Remarks of Acting Assistant Secretary Baker at the Massachusetts Technology Leadership Council

April 17, 2008

Luncheon Keynote (As Prepared): 
"A Strong Communications Infrastructure is Key to Economic Success"
Thursday, April 17, 2008; Sheraton Boston Hotel, 39 Dalton Street, Boston, Massachusetts

Meredith Attwell Baker
Acting Assistant Secretary for Communications and Information, U.S. Department of Commerce


Introduction

Thank you.  I am delighted to be here in Boston and honored to be invited to join in your discussions on China, India, and Russia, our partners in the new global economy.

Although we have had the opportunity earlier to become acquainted, I want to extend my personal welcome and appreciation to the foreign government officials who traveled very long distances to be here.  Your participation today contributes tremendously to a spirit of economic cooperation that promises to bring benefits to both industry and the citizens of your countries and the United States.

I would also like to thank and commend the Mass Technology Leadership Council for the forward-thinking agenda of your Spring Conference.

Telecom & Economic Success

For members of the Council, I am sure that the telecommunications industry is seen as a significant driver of economic growth and job creation both here in the United States and abroad.  Now more than ever, the swift delivery of information across local and long-haul networks increasingly turns the wheels of commerce.

And this trend does not appear to be on the wane.  In projections released a few weeks ago by the Telecommunications Industry Association, the U.S. telecom market will see a 7.2 percent compounded annual growth rate through 2011.  Globally, the growth rate is expected to be even higher, at 12.5 percent, amounting to an estimated US $4.9 trillion in worldwide revenues for the telecom sector in 2011.

A report released last week by World Economic Forum acknowledges that the increasing level of investment in information and communications technologies (ICTs) reflects an awareness of their contribution to economic progress.  Such investments, they observe, help improve “competitiveness and sustained growth by impacting the efficiency of production processes across sectors and industries, accelerating growth of knowledge-based services and industries, and empowering people to access unprecedented sources of information and markets.”

At my agency, the National Telecommunications and Information Administration (NTIA) in the U.S. Department of Commerce, we continuously strive to foster private sector innovation and economic growth in the ICT sector.  We do this in our role as the principal advisor to the President on domestic and international telecommunications and information policy issues.

Massachusetts

As I prepared to speak here today, I learned that there’s much more to the history of Massachusetts than the Pilgrims and Thanksgiving, Paul Revere and the American Revolution, the Red Sox and Patriots.

The contributions to telecommunications and information technologies that had their origins here came as a surprise to me.  For example, among the state’s native sons is Samuel Morse, the creator of the single wire telegraph system and co-inventor of the code that bears his name.

I also learned that Cambridge is said to be the location where America’s first printing press went into production, followed two centuries later by the invention of the typewriter in Worcester.  The first public demonstration of the telephone occurred here in Boston, where Alexander Graham Bell settled upon arriving in the United States, and the first telephone line was installed in Somerville thanks to Bell.  The first trans-Atlantic radio transmission from the United States was sent from a Marconi-built station at Wellfleet, and the first ever radio program was broadcast from Ocean Bluff-Brant Rock.  The state is also known as the place where the precursor to the Internet, the ARPANET, was first deployed and the world’s first email message was sent between side by side computers.

We have come a long way since that first email message was sent in 1971.  According to one recent estimate, the current rate of email messages sent on a daily basis worldwide is 170 billion and growing.  That’s two million emails every second.
 
As essential as email has become to Internet users in practically every home and business across the country, many new and dynamic applications are rapidly changing the user experience:  from e-commerce, to social networking, Internet video, gaming, and other entertainment applications, to more critical uses, such as e-learning and e-health.

Network Management

NTIA has a long-standing view that consumers should have the opportunity for an open and unfettered experience on the broadband Internet.  Indeed, openness and freedom are some of the key characteristics that have made the Internet such an unprecedented success throughout its short history.  We continue to believe that preserving those opportunities should be a key Internet policy goal.

I think it is important to recognize, however, that the ever-increasing number of Internet users, the availability of more bandwidth-intensive content, and the variation in methods for accessing Internet content have created challenges in traffic management for network providers, who must manage traffic flows on their networks to ensure a satisfactory level of service for all of their customers.

