FCC Chairman William E. Kennard
Federal Communications Commission
Second World Telecommunication Development Conference
(as prepared for delivery)
March 23, 1998
Thank you, Mr. Chairman.
I am honored to be here today to participate in the second World Telecommunication Development Conference. Mr. Secretary General, Mr. Deputy Secretary General, and Mr. Laouyane, Director of the BDT, please accept my congratulations for all the fine work the ITU and the ITU-D have performed over the past four years with and on behalf of developing countries.
This is my first trip outside the United States as Chairman of the Federal Communications Commission. I am delighted to be here and I am especially pleased and privileged that my first opportunity to address an international audience is an address to the telecommunication development community.
I feel privileged to be here because I share your commitment to the telecommunications development community. The work that we do here together -- perhaps more than any other work that I will do as chairman of the Federal Communications Commission -- holds the promise of bringing the world together as a community connected by technology. I believe we are all here today to reaffirm our common commitment to build an information community that is truly global in its reach.
All of us come from nations with long and rich histories. If I may, I'd like to share a bit of my own personal history. I decided to become involved in telecommunications because of my father, but he was not involved in telecommunications. From the time my father was a little boy, he dreamed of designing buildings. He was a soldier in World War II and, thanks to a government program for war veterans called the GI Bill, he had the opportunity to go to college, and he became an architect.
He was fortunate to be able to fulfill his lifelong dream of designing buildings. He loved to design the buildings that bring communities together, especially buildings in poor African American communities. In fact, much of his work involved rebuilding communities destroyed by race riots during the Civil Rights Movement in the United States during the 1960s. He designed housing projects and community centers, and churches and hospitals. He loved this work. He loved it because it allowed him to rebuild his community. And he always believed that one's work should be woven into the fabric of building communities that include people of all nationalities, religions and colors -- and that promote values that enrich us as a people.
In a very real sense, like my father, we too are architects, designing and building a grand international community, because fundamentally we are involved in bringing people together; connecting people with one another. Together we can continue drafting the blueprint for this grand, global vision in which the highest virtues of community can be realized by all people around the world.
The digital information age is profoundly changing the way we communicate and the way we live our lives. It is transforming many aspects of daily life -- from how we do business to how we teach our children and administer health care. It is an engine of job creation and the lifeline of the global economy. The ability of individuals, communities and nations to participate in the global community will therefore increasingly be shaped by telecommunications policy.
Four years ago, Vice President Al Gore addressed this gathering and advanced a vision of a global information infrastructure that would link together the world's disparate communities through a global information highway. The landmark WTO agreement on telecom services that was concluded last year by 69 nations signals that much of the world has already embraced this vision of community. Many in the developing world have not participated in this agreement, and may understandably be concerned about the many changes this agreement will bring about.
In the United States, we too are grappling with many of the same issues, and I certainly don't profess to have all the answers. But I hope, through meaningful dialogue and participation in fora such as this one, that we can assist one another to achieve the kind of strategic reform that best ensures full-fledged participation in the global information community.
As we move towards our goal of universal access to all communications facilities, let us proceed determined to achieve a truly global information community -- one that connects Bhutan, Angola and Ecuador as well as Hong Kong, Frankfurt and New York. I would like to sketch out a common-sense approach for achieving this that permits us to benefit from the rich diversity that exists in both the developing and developed worlds. Let us take advantage of private capital, drive development and innovation with competition and set up transparent and independent regulatory regimes that will attract private investment. I believe these are the essential ingredients for achieving our common goal -- universal access and, ultimately, universal service.
Taking advantage of private capital
As we all know, building a global information infrastructure is a highly capital-intensive endeavor. Neither governments nor multilateral institutions can afford the vast investment in new technologies and infrastructure that is needed to achieve universal access.
Moreover, traditional sources of revenue, such as settlement revenue, are no longer sustainable. A recent study indicates that 20% of global traffic by the year 2000 will be refile traffic. Internet telephony and other alternative calling methods like least-cost routing are hastening the demise of the traditional settlements system as a source of revenue for infrastructure buildout.
Although these trends toward lower-cost services are irreversible, we should bear in mind that reductions in calling rates do not necessarily mean reductions in revenue. The increase in demand stimulated by lower prices can more than compensate for reduced per-call revenue. In Singapore in 1995, Singtel rebalanced its tariffs to prepare for competition.
I recognize, however, that privatization can be a tremendous challenge for governments. But building a firm foundation for telecommunications development ultimately depends on meeting that challenge. The information revolution has made billions of dollars of private capital available to fund telecom infrastructure development. More than 40 telecom companies, including operators in Ghana, South Africa, and the Philippines, have been privatized since 1984 thanks to a total of $159 billion in private capital.
