Remarks by Assistant Secretary Rohde at the National Telephone Cooperative Association's 2000 Annual Meeting & Expo

From POTS to PANs With Universal Service
February 16, 2000

Gregory L. Rohde
National Telephone Cooperative Association
2000 Annual Meeting & Expo
February 16, 2000

From POTS to PANs With Universal Service

I. Introduction

Kathleen Norris, in her book Dakota, said: "The High Plains...often act as a crucible for those who inhabit them. Like Jacob's angel, the region requires that you wrestle with it before it bestow's a blessing." Like many of you, I grew up in rural America. I know from my background that the ability of rural citizens to reach our promise and potential often means that we must overcome obstacles. Traditionally, areas like my home state of North Dakota have had to overcome the obstacles of distance and lack of economies of scale to access markets.

But today, there are new opportunities in the era of e-commerce and high speed Internet access. The telecommunications revolution provides us with an opportunity to change our historic disadvantages of distance. But, if rural America is going to be a full participant in the new economy, we still must overcome the challenges inherent in serving sparsely populated areas of the country.

My family is from the Great Plains. My father was born and raised in Nebraska and my mother grew up in a small farm house 14 miles north of Havre, Montana. That farm house did not have a telephone or electricity until she was in high school - which was shortly after World War II. It was powered by a windmill and lighted by kerosene lamps.

The town of Havre, Montana had telephone and electricity service for several years prior to the 1940's. But it was not until a local cooperative received government financing through the Rural Electrification Administration (REA) that a wire was strung outside of town to connect the small farm houses like my mother's with basic telephone service. My mother's history taught me an important lesson: our Nation made a decision a generation ago that everyone in America should have access to basic telephone service. As a result, telephone service is almost universal - 94% of American homes have basic phone service.

Universal phone service has occurred, in part, because of REA finance programs and, in part, because of a universal system that has helped to incentize investment and maintain affordable rates in high cost areas. This commitment has allowed our Nation to have a network in which any of us can call nearly anyone, anywhere. It has made us the envy of the world.

We cannot forget what we have learned from the past. We cannot forget that all of America benefits when telecommunications services are ubiquitous.

As this generation moves into the era of advanced telecommunications and information services, we must maintain our commitment to a universal service system that will, in the President's words, "make access to the computers as universal as telephones."
 

II. Status of the Telecommunications Act of 1996

There is an annual ritual this time of year. It is not Mardi Gras or Valentine's Day. It is the time of year that many people who work in the area of telecommunications assess the status of the Telecommunications Act of 1996. Most people ask: Is it working? Has it failed? Should it be changed?
 

I propose a different standard of judgment: Aristotle's concept of virtue. According to Aristotle, something is good to the extent that it is fulfilling its function or nature. The Act, in my judgment, should be judged a success or failure in relation to its conformity to the vision behind its creation.

What was envisioned under the Act?

First, the Act was about letting loose the forces of competition.

Second, and equally important, the Act was also about ensuring that all Americans would share in the benefits of the telecommunication revolution and it established a promise of universal access and a promise that all Americans would have comparable services at comparable rates.

Let's look at the area of competition and whether or not it is fulfilling the Act's vision:

  • 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. Therefore, the Act's vision of competition is being fulfilled in many of the larger markets in this country.

But the Act was not just about competition - it is also about ensuring universal access. The Act established 2 equally important engines: competition and "an evolving level of universal service" that would drive investment to take us to a whole new world of advanced telecommunications services.

The engine of competition is running well and accelerating. But, the engine of universal service has yet to get started.

Now that the FCC and the states have done a good job in advancing competition, it is time to focus on fulfilling the Act's vision to "preserve and advance" universal service.

The Act promised:

  • Access to advanced telecommunications and information services for consumers all regions of the Nation;

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  • Comparable services at comparable rates;

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  • Access to advanced services for schools, libraries, and rural health facilities.

We have had a universal services system for years - a system that has been largely successful in ensuring near-universal phone service. However, before the Telecommunications Act, rural America did not have an assurance that:

  • Access to advanced services would be available in all regions of the nation;
  • "Comparable services at comparable rates";
  • Universal service support would be forward looking and tied to an "evolving level" of technology;

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  • Universal service support would be "specific, predictable, and sufficient" and required to "preserve and advance" universal service; and

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  • The FCC would do all it can to encourage the deployment of advanced capability for all Americans.

