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Transcript of Remarks of Chairman Michael K. Powell
Before Cellular Telecommunications Internet Association's
CTIA Wireless 2001
March 20, 2001
Las Vegas, NV

Format: Conversation with Tom Wheeler, President and CEO of CTIA.

TOM WHEELER ("WHEELER"): Chairman, thank you for being with us.

CHAIRMAN MICHAEL POWELL ("POWELL"): Good to be with you, Tom, always.

WHEELER: Are you used to that title yet - Mr. Chairman?

POWELL: No, not yet.

WHEELER: I mean, do you turn around when somebody says, "Hey, Mr. Chairman?"

POWELL: A little bit.

WHEELER: A little bit.

POWELL: It's a little daunting.

WHEELER: So, you've just seen a dog and pony show here about the issues of spectrum, and what wireless can mean in rural America and elsewhere. What's your reaction?

POWELL: I think it's outstanding. You know, we're certainly in an extraordinary period of innovation across all of the sectors of the communications industries, and wireless is exciting because it's at the cutting edge of innovation. I think it's at the cutting edge of competitive principles. We're learning a lot from the way that industry is evolving, the way those technologies are evolving, and they're constantly instructing us about the power and the potential of technology to change peoples' lives. So, it's instructive to us. We always look forward to having an opportunity to work with the industry on continuing to realize that great promise for consumers.

WHEELER: You know, it is really significant that you're sitting here today talking with us instead of talking at us. What's that say about the Powell chairmanship?

POWELL: "It says" my mother taught me well. [laughter] The problems are too daunting, they're too great, they're too challenging. The future is too speculative and uncertain for anyone to pretend that they have all of the answers and all the solutions. And I think that that points both government and industry to partnership, to sharing their collective resources and their collective insights, so that as a total package we make thoughtful decisions, meaningful decisions, efficient choices. So, that is the goal that we're both trying to achieve, which is that consumers reap the highest and best values from these changes. And I think the humility with which we recognize that, or recognize the uncertainly and the challenges and the fascinating products and services, is a good way to build a relationship.

WHEELER: Does the role of the FCC change as a result of the changes in the marketplace and the kind of things you're seeing here?

POWELL: I think, absolutely. I think there's no reason that the government doesn't have to rethink its business model. I don't think there's any reason that the government doesn't have to understand and digest the way that technology changes the way you run your business, the way you run your institution - your agency. We are in the process of systematically reviewing and thinking through what is the optimal, organizational model for the Commission. What's the best way to structure it? How do we create procedures and processes that allow us to be efficient and responsive in internet time? We are acutely aware that a decision that is way too late is worse than a bad decision early. We need to be more effective and quicker at doing that. And I think that we need to be a lot more technology-savvy - fluent in the technologies of the agencies with which we interact - or our relevancy is at issue. And if we are not a partner and participant as we were talking a minute ago, we're a distorting influence, and I think that's something we deeply want to avoid.

WHEELER: In internet time - in internet times, and at internet time - can a regulatory agency be a participant and a partner in the terms you just used?

POWELL: I think you can. It has to, in some ways, take humble stock of what it's appropriate role is . . . where it can make a meaningful intervention and where it can't. I think it needs to understand, at times, the futility of its involvement even when seemingly it has a good idea. There are a number of ways, both substantively and procedurally, I think we can do that. We are putting an increasing emphasis at the agency, for example, on an enforcement model, as opposed to the traditional regulatory model. You know, a great many of the regulations that we steward are what I call "by the grace of us" regulations. You want to do something you come get permission, you wait nine months, we say yes, and the opportunity is gone. We're trying to get more and more out of kind of up-front, prophylactic, permissive kind of regulatory environments, to one in which we provide greater flexibility, greater opportunity for innovation and change, but when you cheat and break the rules, we'll kill you at the back end.

WHEELER: That's subtle.

POWELL: Not so subtle.

WHEELER: You've been using the term "vision matters" to try and explain to your troops where you want to go. Explain that to us. What do you mean by "vision matters?"

