Remarks by Larry Irving
Assistant Secretary for Communications and Information
National Telecommunications and Information Administration
U.S. Department of Commerce
Third Annual Florida Communications Policy Symposium
February 18, 1999
Good morning. It's a pleasure to be here in sunny Florida, and to see my good friend Julia Johnson again. Being here today with Chairman Garcia and former Chairman Johnson -- two power hitters -- is like having Mark McGuire and Sammy Sosa in the same lineup.
Last week was a week of reflection for those of us in telecommunications. Some were asking whether Tinky Winky (of Teletubbies fame) is really a societal menace . . . On the more serious side, many of us were assessing the impact of the 1996 Telecommunications Act as it reached its third anniversary. We have been exploring whether the Act has, in fact, changed the telecommunications landscape, and whether consumers have been affected by these changes.
Three years after the Act's passage, it looks as though the ball is finally now in play. The telecommunications field is changing, and Americans are beginning to feel its benefits. With these developments, state and federal governments will need to play new roles -- the subject I'd like to explore today.
The Changing Paradigms in Telecommunications
There is no denying that we have entered an era of paradigm shifts in telecommunications. To begin with, the traditional monopoly structure is giving way to a competitive marketplace. In 1993, President Clinton and Vice President Gore articulated their vision for a National Information Infrastructure (or NII), which would be based on private investment, competition, and open access. Today, we are indeed fulfilling the objectives of the NII agenda: competition is lowering prices, spurring the expansion of facilities and services, and promoting new investment and job growth.
According to a "Progress Report," released by Secretary of Commerce William Daley last week, these developments are occurring across all sectors of the telecommunications industry. Long-distance rates are half what they were before we saw competition with AT&T. Wireless rates have plummeted, and subscribership has soared, because of the many new players and products in the wireless market. Some wireless providers now have plans offering 10 cents a minute, anytime and anywhere. And many are offering new services, such as caller ID, pagers, and voicemail. These are all the fruits of competition.
And the Telecommunications Act of 1996, intended to end the local telephone monopolies, has opened the door to local telephone competition. Many customers - particularly business customers - now have choice in local telephone provider and are selecting among new services at lower prices.
As we near the end of the 20th century, we are also witnessing another paradigm shift: the development of the "Information Age." Today, more people are going online to get their news, weather forecasts, listen to music, make purchases, and even make phone calls. The numbers alone tell the story. In 1993, there were fewer than 100,000 Internet users; today, there are over 150 million worldwide. Five years ago, there were 3 million Internet "hosts"; today there are more than 30 million hosts.
In 1993, very few thought about making money through online transactions. In 1997, there were $3 billion in online retail sales. And the Department of Commerce announced last week that that amount tripled in 1998 -- to $9 billion in online retail sales. By some estimates, consumers spent $8 billion during the Christmas season alone. By year 2000, consumer online purchases could be a $30 billion business.
The "Information Age" has also given rise to an "Information Economy." American companies - almost without exception - are increasingly relying on information services. And a growing portion of companies today are offering information services. In fact, over a third of real gross domestic product growth in the past three years have come from information technology industries. The information and telecommunications industries are expected to continue to fuel America's economic growth, each projected to grow another 8% per year.
The New Challenges for State and Federal Government
These paradigm shifts - the rise of competition and the information sector - are presenting new challenges for state and federal governments. With the new competitive marketplace, we now have new goals. First, we need to facilitate competition and ensure that new competitors really can enter the market. Our business is no longer about regulation, but the elimination of regulations. In fact, if we do our jobs right, we'll have worked ourselves right out of our jobs in a few years time!
We also need to be sure that the benefits of competition are shared by all Americans - not just by businesses or urban homeowners, but by rural residents and the corner shop owner. Florida's efforts to make multi-tenant environments (MTEs), such as apartment buildings, accessible to competitors is an excellent step in the right direction. Let me applaud you for that decision. By prohibiting landlords from selecting a single provider, tenants will now have reasonable access to the telecommunications company of their choice.
