Remarks of Assistant Secretary Victory at the Competition Policy Institute's Conference "Keeping Telecom Competition on Track"

Removing Roadblocks to Broadband Deployment
December 06, 2001

"Removing Roadblocks to Broadband Deployment"
Speech by Nancy J. Victory
Assistant Secretary for Communications and Information
U. S. Department of Commerce

before the

Competition Policy Institute's Conference
"Keeping Telecom Competition on Track"
December 6, 2001

Good afternoon. I am very pleased to be here to participate in your conference on "keeping telecom competition on track." I would particularly like to thank Debbie Berlyn for inviting me. The Issue Forum that you are hosting today and tomorrow truly targets the key telecom issues of the day. You have put together a thought-provoking program that will certainly help telecom policymakers, such as myself, as we work ensure that our nation stays "on track" for continued competition and ultimate economic growth for our nation as well as benefits for consumers.

Later today, you will be discussing the status of competition in the telecom markets. Clearly, where robust competition has emerged, we have seen great benefits to consumers in terms of lower prices and more choices, and great benefits for American companies, in terms of innovation, growth, and increased productivity. The Bush Administration is a believer that competition is the best means to promote strong telecom markets, which will ultimately deliver a vast array of telecom services for Americans. Moreover, we believe that the telecom and tech sectors, although they have recently taken a hit in the markets, will in the long term continue to drive America's economic growth and our nation's social well-being. We also recognize that a vibrant American telecom sector at home helps us become a more competitive trading partner internationally. 

In your panel discussions over the next two days, I urge you to focus not only on voice services, but also on new advanced broadband transport systems designed to unlock and unleash the full potential of the next generation digital and IP-based telecom world. Hopefully, today's slow speed wires carrying analog traffic into the home will someday be viewed as historical curiosities akin to the old 19th century coal-fed locomotives that huffed and puffed their way across the country in bygone days. In their place will be broadband telecom lines that rocket information and content to our doorsteps at mind-boggling speeds. 

We in the Bush Administration have spent a significant amount of time lately focused on broadband and its potential. Broadband seems to be the word on everybody's lips these days. The Administration is a believer that the opportunities and innovation offered by high-speed networks are crucial to promoting America's productivity and our people's welfare. The question is - what are the right policies to ensure broadband services develop and are made available in a manner that best benefits our country? 

Well, that's what we continue to work on. Over the last few months, the Bush broadband team has been hard at work understanding the problems with broadband deployment and developing a position on what role, if any, government should play in facilitating its roll-out. In our view, our role should be to remove impediments to broadband deployment and then get out of the way and let the market work. But what are the true impediments? And what safeguards must remain or be put in place to protect against anti-competitive behavior or market failures? Further, we also recognize that broadband does not exist in a vacuum. Rather, it is an integral part of our overall telecom policy. That means that the competitive framework that we have established for traditional voice services both impacts, and is impacted by, broadband services and the challenges broadband presents. 

As a policymaker, I believe that is best to listen and learn before acting - to fully understand the nature of a problem before attempting to solve it. And that's what we have been doing.

We started with one-on-one meetings - with Members of Congress, industry representatives, consumer advocates, and other stakeholders in the broadband debate. What these meetings made clear is that on most of the issues in the broadband debate, there were not just one or two points of view, but many, many facets and perspectives. 

In an effort to compare and contrast these myriad viewpoints, NTIA held its first-ever Broadband Forum in October. Our goal at the Forum was to ask critical questions and challenge underlying assumptions to better inform our thinking. We started at the beginning - Is there an unmet need for broadband? If so, is this a problem of supply or demand? Second, what should government's role, if any, be in this process? Is the market working? Is it working in some, but not all, areas? And what policies, if any, should government advocate in response? 

We heard from a variety of broadband providers, including incumbent LECs, competitive LECs, wireless providers, broadcasters, satellite operators, and cable providers. We also invited state and local representatives, community leaders, consumer representatives, academics, financial analysts, and others who have been thinking about these issues. What resulted was a very spirited and helpful dialogue that really focused in on the issues and avoided rhetoric. 

Here's what we learned: Most of the participants agreed that broadband has been rolling out at a relatively fast pace nationally. Currently, studies show that some 70 percent of Americans have access to broadband services over DSL and/or cable. Looking only at rural areas, broadband service over such platforms is available to a somewhat lesser, but still significant, 50 - 60 percent of homes and businesses. Moreover, broadband services over satellite technology reach many more end users. These numbers suggest that the pace of rollout for broadband has far exceeded the rates for other technologies and services, such as VCRs, the Internet, TV, or telephones. 

Well then, what is the problem? Why are the telecom and the tech sectors in general so concerned about our nation's broadband policy? 

Different sectors of the tech and telecom industries raised a number of concerns. First, while service availability is high, the actual take rate is still quite low - apparently less than 10 percent in most areas. Some suggested that this was because prices are still high and getting higher, because new killer applications have not yet been developed, or because some communities still do not recognize the utility of broadband. Part of the problem may be one of marketing, not of the marketplace. My colleagues in the Technology Administration in the Commerce Department will be taking a closer look at these demand issues in a series of events beginning early next year.

