William E. Kennard, Chairman
Federal Communications Commission
National Association of Telecommunications Officers and Advisors
19th Annual Conference
September 17, 1999
"CONSUMER CHOICE THROUGH COMPETITION"
Thank you very much, Darryl, for that kind introduction. And congratulations on your imminent ascension to the presidency of NATOA.
Although I am not a member of NATOA, I am very proud to see my hometown of the District of Columbia represented well here by NATOA’s new president.
And to my friend, Jane Lawton, congratulations on your terrific leadership at NATOA this year. Jane has done an exceptional job representing your interests in Washington and especially at the FCC. Jane, you should be very proud of the work that you have done for this organization.
And congratulations to NATOA on the appointment of Libby Beaty to be your new Executive Director. Libby is one of the most talented people that I have ever had on my team at the FCC. She is a dynamo. She will do a wonderful job at NATOA and I am delighted for Libby and for NATOA.
It is a great honor and privilege for me to be here today as part of NATOA’s 19th Annual Telecommunications Conference.
We gather at a time of incredible change and excitement in telecommunications. Jane asked me to make some predictions about the future of telecommunications in our country. The one thing that I have learned about predicting the future of telecommunications is that most predictions in this area are wrong.
In 1946, the head of 20th Century Fox predicted that people would get bored with watching television after six months.
In 1977, the president of Digital Equipment Corporation predicted that no one would ever want to have a computer in their home.
It has been reported that even Bill Gates said in the early 1980s that no one would ever need more than 64 kilobits of bandwidth.
So I am not going to make any predictions today, other than to say that I predict that people will continue to dramatically underestimate the power of telecommunications in our lives.
And, those of us who labor in government will find it increasingly challenging to do our jobs in this ever more rapidly changing telecommunications arena.
The world has never seen anything like the Internet. It is the fastest growing communications technology the world has ever known. It is changing every aspect of our lives. It is a fundamental paradigm shift in the way that we live.
As you know, the Internet touches all three tiers of regulation of telecommunication: federal, state and local.
We are assigned various tasks in our roles as local, state and federal representatives. But any jurisdictional boundaries are somewhat artificial, because in a very real sense, we are dealing with national, indeed international, networks. And this is becoming more and more the case with the phenomenon of convergence.
We operate in a world in which bits know no jurisdictional boundaries, nor should they. Indeed, when I use a cable modem to send an e-mail across the country, or even across the street, it may move through many different jurisdictions.
That means that more than ever before, we have to work together to coordinate our activities. To promote the growth of networks that are international in scope, we have to work together to promote growth and competition for the benefit of consumers.
And as you know, sometimes there are tensions in these inter-governmental relationships. We have tension sometimes with our colleagues in the states and sometimes with our colleagues in the cities. And what I have found in my tenure at the FCC is that what works best is when we put aside, for the moment, our jurisdictional differences and focus on what is best for consumers. I learned that when we worked with state public utility commissioners to implement the 1996 Telecommunications Act. We found ourselves fighting jurisdictional battles -- all the way to the U.S. Supreme Court . At the end of the day, we found that what we all wanted for consumers was exactly the same thing. For the most part, we agreed on the fundamental objective. The fight was about the means of getting there.
Many of you remember that when I first became chairman of the FCC the wireless industry came to the FCC and to me and said, "Mr. Chairman if you want to have a ubiquitous national wireless system in this country, you have to preempt the local municipalities. We can not get our cellular and PCS towers built because the local zoning authorities are getting in our way." They filed petitions at the FCC and they said, "Just preempt the local governments and we will have a national wireless system."
I thought about this and I said that is not the right approach. We are going to work with our colleagues at the local level. And we worked very hard with the local state government advisory committee under the leadership of Ken Fellman and Jane Lawton. We came up with a dispute resolution process because we decided that we can serve these twin goals of having a national wireless system and also respecting the authority of local regulators. And it has worked. We have a national wireless system in our country and I am proud of that. And I am especially proud of the work of the local state government advisory committee in helping me resolve these issues in a cooperative way.
The most important issue on our agenda today is broadband. This debate that we are having in our country about broadband -- that we must have about broadband -- is an important debate. Broadband is going to change America in wonderful ways that no one in this room can predict, certainly not myself.
The most important thing we should recognize is that as public servants, those of us at whatever level—state, federal, or local— want the same thing for all American consumers.
That has become very, very clear to me when I have talked to my colleagues at the local level around the country about the current issues surrounding broadband deployment.
It was clear to me when I talked to Supervisor Leslie Katz in San Francisco, and David Olson in Portland and Commissioner Dennis Moss in Dade County, Florida, as well as Ken Fellman and Jane Lawton.
