Commissioner, Federal Communications Commission
At the Satellites and the Internet '99 Conference & Exhibition
Sponsored by Advanced Communications Technologies
July 23, 1999
I. It is odd to look back 100 years. People then thought that they had the greatest technologies around. Great ideas. Major investments in new products and services. They thought that they were doing well.
How little they knew. If only they had known what we known. They would have known which few of their investments were worth making, and which were folly.
II. It would be easy to say such words today. It would have been easy to say them in 1900 as well. Or 1800. Or 1700. Or 1600. There is a conceit in every generation that we have finally found it: the end of technological advancement. Things cannot get any better. Conceit, however, in this instance, is a recursive process. It begins where it ended in the last period, and starts all over.
III. It is easy to imagine a successful entrepreneur in 1900, or a would-be successful entrepreneur in 1900, saying to friends and anyone who will listen: "Whatever you do, don't make it difficult for me, and others like me, to develop" the airplane, or the automobile, or radio, or electricity, or any of the thousands of new products and services that emerged a century ago.
IV. Yet if one looks back on the many innovations of the past century, or of any century, it is often impossible to fail to see the possible effects of government activities: some intended, some not; some direct, some indirect; some beneficial, some harmful.
V. I am perhaps as guilty of this as anyone: pleading for deregulation in the name of the advancement of new technologies and innovations while at same time painfully aware that the heavy hand of government has touched many aspects of technology already.
VI. It is easy to misty-eyed and speak of innovation and new technologies as having been immaculately conceived without the polluting help of government interference. Sometimes it is true; sometimes it is not.
VII. I am one of those people who rail against the excesses of government regulation. I firmly believe that there are diminishing returns to the activities of government, and that at some point they become counterproductive. And I also believe that in many instances we have already reached the counterproductive points.
VIII. Today, we have a conference on technologies for which the government has been all too present, and I am painfully sobered.
It is great to be here today for a conference on a topic that was unthinkable just a generation ago. Communication by satellite was the material of science fiction. And the Internet--that was doubtlessly some sort of fishing tackle to catch that obscure fish known as the "Inter."
No doubt I could stand here and tell you what many government officials in my place would tell you--how wonderful the technology is, some of its "Gee-Whiz" characteristics, and what a great job we in the government are doing for you. It would be easy to do that.
A couple of weeks ago, I asked the FCC's International Bureau for some background material for this conference. Internet of satellite technologies and markets are very impressive. There is little doubt that satellites are great, and the Internet, and the combination is greater still. You don't need me--or any other government official--to tell you that. Many people at this conference, all far more qualified than I, have already told you that. Indeed, I would be a little nervous, more than a little nervous, if government officials were the experts in a commercial technology or a commercial market.
Instead, I am going to talk about a little word that might strike terror in the hearts of people interested in the Internet or interested in satellites. It is a word I perhaps am little bit too familiar with. It is regulation.
For those in the satellite business, government regulation is all too familiar if not comforting. The satellite industry was born and bred and nursed by governments or by heavily regulated enterprises. Around the world, we hear of various forms of deregulation of the satellite industry, but rarely do we hear of completely severing the regulatory linkage to governments.
But the Internet is oddly different. Like the satellite industry, it was born, bred, and nurtured by government, particularly the U.S. government. Yet it has become sacrosanct for government officials to speak of the absence of regulation.
OPP of the FCC just in the past week issued a paper on the "FCC and the Unregulation of the Internet" by Jason Oxman in OPP. It is just a staff working paper, not an official FCC document, not voted out by the Commission. I had not heard about it, much less seen it before it was released. But it is a very good paper, and describes the history of how the FCC has eschewed explicit regulation of data services including the Internet.
We have in America something akin to a worship of the Internet. It is part of the catechism of Washington to say that neither the federal government, nor any level of government, should regulate the Internet. Whatever you do, don't regulate the Internet.
Of course, with the possible exception of this little eesnie-weensie issue over here.
The problem, of course, is that every one has their own little eensie-weensie issue. You add up all of the eensie-weensie issues, and pretty soon you have full-blown regulation.
Let me just remind all of us that we, in fact have regulation of the Internet today. In each case, the regulations apply to all internet companies, to greater or lesser, degrees, but they may be even more difficult for satellite-based providers.
Businesses in America face all sorts of regulations: labor practice, workplace safety, land use, accounting practices; you name it and it may well be regulated at the federal, state, or local level. Ordinary businesses face these regulations, and the mere act of opening a web site or an ISP does not absolve a business of responsibility to comply with these regulations. Similarly, satellite companies that offer Internet services do not suddenly avoid ordinary business or satellite regulations.
Today the federal government regulates both access to telecommunications services and interconnection with telecommunications facilities and equipment. Some of these telecommunications services may provide access to the Internet, as do some of the telecommunications facilities and equipment.
Regulation of access to cable services and information services is far more limited. But some of the most contentious debates before the Commission involve definitions of telecommunications services, cable services, and information services. These issues are at least indirectly raised in the dispute between the City of Portland, Oregon and AT&T. There the dispute is whether a local franchising authority may require a cable operator to unbundle its cable modem and internet access services so as to be available to competing internet access providers.
