Remarks of Assistant Secretary Rohde at the NARUC Communications Committee

July 26, 2000

Remarks of Gregory L. Rohde
Assistant Secretary of Commerce for Communications and Information
National Association of Regulatory Utility Commissioners
Communications Committee
Los Angeles, California
July 26, 2000

Introduction

Good morning and thank you for inviting me to address you today. I am delighted to be here. Some would say that L.A. is the heart of entertainment but later today I will be returning to the real entertainment capital of the world - Washington, D.C. Actually, Washington and Hollywood - or politics and movies - have a lot in common. It is basically the same business, we just speak different languages.

  • In the U.S. Senate the "Perfect Storm" is known as a bi-partisan filibuster.

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  • In Washington a tough vote that demonstrates bold political leadership usually turns into "Chicken Run." That's because true political heros are more often treated as "Gladiators" as opposed to a "Patriot."
  • The Republican attempt to spend the surplus on a tax cut (in the form of a repeal of the marriage tax penalty after the veto of the estate tax bill) is known as "Mission Impossible II."
  • The 106th Congress and its promise to accomplish so much is the political equivalent of the blockbuster "Ishtar."

The last time I addressed the Communications Committee of NARUC it was at the invitation of North Dakota Commissioner Bruce Hagen. It was a humbling experience because it caused me to reflect on the fact despite my flashy title as an Assistant Secretary of Commerce and ten years of experience from Capitol Hill, I have relatively modest credentials to come before NARUC and talk about telecommunications issues. Indeed, Bruce Hagen has been a Commissioner my entire life. Bruce and many of you have been working on communications issues far longer than I have.

The fact is that I look to many of you to learn about telecommunications issues. You are the ones on the front line and many of you have been doing this before satellites were carrying phone calls and anybody other than a few government scientists had heard of the Internet. I feel like a seminarian addressing the collage of cardinals on theology when I come before you. Nevertheless, I still would like to share with you some reflections on state of the telecommunications arena and comment on a few of the challenges that lie ahead.

Although we all live in a time of dramatic change and breathtaking revolution of technology - especially information and telecommunications technologies - it is important to keep in mind the historical context. Until the invention of the telegraph, information traveled by foot or by horse.

Copper wires and satellites have connected the world through voice communications. Now, fiber optic cables and broadband technologies are providing unprecedented opportunities to access volumes of information from the world's greatest libraries in an instant and high resolution video imaging to conduct telemedicine applications such as remote surgery. Things are changing so fast that the instructions for the voice mail service on my Sprint PCS phone are in German.

Reinhold Niebuhr said that "Nothing we do, however virtuous, can be accomplished alone..." To succeed in establishing a robust, competitive telecommunications market with universal service, state and federal regulators - and policy makers - need to work together. The Telecommunications Act of 1996 set up a partnership between state and federal governments to construct a competitive telecommunications environment and ensure that all Americans can share in the benefits of the information age. Only a successful partnership between federal and state regulators can realize those goals.

Competition

One area where the federal-state partnership is bearing fruit is in the development of competitive telecommunications markets. The recent explosion of new services that are bringing Internet access to more Americans and its corresponding opportunity is not happening by accident. It is happening because of technology and the ingenuity to apply new information technologies.

It is also happening because federal and state regulators have worked to establish a competitive environment that is driving investment. The same technology exists in Europe, Asia, and Latin America. But there is an explosion of growth in the U.S. that has other nations striving to replicate our success.

There is a growing recognition in the world that open, competitive markets foster growth in telecommunications and information services. The U.S. has shown leadership in breaking open markets to competition. The breakup of AT&T and the Telecommunications Act of 1996 have done this and have generated very positive results for consumers. The AT&T divestiture lead to the creation of hundreds of long distance competitors who built multiple nation wide fiber optic networks within a decade and long distance rates dropped by more than half.

In 1996 the Congress and the Administration sought to replicate a competitive environment in all areas of telecommunications and information services. When I worked on that legislation in the U.S. Senate, there were fewer than a dozen competitive local exchange carriers (CLECs). Today, there are more than a hundred new competitors offering telephony and advanced services whose existence was made possible by the pro-competitive provisions in the Telecommunications Act of 1996. In fact, the competition has become so intense in some areas, such as Washington, D.C. that the city had to impose a moratorium on carriers tearing up the streets to lay facilities which provide high speed Internet access and other services. The pro-competitive environment has lead to more than $50 billion in investment and created nearly a quarter million new jobs.

The auctioning of additional spectrum and the consequent growth of more cellular and PCS carriers has driven wireless usage up from 17 million to 85 million and driven prices down 40 percent in less than a decade.

Wireless and land line CLECs are making progress into RBOC territory because the Act not only imposes interconnection and unbundling on the incumbent carriers but also because the Act requires that the RBOC network be effectively open to competition before they can enter long distance services. The Act's pro-competitive provisions are indeed working to open up markets. In my judgement, we are seeing significant progress in several states with RBOCs opening up their markets. As a result, opportunities for entrepreneurs and competitors are growing and consumers are the real beneficaries.

The Administration believes that competition, as structured under the 1996 Act, is the model that will best deliver advanced telecommunications and information services, such as high speed Internet access. We need to continue down this road and I urge you to remain diligent in promoting competition. Walking away from the Act's pro-competitive provisions at this point would be a serious mistake. The leadership of state regulators in the 271 process is critical. It is imperative that you work closely with the RBOCs and the FCC to make the 271 process work.

Closing the Divide

A generation ago we as a nation made a decision that voice communication was going to be a universal feature in our society. So, we created federal support and loan programs and developed a universal system to ensure that even the most remote rural farm communities and impoverished inner-cities would have access to a telephone.

