[ Text Version | WordPerfect Version ]

Comments of
Harold W. Furchtgott-Roth
Commissioner, Federal Communications Commission
before the CCIA
March 11, 1998

Thank you for inviting me to CCIA.

The end of the century is fast approaching. It has become trite and hackneyed to speak of the new milleneum. Let me speak on a slightly smaller scale, the past century.

Future generations will look back and say that it was an amazing century, one that saw new networks span the world. By the end of the century, these networks brought new services to people practically everywhere. Not only were these networks of direct value to consumers, they also spawned countless new business activities. Every city of any importance had major investments in these networks.

The common folk wisdom held that these networks were the wave of the future, indispensable elements for any economic growth. It was to be the final step in technological development.

No government privilege to enhance the industry was deemed too great. Special taxes were created for the networks. Special regulations. Few laws or regulations were created without passing reference to these new networks and the industry they spawned.

No investment in the industry was deemed too large. Whereever the networks went, demand was assumed to follow.

The new networks generated men of extraordinary wealth, power, and political and social influence.

The century of which I speak, of course, was the 19th Century. The networks were railroads. Only two decades into the next century, it was already evident that these new networks were not all that they were cracked up to be. They were not the final word in technological development. Or even a necessary engine for economic growth.

Make no mistake: the railway industry has prospered and, by some measures, even grown in the 20th Century. But the rest of America that, at one time, seemed so dependent on rail networks, grew much faster than the rail industry. And many of the new industries and communities of America even became independent of railways.

But the peculiar forms of regulation, taxation, and special cozy governmental treatment that so characterized the rail industry have survived and thrived in the 20th Century for various transportation and utility industries, including the telephony industry. And other industries as well.

Government regulation alone did not lead the rail industry to fail to meet lofty expectations. The advancement of technology is not sentimental, nor does it have much patience with governmental efforts to shift its direction. But there are many such efforts.

Excessive government regulation may not alter ultimate technological discoveries or adaptations, but excessive regulation may certainly delay the time path to reach new technologies, and it may alter the cost of reaching new technologies.

Why should we care about when technologies are achieved? Ultimately, it is the consumer who benefits from new technologies, from new services, and from lower prices. Delay new technologies by a few years and there is substantial harm to consumers. Delay them by a few decades, and the harm is incalculable.

Just ask the hundreds of millions of people who suffered under repressive regimes around the world during the 20th Century. These were not the countries of new consumer technological innovations. And their consumers lost enormously.

"How," you may ask, "can the federal government affect the direction of technology?" This conference has addressed some of the potentially disastrous effects of overregulation from agencies such as the FCC. But communications regulation is just one way that Washington casts a shadow on the development of new technologies.

Look down the street at antitrust policy in America. Some will say that if only the federal government spent more effort in this area, technology would blossom.

Washington is the home of the Internal Revenue Service, the Patent Office, and the Copyright Office, dominant factors in many changes in technology. And Washington is home for the agencies that oversee our international trade, including trade in new technologies. Some will say that if only the federal government spent more effort in these agencies, technology would blossom.

Washington is also the home of the federal agencies that hand out the federal research and development dollars that influence many new technologies. Some will say that if only the federal government spent more effort in these agencies, technology would blossom.

Wittingly or not, many government agencies already affect the direction of new technologies without direct regulation. But in Washington, words often speak louder than actions. It is here that politicians make claims about future technological growth and what might affect it.

Many politicians march around this city proclaiming that unless the federal government plops a computer with internet access in front of every child in America, our future generations will be technologically illiterate and lost in the world market. Of course, at the same time, the latest international educational comparisons show that while American students may be first in terms of access to computers, we are practically dead last in terms of educational achievement.

There are other politicians who claim that without a better moral and ethical foundation, our country is lost and unable to develop new technologies.

And Washington is also the home of many business experts. You know the type. If only we had better marketing or better management, we could move the technology frontier out exponentially.

If you thought that new technologies were simply about putting some scientists and engineers together with a computer and a white board, you obviously haven't spent enough time in Washington. Welcome to Washington! Welcome to Washington!

The good news for an FCC Commissioner is that we at the FCC are, at most, only part of the problem that may be impeding the development of new technologies. The bad news is that, even if we do every thing we can to allow the full development of new technologies, other parts of Washington may succeed in getting in the way.

Every generation has its infatuations with new and emerging technologies. Two centuries ago, many Americans invested in new manufacturing technologies, and many Americans sought government protection through favorable international trade policy. But governments do not "grow" manufacturing. Despite, and not because of, these government interventions, both manufacturing and the American economy grew.

A century ago, many Americans invested in new transportation technologies. They also sought government protection through favorable tax and regulatory policies. But governments do not "grow" transportation services. Despite, and not because of, these government interventions, both the transportation sector and the American economy grew.

And so there has emerged a common pattern in the political economy of America. Businesses develop new ideas, and they come to Washington seeking protection and help. But governments do not "grow" economic activity. They sometimes receive the help, and the businesses and the economy grow despite, not because of, the intervention.

