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Remarks of Assistant Secretary Strickling at Columbia Institute for Tele-Information

September 26, 2012

Address by Lawrence E. Strickling,
Assistant Secretary of Commerce for Communications and Information
The State of Telecom – 2012

Columbia Institute for Tele-Information (CITI) and IDATE

New York, New York
September 24, 2012

-As prepared for delivery-

I would like to thank my close friends, Eli Noam and Bob Atkinson, from the Columbia Institute for Tele-Information (CITI) and Yves Gassot from IDATE for organizing today’s event and inviting me to participate.  Today’s discussion is indeed timely as the international community weighs whether to impose 20th Century regulations on the 21st Century Internet. The Obama Administration is committed to fighting back proposals to hobble the Internet with telephone-era regulations and will work to preserve the Internet as a vibrant and growing tool for economic development and social expression.

Over the next few months, countries around the world, including the United States, will be considering their positions on these important issues as they prepare for the World Conference on International Telecommunications (WCIT), to be held under the auspices of the International Telecommunication Union (ITU) in Dubai in December. There, member countries will consider updates to the International Telecommunications Regulations (ITRs), a multilateral treaty that governs international telephone traffic.  Much is at stake.

Today I will share why the Obama Administration strongly believes that the best way to resolve Internet policy issues, including those associated with investment in broadband networks, is through multistakeholder processes – not intergovernmental treaties like the ITRs.

Our position is non-partisan. While there’s not much Republicans and Democrats can agree on in Washington, we are united in our embrace of the multistakeholder approach for Internet policymaking. Both party platforms include support for the multistakeholder model and concurrent resolutions approved by both the House and Senate support the approach.

And our support for the multistakeholder model of Internet policymaking is also shared by many countries.  Last year, the Organization for Economic Cooperation and Development (OECD) adopted a set of principles for Internet policymaking that strongly endorse multistakeholder cooperation.  The OECD principles state that “multistakeholder processes have been shown to provide the flexibility and global scalability required to address Internet policy challenges.”  Members of the Asia Pacific Economic Cooperation (APEC) organization endorsed these principles last month, broadening this consensus.

The case for preserving and enhancing the multistakeholder model as the preferred tool for dealing with Internet policy issues is a strong one.  Multistakeholder organizations are directly responsible for the Internet’s success.  They have played, and continue to play, a major role in its design and operation.  These multistakeholder processes have succeeded by their very nature of openness and inclusiveness.  They are most capable of attacking issues because they can bring the speed and flexibility required in this rapidly changing Internet environment.  Maintaining and extending this model is important for ensuring the continued growth and innovation of the Internet.   

A key factor in the success of multistakeholder processes is participation – the fact that policy development is open to all interested parties.  Such parties can include industry, civil society, government, technical and academic experts and even the general public. Contrast this approach with more traditional telecommunications regulatory processes which, by their very construct, have a more limited set of stakeholders and are often designed to limit direct participation, or at least make it difficult for others to participate.  Top-down regulatory models too often can fall prey to rigid procedures, bureaucracy, capture by incumbents and stalemate.

Internet policy issues, on the other hand, draw a much larger range of stakeholders given that the Internet is a diverse, multi-layered system that thrives only through the cooperation of many different parties.  Solving policy issues in this space requires engaging these different parties. Indeed, by encouraging the participation of all interested parties, multistakeholder processes encourage broader and more creative problem solving. This is essential when markets and technology are changing as rapidly as they are.

Widespread participation by all flavors of stakeholders will be important to the ultimate success of any Internet policy initiative. Our role needs to be one of supporting more inclusion.  We must stand firm against the efforts of one faction or another to allow decisions to be made or unreasonably influenced by only certain stakeholders to tip the outcomes in their favor.

As we turn our attention to Dubai and the upcoming WCIT conference, the world should weigh proposals to add new international regulations against the spectacular progress that the Internet has experienced free of such treaty controls.  To his credit, Secretary General Hamadoun Toure has promised to run the WCIT on the basis of consensus, and that is as it should be.  Given how well the Internet has grown and flourished over the years, any nation seeking to impose new restrictions on the Internet, no matter how “light” the regulatory touch, should bear the burden of developing consensus support for such proposals.

One suggestion raising a lot of discussion is a proposal from the European Telecom Network Operators (ETNO) to assign governments the role of ensuring that service providers provide satisfactory quality of service commitments to each other and require providers to negotiate a sustainable system of compensation between providers applying the principle of “sending network pays.”

Let me be clear:  the United States government is unequivocally opposed to this proposal for two reasons.  First, a treaty conference where only member states have a vote is the wrong place to debate a change of this magnitude.  Second, the proposal is a bad idea.  It is a solution in search of a problem and it most likely would disadvantage the developing world which has the most to gain from continued growth and expansion of the Internet.

On the first point, I have already described the benefits of the multistakeholder approach to dealing with Internet issues.  Contrast that open, inclusive approach with what will happen at the WCIT.  Only the member states will have a vote.  Industry, civil society and other organizations may observe and may have a chance to speak, but at the end of the day, this is no multistakeholder process where all interests are fairly represented.

