that could have a profound effect on how the Telecommunications Act plays out. Everyone is anticipating more 271 applications that, like the Bell Atlantic application approved by the FCC late last year, demonstrate serious efforts on the part of RBOCs to comply with the statutory requirements to open up their markets to competition. How these decisions are made will have a profound effect on the future of telecommunications competition.

The FCC is also at a critical decision making point with respect to how to structure a universal service system that conforms to the Act's requirements and determine the future structure of access charges. Decisions made by the FCC could determine whether or not a digital divide will be institutionalized or overcome.

The rapid pace of change in technology; the growth of e-commerce; and the critical juncture in the life of the Telecommunications Act are three realities which I think direct the agenda of NTIA for the coming year and beyond.

NTIA Agenda:

Innovation and Digital Conversion. NTIA needs to be an innovation agency. One area in which we can foster innovation is through our responsibilities of managing the radio spectrum - which is a public resource. We want to make certain that both federal spectrum users and private users are constantly working on ways to use spectrum more creatively and more efficiently. One of the principle responsibilities of NTIA is to manage federal radio spectrum. This responsibility imposes an obligation on us to protect public safety and national security. It also imposes an obligation to help foster innovation by the private sector.

I think NTIA can do more to help the federal users we serve to better meet their needs in a more efficient manner by pro-actively seeking out new wireless technologies. In addition, I think we can do more to be an agency focused on helping to foster private sector innovation. We need to be responsible stewards of the radio spectrum which is a public resource. To accomplish this, I am working to establish a wireless innovation committee which will work with the private sector to: (a) identify new technologies that will help federal agencies better meet their needs and utilize the radio spectrum more efficiently and (b) finds ways to help foster private sector innovation through spectrum sharing and other cooperative approaches.

Digital conversion is a critical issue for the future of local broadcasting. If I were a broadcaster in a small market, I would be very concerned about how this conversion is going to occur and what it will cost.

Stations will be required to convert to digital formats by 2003. For many broadcasters, the cost will be more than the value of the station - particularly in sparsely populated large geographic regions. Those broadcasters will also have to deal with translator stations - further complicating the transition.

I also want to make certain that broadcasters have access to the transport systems of the future. We cannot walk away from our commitment that local broadcasting has access to the transport systems of the future - satellite or others means.

To this end, NTIA is conducting a public inquiry as to how to promote local-into-local in small and rural markets. Earlier this week, NTIA published a Federal Register Notice soliciting public comment and suggestions on how small and rural markets will receive local-into-local through satellite systems or other technologies. We will post all the comments on our web site: "www.ntia.doc.gov." In addition, on March 2, 2000, I will host a roundtable discussion with consumers, industry representatives, policy makers, and technology experts on this subject. My intent is to complement the Congressional debate on legislation to establish a loan guarantee program for local-into-local in small and rural markets as well as the FCC consideration of this matter.

Even while we strive to protect local broadcasters as they move into the digital age, we must also not lose sight of a substantial body of analog values that must be preserved. I've already mentioned localism, but let me add another - an obligation to serve the public interest. I heard a station manager recently describe to me a dilemma he faced. He chose not to broadcast a political debate between some local candidates. When the other stations covered the debate, he got hammered in the ratings and so decided it was good business to cover the next debates. He explained how covering political debates was "good business sense" and therefore he would cover them in the future. Something troubled me about his reasoning - not his conclusion. Why should the coverage of political debates be reduced to an economic or business decision as opposed to a decision in the public interest?

To the ancient Greeks - the birthplace of democracy - participation in democracy was considered an obligation. It was mandatory. In fact, among the articles of condemnation against Socrates was the charge that little evidence was found that he actually participated in the democratic debates of Athens. Socrates was not simply condemned to drink hemlock because he "corrupted the minds of the youth" but also because he did not do what was expected of all Greek men at the time - actively participate in the governing of their society.

It is unfortunate that our society, at large, has grown to view democracy as merely a "privilege" and less a responsibility. Those who operate in the public interest - such as those who hold licenses to broadcast using the public resource of the radio spectrum - ought to adopt and maintain a sense of responsibility in our democracy. Therefore, as the broadcast industry transitions into the digital era, it ought to take with it a commitment to enhance the political debate in this country. The question about the public interest obligation of broadcasters should not devolve into a matter of whether or not there is one. Rather, the question should be how is their public interest obligation manifested. And, the answer should transcend economics or financial self interest. It should reflect a public duty.