Today we have before us a new industry with new ideas, ideas that have captured the imagination of American businesses and the American people. It is called the computer industry. And these businesses come to Washington with a refreshingly different message. They don't say "help and protect us." They don't say, "Federal government, please 'grow' our business."

They do, however, ask for special treatment. Their special treatment is "Leave us alone. Don't regulate us as you regulate those other businesses. We've seen government efforts to grow other businesses, and we think that they would be lethal for us."

And other businesses look at the computer industry with covetous eyes. They say "Don't treat them any differently. Create special regulations for them. Create special taxes for them. Create special government programs for them. But whatever you do, do not leave them alone. It would not be fair."

A powerful government was not to be the course of American history. To the contrary, the American colonists had rebelled against a government precisely because it sought to exercise expanded authority, precisely because it sought to impose new taxes, and precisely because it sought to overregulate and stifle commerce.

The American reaction to an overactive British government was the U.S. Constitution, perhaps the political document of all time. It begins with "We the People," and its original Bill of Rights ended with two powerful sentences emphasizing that the government serves the people and not vice versa: "The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people. The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States, respectively, or to the people."

Between the beginning and the ending dedication to the People are just a few short pages. In those pages is a description of a decidedly weak government, one that is defined more by what it may not do than by expansive, unlimited powers.

There are those who say that it is ironic that the most powerful Nation in the world has grown with only a limited government. And there are those of us who find no irony at all.

Someone once described the greatest and wisest power as self-restraint, both in individuals and in nations. A powerless country does not threaten its neighbor. A powerful country may threaten its neighbor. But the most powerful and wise of nations does not threaten its neighbors. It is bound by wise self-restraint, and its neighbors know it, and the world knows it. It would be irrational to threaten neighbors. It would be unwise. It would be wrong.

Similarly, the wisest form of regulation is self-restraint. Wise and powerful countries do not overregulate. They do not suffocate. They do not threaten. It is not that they are powerless to do so. Rather, it would be irrational, unwise, and wrong. America must learn to regulate in a manner commensurate with our world leadership.

Overregulation is a great impediment to economic growth. Despite the claims of many politicians, neither governments nor political leaders "grow" economies. Economic growth is the product of common people making uncommon efforts to innovate, to invest, to work hard, and to manage wisely. New technologies. New ways of doing business. In the crucible of life, successful people typically look to themselves, not the government, to undertake these activities. They occur when there is a reasonable expectation that these activities will be rewarded.

It is the People of America, who by their individual activities of innovation, investment, hard work, and prudent management. These are the people who truly "grow the economy".

The irony is that some political leaders, while claiming to "grow" the ecnomy as if it were an agricultural crop entirely government control, in fact stunt its growth by removing reasonable expectations of rewards from innovation, investment, hard work, and prudent management.

So what can we do to ensure that the FCC does not stunt economic growth and the development of new technologies? First, I believe that there are some piecemeal, ad hoc activities that the Commission can take. Some of these potentially fall under the Section 706 proceeding.

But, in a larger sense, what is needed is not more regulations and more proceedings. What is needed is what I would term rational regulation. Regulation that takes into account the costs and benefits, and moves forward only where benefits clearly exceed costs.

That simple prescription may seem obvious, almost tautological to most of you. It's the common sense approach that all successful businesses have. Those that do not, go out of business.

But taking into account the costs of regulation is a radical idea in Washington. When I was Chief Economist for the House Commerce Committee, we surveyed federal agencies for their accounting of the costs of regulation. Not a single one had a clear and complete accounting of the costs of regulation. And the FCC had no accounting at all.

The excuse that all agencies provided was that they were not required by law to account for the costs of regulation. Of course, they were not prohibited either.

It is of paramount importance that government agencies faithfully follow their enabling statutes. Businesses and individuals may reasonably be expected to try to get out from under the law. But not federal agencies.

There is now, for the first time, a federal statute that may require the FCC to consider the full costs of regulation. It is Section 11 which requires the FCC to conduct a biennial reivew of all telecommunications regulations beginning in 1998. It is difficult for me to understand how the Commission can review all such regulations without a framework that considers explicitly the costs of regulation.

And if we are faithful to Section 11, I believe that we can move the FCC a step away from impeding the development of new technologies and a step closer to the concept of limited self-government on which our Nation was formed.

What is the future of the computer industry? I do not know. But I look into an audience filled with people who do see that future. It is up to you, and not the federal government, to make wise investments, to innovate, to work hard. And it is up to you to urge the federal government, and the FCC in particular, to show restraint and to regulate wisely but not often.

The wisest government is a limited government, one that takes invasive action only when absolutely necessary. A limited government is not a sign of weakness; it is rather a sign of power, of wisdom, of rationality, and of enlightened leadership. It is that government that we need for our future, and it is that government that I will try to help you find, even here in Washington.