We have largely succeeded in obtaining that objective. Certainly, there are still areas of the United States where basic telephone service is wanting. But we can be proud of the fact that about 95% of American homes have telephone service. This near ubiquity has helped make the United States the world's leader in terms of Internet access.

Now as we deploy the next generation of telecommunications services, such as broadband, we need to renew the same commitment we made a generation ago to ensure that all Americans can be connected in the information age. The key policy question before us today is how do policy makers and regulators ensure that the tools of the new economy - computers, the Internet, and broadband capability - extends to the furthermost corners of our society.

We commonly refer to this challenge as "closing the digital divide." At NTIA we have found that low-income families, minorities, and those who live in rural areas regardless of income have less access to the tools of the information age - such as computers and Internet access - than the majority of our society. We have also found that there is another digital divide between urban and rural areas emerging with respect to the deployment of broadband networks. Last spring President Clinton released a joint study conducted by NTIA and the Rural Utilities Service which showed that digital subscriber line (DSL) and cable modem service - the most widely deployed broadband technologies to date - are being deployed mostly in urban areas and that rural areas are lagging behind.

If we can overcome the challenge of closing the digital divide, our nation will benefit by our diversity. Abraham Lincoln used to practice his homework with charcoal on the back of a shovel. He overcame his humble beginnings but how many more Americans are not fulfilling their full potential because they face the barriers of geography, discrimination, or financial status. Think of the talent that has gone unrealized because of the accidents of geography, economic status, gender, or race.

Fortunately, we have an unprecedented opportunity to change that. The new economy and the telecommunications revolution which has helped make the new economy possible can eliminate the barriers of the past. The telecommunications revolution and the Internet has completely transformed the center of our economic universe. No longer is it the case that one's economic opportunity is dependent upon geographic proximity to markets; the prosperity of one's community, or ones race or gender. In the new economy, access to the tools of the information age will determine opportunity.

E-commerce makes it possible for small main street businesses to become international marketplaces. It creates new opportunities for inner-city and rural communities to rejuvenate and it opens doors for economic development. The Internet is also turning remote school houses into sophisticated centers of learning.

Finding the Solution

The federal-state partnership has worked well to promote the first of the two principle goals of the Telecommunications Act - competition. What lies ahead is the challenge of reforming universal service consistent with the Act's vision. State Commissioners such as Bob Rowe and Bill Gillis are showing tremendous leadership in this area. Their leadership - and your commitment in supporting the Rural Task Force - are critical to realization of the Telecommunications Act. There is no way that the Federal Communications Commission can solve the universal service challenge on their own. The same commitment that you and the FCC have applied to opening up the telecommunications market must now be applied to fulfilling the second leg of the Act - reforming universal service.

There are two thoughts I would like to leave with you as you contemplate solutions to reforming universal service to meet the Act's goals that consumers in "all regions of the Nation have access to advanced telecommunications and information services" such as high speed Internet access.

First, technological development is taking us most of the distance. Wireless technologies in particular are helping to bring affordable access to more and more consumers. About one in five mobile phones worldwide are capable of accessing the Internet. Within 3 years, that ratio will be one in three. And, within 5 years, nearly a half of billion people world wide will access the Internet via a wireless device - compare that figure to the estimated 100 million Americans that access the Internet (mostly over a wire line infrastructure) today.

Unfortunately, the U.S. is falling behind Europe and Asia in this area. "M-commerce" is now sweeping Sweden, Finland and Japan where people are using their cell phones to pay for soft drinks at vending machines, receive restaurant discounts, and check train times.

We are only seeing the very beginning of wireless Internet access in the United States. But we need to view the development of broadband wireless technologies - fixed, mobile, and satellite - as an essential component of our strategy to close the digital divide. Solving the problem of putting an affordable computer in the hands of a remote rural resident or poor inner-city family is very achievable with less expensive wireless infrastructure and smaller wireless computers.

This is one of the reasons why NTIA views the development of 3rd generation wireless as a top policy priority - and not just as a spectrum management challenge. Developing broadband wireless Internet access is both a matter of achieving the goal of this Administration to close the digital divide as well as a matter of assuming world leadership and a leader in telecommunications technologies.

My second thought for your consideration is to ask you to be bold and think beyond the dogmas of the past. Telecommunications is the technology of tomorrow and should not be bound by the assumptions of the past. Although the values of yesterday that every home would be connected are still valid, the new paradigm may require new regulatory structures.

As you work to address universal service reform, remain mindful of how new technologies can play a role and don't limit your support options to the old mechanisms.

For centuries, western Europe lived under the assumptions of Aristotlean physics. The answer to questions such as how fast two objects of different sizes would drop from the sky were easily answered by applying the Aristotlean notion that an object's speed is directly proportional to its weight. Then along came a guy named Galileo who questioned these assumptions. Galileo thought that this question ought to be answered through an empirical test. So, legend has it, he climbed the tower of Pisa in a black robe with two lead balls - one a pound and the other 10 pounds. Dropping both from the top of the tower, he observed that they both hit the ground at about the same time - rather than the larger one traveling 10 times as fast as would have been concluded under the Aristotlean model.

Although Galileo's critics - which he called the "pigeon society" - would not concede the point that perhaps scientific endeavor needed to adopt a new paradigm, his initiative to challenge the dogmas of his day gave birth to empirical science and the Renaissance.

Bold new ideas are needed to create a new universal service support system that is sufficient - as the Act requires - and encourages the deployment of new technologies. The Nation needs the experience and ingenuity that you have to offer in addressing this critical issue. I urge you to work closely with the Rural Task Force, the Joint Board, and the FCC to fulfill the goal of universal service.

It is difficult to think anew and create a new paradigm. But, this is the demand of the time in which we live in the telecommunications arena. As regulators and policy makers, we must think anew, be bold, and create a new renaissance.

Thank you for your attention.