Moreover, a treaty conference based on regulations written in another era is hardly an appropriate forum in which to discuss issues that are fundamentally different from the circuit-switched voice telecommunications that were the basis of the 1988 ITRs.

The ITU was established as the International Telegraph Union in 1865 to facilitate the interconnection of nationally administered telegraph networks.  As communications evolved, the ITU changed its names in 1932 to once again facilitate interconnection of national networks, this time the circuit-switched telephone networks based on national borders.  The definition of telecommunications used by the ITU today was adopted in Geneva in 1959, more than 50 years ago.  Throughout this history leading up to and including the 1988 conference, the focus was on the country-to-country exchange of traffic between government-owned or monopoly networks.

Over time, the relevance of the ITRs negotiated in 1988 has steadily dwindled.  A recent study reported that less than two percent of the international voice traffic of US operators is terminated under the traditional settlements arrangements of the 1988 ITRs.  So we have a situation where 98% of this traffic is exchanged without reference to the ITRs, yet a group of incumbent carriers now wants to extend this regime to Internet traffic?

The Internet does not operate under the anachronistic model of monopoly telephone providers that control all aspects of their networks within their countries.  Rather, it is a diverse, multi-layered system that thrives only through the cooperation of many different parties.  All of these parties together from the “network of networks” that we call the Internet.  But the magic is that the system works without requiring all of these parties to have a commercial relationship with each other or even to know everyone else involved in a given communications.

Just as important is the fact that international treaty organizations, indeed most government bureaucracies, are not engineered to move with much speed and flexibility.  In January and February of this year, ITU held the World Radiocommunication Conference in Geneva where one of the most hotly debated issues was what should be on the agenda of the next conference in 2015.  Do we really want to subject the Internet to the glacial pace of decision-making that takes place in international treaty organizations?

Turning to the substance of the proposal, it simply is not a good idea.  First, what is the problem the proposal purports to solve?  Private negotiations between providers of peering and transit agreements have worked well on the whole in the absence of international treaty requirements.  There should be a compelling showing of how the current system is not working before this matter is taken up in treaty negotiations, and that case simply has not been made.  It may be the case that the regulatory framework the European incumbent carriers live under constrains their returns in a manner that reduces their incentive to invest – I have not studied the matter and have no opinion on that.  But even if that is the case, that is no justification for upsetting the well-settled Internet interconnection regime with a proposal to raise revenues from other providers in the communications pathways as opposed to addressing the problem at its source.

Second, the proposal is a relic of an industry and network structure that no longer exists.  I understand ETNO takes issue with the fact that critics of its proposal have raised the concern that the proposal will impose new burdens throughout the chain of Internet connections, reaching both content providers and end users.  But that almost certainly will be the case since any company facing increased costs in the form of an access charge will seek to recover that cost from its customers, including other providers, content creators and end users.  To think otherwise is to ignore the massive transformation that has occurred in the industry since 1988.

Implementing a sending-party-pays regime would require a cascading series of payments across all involved networks.  A new study by Michael Kende at Analysis Mason demonstrates what will happen next and the news is not good for developing countries.  Foreign operators “would likely raise the price of hosting websites serving countries with high settlement rates, which might lead websites to develop less content targeted at a particular country in order to limit their costs.”[1]  The report goes on to conclude that “providers would be reluctant to invest in providing infrastructure to a particular country to which it is expensive to deliver traffic.”[2]

And we have not even talked about the issues of attempting to meter and bill for Internet traffic, what happens to network performance if such a system is grafted onto the Internet, and the likely reduction of overall Internet usage that might result.  The potential harm this proposal could cause, particularly when balanced against the absolute failure of the proponents to make a case for why change is needed, demonstrates how foolhardy it would be for nations to take this proposal seriously at the WCIT.

Apart from the ETNO proposal, Secretary General Toure has raised the question of the sustainability of the Internet and the need for more investment, particularly in developing countries.  That is an important debate we should have, but it should be held in a venue where all stakeholders can participate and where all issues can be discussed.

For example, several months ago, UNESCO, OECD and the Internet Society released an important study on the relationship between local content, Internet development and access prices.[3]  The report found a strong correlation between the growth of local content and the development of network infrastructure.  While the study reaches no conclusion as to causality, if the development of local content is a key factor in growing the Internet in developing nations, perhaps the global Internet community should be focusing on how to encourage content development in such countries, and not how to gum up the plumbing of the Internet.  That’s not a matter for discussion at WCIT and it’s not a discussion that only governments should have among themselves.  But it is an appropriate discussion for the global Internet community and we should work to determine where and how this important issue can be developed.

