Remarks of Acting Assistant Secretary Baker at the Progress and Freedom Foundation Aspen Summit

August 17, 2008

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

Progress and Freedom Foundation Aspen Summit
St. Regis Resort, Aspen, Colorado
Welcome Reception, August 17, 2008


Introduction

Thank you, Ken.  It is a great pleasure to be here, and an honor to be the first to take a stab at answering the provocative question of the Summit’s theme:  “Unlocking Innovation:  Has the Key been Misplaced?”

But before I do, I want to extend my congratulations to PFF on its 15th anniversary and the launch, this evening, of the 14th annual Aspen Summit.

This is really quite momentous:  PFF was formed at the very dawn of the Internet revolution and over these many years of extraordinary technological innovation and growth, PFF continues be an enlightened voice in the dialogue on our nation’s digital policies.

Now, I promised Ken I wouldn’t be talking this evening about the DTV transition and NTIA’s TV Converter Box Coupon Program – even though I’ve become so accustomed to being asked to do just that.  If that’s what you were hoping for, I’ll be happy to talk with you afterward.

But I have to mention that today marks six months to the day that full power television stations will shut off their analog signals and from then on only broadcast in digital.

We are making great progress in helping millions of Americans prepare for the DTV transition.  And though we still have much work to do over the next six months, we are also well-poised to help prepare millions more.

If your household is like most, and you don’t need one of our $40 coupons, remember you can gift them to someone who does.  Knowing that no one here dares to be unprepared, I urge you to look beyond your own entertainment center and make sure that Sunday, February 18, 2009, is a day of rest for every one of your family members, friends, and neighbors, and not a day spent in a flurry trying to get an analog television set to work.

Fundamental Guiding Principles

One of the joys of my job is the opportunity to contribute to the shaping of policy for one of the most dynamic and thriving sectors of the U.S. economy on behalf of the American people.

And I firmly believe the technology advances consumers enjoy today have occurred, in part, because we got the policies right:  policies that foster innovation and growth, and that rely on private sector investment and free market competition as fundamental, guiding principles.

Our efforts on the inter-related policies of broadband deployment and spectrum management serve as excellent examples.

By emphasizing incentives for private investment and competition in our broadband strategy, we have observed impressive results:  an increase of more than 1,300 percent in the number of broadband lines serving Americans over the past eight years.  And through our efforts to improve efficiencies in Federal spectrum use, we are helping to clear 174 MHz of spectrum for new wireless broadband services.

With five months to go before we turn over the keys to the next custodians of our nation’s telecom and information policies, I’m mindful of the need to continue working to get the policy right on a few other issues.

Network Management

There are a few voices out there claiming the issue of network management, or “net neutrality,” has been resolved with the recent FCC action or, at least, that we’re now headed in the right direction.
Call me a skeptic.  I’m just not convinced this is the key that opens the door to innovation, but instead one that deadbolts it locked, shut.
The challenge in devising a standard on network management is to achieve a balance between the demonstrated benefits of an open network and the adverse consequences broadband providers occasionally confront with surges in network traffic.

I believe a better approach is to allow more time for the long-standing and time-tested voluntary, collaborative organizations and processes – the very ones that have enabled the Internet to succeed so phenomenally over its history – to develop technically-feasible and mutually-agreeable network management practices.

The Administration’s principles outlined by Commerce Secretary Gutierrez in May state that competitive markets should not be regulated and that government should avoid prescriptive rules that can’t keep pace with technological change or inhibit investment in new Internet capacity.

For the sake of one of the most important communications tools in the history of womankind, we had better find the misplaced master key, or we may never get that door reopened.

Broadcast Localism

A move away from traditional regulation and toward a lighter regulatory touch to enhance broadcasters’ service and responsiveness to their local communities was a bold step adopted a generation ago. In fact, it was even before competition from cable and satellite television took hold, and a decade before the Internet became commercial.

So if this was the right policy on broadcast localism in the 1980s, it would seem even more right for the 21st Century.

Broadcasters today not only compete with cable and satellite television and the Internet, but also with satellite radio, video sales and rentals, video games, and DVRs.  Their presence in local communities and the production of local-oriented programming are among the more salient characteristics that differentiate broadcasters from their competitors.
So why try to force a very old key into a modern-day lock?

A score of new rules have been proposed under the guise that “the dialogue between broadcasters and their audiences concerning stations’ localism is not ideal.”<1>  Proponents believe that stations could devote more time and resources to local programming and improve their communities’ awareness of local issue-responsive programming they air.

Among the proposed solution, as you may know, is one we all thought had been laid to rest long ago:  the so-called Fairness Doctrine.
Perhaps I’m being too rational, but it would seem to me that if these proposals are finalized, more resources will be tied up in regulatory compliance, and fewer on local programming production.  Moreover, there is something distinctly counter-intuitive in today’s vast and diverse media marketplace to suggest that regulating broadcasters will serve local communities better than competition in this vibrant and diverse market.

Cable:  A La Carte

The same is true of cable television.  In the absence of regulation governing network bundling, the cable market has grown dramatically:  from 28 networks in 1980, to 565 networks in 2007, offering consumers more diversity and choice in programming than ever before.

Yet, a proposal is still on the table creating an illusion that consumers will benefit from the ability to select and pay for only the cable networks they want, and also from prohibiting the bundling of networks by programmers in licensing agreements with cable operators.
If either type of “a la carte” cable pricing regulation moves forward, this key is likely to unlock far fewer passageways for consumers.
Adam Thierer of PFF co-authored an excellent article on the subject in the most recent issue of the Federalist Society Journal.  It clearly and effectively refutes the arguments underlying both the economic and social justifications for “a la carte” cable pricing.

It notes that the economic basis for regulation is erroneous – real prices of subscription television have declined over the past decade, and economic efficiencies are improved by the offering of network bundles.

From the perspective of social regulation, it lays out how consumers will end up with fewer programming choices in the long run as smaller niche networks – for example, those appealing to minorities – lose prospective viewers and ultimately, their viability.

And then there’s the whole separate question of the First Amendment.
I commend Adam’s insightful article if you haven’t already read it.

Conclusion

In summary, I would say the key to innovation has not been hopelessly misplaced, but we may need to change the locks on a few doors.

In my four and a half years with NTIA, I have witnessed first hand how the right policies can unlock private investment and innovation in the telecom and technology sectors, and how others can close off access to the resources necessary to advancement.

For our part, I can say that we have worked very hard to pursue the right approach.

Although this may be my last opportunity to address a PFF audience in my current position, I hope it won’t be my last ever and I find a key that will open a pathway back to PFF and Aspen.

With that, let me close by again expressing my appreciation to Ken and all of PFF.   Thank you.


<1> FCC Report on Broadcast Localism and Notice of Proposed Rulemaking, MB Docket No. 04-233, January 24, 2007, para. 2.