We will need to focus on bringing competition to all geographic areas - whether in concentrated, urban centers or remote towns. In Florida today, for example, we are seeing competition in Ft. Lauderdale, Jacksonville, Miami, and Orlando. Ideally, the Telecommunications Act should make it possible for every home and community to have a choice in telephone, Internet, or cable provider. And we have to make sure that wherever Americans live, be it in rural, suburban, or inner city areas, that they remain connected through universal service programs.
The emerging Information Age is presenting its own set of challenges. States and federal governments alike will want to support the rapid growth of the information sector. This means, for one thing, ensuring that our youth and adults are adequately trained in high-tech skills so that they can take lucrative jobs with software companies and high-tech manufacturers. Remember, nearly 350,000 of today's high-tech jobs are unfilled because companies cannot find skilled employees. It used to be the case that people moved to where the jobs are; now, because of the existing skills deficit, companies are moving to the areas with the skills.
A well-trained workforce could mean new business for a community. As Secretary Daley said recently, "The hot spot for technology is beyond Silicon Valley. In the 21st century, to be economically competitive, every town must be technologically sophisticated." My experience is that communities with high-tech success have two things in common: the right technical education and the infrastructure. That's true, not only of Silicon Valley, but also for Austin, Boston, D.C., and Redmond.
We also need to encourage the rollout of broadband networks so that more Americans can access information services. The demand for broadband services is growing at a tremendous rate -- over 1000% per year according to MCI WorldCom. Americans are consuming more sophisticated services today than ever before. Witness the turnout of 1.5 million people at "Victoria's Secret" online fashion show, or the numbers of teens using MP3 to download music from the Net.
To get these services, we will need faster, bigger pipelines. To quote The New York Times, the difference between a high-speed broadband connection and a regular phone connection is the difference between "Speed" and "Driving Miss Daisy."
While we want to encourage the buildout of broadband services, we also need to do it in a way that includes all families and locations. In NTIA's July 1998 study (which we will be updating this summer), we found that some 80% of all households still do not have Internet access. These figures are even worse in rural areas and for minorities. Ninety-one percent (91%) of Hispanic-Americans, 92% of African-Americans, and 98% of the rural poor, do not have Internet access at home. These families cannot e-mail their Congressman, follow news breaking events online, communicate cheaply with distant relatives, or find the thousands of jobs that are posted only on the Net. If we let this "digital divide" persist, significant portions of Americans will be left out of the Information Revolution.
Meeting the Challenges through Partnership
Numerous tough and exciting challenges lie ahead, and we can meet them head on if we work collectively -- through federal/state partnerships. None of these challenges are brand new. Federal and state governments have been thinking of ways to promote competition. We've been experimenting with ways to extend service to inner cities and rural Americans. And, we've been thinking about how to educate our youngsters and our communities for the jobs of the 21st century.
We will make greater progress on these issues, however, if we work together in generating ideas and implementing solutions. We all have limited resources, but with coordination we can make these resources go further and achieve greater results. States have served as the labs of innovative ideas and solutions. They can learn from each other by sharing their "best practices," and the federal government can learn from states about what has, and hasn't, worked.
For example, I am hopeful that the recent Supreme Court decision upholding the FCC's interconnection order will foster renewed cooperation. For the last three years, we have been living with uncertainty over what the Act requires and who has authority. Incumbent companies have been playing a game of stall ball, where the team with the lead late in the game keeps the ball away from the opponent.
The recent decision should put an end to this strategy and create greater certainty surrounding the jurisdiction and the Act's obligations. Such resolution should unleash new investment by competitors and incumbents alike. That's not to say, however, that the last three years of innovative thinking and policy-making by states should be ignored. The states have been laboratories of democracy and of technological innovation, and commissioners such as Bob Rowe, Julia Johnson, and Chairman Garcia can teach us a lot. I hope that when the FCC considers new pricing rules, it will look to the states for guidance and insight and will work with states to generate new policy.
Similarly, we can learn from each other about transitioning to an Information Economy. There is a wealth of programs throughout the country designed to train and prepare citizens for the high-tech future. Some states are already experimenting with tax credits to attract high-tech firms to their area. Other states are focusing on teaching high-tech skills to prepare today's students for tomorrow's jobs.