Stepping back from the specifics of the ETNO proposal, what the WCIT brings into stark relief is the fact that our international institutions originally designed for a world of monopoly providers operating within national borders do not work well in the borderless, global, multi-layered world of the Internet.  And governments quite naturally are struggling with how to define their roles in this new reality.  It is critical to the future of Internet freedom and openness that multistakeholder institutions demonstrate to governments that they can be heard and their issues dealt with in the multistakeholder process.  I believe increasing the meaningful engagement of governments in multistakeholder organizations is one of the strongest arguments we have, and indeed is a necessary precondition, to opposing the views of some nations to have international intergovernmental bodies replace multistakeholder organizations in important areas of Internet governance.

Although, as Secretary General Toure will tell you in his remarks this afternoon, the issues of ICANN and the governance of the domain name system are not today on the WCIT agenda, we in the Obama Administration have been thinking about the idea of “enhanced cooperation” and the need to find ways for the global Internet community to have a more direct say in matters of Internet governance where historically he United States has a played a more central role.  In fact, we have made great strides in the last three years to “internationalize” ICANN.  In 2009, the United States executed the Affirmation of Commitments with ICANN.  This agreement provides a model of enhanced cooperation by establishing mechanisms and timelines for the multistakeholder review of ICANN’s performance of its core tasks.  We expanded what had once been a unique role for the U.S. government to include the participation of the international community through review teams.

In 2010, I served on the first of these review teams which focused on evaluating ICANN’s accountability and transparency. Our team, which included representatives from the governments of China and Egypt as well as representatives from South America, Europe and Australia, made a series of recommendations to the board, all of which the Board adopted last year in Singapore.  The new CEO of ICANN, Fadi Chehade, has committed to complete the implementation of all but one of the recommendations by next month’s meeting in Toronto, which will provide a good start for the next review team, which will begin its work in January.

More recently, we made a concerted effort to employ the principle of enhanced cooperation and expanding international participation in Internet governance with respect to the IANA functions contract.  Last year, in anticipation of the expiration of the IANA functions contract, NTIA undertook two consultations of stakeholders, both domestic and international, on how to best enhance the performance of the functions. Based on input received from stakeholders around the world, we added new requirements, such as the need for a robust conflict of interest policy, to exercise heightened respect for local country laws and to increase transparency and accountability.

This spring, we took the unprecedented action of cancelling the initial request for proposals (RFP) because we received no proposals that met the requirements requested by the global community.  We then reissued the RFP and at the end of June.  We awarded the contract to ICANN, whose submission in response to the reissued RFP did adequately meet the new requirements.  This contract is consistent with the global community’s input and will provide all stakeholders greater visibility into the performance of the IANA functions.  One priority task for ICANN, Verisign and NTIA will be to automate the root zone management system over the next several months, which will be important as we face the prospect of a large influx of new global top level domain names.

This brief summary demonstrates that multistakeholder organizations have the ability to move quickly to respond and evolve to better meeting the needs of governments without abandoning the model and should serve as guidance to all of us as we continue to face calls to “regulate” the Internet through international treaty language.

Finally, I would like to close on a note of caution as the world prepares for Dubai.  Earlier this year in July, the United Nations Human Rights Council adopted a landmark resolution on the promotion, protection and enjoyment of human rights on the Internet.  The Council affirmed that the same rights people have offline must also be protected online, in particular, freedom of expression.[4]  Moreover, the Council recognized that the “global and open nature of the Internet” is a “driving force towards development.”  We all need to remember that the issues some countries wish to present at WCIT may be styled as matters of economics. But given how the Internet affects so much of our lives, they are just as much matters of human rights and freedom.

Last Thursday, I had the privilege to hear the President of Estonia, Toomas Hendrik Ilves, speak at the annual Freedom House awards dinner.  His topic was the “universals of democracy and despotism” yet he reserved his closing remarks for a discussion of WCIT.  Here is a little of what he said:

The enemies of open society prefer the imposition of a regulatory system [on the Internet]. . . . The authoritarians will present proposals that would undermine the current multistakeholder model of the Internet, replacing it with a scheme that would allow them to expand control of their own populations and economies, extending their control to undermine the freedom and openness we value today.[5]

He closed with the words: “Let’s not let them do it.”  It’s a call to action that the United States and all freedom-loving nations should follow.  Thank you.



[1] See Michael Kende, Internet global growth: lessons for the future, ANALYSYS MASON, September 2012, at page 47.  Available at http://www.analysysmason.com/Research/Content/Reports/Internet-global-growth-lessons-for-the-future/ (last accessed 20 September 2012).

[2] Ibid.

[3] See Internet Society, Organization for Economic Cooperation and Development, and United Nations Educational, Scientific, and Cultural Organization, The relationship between local content, internet development and access prices, 2012.  Available at http://www.internetsociety.org/localcontent (last accessed 20 September 2012)

[4] United Nations Human Rights Council, Twentieth Session. "A/HRC/20/L.13: The promotion, protection and enjoyment of human rights on the Internet" June 2012. Available at: http://ap.ohchr.org/documents/alldocs.aspx?doc_id=20280 (last accessed 20 September 2012).

[5] President of the Republic of Estonia Toomas Hendrik Ilves, “The universals of democracy and despotism” (Speech delivered at the Freedom House Annual Awards Dinner, Washington DC, 20 September, 2012).