POWELL: You know, it's another thing that . . . I've spent the better part of my life in government and it tends to be an institution that is very reactive. Things come up - it's the problem of the day, the item of the day, the issue or the order of the day. But what is needed more and more is to try to have some coherency - some vision - as to what you're trying to get to so that you can harmonize more of your decisions toward the same goal. Vision, though, in my view of it in a regulatory sense, is not "I know what the model . . . I know what the industry looks like . . . I know what the products and services look like." I don't know any of those things. But I do know that there are certain persistent trends that we take account of, certain distortions and the lack of harmony among different regulatory environments that we have to work to remove as we sort of drive toward that flag. I've described it recently to people like a good basketball team -- apropos of March. You don't know how every game is going to go. You don't know what are the challenges of the game. But you build the team for any game, and you build the assets to adapt and change as conditions change. And you recruit the right people, and you train them, and they're disciplined, and then that team can take on whatever uncertainties are presented in any game, and with good coaching can adjust and make adjustments to that. But if it understands it's basic game plan, it's strengths - what it does well, it's weaknesses - what it does less-well, I think that it will increasingly be proud of its service and proud of its contribution to the revolution.

WHEELER: Can a regulatory agency shoot three-pointers?

POWELL: [chuckle] We're going to try.

WHEELER: Let's talk about your vision on some issues, then, for a second. I mean, we've been spending the last half-hour up here talking about spectrum. Tell us the Powell vision for the world of wireless spectrum.

POWELL: I think that spectrum becomes an increasing challenge. I think the country needs to spend some collective thinking on trying to have a more coherent, nationally harmonized spectrum policy. We're trying to do that, as I touched on, to some degree in the Commission, itself. We have many spectrum challenges across many different bureaus, many different priorities, many different policies woven into them. We're certainly looking at ways to create kind of a better over-arching coordination of those policies so that, at least the policies emanating out of the Commission are more coherent. But, as you are well aware, we don't own the entire problem. Critical spectrum is spread all across the United States Government, with different points of decisional responsibility - the government users themselves, the Department of Defense, the Federal Aviation Administration. So, we really do need, as well, to partner with . . . the Administration has to play a critical role, Congress has to play a critical role, so that the policy has some coherence, and the nation can make some more thoughtful decisions about where it places the highest value on, and arguably and definitely, scarce resources.

WHEELER: Let's see if we can parse the spectrum issue into three parts. You just mentioned all three of them . . . two of them. One is lack of a plan. I mean, spectrum planning today is an exercise for the budget committees in the Congress when they say, "oh, let's sell some more spectrum and make some money." How do we get to a plan? Second part is - that plan, as you just indicated, is going to have to access spectrum that is currently occupied by others in the government - particularly the Defense Department. And the third component is, because the second component is going to take awhile, we've got perhaps an interim solution in spectrum caps, and the free-flow spectrum amongst various licensees. Can you kind of ad seriatim 1, 2, 3 go through those?

POWELL: [Chuckle.] Those are a lot of steps. I think the first recognition is that there is value in having a plan. That sounds obvious, probably, to this audience. It's not so intuitive to some quarters of Washington and I think the case is continuing to be developed for greater coherency out of recognition that many different users have very different interests that have to be coordinated. I do think the Administration has to take a central role with respect to the government portion of the piece. I think, as you mentioned, Congress has to take a sober role about to what degree it's going to see spectrum policy as a matter of budget policy. Fortunately, I'm not a budgeteer - it's not my job to figure out where each and every dollar comes from in the total collective federal budget - but I do have growing concerns that if maximization of money is the interest, you can countermand or undermine the communication policies that are associated with the efficiencies of spectrum. So, I think that they have to play a central role.

And, finally, and as to your question about caps - I think that the Commission recognizes that it has a duty and an obligation to reevaluate and revalidate or get rid of rules that are artificial or structural constraints on growth. It has at times employed these kinds of mechanism for the facilitation of competitive markets in their infancy. But, as those conditions change and markets become more competitive, I think the government has a duty and an obligation to reevaluate whether the rule continues to serve its purpose. With respect to the cap you are concerned about, in particular, we do have vehicles on the road that provide an opportunity for that reexamination that are coming up fairly quick this year, and I think that'll be an opportunity to undertake that exercise in this case.

WHEELER: That's a great piece of information, but I hesitate to point out - you bookended it - you skipped the second point. These guys over . . .

POWELL: I can only do two parts of . . .

WHEELER: These guys over across the river - you know, in the Pentagon - and their spectrum. What kind of role does, or can, the FCC play in that?