Tests are now showing, for example, that integrating computers in classes really can make a difference. But, teachers need to learn how to incorporate these new technologies in the curriculum. On the federal level, the Administration has allocated $75 million in its FY 1999 budget to help with teacher training efforts. Several grant programs - such as the Technology Innovation Challenge Grants and the Technology Literacy Challenge grants - are also assisting states and school districts that are incorporating new technologies in their curricula.
States are also generating a number of innovative programs in this area. Florida's legislature has put lottery funds to good use through technology grants for schools. Other states are also developing a variety of teacher training programs. These include a curriculum-focused training program for nearly 1,000 teachers in Rhode Island, and a web-based program for 15,000 teachers in Tennessee.
With this range of innovative programs, we should be learning from each others' experiences. NARUC has already come up with a useful method: it has been collecting information from states on their "best practices" in implementing the 1996 Telecommunications Act. It plans to release the results of this survey at its Winter meeting next week so that states and Commissioners can hear about successes elsewhere. There is no reason that a "best practices" databank would not be equally useful in other areas: for teacher training programs, education technology efforts, or other state efforts to attract high-tech companies.
Coordinating Efforts to Connect Communities
Finally, we also need to coordinate efforts to ensure that all Americans have access to our telecommunications resources. The concept of universal service - that is, connecting all Americans - has been at the heart of our telecommunications policy for 60 years. The Telecommunications Act of 1996 has now made that goal explicit, and issued a clear mandate to states and the FCC to take necessary steps to meet that goal. Under Commissioner Johnson's excellent leadership as State Chair, the Federal-State Joint Board on Universal Service has made considerable progress in recommending mechanisms to connect all Americans.
Many states, including Florida, are also contributing to these efforts. I commend the Florida PSC for developing a Lifeline Assistance program, which will help low-income residents afford telephone service. And support for high-cost areas will help connect the rural, insular, and high-cost urban areas. If we successfully implement these programs, telephone service should be available and affordable to all households.
Today, however, we need to do more than provide basic telephone service; access to information services is also becoming critical. I started out by talking about new paradigms. Six years ago, 90% of the traffic over our nation's networks was voice traffic. Today, the traffic is half voice and half data. Four years from now, many predict it will be 80% voice and 20% data.
As Vice President Gore noted recently, "[with] 52,000 more Americans logging on for the first time every single day, the Internet is remaking the way we live, the way we learn, the way we work." Access to data services is now key to operating a business: Travel agents are going online to check ticket availability; car dealers are e-mailing their requests to the manufacturer; even cattle ranchers use the Internet to participate in virtual "cattle sales" and to check the cattle futures market to determine when to sell. This is not to mention the doors that are being opened through distance learning programs, telemedicine, online libraries, and online job banks. And who knows how much of our work, leisure activity, and information will rely on advanced services in the next century?
State and federal governments will need to grapple with the implications of our soaring data use. Do we regulate data traffic the same way? How do we spur innovation and investment? How do you avoid new monopolies?
Another critical issue is encouraging companies to build out broadband networks that can deliver this traffic at high speeds. The Clinton Administration has long believed that the most effective method to promote these investments is through competition. Competition has indeed produced results: we are seeing more fiber, more cable modems, and additional digital subscriber lines installed every day. Nevertheless, not all communities will have high-speed networks immediately. In the meantime, state and federal governments must develop ways to spur the deployment of broadband networks and to make information technology available to underserved communities.
Encouraging the rollout of broadband networks may require putting in place a new set of incentives. In the current 706 proceeding, the FCC is considering whether the Bell Operating Companies (BOCs) have the appropriate incentives to deploy digital subscriber lines. The BOCs have alleged that the current regulatory structure discourages this buildout because the BOCs would be required to share those lines. NTIA has filed comments proposing several modifications to the existing regulations that we believe will promote greater competition and lead to the more rapid deployment of high bandwidth services. In the same proceeding, we have also supported the FCC's proposal to create a federal model for collocation and local loop arrangements. We agree that such a model would create certainty and therefore spur competition. NTIA has recommended, however, that the FCC look to the rich experiences of state Public Service Commissions and rely on the "best practices" in this field.
