Remarks of Acting Assistant Secretary Baker at the National Association of Regulatory and Utility Commissioners (NARUC) Summer Committee Meetings Commissioners Luncheon

July 22, 2008

Remarks of Meredith Attwell Baker, Acting Assistant Secretary, NTIA (As Delivered)

NARUC Summer Committee Meetings
Commissioners Luncheon
Hilton Portland and Executive Tower, Portland, Oregon
July 22, 2008


Introduction

Thank you, Commissioner Baum, for that kind introduction.  I wish to extend my congratulations to you and also to Commissioner Anne Boyle, for your recent appointments.  My NTIA colleagues and I look forward to working with both of you and your Committees in the days and months ahead.

I am very pleased to be here today and appreciate the opportunity to share with you my perspective on a few of the issues at the top of the telecommunications policy agenda for NTIA back in Washington.

Four and one-half years ago, when I first joined NTIA, we spoke of the extraordinary innovation and growth occurring in the telecommunications industry and how, by driving demand for new services and applications, Americans eagerly “embrace the future.”

Indeed, the American public’s appetite for new telecom services and applications has remained as fervent as ever and continues to drive growth in every sector of our tremendously vibrant telecommunications marketplace.

That theme – “embrace the future” – still very much resonates throughout all of our work at NTIA.  But no issue has been as consistently high a priority for us than ensuring that our citizens “embrace” the transition to digital television (DTV).

As of today, we are 210 days away from February 17, 2009, when all full-power television stations switch off their analog signals and broadcast in digital.

We are greatly determined and taking all appropriate action to ensure a smooth DTV transition for every American household.

Despite the intensity of effort devoted to the DTV transition, we are also fully engaged on a number of other critical issues.

Among them is promoting the deployment and availability of broadband services for all Americans.  This has been a major policy objective of the Administration and one, I know, that is a priority among state governments as well.

If I may, then, let me first give you more details about our work related to the DTV transition, then turn to broadband and a couple of other issues of interest.

TV Converter Box Coupon Program

After some two decades, our nation finally stands on the threshold of the era of digital television.  With all full-power television stations set to cease analog broadcasting signals in 210 days, most are already transmitting a digital signal along side their analog signal.

Rather than wait until February 17, 2009, consumers can already “experience the benefits” – as we say at NTIA – of digital television.  The sooner consumers act, the sooner they will begin to enjoy improved picture and sound quality, and more programming choices.

Through NTIA’s TV Converter Box Coupon Program, eligible households can apply by phone, fax, mail, and online for up to two coupons, each worth $40, to use toward the purchase of a coupon-eligible converter box.  The coupons are good for 90 days.

When we first launched the Program on January 1, 2008, we received an extremely high volume of coupon applications.  Since that time, the rate of applications has remained relatively consistent with an average of 105,000 applications submitted each day.

Coupon mailing began on February 21, when we were confident that a sufficient inventory of certified converter boxes was available through participating retailers.  The backlog of coupon orders was quickly eliminated and consumers today can expect coupons to be issued and mailed within 10 to 15 business days.

As of July 16, NTIA has received requests for over 20.5 million coupons from nearly 11 million eligible households.  More than 19 million coupons have been mailed to consumers, and over 6 million have already been redeemed in stores for a certified converter box.

We have been very pleased with the high level of voluntary participation in the program by converter box manufacturers and retailers.

To date, we have certified 112 coupon-eligible converter boxes.  37 of these boxes include an analog pass-through feature.

Coupons are being redeemed in over 26,000 outlets throughout the United States operated by more than 2,300 retailers certified by NTIA.  Among them are the nation’s seven largest consumer electronics retailers – Best Buy, Circuit City, Kmart, Radio Shack, Sears, Target, and Wal-Mart.  Hundreds of other regional chains and smaller retailers have also been certified. 

Consumers can also redeem their coupons from any one of 26 online retailers or 13 phone retailers.  A list of all participating retail outlets, searchable by state and 5-digit zip code, is available on the Program’s webpage – www.dtv2009.gov, and when the coupon is mailed, it contains a listing of the closest retailers to that address.