For satellite-based Internet services, access issues go far beyond whether competing ISPs have access to specific facilities. Access issues also include access to earth stations, access to antennae in buildings, access to local loops and wiring within a building.
How do issues of access affect satellite-based Internet services and their providers? I think that it is too early to tell for sure. However, investors in an enterprise whose business plan at least in part is based on providing exclusive Internet access customers over specific plant and equipment may be troubled by the prospect that a current or future regulator, in the U.S. or abroad, may by government fiat require the enterprise to make the specific plant and equipment available to competitors. Can regulators require competitive access to satellite pods, or earth stations, or antennae, much less the cables or wires that access a home? If U.S. regulators, whether at the federal, state or local level, have the conceivable authority to require any such access, is it plausible that foreign regulators have any less authority? If anything, satellite-based internet services face many of the same access issues faced by wireline providers and then additional ones that are unique to satellite services.
At the same time, satellite-based access may provide the competitive basis for regulators to abstain from regulating access at all. Why regulate access if there a multiple sources of access?
Neither the FCC nor state and local officials currently directly regulate rates for access to the Internet. We do however, regulate rates for such services as access charges at the federal level, and state regulators may regulates rates for local loops, local access, and reciprocal compensation, all of which may indirectly affect Internet access rates. In the U.K., where all calls, both local and distant, have metered rates, the price of internet access has recently dropped to zero, but consumers must still pay the phone company for every minute of phone access. Consequently, for these and other reasons, the rates that ISPs can charge customers is indirectly affected by government price regulations.
Satellite-based internet services may face these and other forms of price regulations.
Efforts to limit or outlaw certain content on the Internet have largely failed in practice; but these failures have not curtailed legislative efforts to attempt to limit what has proved to be impossible. Even today, different nations have different laws about what types of information may lawfully be transmitted. Enforcement of these content laws is difficult where networks and ISPs are dense, but these law are potentially more easily enforced where access is less dense. Satellite providers may prove to be particularly easy targets for liability if not enforcement of local content laws.
Taxes are perhaps the greatest bugaboo of regulations potentially affecting the Internet. How many people in Washington have said: "Don't tax the Internet!"? A simpler question might be: Who has not? Taxation is often in the eye of the beholder. Do Internet companies not pay taxes? Can an ordinary business avoid taxes by establishing a web site or going into the ISP business? I don't think so. The only way that Internet companies actually avoid taxes is that many of them lose money and therefore have no taxable income.
State sales taxes are one of the most contentious issues. People often compare Internet transactions to 1-800 transactions and claim that such sales are tax free. Technically, such sales within are subject to a sales tax, and even purchases from other states are subject to state taxes. Many states have tax forms for such transactions. These tax forms and their force of law are unknown to many tax specialists, to practically all businesses and individually. These are largely ignored and raise little revenue. Yet presumably, Internet purchases would fall under these state taxes.
Access to the Internet itself is often taxed indirectly. We have federal, state, and local taxes on practically all forms of telecommunications services that in turn are purchased by ISPs and that are ultimately paid for by Internet customers.
All of these Internet tax issues may be somewhat more complicated for satellite providers. Suppose a jurisdiction wants to tax some aspects of internet service, or e-commerce over the internet. Is the basis for the tax the location of the end user, the location of the selling business's remote server, its corporate headquarters, or the location of an earth station that provides remote access? How are taxes to be collected: on businesses, on end users, or on ISPs? Satellite providers are simply in a more awkward position because they have access to more jurisdictions.
One Member of Congress recently described Internet privacy as the surprise issue of this Congress. Many Members of Congress, on both sides of the aisle have introduced legislation to protect consumer privacy.
These laws, in some instances, would be hard to enforce for most Internet activities, but all the more so across national boundaries and for services provided by satellite-based companies.
An analogous problem is faced for CALEA, a law that enables U.S. law enforcement agencies to gain access to telecommunications messages. It all works well with POTS. It works less well with digital signals and wireless communications. And sorts of problems break loose with Internet communications. And how does it work across national boundaries? Not at all. Yet U.S. telecommunications carriers, quite possibly including satellite companies, will be investing billions of dollars to comply with CALEA. That compliance may be troubling to governments in other jurisdictions served by the same satellites.
Different countries have different intellectual property laws, and enforcement of them. How does e-commerce protect intellectual property across different jurisdictions, particularly where transactions are difficult to monitor, much less trace? How does the U.S. limit access to pirated intellectual property distributed legally, or at least without fear of enforcement, in another country? These issues may be particularly problematic for internet companies serving multiple countries, again by satellite.
This is a major issue for intellectual property companies, particularly music, video, and software.
Where does this leave us? A century from now, people will look back at our generation with technological disdain. How primitive we were. If only we knew what they shall know.
And perhaps they will even say how overregulated we were. But at least in the area of satellite-based internet services, I hope that they will be able to say that we were aware of the regulations we faced.