E-Commerce and the Globalization of the Economy. We are also working to make certain that our philosophies of innovation, competition, open markets and universal service are adopted around the world. We recognize that the Internet has created a global marketplace, and those principles are particularly important as the boundaries between countries break down through online transactions. The commerce department, along with the FCC and USTR, recently filed comments with the European Union asking the EU to make certain that it completes the transformation of its telecommunications sector into a fully competitive market. We are pursuing those goals as well through negotiations with officials in Latin America and in the Asia-Pacific sector as well as with Europe.

Implementing the Telecommunications Act of 1996. The Telecommunications Act of 1996 was built on two equally important pillars: competition and universal service. Both are critical to achieve the goals of creating jobs, growing the economy, and ensuring that all Americans benefit from new telecommunications and information technologies.

Competition. The development of competition is one of the goals of the Telecommunications Act of 1996.

  • In 1995, there were fewer than a dozen CLECs - today, there are hundreds.

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  • The streets of many major cities are being constantly dug up and filled in again by telecommunications companies laying facilities to provide competitive services.
  • The competition has spurred growth. Since 1995 the telecommunications and information industries have grown 23% and 41% respectively. Equipment and services in these sectors has grown more than $180 billion since 1995.

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  • The annual growth rate of the telecommunications and information sector revenues is twice the rate of the overall economy. And, the IT sector accounts for a third of the economic growth during this time of record economic expansion.

By any measure, competition is growing and in some areas, it is thriving. It is, as envisioned, a driving force for investment and a spur to building an advanced infrastructure. We need to remain faithful to agenda of promoting competition.

Universal Service. But the Act was not solely about promoting competition. That was only one of its goals. The other part of the equation - on a par with promoting competition - was preserving and advancing universal service. The Act promised access to advanced services for consumers in all regions of the country. It promised comparable services at comparable rates, with special discounts for schools, libraries and rural health clinics.

The Act established 2 equally important engines designed to drive deployment of facilities to provide advanced telecommunications and information services: competition and "an evolving level" of universal service. It is like a twin engine plane. If we only fire up one engine, it is not going to take us very far. While the engine of competition is running well and accelerating, the engine of universal service has yet to get started.

The concept of universal service must move forward, from plain old telephone service, known as POTS, to Provisioning of Advanced Services - PANS. The problem is that the existing universal service regime won't sustain the new competitive environment the FCC and the States have worked so hard to establish.

The existing system won't provide sufficient support to fulfill the Act's vision that all regions of the country have access to advanced services. The existing system won't ensure that consumers in high-cost areas will have access to comparable services at comparable rates. The existing system won't stimulate the deployment of advanced services across the country as the Act envisioned.

There are 6 principles of reform specified in Section 254 of the Telecom Act. Three of those principles mention the word "access." In each case, access is linked to "advanced telecommunications and information services." The Act does not suggest that universal service be limited to yesterday's technology and service. Rather, the Act consciously links universal service support with an "evolving level" of service. In other words, it must be forward looking - not retro.

A top goal of the Administration is to close the digital divide and ensure that all Americans can share in the benefits of the telecommunications revolution. To achieve this goal, we must remain faithful to the pro-competitive principles of the Act and successfully establish a universal service system that is consistent with the Act's vision to ensure access to advanced telecommunications and information services.

Addressing the infrastructure build out is only one aspect of the digital divide. The Administration, with strong leadership of President Clinton, is vitally interested in closing the Digital Divide. At NTIA, that's one of my top priorities, through our highly successful TIIAP grant program, now known as TOP, and we hope to extend the TOP concept of helping local organizations through a new grant program we informally call Connecting American Families. We have asked $50 million for this program, which we expect to be administered as a grant program similar to TOP, a public and private partnership. We must break down the barriers that allow some of us to have greater access to information technologies than others.

Commerce Secretary Daley has committed to do his own digital divide tour this year, with events over the next 11 months highlighting the digital divide and the need to work to solve it. President Clinton, in his New Markets tour, also will make a point of trying to point out that the private sector and government have to work together. We applaud Ford Motor Co. and Delta Airlines for pledging to equip their employees with computers and Internet access. We know as well that simply giving people computers and Internet access isn't enough. As the Vice President said recently, we are committed to the ABCs of Internet use - Access, Basic Skills and useful Content are also necessary. We want to work with you as this program moves forward.

The watchword of these efforts is to establish partnerships with the private sector. The federal government needs to establish programs designed to address the connectivity needs of those would otherwise be left behind. These programs, however, must be done in partnership with private sector efforts.

Thank you for your interest today. I'd be happy to answer some questions.