We all want to foster a regulatory environment that will maximize consumer welfare. It will be the best thing for all of our consumers.
Fundamentally, we want four things for consumers in the broadband world. We want fast deployment. We want ubiquitous deployment. We want competitive deployment. And we want open deployment.
Here is what I mean.
Fast Deployment. Our challenge today is to make broadband happen and make it happen fast. We want to bring high speed Internet access to every home in America. The demand is there. Americans want it. If we can get it there, it will open up a whole new horizon for electronic commerce in this country.
The networks we have in this country already are the envy of the rest of the world. It is abundantly clear to me when I meet with my counterparts around the world in the European Union and in the Far East. They are very envious of the network that we have managed to build in this country. They are envious of the Internet because we in this country invented the Internet. Our companies drive the hardware and the software that are building the Internet around the world. There is no question about that. And the next phase of the Internet is broadband. We have to make sure that we, as a nation, retain our competitive lead in the broadband world. And so we have to create the conditions for fast deployment.
Ubiquitous Deployment. And second, we want ubiquitous deployment. We have to make sure that all Americans have access to broadband in our country. As some of you may know, I have devoted my chairmanship of the FCC to the principle that all Americans must have access to telecommunications services. I decided when I got this job that I wanted to do it somewhat differently from my predecessors. And so we have reached out to constituencies that never had a voice before at the FCC. We have reached out to the education community and we fought hard for the E-rate to bring telecommunications access to every classroom and every library in America.
We also fought hard along with the disability community to make sure that Americans with disabilities have access to telecommunication technology so that they can participate in this wonderful new digital economy. In July of this year we wrote new rules that are the most significant initiative for Americans with disabilities since the Americans with Disabilities Act was enacted in 1990. We literally wrote the rules that created the first curb cuts on the information highway. We are also involved in some historic initiatives for rural Americans and for Americans on Indian reservations. And all of us in public service share this commitment to make sure that all Americans have access to state-of-the-art telecommunications services.
We cannot afford to live in a world where broadband becomes another chasm of the digital divide, that separates those who have access to technology from those who do not.
Competitive Deployment. And third, we want competitive deployment. The best way that we are going to bring all Americans broadband quickly is to create competitive conditions for high-speed networks to be built out. I think the debate we are having today about broadband is one of the most exciting debates I have seen in communications policy in the last 20 years. The debates surrounding the 1996 Act were mainly about competition in the narrowband world for voice telephony. And while we were having this debate at the FCC and in the Congress in the years leading up to the passage of the Act in 1996, everyone was debating voice competition. It was yet another chapter in the holy Jihad war between the long distance companies and the local companies that raged in the halls of Congress. And at that time the Internet was just beginning to burst onto the scene. And once it did, the Internet changed the whole dynamic. Because now the debate is all about the next generation of the Internet. And that is broadband.
And it is a great debate because we are seeing the competitive conditions develop for a truly competitive broadband environment. The most exciting thing that is happening is this competition emerging between the telephone companies rolling out their broadband product, DSL, and the cable companies simultaneously rolling out their broadband product, the cable modem.
And it is just beginning. At the beginning of 1998 there were 50,000 cable modems in service in America. At the end of 1998 there were 500,000 – a ten-fold increase. At the middle of this year, there were a million. By the end of this year there are predictions that there will be a million and half to two million cable modems in service.
And on the telephone side, on the DSL side, we are seeing some real interesting growth in DSL service. The telephone companies are starting to deploy it much more aggressively. Between the end of March and the end of June of this year the number of DSL lines doubled to nearly 200,000 and it is expected to double again by the end of the year. And this pickup in growth is a function of one thing: competition. The regional Bell companies know that for the first time in the history of this country they are facing a serious, facilities-based competitor in their backyard: the residential marketplace. And that is the cable television industry. And it is the prospect of that competition that is going to really jumpstart broadband deployment in this country.
But we should not stop there.
Two pipes are not enough. We want to see multiple broadband pipes. I am convinced that we will have a wireless broadband pipe. The wireless companies are starting to show up at the broadband party. They now need the spectrum that will allow them to do high speed Internet access over a wireless platform.
And the broadcast industry, which recently received from Congress 6 MHz of spectrum for digital television, can also use it to deploy broadband to create yet another terrestrial wireless broadband platform.
And the satellite industry, as many of you know, is starting to roll out broadband offerings as well.
It is exciting for the industry; it is exciting for consumers.
The challenge for us is to make sure we are creating a regulatory environment that is technology neutral so we get as many players on the field as possible. And then things get very interesting and very good for consumers.
