Remarks by Commerce Assistant Secretary Nancy Victory
Broadband Outlook 2002 Conference
January 23, 2002
The New Medium for a New Media?
Thank you very much for the invitation to appear before you today. I know many of you are here from the content side of the aisle. This is a "homecoming" of sorts for me, given my deep family roots in broadcast programming. As some of you may know, my father is the Victory in Victory Television. His career led him from CBS to Viacom to founding his own program syndication company. Before his retirement, my Dad held the syndication rights to Hill Street Blues, St. Elsewhere, WKRP in Cincinnati and Concentration, to name a few. He ran a quality business focused on quality entertainment.
As a youngster, I was my father's personal focus group. After homework (and, don't tell my Mom, but sometimes even before I had finished it), my Dad had me watch television shows to test my reactions. What did I like? Why did I like it? Would I watch it again? And, very important for syndication purposes, would I watch it again and again and again? I was cheaper than Nielsen ratings and he didn't have to wait for the spring sweeps for feedback!
While I am expected to do the talking this morning, most of you know that NTIA is committed to listening and learning before acting. So I was hoping that you could be my personal "focus group" for a day. The issue of the day is broadband. Let me challenge you with my questions: Is broadband a new medium for a new media? Would the widespread availability of high speed and interactive video highways into the living rooms, classrooms and desktops of Americans spark a new media revolution? Is broadband a "transformational enabler" of a leap forward in information services and capabilities? Are we just talking about bigger "pipes" or "pipes" that make a bigger difference? I've been hearing from others on this issue. I would be interested in your feedback as well.
As you know, broadband issues are a top priority for President Bush and his Administration. Broadband holds the promise of revolutionizing our use of the Internet. This new technology's faster speed and greater capacity not only will permit us to make more effective and efficient use of Internet connections, but also to open up a whole new world of data that can be accessed, distributed and downloaded - in seconds. As such, broadband promises to increase economic productivity, spur innovation and open up new avenues for education, medicine, and commerce - improving our lives domestically and our competitiveness globally. And greater deployment of broadband networks could generate thousands of new jobs directly in the provisioning of network facilities and new services and indirectly in the industries related to these networks and services.
The Administration is not alone in its recognition of the importance of broadband. Countless industry and consumer groups have stressed the importance of timely broadband deployment. Just last week, TechNet, a group that includes more than 300 chief executive officers and senior partners of companies in the fields of information technology, biotechnology, venture capital, investment banking, and law, released its paper calling broadband "a national imperative," and stressing the importance of rapid broadband deployment. While estimates vary tremendously, expert studies cited by the commenters in our broadband proceeding suggest that there could be substantial economic benefit from greater broadband deployment.
As many of you know, the Administration has been working hard to determine what the appropriate role is for the federal government in assisting the roll-out of broadband. NTIA has taken a leadership role in this process by holding a Broadband Forum in the fall, releasing a formal Request for Comments on broadband issues last month, and engaging in extensive outreach with industry, public interest groups, academics, and other interested parties. Through these activities, we have learned a lot about broadband and the state of broadband deployment in the United States.
We have also been able to develop some guideposts to assist us in determining what the appropriate role for government should be in facilitating broadband deployment:
· The first of these guideposts is that, wherever possible, the market, not government, should drive this deployment. Government's role is to remove the regulatory underbrush that impedes efficient capital investment. Carriers' decisions to deploy and consumers' decisions to subscribe should then be left to the market.
· Second, we should pursue policies that promote rational facilities investment. 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. However, 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 a 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.
Using these guideposts to frame our examination of a broadband policy, we looked to the comments in our proceeding to provide more specific information. Among the valuable insights in the comments is that broadband requires a look at both supply side and demand side issues. Building the broadband "field of dreams" requires a careful and collaborative consideration of what spurs deployment and what spurs consumption. "Build it and they will come" only works in the movies. But "build it" and bring "value" for consumers - then you will have a real world box office smash! What the comments seem to be telling us is that we cannot be myopic in our analysis of broadband - we must take a holistic look and develop a policy that is comprehensive, yet has all of its various elements coordinated and in balance.
In wading through the comments and what they reveal about the nature and inter-relationship of all of these broadband issues, I was thinking that one of the athletic endeavors of my youth prepared me well for the challenge of trying to figure out an effective broadband policy. Like so many young girls growing up in the 1970s, I dabbled in gymnastics. And like Olga Korbut (although I was far less talented), I chose the balance beam. I tumbled, posed and pirouetted - all on a four inch wide piece of wood. It was no small feat! The slightest exaggeration of one limb could throw the entire body off kilter, ruining the whole routine. The message we're hearing on broadband seems to be saying the same thing. You need to keep well-grounded and have all parts of the policy moving in coordination in order for the overall approach to be effective. If the elements of the policy are not all in balance with each other, the desired outcome will not be achieved.