The Telecommunications Act of 1996 did not say to rural America: "Don't worry, one day you will be able to catch up to the rest of the country when it comes to telecommunications services." Rather, the Act said: Rural America will keep pace. It will not fall behind.

The Act did not simply say: "Maintain universal service" - or just "stay the course." Rather, the Act said that universal service must be "preserved and advanced" and be sufficient to support an "evolving level of service" provided through new technologies.

Universal service is meant to be a driving force for investment in the new generation of service - not a constrained system looking backward on yesterday's technology.

Universal service must move us from POTS to PANs - from "Plain Old Telephone Service" to the "Provisioning of Advanced Networks." Universal service needs to be forward looking to help build the broadband networks of the future in a manner that fulfills the vision of the Telecommunications Act.

When the Federal government deregulated the airline and railroad industries in the 1980's, it did not provide an assurance that rural citizens would have "comparable service at comparable rates." There is no protection or safety net for rural consumers in the aviation and railroad statutes of this country. As a result, rural consumers have often found themselves paying a higher price for less service.

But when Congress developed the Telecommunications Act, it consciously decided not to make that same mistake. Consequently, rural America received a significant victory in the assurances provided under the Telecommunications Act. The question today is: How do we ensure that universal service is revised in a manner that fulfills these promises.

The existing universal service regime will not sustain the new competitive, changing environment. One must ask, under the current rules:

  • Is there sufficient support today to fulfill the Act's vision that consumers in all regions of the Nation have access to advanced telecommunications and information services?

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  • Will the present system ensure that consumers living in high cost areas will have access to comparable services at comparable rates when broadband is being deployed in urban centers?

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  • Will the present system stimulate the deployment of advanced services across the country as the Act envisioned?

In my judgment, the answer is no. The present system needs reform to fulfill the Act's vision. And, the time to reform is now.

If we fail to implement a universal service system consistent with the Act's vision, we will have institutionalized a digital divide that rural America may never overcome. We cannot allow this to happen.

III. Closing the Digital Divide

A top goal of the Administration is to close the digital divide - i.e., ensuring 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 reform universal service consistent with the Act's vision.

Under the Aristotlean standard that something is good to the extent it is fulfilling its function, the Act is developing in the right direction in my judgment. It is fulfilling its competition function. But, we have to now focus on it fulfilling its universal service function.

Steve Case, the CEO of AOL said: "The Internet is big enough to matter, yet young enough to shape." As the Internet and other advanced services become more and more central to our telecommunications system, we must take the steps now to ensure that all Americans can share in the revolution. Now is the time to develop the universal service mechanisms to fulfill the Act's vision for ubiquitous access to broadband networks.

As we all know, Louisiana was once the name given to a much larger parcel of land than this lovely state where the Mississippi River meets the Gulf of Mexico. Louisiana was the vast new territory purchased by President Jefferson from the French nearly two centuries ago that stretched from where we stand today through the Dakotas to Montana. To Jefferson, the Louisiana Territory was not merely a good land deal. It was the fulfillment of the American destiny to grow and expand - not only in geographic terms but in the fullest sense of creating opportunity for a young Nation.

In 1803, President Jefferson instructed Meriwhether Lewis and William Clark to explore this great new territory. He specifically asked them to "explore the rivers of commerce" that would open up new doors of opportunity for a young nation. Imagine the excitement, the fear, and dreams of the Corps of Discovery as they rowed up the Mississippi and Missouri rivers on their mission to chart new pathways of commerce.

Today, our Nation is on a metaphorically similar journey; exploring the new rivers of commerce in the area of telecommunications. Many of you are the pioneers, the explorers, and the leaders who are building the rivers of wires, cable, and radio waves that will deliver our citizens to great new economic, social, and cultural opportunities that we never before possible.

This indeed is a very exciting moment to be in the telecommunications business. It is a bit like looking out on the unexplored West and seeing only the limits of human imagination.

I know that for cooperatives, it is not just a business. It is a community service. Many of you who have worked in the cooperative movement for a number of years know that if it had not been for the commitment of a local small town cooperative, your neighbors and relatives would not have telephone service. I know this because I have lived in communities where only the coops made it happen. Without the coops, many rural Americans would be disconnected and in the dark.

Now, because of the tremendous changes in technology, you have the opportunity to take that service to a whole new level. When the Telecommunications Act of 1996 was signed into law on February 8, 1996, Vice President Gore said that this law was not simply a "mid-course correction" on the way to the moon but "a new path to an entirely new world." This is a new world and you are fortunate to be a part of it.

Thank you very much.