Before they shop, we encourage consumers to call local participating retailers to identify the stores in their area that have boxes in stock.  One example of how retailers are addressing inventory is Radio Shack’s Direct-to-You program in which a sales associate in a store without inventory will locate a converter box in its supply chain and ship it to the consumer free of charge.

To help retailers in managing their inventory of boxes, the Coupon Program tracks coupon requests and redemptions by state and zip code, and makes this information available to retailers.

NTIA remains vigilant in monitoring for waste, fraud and abuse across all aspects of the Coupon Program.  Fortunately, we have had no egregious problems in these areas.  However, several retailers have been decertified from the Program for a variety of violations of Program rules.
I am aware of the draft resolutions brought before NARUC’s Consumer Affairs Committee raising concerns about various aspects of the Coupon Program.  Let me respond by clarifying several key points.

First, the 90-day expiration on each coupon is a statutory requirement.  We do not have the authority to extend the expiration period, nor to select a specific date of our own choosing, nor to reissue coupons that have expired.  However, to assist consumers whose coupons may have expired, NTIA is working with its partners and the media to alert individuals that they may assist family, friends, and neighbors to obtain a coupon.  While it is illegal to sell coupons, giving a coupon for free to a family member, friend, or neighbor is not prohibited under Program rules.

We also understand that stores occasionally experience periods of low inventory.  That is why we are reminding consumers not to wait.  When consumers receive their coupons, they should research and find the box that best suits their needs, call ahead to identify a store with the box in stock, and use their coupon before the date stamped on the front of the card.

I would also note that our rules are not prescriptive with respect to retailer practices; our authority under the law is limited to the Program.  We require that participating retailers train employees on the purposes and operation of the Coupon Program, but we do not monitor or specify retailer inventory practices, or refund and exchange practices.

We are always happy to assist and work through problems consumers may encounter.  Frankly, the number of complaints we have had relative to the volume of coupon requests has been very small.  Still, to the extent concerns come to your attention, we are ready to assist.  You can contact the Program directly, or contact me or Jim McConnaughey, who most of you know.  We will be happy to do what we can to resolve problems consumers may be experiencing.

Wilmington Test Pilot & Station Testing

In early May, the FCC announced that the Wilmington, North Carolina, market will serve as a “test pilot” and be the first in the nation to transition to DTV on September 8 at noon.

We are actively working with the FCC on this pilot effort and will continue to keep a focus on Wilmington through the September 8 switch.  We anticipate this test pilot will provide important information about the readiness of American households and how aspects of our outreach and educational efforts can be strengthened.

Several broadcast stations around the country are using a novel testing approach to alert viewers who will lose their television signal when the transition occurs and to encourage them to act now.  Here in Portland, KATU-TV shut off its analog signal last Thursday (July 17) for a brief 10 seconds for this purpose.  Likewise, KGW-News Channel 8 here in Portland conducted the same type of test last Friday evening.  Similar tests have also been conducted by stations in Phoenix, Honolulu, Seattle, and Orlando. 

I think this is an extremely creative, helpful way to prepare consumers for the transition and I applaud these broadcast stations for their efforts.

DTV & Coupon Program Public Education

Public education and outreach about the transition and options available to consumers is a critical focus of the Coupon Program.  NTIA places special emphasis on reaching vulnerable audiences.  These groups, including seniors, minorities, the disabled, low-income, and rural households, face a greater risk of losing all television service as a result of the DTV transition.

We are working with print, broadcast, and online media, and engaging a wide range of partners to disseminate information at the national, regional, and local levels about the DTV transition and the Coupon Program.

For example, NTIA is working with 17 federal agencies that have direct contacts with citizens, and more than 280 national, state, and local organizations to help educate consumers.

NARUC itself is a valued partner in this effort.