Other participants contended that the problem is not one of demand, but of supply. Several providers maintained that certain barriers have prevented them from reaching economies of scale necessary to bring down prices. Some parties cited unbundling requirements as disincentives to investing in higher-speed broadband services, such as fiber, as well as in rural and hard-to-serve markets. Many also identified cumbersome state regulations and local rights-of-way obligations as barriers to deployment. 

Most agreed that, if government did anything, it should do so in a cautious, limited way. The market appears to be working in rolling out broadband to most areas. If anything, there was a call for government to remove those regulations that appear to pose barriers to deployment. Additionally, a number of panelists called for government action where the market fails. 

Unquestionably, the Forum was hugely helpful to those of us working to assemble the right broadband policy. However, it still left certain questions unanswered and details unclear. It was also based only on a finite sampling of stakeholders. For this reason, on November 19th, NTIA released a Request for Public Comment, which sought written comments and suggestions on a variety of broadband issues. 

Since this will be our first opportunity to hear from many of those stakeholders that did not participate in the Broadband Forum, the Request for Comment includes some fundamental questions, such as what is broadband? What criteria should we use for determining what minimum transmission speed should be considered broadband? How should that definition evolve over time? What are the policy implications of different definitions? How should the broadband product market be defined? And what policy initiatives would best promote inter-modal and intra-modal broadband competition?

We also ask specific questions about different incentives and disincentives for investing in broadband facilities and services. Do the interconnection, unbundling, and resale requirements of the Telecommunications Act of 1996 reduce ILECs' incentives to invest in broadband? Is TELRIC pricing the real problem? If so, what's the alternative? If there are added network costs needed to accommodate potential competitor requests, are there mechanisms that could be put in place to share the risks of those costs efficiently and equitably among ILECs, competitors, and users? And what exactly is this "old wires, old rules; new wires, new rules" approach that some are proposing? And how would it really work in practice? We don't want generalities, we want specifics!

We ask about problems experienced by wireless and satellite providers in their efforts to deploy broadband services. We also ask about cable. Cable providers currently lead in the broadband penetration race. But do they face deployment impediments? Or are there competitive or consumer reasons for changes in the cable regulatory regime?

With respect to any of the approaches proposed, we ask for - and greatly encourage the submission of - specifics. How would such an approach work in the real world? And, for the lawyers in the audience, under what legal basis could such an approach be achieved? Would legislation be required, or could any necessary regulatory changes be made under the FCC's existing authority? I can't emphasize enough the importance of this last question. We are hoping to receive detailed analyses.

We also ask about state and local impediments to broadband deployment. One thing we've heard lots about are problems in obtaining access to rights of way - both in terms of cost and delay. We ask for specifics on the nature of rights of way problems encountered. We hope to be able to build a case that will enable us to enlist help from municipalities and the states in addressing this varied and very localized impediment. 

Because we recognize that federal, state and local governments all have a hand in the creation and implementation of a successful broadband policy, the Administration particularly hopes to work in partnership with NARUC and the PUCs in addressing some of these broadband issues. But we also recognize that problems may need to be solved in our own backyard. We accordingly inquire about impediments to accessing federal lands and buildings that may thwart broadband deployment.

Obtaining answers to these questions will assist us in establishing a thoughtful and comprehensive Administration program for broadband as well as allow us share NTIA's findings and conclusions with the FCC and Congress in their consideration of this important issue. Comments are due December 19th. I strongly encourage all of you here today to share your experiences and knowledge with us. 

The comments we receive will not be reviewed against a blank slate. To the contrary, based upon input from the Broadband Forum and other venues, the following five guideposts have emerged to steer the formulation of our policies: 

· First, government policy responses should not be driven by consumer adoption rates. Consumer wants and needs often cannot be anticipated and can quickly change, and government often can't react quickly enough. Government's role, therefore, should be to facilitate the deployment of new technologies by removing any unnecessary roadblocks to that deployment. Then it's up to the market - both in terms of carriers' decisions to deploy and consumers' decisions to subscribe. 

· Second, policies that promote rational facilities investment should be pursued. 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. But as we saw on September 11th, there are network reliability and security advantages to having a diversity of facilities-based competitors. 

· Third, where possible, we should promote competition via 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 be mindful 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 policy, we need to 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.


Thus, my overarching concern is not just "keeping telecom on track", but rather making sure that telecom is on the right track, heading the right way to deliver competition and consumer benefits. The rails upon which those tracks are built need to be laid on a firm factual bed with each individual rail connected to the others by carefully hammered policy spikes.

Commerce Secretary Don Evans has said, "Our robust Internet economy has driven American economic growth, technological innovation and global competitiveness over the past five years and we look to information technologies to support future growth." Much of that growth, innovation and global competitiveness hinges upon advanced telecom infrastructures. We are working hard to put forth a broadband policy that promotes efficient investment in next generation facilities and services to advance these goals.
 

Thank you very much.