Another issue we are now considering is whether rural incumbent carriers will build high bandwidth services in rural areas. U.S.WEST, for example, has claimed that it is too expensive to build out service to rural areas within the existing LATA boundaries. This carrier has petitioned the FCC to either lift the ban on interLATA data carriage or redefine LATA boundaries to encompass broader territories.
We need to give serious thought to this proposal. At present, we have little evidence regarding service to rural areas. I am also concerned that the requested relief would undermine significant provisions of the 1996 Act. And, even if the FCC granted such relief, we have no guarantees that rural households - and not just businesses - would obtain data services. I therefore hope that federal and state governments will collaborate in considering whether such relief is necessary, or whether other types of incentives could achieve the same ends. We might consider, for example, whether low-cost loans in return for modernization -- akin to RUS's state modernization plans - would better meet rural needs.
I also hope to coordinate with states as we develop programs to bridge the gulf between the "information rich" and "information poor." As you know, the Clinton-Gore Administration has made it a priority to connect underserved communities to the nation's information infrastructure. One program we have fought hard to establish and protect is the education-rate, or "e-rate," program in the '96 Act. This program provides a discounted rate to schools and libraries for Internet access, telecommunications services, and equipment to connect to the Internet. This fiscal year, over $1 billion in discounts has already been committed to over 21,000 applicants. As a result, students across the nation are learning essential computer skills, and communities can access online information at their local libraries.
Another Administration program, administered by NTIA, is the Telecommunications and Information Infrastructure Assistance Program (TIIAP). TIIAP provides matching grants to non-profit and public entities using new technologies to reach underserved communities. This year, several TIIAP projects in Florida are providing valuable models to demonstrate the power of new technologies.
One project, coordinated by the state Department of Agriculture and Consumer Services, is helping fire officials fight fires through a computer mapping system. This system, once completed, will include weather information and a digital map of current fires, burn permits, and fire fighting resources. This information will help a fire official tell whether it is safe to grant a burn permit for a particular area, or whether fire fighting resources should be relocated. TIIAP is also funding a project to extend legal services to four large, rural counties in Central Florida. Low-income communities will be able to communicate with Florida Rural Legal Services through websites and video computers stationed in 18 public libraries around the counties.
These projects are extending the reach of data services to new communities. Obviously, many other state and federal programs are trying to attain the same goal. Some states, in fact, are now replicating TIIAP's grant program, or developing similar funding mechanisms to support yet more projects around the country. Other states, including Florida, are supporting efforts to connect schools and libraries. Florida's school districts have invested significant time and money to determine their technology needs and file grant applications. And who can forget the "barn-raising" efforts of Florida's citizens on Net Days to connect classrooms to the Internet?
Under Commissioner Johnson's leadership, Florida made significant strides in promoting universal access. We now look forward to working with Chairman Garcia to continue Florida's efforts to bridge the "digital divide."
As we strive to connect our communities, let's not forget what telecommunications and information technology is really all about. It's about more than commerce and finance, the number of items sold over the Net, or the creation of a new fortune. What it's really about is enriching the personal and cultural lives of Americans.
Thirty years ago, Robert Kennedy reminded us that:
Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things. Our gross national product, now, is over eight hundred billion dollars a year, but that GNP - if we should judge America by that - counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. . . .
Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud to be Americans.
Bobby Kennedy got it right in '68, and we can get it right today. We know that it's important to connect communities so that they can get health care information. We know the excitement of schoolchildren when they see real-life depictions of the pyramids. We know that new technologies are about the ability to participate directly in a political poll or discussion, at the click of a mouse. None of these are part of electronic commerce or included in our GDP, but every one is reason why should be excited about the Information Revolution and what we are doing here today. These are the developments that go to the core of what makes America truly great.
I thank you for what you are doing on the state level, and look forward to coordinating our federal and state efforts in the future.