I want to express my appreciation to NARUC and many of its member state commissioners for the steps you have taken to increase awareness about the transition.  NARUC has contributed significantly to our outreach efforts and We very much appreciate your commitment to inform the public about the transition.

NARUC’s DTV webpage contains a link to NTIA’s Coupon Program site as well as other numerous informative sites.  One of the easiest steps you can take is to create a similar link from your state commission’s web site to the Coupon Program.

In addition, you can visit the “Our Partners” link on our web page and take advantage of the comprehensive toolkit of information – fact sheets, a poster, a mailer, sample presentations and other materials – we have developed to help organizations with their own public education efforts.

We welcome your state commissions’ use of these materials and encourage you to refer other state and local agencies to the webpage and the toolkit and become Partners with NTIA.

PSIC Grants

I spoke earlier about the benefits of the DTV transition to television viewers.  But even more critical is the spectrum that is going to public safety.

Additionally, this transition funded the Public Safety Interoperable Communications (PSIC) matching grant program.  NTIA has made available nearly $1 billion in grants to fund interoperable communications projects from the 56 states and territories.  The grant awards will help state and local first responders improve public safety communications during a natural or man-made disaster.

The ability for public safety agencies to communicate with each other is critical for first responders who serve on the front line during a crisis.  These grants will help communities and regions close the gaps in communications capabilities for these courageous public servants.

Broadband

Turning to the issue of broadband, from my perspective, while we have seen amazing growth, we still have work to do:  Encouraging greater competition in the broadband market.  This will drive down prices and enable more of our citizens to “embrace the future” through broadband.

In January, NTIA released a report – Networked Nation:  Broadband in America 2007 – which examined the policies pursued by the Administration and took stock of the state of broadband competition in the U.S.  It also evaluated our attainment of the goal, set by the President in 2004, to achieve universal, affordable access to broadband by 2007.

The report’s findings confirm our belief that the comprehensive, integrated set of fiscal, regulatory, and technology policies that form the Administration’s broadband strategy are working.  By lowering barriers to innovation and entry, and avoiding prescriptive government regulation, we have stimulated private sector investment and accelerated the deployment of broadband facilities and services.

For example, on the fiscal policy front, the Administration led legislative efforts to preserve the Internet tax moratorium and reform the depreciation of assets in order to reduce tax burdens and increase the flow of capital for broadband infrastructure.

In the area of regulatory policy, the Administration strongly endorsed freeing new broadband platforms from unnecessary legacy regulation and leveling the playing field among competitive broadband providers.

With respect to technology policy, NTIA has been particularly instrumental in advancing new broadband platforms.  Through reforms and improvements in spectrum management, we have contributed to the development of wireless broadband technologies – by freeing up spectrum for both licensed and unlicensed advanced wireless services.  And our technical research and analysis have helped to remove barriers to the emergence of new platforms, such as broadband-over-power lines.

The available data shows that these technology-neutral, pro-investment, de-regulatory policies have been working, yielding a dramatic increase in broadband subscribership over the past eight years.

The total number of broadband lines in the United States has grown by more than 1,300 percent since President Bush took office.  Broadband service is available in 99 percent of the nation’s zip codes, encompassing 99 percent of the nation’s population.  In fact, 95 percent of all zip codes have three or more broadband competitors.

Release of the report did not signify the completion of our objectives.  Rather, we believe these policies must be maintained, and carefully tailored as necessary to address any gaps in the market that may remain, such as in remote areas where broadband deployment has not been as rapid and fewer choices are available to consumers.

In this regard, we endorse efforts to improve data collection to obtain more granular information about broadband deployment.  Better information will provide a higher-resolution picture of the broadband landscape, which in turn, will facilitate measures to bring broadband to these communities without fundamentally disrupting the competitive market forces that have been so successful thus far.

As you know, much has made about world broadband rankings and the position of the United States relative to other countries.  The rankings developed by OECD, in particular, always seem to garner attention.