The policy issue presented by the Comcast – BitTorrent dispute is how network operators can manage traffic in ways that protect and serve subscribers and preserve as far as possible the innovation engine of the Internet.  Industry is demonstrating its ability to meet this challenge through a collaborative effort among all stakeholders to develop workable and sustainable “best practices” in this area.  This is exemplified by the recent agreement between Comcast and BitTorrent to collaborate together and with the broader Internet and ISP community to address issues associated with rich media content and network capacity management.  I think this effort is a great example of how, in a competitive marketplace, it is in the interest of both sides to find a mutually agreeable and technically sound solution to these challenges that is acceptable to their customers.  I encourage industry stakeholders to participate in these or other initiatives with respect to network management issues generally.

Broadband

Broadband deployment and its availability to consumers have been a top priority for NTIA for several years.  It is increasingly considered a basic infrastructure that can generate wide-reaching benefits across the economy.  Although measuring the economic impact of broadband is still in its early stages, signs clearly point to significant positive effects on jobs and economic growth.

As part of the President’s call for a ‘New Generation of American Innovation” – a series of measures announced in 2004 to ensure that our economy remains the most flexible, advanced, and productive in the world – the President called for universal, affordable access to broadband technology by 2007 and, thereafter, plenty of consumer choice among broadband providers.

The motivation for the goal was straight forward:  providing American consumers with the most affordable and highest quality broadband service in the world would contribute to our economic productivity and competitiveness, and offer American consumers life-enhancing applications, many of which I just mentioned.

To achieve this broadband goal, a concerted effort by the private sector, and not government mandates, was seen as the most effective approach to reaching the goal.  Complementing our system of private enterprise, the Administration pursued a comprehensive, integrated package of policies – fiscal, regulatory, and technological – designed to lower barriers and provide incentives for the investment and deployment of broadband technologies.  For example:

  1. On fiscal policy, the Administration led efforts to preserve the Internet tax moratorium and to reform the depreciation of assets in order to reduce tax burdens and increase the flow of capital for broadband infrastructure;
  2. In the regulatory arena, new broadband platforms were freed from unnecessary legacy regulation to level the playing field among competitive providers and promote greater investment;
  3. In the technology area, the Administration fostered the development of new technologies such as Wi-Fi and broadband over power lines, and has undertaken reforms to free up spectrum for advanced wireless services.  NTIA is a principal player in the development and implementation of spectrum reform policies, which I will speak to in more detail shortly.

As we began to analyze the impact of these policies and estimate the nation’s attainment of the President’s goal, we found that consumers are indeed enjoying the fruits of a vigorous broadband marketplace and carriers, across a range of platforms, are competing against one another on price, speed, mobility, content, and other service features.  We also found that broadband accessibility and penetration have increased sharply over the past four years, and consumers have more opportunities than ever to choose the broadband solution that best suits their needs and budget.

Since President Bush took office, the total number of broadband lines in the United States grew by more than 1,100 percent, from almost 6.8 million in December 2000, to 82.5 million lines in December 2006.  We also found that 99 percent of the population lives in 99 percent of the zip codes where consumers have access to at least one broadband provider, and in over 90 percent of the zip codes, citizens have three or more choices of broadband providers.

Our findings are described in “Networked Nation:  Broadband in America 2007,” released by NTIA this past January.  The report is available on NTIA’s website:  www.ntia.doc.gov.

For Massachusetts, data collected at our request by the U.S. Census Bureau last October shows that 61 percent of households in the state have broadband connections.  This places the state third behind your neighbor to the north, New Hampshire, which ranked first with 65 percent, followed by Alaska with 62.5 percent.  State-by-state data is also available on the NTIA web page.

When the report was issued, we didn’t proclaim the job completed and call it a day.  Rather, we strongly endorse efforts to improve data collection and to identify communities, especially in remote areas, where broadband deployment has not been as rapid and fewer choices are available to consumers.  We believe it is equally important to ensure that the second part of the President’s goal – consumer choice of broadband providers – is more fully met.

Spectrum Management

A significant finding in NTIA’s Broadband Report was that mobile broadband is the fastest growing sector of America’s broadband economy.  Based on industry data, we reported that from 2000 to 2007, the total number of subscribers increased from 97 million to 243 million; the average monthly minutes per subscriber increased from 228 to 746 minutes; and industry revenues grew from $45 billion to $132 billion.