Just this week, the FCC addressed the very complex FCC rules to bring competition to the incumbent telephone monopolies, to encourage new competitors in that marketplace. We issued a decision that was the result of a remand from the United States Supreme Court. Basically, we told the Bell Companies, "We want you to get into broadband. We want you to deploy and compete." We told them that we are not going to require them to unbundle their equipment for rolling out broadband – the DSLAM, the packet-switched network -- because I envision a broadband oasis, where anybody who wants to compete in this broadband marketplace and make the investment to deploy should be able to do so in an unregulated environment or a significantly deregulated environment. Because that is the fastest way we are going to get broadband out to the American public.
Open Deployment. And finally, the fourth value that we all embrace is openness. Everybody wants this to be an open platform. The wonderful thing about the Internet is that it is a wonderfully open environment and that has fueled its growth and characterized its success.
And I think we can all agree on these principles that spell out what we want for the broadband world. What some of us disagree on is how to get there. So, our debates on this access question are really debates about means and not ends. I think we should all recognize that we share these values. We should recognize that right up front.
What I would like to do is take the opportunity here today to talk to you a little bit about why I believe the best way to achieve these values is to resist the urge to regulate right now. One reason is because of my vision that we will have multiple broadband pipes – cable, DSL, broadband wireless, satellite, terrestrial broadcast. That is why I think the debate that we are having today about unbundling and access to this cable pipe is fundamentally different from the debates that we had about the telephone industry, when everybody knew that we only had one wire for the foreseeable future..
We have in the broadband world the conditions developing for choice and once you recognize that, and you recognize how quickly this world changes and how quickly networks get deployed today, you realize that this access issue is a transitional issue. It is a transitional debate that we are having.
And second, and very importantly, we should resist the urge to regulate because I think that it is likely that the market will sort this out. You need regulation when market-based incentives are not aligned with the needs of consumers. That is really why we have our jobs. But I believe that there are market incentives that will drive openness in the broadband world. One is the prospect of alternative pipes that I have talked about. The second is the culture of the Internet that has grown up in this country. Consumers love the openness of the network. Those early adopters who are going to migrate from the narrowband world to the broadband world grew up in a culture of openness on the Internet. They are going to insist that they have that same culture of openness in the broadband world.
And broadband providers will have to learn to accommodate it and deliver it. Otherwise they are not going to be competitive in a broadband world, particularly one where there are multiple broadband pipes.
Now, third, we must also recognize that regulation has costs. We all know that. And I come to this debate as a battle-scarred veteran of the telephone wars. I have been in those battles. I helped write the regulations implementing the 1996 Telcom Act. I was general counsel when that process was on-going. I defended those rules all the way up to the United States Supreme Court. I am still defending them. I believe in them. But I also know that it is more than a notion to say that you are going to write regulations to open the cable pipe. It is easy to say that government should write a regulation, to say that as a broad statement of principle that a cable operator shall not discriminate against unaffiliated Internet service providers on the cable platform. It is quite another thing to write that rule, to make it real and then to enforce it. You have to define what discrimination means. You have to define the terms and conditions of access. You have issues of pricing that inevitably get drawn into these issues of nondiscrimination. You have to coalesce around a pricing model that makes sense so that you can ensure nondiscrimination. And then once you write all these rules, you have to have a means to enforce them in a meaningful way. I have been there. I have been there on the telephone side and it is more than a notion. So, if we have the hope of facilitating a market-based solution here, we should do it, because the alternative is to go to the telephone world, a world that we are trying to deregulate and just pick up this whole morass of regulation and dump it wholesale on the cable pipe. That is not good for America.
I have talked to many, many people about this issue, on all sides. No one has offered a practical solution to me that avoids drawing us into this quicksand of regulation and embroiling what is a very nascent marketplace in a situation that I do not think we will be able to work our way out of anytime soon. So, when I look at the cost of regulation versus the benefits, when I look at the prospect that we can have a robust, competitive broadband marketplace, I conclude that we have to resist the urge to regulate and let it play out for just a while longer.
But that does not mean that we are putting our head in the sand and ignoring what is going on. If there are competitive problems, we will step in. If consumers are being denied access to products and services that they want, we can address that as an enforcement matter. What I am hearing on this issue is a lot of rhetoric that the sky is falling but when I look out in the marketplace and see only a million cable modem subscribers and about 200,000 DSL subscribers, my first reaction is to allow this marketplace to play out for a while before we step in and start regulating.
At the FCC we are continuing to monitor closely what is happening in this marketplace. We will continue to do that. We will continue to work with you. We will continue to learn from each other in this debate. I am convinced that we can create the conditions for an open, robust and competitive broadband marketplace that will serve consumers. And I am also convinced that, if we follow this course, this country will have a broadband marketplace that is better than anything the world has ever seen.
Thank you all very much.