Driving development and innovation with competition
Privatization, however desirable, is not enough. If incumbent carriers are allowed to remain monopolies, all that is guaranteed is that a select group of private investors will receive monopoly profits. Moreover, this strategy comes at a great price to consumers and the economy. By maintaining the monopoly -- even a privatized monopoly -- network buildout will be slower, much less efficient, less innovative, services will be more expensive, and everyone but the monopoly's shareholders lose. Indeed, several countries, including Hong Kong, Singapore, and Mexico recognized the problems inherent in their monopoly policies and ended their carriers' monopolies earlier than planned. And less than two weeks ago, Argentina withstood pressure to extend its monopoly for three more years.
Moreover, there is a lot of evidence that competition is working. In those countries that have permitted competition, the benefits to consumers in the form of lower prices are undeniable. According to a recent McKinsey & Co. study, prices for international service have declined by 73% in the United Kingdom and 60% in Japan. In Chile consumers have enjoyed international price reductions of at least 50% since competition was introduced in 1994.
Competitive carriers are also much more likely to use innovative technologies such as wireless local loop and satellite services, that can bring cost effective service to the large unserved areas of the developing world where the cost of bringing wireline communications to poor and remote areas is prohibitively high. Wireless technologies, including innovative satellite networks like low earth orbit satellites and stratospheric repeater platforms, will therefore play an increasingly integral role in providing access for remote areas. In Sri Lanka, for example, the four mobile phone service providers have rates lower than the rates for fixed services, and mobile phone services account for 20% of all telephone services.
Creating an independent regulator
Governments and regulators do have a critical role still to play in all of this. Although government is no longer suited to act as a provider of telecom services, it must act as a guardian of competition and a champion of new entrants in the market. In order to ensure that a competitive and liberalized market benefits consumers, governments must establish regulatory authorities that are independent of the incumbent operator and that are shielded from political pressure. And these regulators must be empowered by being given licensing and enforcement authority to establish a fair, transparent and predictable regulatory process.
The transition from monopoly to competition will undoubtedly require a heavy dose of regulatory intervention. Competitors must be able to gain access to existing networks at fair prices for competition to take root. And they must ensure that new technologies can enter the marketplace. This is essential to real competition.
The government of Peru established a particularly effective regulatory body that has pursued innovative policies and made difficult decisions. This regulatory body, Osiptel, has pursued aggressive network buildout targets that have been met or exceeded by the monopoly operator. It has also set up a framework to rebalance tariffs so that the market will be prepared for competition next year. The results of Ospitel's action have been to dramatically increase access to telecommunications for Peruvian consumers.
Governments must also establish transparent and non-discriminatory regulatory processes. Regulatory decisions must not be made behind the closed doors of a bureaucracy. The regulatory authority must be empowered to face these challenges under an impartial framework that minimizes political pressures, and it must have sufficient authority to enforce its decisions.
At the FCC, for example, each of the four Commissioners and I are appointed for a fixed term and cannot be removed from office by any department or ministry or even by the President for making a decision that is unpopular either with industry or with our elected officials. Of course our decisions must be clearly articulated and reasoned, and based on a transparent record of the proceeding that is publicly available, but when issuing a controversial decision, as we sometimes do, it's nice to know that we can't be fired for it.
Conclusion -- an inclusive community
Not long ago, I visited a school in a poor section of the city of Newark, New Jersey. I visited the school to see a new classroom built in the school to teach the students how to use computers. There, I met a nine-year-old student named John and I had the privilege of teaching him how to access the Internet for the first time.
John and I found a website devoted to the life of Dr. Martin Luther King, Jr. We explored the website together and John learned many things about how Dr. King's life and sacrifices changed the course of history. At one point, I asked John what he thought about the Internet, and he said to me, "The Internet is great, it's more fun than books." At that moment, it occurred to me that John had summed up the revolution that is occurring here and around the world: technology is fundamentally changing the way that people get information and communicate, and think, and learn and do business all over the world.
As I left the school that day, I thought about how John's life could be changed as a result of the experience we shared that day. He was introduced to a technology that has the promise of changing his life. It offers him the power to access people and information anywhere in the world in an instant. And it gives him the power to unlock his own potential to contribute to his society and his world. And I thought about all of the millions of children around the world who must have access to this wonderful technology so that they all have the power to realize their full potential. That is the most important reason, I believe, that brings us all together today -- the promise that technology can bring a brighter future for all people, of every color and gender, in every country, all around the world.
So let us renew our commitment to achieve a truly global information community -- one that bridges the gap between the haves and the have-nots and gives every county, and every community and every child on earth an opportunity to be part of the global economy and the global community.
As the architects privileged to have a hand in designing our emerging telecommunications community, let us continue along the well-proven path first charted in Buenos Aires: take advantage of private capital, drive development and innovation with competition, and set up an investment-friendly environment with an independent regulatory regime. Many of you have embraced these principles. For those who still hesitate, let us continue a dialogue, and let us continue to share our experiences -- successful as well as unsuccessful -- in seeking to bring about meaningful liberalization, privatization and competition.
As Vice President Gore said at Buenos Aires, "let us build a global community in which the people of neighboring countries view each other ... as potential partners, as members of the same family in the vast, increasingly interconnected human family."
If we accomplish this, history will judge us well.