Introduction

During Telecom '95 - almost six years ago - I had the privilege of speaking at the first Internet Forum hosted by the International Telecommunications Union, here in Geneva. At that time, I observed that when people think of regulators, they think we have the following mindset:

If it moves, regulate it.
If it doesn't move, kick it until it does move --
And then regulate it!

While I am older and, perhaps wiser now, I still am not of that mindset - especially when it comes to the Internet.

Background

The Internet has revolutionized telecommunications. But the revolution of telecommunications and the Internet is still unfolding. We have witnessed over the last year the turbulence of telecommunications and the Internet markets -- suggesting that its trajectory is really a work in progress, fast-changing, and not free of risk. Many aspects of this picture remain unknown.

We do know that communications technologies link the nations of the world. Therefore, governments and businesses - collectively -- face the challenge of ensuring that all persons can reap the benefits that these technologies sow.

To realize the Internet's potential for driving economic growth, promoting information-exchange, and preserving and enriching our culture - as so many case studies presented today have demonstrated -- we must implement sound decisions and strategies.

Benefits of Internet Protocol (IP) telephony

Voice increasingly is just one of a suite of Internet applications. Not only does IP telephony bring the immediate benefit of expanded telecommunications access at reduced prices, but also it offers consumers and businesses new services and expanded functions. An IP network has the capability to integrate voice, data, and video. Users can communicate and conduct business more quickly and efficiently.

IP telephony can spur deployment of Internet facilities and applications in developing countries, thereby leapfrogging technology and the need to expand more costly legacy systems. Developing countries can benefit from the early introduction of Internet packet-switched technology and the variety of Internet services that this technology offers.

The FCC's View

The FCC encourages governments to remain open to the development of IP telephony. We understand that these are complex issues and that there are no simple solutions. The United States believes that, to the greatest extent possible, market forces should continue to drive technological advances and innovation in IP telephony.

The U.S. Experience

I want to share with you what we have done in the United States. It is by no means a perfect approach nor, clearly, is it the only approach.

We have had a tradition of decisions that have enabled us to adapt to the fast changes in communications technologies. We have tried to create an environment for competition, innovation, and investment for the benefit of consumers. By so doing, we set the stage for enabling the Internet to flourish.

The secret to the Internet's success in the United States is competition - competition introduced upon a network founded by government and academia. Where we have promoted competition, innovation and investment have followed.

During the course of our communications history, we have tried to maintain regulations only where a firm exercises market power over essential services or facilities, or where there is a public interest imperative that cannot be addressed in any other way. Neither of these factors appears evident in the Internet realm. But the FCC will continue to monitor the situation carefully as market forces are at work.

A series of past decisions underlie our current policy:

• In the 1960s, the FCC acknowledged the innovative force of technologies that deliver enhanced services to the public, and in our Computer Inquiry proceedings, decided not to treat data processing services as a common carrier transmission.

• In 1975, we adopted rules that allow anyone to connect a piece of equipment to the phone network provided it would not harm the network. This decision allowed a new competitive market to develop for customer premises equipment. We did not know it at the time, but that decision spurred the deployment of modems - a means by which to access the Internet.

• In the early 1980s, we determined that enhanced services would be exempt from access charges -- a decision that later enabled consumers to have affordable flat rate Internet access.

• Also in the 1980s, the courts ordered competition in the long distance telecommunications market. We moved aggressively to break-up monopolies and promote competition. These actions gave rise to the deployment of long- haul infrastructure upon which the Internet rides today.

• The Telecommunications Act of 1996 affirmed our policy to refrain from treating information services as telecommunications services.

• In April 1998, the FCC reexamined our Internet policies in a Report to Congress on Universal Service. Upon investigation, we found that the Universal Service Fund was not being eroded, because Internet Service Providers (ISPs) leased capacity on basic telecommunications facilities from interstate carriers. The contributions of interstate carriers into the Fund reflected these lease payments. Therefore, as ISPs grew, so would USF.

• We therefore reaffirmed that Internet services should not be subject to regulations designed for incumbent telephone networks.

• In our Report to Congress, we declined to regulate IP telephony. We noted that these were very difficult issues. As to phone-to-phone IP telephony providers - as opposed to computer-to-computer configurations -- we said that we may again examine their treatment on a case-by-case basis, but stated we would need to better understand these services before making any definitive findings.

• We more recently have stated that as Internet-based services begin to compete with legacy (traditional telecommunications) services and there is real competition in the marketplace, policy makers can begin to deregulate the legacy services - in other words "level" the regulatory playing field by deregulating incumbents rather than by imposing legacy regulations on new entrants that lack market power.

Past experience has taught us that:

• Policy makers must remain sensitive to the rapid pace of technological change. Markets often move faster than regulators;

• Dynamic emerging markets, such as that for IP Telephony, promise to frustrate the goals of even the most thoughtful policymaker; and

• Rather than regulate prematurely, we should take a cautious approach.

Our technology, our economy, and our consumers have benefited as a result.

Thank you for the opportunity to "kick" these ideas around with you this afternoon.