With responsibility for the management of spectrum use by the federal government, NTIA is actively engaged in the formulation of spectrum policy as part of our larger goals to enhance private sector competition and broadband deployment.

Inspiring our efforts to identify and implement more efficient and dynamic uses of spectrum by the federal government, the President’s 21st Century Spectrum Policy Initiative was launched in November 2004, seeking to “unlock the economic value and entrepreneurial potential of U.S. spectrum assets, while ensuring that sufficient spectrum is available to support critical Government functions.”

For example, NTIA supported legislation enacted in 2004 to reallocate spectrum used by the federal government in the 1710-1755 MHz band for Advanced Wireless Services.  We are now working with federal agencies to relocate federal systems more expeditiously than required by law to accommodate the interests of commercial providers in more quickly launching advanced wireless services.

We also released a Federal Strategic Spectrum Plan, the most comprehensive information to date on how federal agencies use spectrum. The report includes a set of recommendations to improve spectrum efficiencies by federal users, including:  the use of commercial wireless services where feasible; implementation of dynamic access and “smart” radio technologies; spectrum sharing among federal users and between federal and non-federal users; and collaboration with NTIA to identify economic and other incentives to promote more efficient spectrum use.

NTIA has also reached out to the private sector for advice on spectrum efficiencies.  We convened a Commerce Spectrum Management Advisory Committee in 2006, made up of representatives of the private sector, to provide NTIA with advice on domestic spectrum management and policies, including spectrum efficiency and the use of economic incentives in federal spectrum management.  Among the recommendations of the Advisory Committee already in the implementation stage is the creation of a Spectrum Test-bed.  A coordinated effort with the FCC, the Spectrum test-bed will enable us to evaluate new technologies that can facilitate sharing between federal and non-federal spectrum users.

DTV Transition & NTIA’s Coupon Program

You may have heard about the recent auction conducted by the FCC to award licenses for new commercial wireless services in the 700 MHz spectrum band.  This is spectrum being reclaimed from television broadcasters as they transition from analog to digital television (DTV).  The auction raised more than $19 billion in gross bids, almost twice as much as pre-auction estimates.  Revenues from the auction will make possible improvements in public safety interoperability, help reduce the national deficit, and fund several DTV transition programs, including the TV Converter Box Coupon Program administered by NTIA.

If you are not yet aware, it’s time you know:  come February 17, 2009, all full power television stations in the United States are required by law to end their transmission of analog signals and thereafter broadcast only in digital.  For most Americans, the switch will be of no consequence.  But for households with analog television sets that only receive over-the-air broadcast signals, and are not connected to a cable, satellite, or other subscription television service, action is required to continue to use those analog sets after February 17, 2009.

One option is to purchase an NTIA-certified digital-to-analog converter box at a participating retail outlet using a $40 coupon courtesy of NTIA.  You can apply for up to two coupons online at www.dtv2009.gov, or by phone, fax, and mail.  All the information you’ll need about the program is also available on the www.dtv2009.gov web site.  I will be pleased to share more detailed information about the program and our efforts to educate the public about the DTV transition during Q&A after the conclusion of remarks.

700 MHz Band Internationally

The United States is not the only country making the transition to digital television.  In fact, the transition has already been completed in a few countries, such as Sweden, Switzerland, and Finland.  In many other places around the world, including in both China and Russia, the transition from analog to digital television is in process.

Consistent with our domestic objectives for the DTV transition, and to ensure global access to spectrum for broadband wireless technologies, the United States strongly advocated and secured the adoption of two spectrum allocations for future advance wireless services during the International Telecommunication Union’s (ITU) World Radiocommunication Conference (WRC) held last November.

The first identifies the 700 MHz band for use by advanced wireless systems, such as International Mobile Telecommunications 2000 (or IMT-2000), with a potential market that extends from the United States, throughout the Americas, to the largest economies in Asia, a marketplace of over 3 billion mobile customers.  Coupled with an agreement to include WiMAX technology in the IMT-2000 family of technologies, this action will likely lead to a larger, more competitive, and open market for a variety of advanced wireless services.

Second, the United States succeeded in ensuring the protection from satellite interference for terrestrial systems in the 2500-2690 MHz band – which is globally harmonized for the provision of advanced terrestrial wireless services and is a key band for WiMAX deployment around the world.  This will ensure the stability of satellite-terrestrial spectrum sharing in this band and support the introduction of new advanced wireless services, such as WiMAX, here and abroad.  At the same time, the WRC ensured the continued use of C-band technology for satellite connectivity globally, a key technology for developing economies and crucial to the U.S. infrastructure as well.