In OECD’s most recent rankings, the U.S. ranked 15th in the world in broadband subscribers.  With 14 other nations said to be ahead of the United States, it is not a surprise that there would be much hand-wringing within policy circles here in the U.S. about the OECD rankings

But what is concerning about the OECD ranking methodology, and a point rarely noted, is that it fails to account for the tens of millions of Americans with wireless broadband subscriptions, as well as those with special access lines at their places of work.

Other studies show that the United States, in fact, is among the world’s leaders in a variety of broadband-related categories, such as the number of broadband lines, originating traffic and e-commerce, networked readiness, e-readiness, useful connectivity, and IT competitiveness.

NTIA’s broadband report, like many other analyses, found that wireless is the fastest growing segment of our broadband economy.  In the past eight years, the number of wireless broadband subscribers jumped from 97 million to 256 million, almost a three-fold increase; and the average number of minutes per month used by subscribers grew at an even higher rate, from 228 minutes to 746 minutes per month.

Spectrum Management

We appreciate the viewpoint expressed by NARUC on the issue of broadband deployment in its February 2007 resolution encouraging new network providers to make reliable broadband more available and affordable, and encouraging NTIA and others to consider creative approaches to spectrum allocations.

Your call to action on spectrum is completely aligned with NTIA’s own goals in carrying out our spectrum management responsibilities.  The mandate in the President’s 21st Century Spectrum Policy Initiative, announced in 2003 – to free up spectrum for advanced commercial wireless services – greatly stimulated our ongoing efforts to identify and implement creative solutions to improve the efficiency of Federal spectrum use.

In pursuit of this objective, we have taken numerous actions to devise more efficient and dynamic methods of Federal spectrum use, and work each day to improve and refine our tools and processes.

We have also reached out to the private sector for advice and expertise.  Last week, I attended the most recent meeting of the Commerce Spectrum Management Advisory Committee.  Composed of representatives of the private sector, and created to provide advice to NTIA on spectrum management and policies, the CSMAC has focused its work on improving spectrum efficiencies and economic incentives in Federal spectrum management.

These are just a few of the creative solutions we are pursuing at NTIA to continue to ensure that wireless services continue to grow and offers even more consumers a genuine alternative broadband service.

Network Management

The “embrace the future” mantra isn’t unique to NTIA.  The private sector understands very well consumers’ fascination with and demand for new and dynamic services, devices, and applications.

In a study commissioned earlier this year, the Telecommunications Industry Association (TIA), reported that the U.S. telecom industry will grow at an average annual rate of 7.2 percent over the next four years (2008-2011), reaching $1.3 trillion in 2011.  That’s the good news.

The bad news is that TIA also reports that current network capacity could soon be unable to support the increasing levels of bandwidth-intensive traffic, such as Internet video, that is occurring in response to soaring consumer demand for such services.

This potential for increased network congestion is clearly a concern.  And it speaks directly to both the need to maintain existing policies to promote broadband deployment, and to ensure that broadband providers have the ability to manage their networks effectively.

The Administration believes that preserving the ability of the Internet to spur innovation and support the free flow of information should be key Internet policy goals now—and for the future.

In May, Secretary Gutierrez laid out the Administration’s core principles on the issue of network management.  Those principles are that:

  • Competitive pressures – not new regulation – provide the most effective discipline on broadband providers;
  • Incentives must remain in place for the build out of new Internet capacity.  The ability of providers to price and/or manage their networks should not be limited;
  • Government should avoid prescriptive regulations that can’t keep pace with technological change.  Defining “network management” is difficult and will be quickly overtaken by technological developments; and
  • Transparency promotes competition.  Broadband providers should disclose their network management practices to consumers

Conclusion

The importance of continuing to encourage technological innovation brings these remarks full circle.

But it is worth reemphasizing the critical role of consumers in driving innovation and growth in the telecommunications sector, and the importance of crafting policies that foster innovation and growth to meet consumer demand.  I know that is true not only for NTIA – from the DTV transition and improving the capabilities of first responders, to the deployment of broadband and the realization of efficiencies in federal spectrum use – but also for the state commissions.

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