Let me try to be more specific about what I am hearing. The comments in our proceeding demonstrate that we must examine supply issues, demand issues, laws and regulations at the federal, state, and local level, and the respective regulatory treatment of all potential broadband providers - telcos, cable companies, wireless providers, satellite operators, and any others that come on the scene.
With respect to supply issues, much of the broadband debate has been focused on whether current regulation stands as an impediment to deployment. Many of the comments filed in NTIA's broadband proceeding address whether and how to deregulate new high speed infrastructure to spur investment in broadband facilities and services. A number of the comments focused on unbundling issues. Some parties advocated the relaxation of UNE requirements for certain new broadband infrastructure. Other parties argued for the adoption of different unbundling regimes for "new" and "old" incumbent telco facilities. Still others are adamant that unbundling would inhibit, rather than promote, competition. Another critical issue raised was pricing - specifically, whether to transition away from the FCC's current pricing mechanism - the controversial TELRIC. Other commenters discussed detariffing of broadband services provided by incumbent telcos in markets where there are multiple providers of comparable services.
The comments also addressed the issue of open access obligations for cable, satellite, and wireless broadband providers. Some see open access as necessary to ensuring consumers' ability to have choice over how they access the Internet and as critical to the viability of small niche companies that are not vertically integrated to play in the marketplace. In contrast, others see open access as something that is best brought about by the competitive play of the marketplace and not through a blanket requirement mandated by the government.
Many commenters referenced impediments inherent in the ability to access rights-of-way - both those controlled by localities and those owned by the federal government. These commenters emphasized that efforts to increase facilities-based competition must include addressing such problems. Some pointed to solutions like those taken by Florida and Michigan, which have acted to curb right-of-way barriers throughout their state and thus improve the ability of service providers to reach their customers more efficiently. Indeed, it is important to learn from these various innovative approaches to removing state and local roadblocks.
But in looking at these issues, the commenters have repeatedly reminded us that we must "keep our balance" and be sure to coordinate the various policy issues affecting broadband deployment. For example, some have underscored the interplay between relaxation of the unbundling requirements and the administration of rights-of-way. Specifically, changes to facilitate facilities-based competition might not be effective and, indeed, might undercut competition unless impediments to accessing rights-of-way are eased. Similarly, just addressing federal issues will not do the trick when state and/or local issues may create an imbalance that thwarts the entire effort. We must be cognizant that our counterparts at the state and local level can also influence the pace - and overall effectiveness - of broadband deployment.
Just as importantly, a well-grounded and coordinated policy cannot be limited to a review of supply-side regulations. While an estimated 63 percent of Americans have access to cable modems or DSL service today, only about 10 percent of American consumers have subscribed to broadband service. Thus, the government and the private sector need to look at demand issues, such as digital rights management and productivity-enhancing applications. NTIA raised these issues in our Broadband Forum in October, and our sister agency at the Department of Commerce, the Technology Administration, is taking the lead here. The Technology Administration held a forum last month on digital rights management, raising questions like: Who will set the technical standards for digital rights management - industry or government? Who will enforce the standards? What impact will digital rights management have on the consumer electronics industry? How will content be protected? What types of applications will emerge once these intellectual property issues are resolved? Reviewing and answering these questions is crucial to addressing demand side issues that affect the full realization of broadband's potential.
Finally, a number of the commenters noted that a comprehensive, coordinated and balanced approach must also address financial incentives. Here, the Bush Administration has already taken some important actions. First, the President signed into law an extension of the Internet tax moratorium, which will prevent new access taxes from increasing the cost of Internet services for consumers and businesses. Second, the President's economic security package makes an important step toward modern tax depreciation schedules, which will remove obstacles to new investment in information technology and broadband infrastructure. Third, the President has proposed permanently extending the research and experimentation tax credit to promote increased investment in the development of new technologies. The President also has proposed broadening access to the research and experimentation tax credit (which the Clinton Administration restricted in its last days) to make it easier for companies to deduct many costs of developing new technologies and drugs. It is essential that these critical legislative proposals are enacted so that we can begin to enjoy the benefits they are likely to have on the deployment of broadband and other new technologies.
Given all that the comments conveyed to us, it appears that regulators are going to need to be nimble and focused to come up with a coordinated policy that keeps its balance. For this reason, I am beginning to realize that my past experience on the balance beam will serve me well. And I am glad to see that Chairman Powell has a similar gymnastics background. He has already demonstrated his proficiency for the on-stage somersault. It appears that those skills will come in handy in tackling the panoply of issues associated with broadband deployment.
There is no question that broadband technology has great promise. Whether it develops into a critical new medium or a whole new media remains to be seen. But either way, Americans' enjoyment of the full benefits of broadband appears to depend at least in part on a regulatory policy that eliminates unnecessary impediments to deployment and promotes full and fair competition - a regulatory policy that is comprehensive and coordinated, with all of its elements "in balance."