Many of NTIA’s staff actively participated in the WRC as members of the U.S. delegation, providing critical policy and technical expertise and working in close cooperation with other government and private sector members.  We serve as a key partner in the nation’s long-standing engagement on telecommunications and information policy issues at the international level, both bilaterally and in numerous multilateral organizations, such as the ITU and the Asia Pacific Economic Cooperation (APEC), in which China and Russia are key partners to the United States.

Global ICT Trends & the Three Economies

The trend in the growth of mobile services is not unique to our telecommunications market, or even that of other developed economies; it is very much a global phenomenon.  According to a recent report of the United Nations’ Conference on Trade and Development, the number of mobile subscribers in developing countries has nearly tripled over the past five years, and now accounts for 58 percent of mobile subscribers worldwide.

The three economies of focus here today also demonstrate this global trend.  Just in the past couple of weeks came these reports:

  1. The largest cellular operator in Russia, Mobile TeleSystems (MTS), will report revenues of more than US $8 billion for 2007, up 25 percent from the previous year, beating its own forecast.  By the end of 2007, the company reportedly had 85 million subscribers.
  2. India’s Telecoms Regulatory Authority (TRAI) reported that the total number of wireless subscribers in India was 250.9 million at the end of February, with 8.53 million added in the month of February alone.
  3. And the world’s largest mobile operator, China Mobile, announced an increase in net profits of 31.9 percent in 2007, bringing its total to US $12.31 billion, with 68.11 million new subscribers in 2007 and a total subscriber base exceeding 369 million.

More broadly, the diffusion of ICTs is occurring quite rapidly in China, India, and Russia.  The recent report of the World Economic Forum confirms that these three economies – known as three of the four BRIC economies (i.e. Brazil, Russia, India, & China) – have made important improvements in their network readiness over the past seven years.

Bilateral Relationships

The importance of these markets to our international trade can not be overstated.  As your discussions proceed here today – and hopefully continue into the future – so too are ongoing efforts by the Administration in economic engagement with China, India, and Russia.

China

In December 2007, the Department of Commerce announced the signing of “Guidelines for U.S.-China High Technology and Strategic Trade” with China’s Ministry of Commerce.  The Guidelines outline the importance of working cooperatively to achieve the mutual benefits of promoting high technology exports to China.  They also build on the existing commitment to communication and cooperation through such forums as the Joint Commission on Commerce and Trade hosted by the Department of Commerce, promoting the development of safe, secure high tech and strategic trade between our two countries.

Additionally, we hold continuous consultations with China under the U.S.-China ICT Policy Dialogue, to which China has invited the participation of NTIA, the FCC, and the State Department in June 2008.  This dialogue will be especially important as China began a Ministry reorganization in March 2008.  This dialogue builds on three telecommunications summits organized by NTIA for U.S. and Chinese governmental and private sector telecommunications interests held from 1996-2004.

India

Since 2005, the U.S. and India have conducted bilateral dialogue on the liberalization of the Indian telecom market within the standing U.S.-India ICT Working Group, a complement to other existing bilateral venues.  At the most recent bilateral meeting held in December, issues related to spectrum policy, licensing, and liberalization of VoIP services and interconnection were discussed.  We plan to meet again this summer in Washington, and again in December of this year in New Delhi.  An important component of this working group is the high profile maintained by the dynamic Indian private sector, complemented by our own private sector.

Russia

Just two weeks ago, following the NATO Summit meeting, President Bush and President Putin issued a Declaration setting forth a framework for strategic cooperation between our countries.  As part of the framework the Declaration identified as an area of cooperation economic and business interaction that will enhance our trade and investment relations, contacts between our business communities, and increased prosperity.

Conclusion

In closing, the best way that I can think to express in my very strong belief that a robust communications infrastructure is key to our economic success is to take the words directly from the President himself.  “The role of government,” the President said, “is not to create wealth; [rather, it] is to create an environment in which the entrepreneur can flourish, in which minds can expand, and in which technologies can reach new frontiers.”

Let me again thank the Mass Technology Leadership Council for this opportunity today, and to all of you for your attention.

Thank you.  I will be happy to answer your questions.