POWELL: You know, I think that that role is limited to a degree. You know, the Federal Communications Commission is an independent agency. It's not a component of the administration. I think it can be an advocate for an understanding, collectively of the government, what the trade-offs are, but we can't trivialize the uses of our spectrum for our national security and national defense either. Those decisions are way above my pay grade, in some respects. And, as the son of a four-star, I respect authority in that regard. But I do think that it can be an advocate, that it can be an institution that is able to lay out what the challenge . . . help lay out what the challenges are for the country, collectively, so that our President and the members of Congress can make coherent decisions about where it places the national interest highest and best. I think that we have not done as well with this as we could. I think there are a number of initiatives under way, some which were done under the prior administration that will continue in part, and I think we'll have an opportunity to look at that.

WHEELER: You know, Jerry Yang is our next guest here and I've been saying to the folks on our staff that there's a reason why Yahoo started in the United States and not in, let's say, France. And that was because of the fact that there was a backbone here. There was the ability for guys with good ideas, like Jerry Yang, to test them and then to go to scale quickly because the wired internet was here. It appears, from the charts that John Stanton was showing a moment ago, as though the rest of the world - our trade partners - have stolen a page out of our play book and are saying they're going to build the infrastructure for the next generation internet - the wireless internet - so that theire home team can have an advantage against our home team. Do you think that that message has gotten through in Washington?

POWELL: As we would have said in law school, I think that those developments cause an issue-spotter. I mean that at least we have had some circumstances that point out the need to examine that and see what our response is to it. I'm not normally one who is quick to sort of take up a national champion view of coherent policies. I think that they can be misleading, but I do think that the situation in other parts of the world have alerted us to the changes in the situation. This was always a touchy trade-off, as we know. Going first is not always going to cause you to be the winner. Going first also, in an innovative market, runs the risk that you imbed inferior technology - you bet too fast, too soon, too early. When the government, itself, is so heavily involved in sort of the industrial policy of infrastructure choices and innovation, my view is that their record is not particularly noteworthy over history on technological interventions. And so I think it's a very delicate balance between the right involvement of government to facilitate the conditions for markets. Because you know what, Jerry Yang also would have only come to being in a United States that rewards entrepreneurs and risk-takers and market mechanisms that allow them to reward and profit from their innovations. And those same forces are also what create a lot of energy and innovation. I think it's curious when some people criticize the United States for its policy over multiple standards in the second generation, and I giggle a little bit and, yes, and CDMA wouldn't have been produced if we had bet on a technology at the time we were asked to - the very standard that's forming the foundation of that third generation in other parts of the world. I would also remind people that in Europe they had a high-definition TV industrial policy infrastructure, too, that imbedded and inferior technology prematurely. So, it's not a simple question of being ahead. You know, like a good marathon runner - I think sometimes being two or three steps back in the race until you get closer to the end is not a bad place to be.

WHEELER: Kind of like our demo did a minute ago.

POWELL: Yeah. That was pretty good.

WHEELER: Let's pick up on that point - and the government as a predictor or facilitator of infrastructure decisions. I was serious about what I was saying about John Stanton up here. John has a vision and has put his money where his vision is. Yet, it keeps doing this against government policy that was designed for a narrowband world. How do we get around that?

POWELL: We get around it the way we get around everything. We assess what the situation is. We look at what it's constraints are. We try to find out what the policy trade-offs were - the first principles of the rule that they're running into - and we reassess whether those first principles have any continuing validity in the context of that modern innovation. One thing that we have to humbly accept in the government is we will not be the first to walk into new pastures. It's going to be people like John Stanton. It's going to be the industry. It's going to be the market that is going to bring to us disruptions, changes, little wobbles in the matrix, if you will. That will be brought to us and it will be our obligation to sort of assess that and try to rapidly reevaluate the kinds of constraints they're finding. It's fascinating if you go back through a lot of communications technology history. It's always the monster we tilt to - to use George Gildr's term - it's always some entrepreneur that's breaking the rule, that has found a way around something. Whether it was Bill McGowan and the use of microwaves to circumvent AT&T's monopoly over long distance. Whether it be Einstein's refusal to accept, you know, that in quantum mechanics things can have two behaviors and change technology forever, against the critics . . . I mean, we're always going to encounter that entrepreneur who refuses to accept convention and shows us something that we've never seen before. I think that's wonderful, that's exciting. It's not our job to look ahead of that always and figure out what it is. It's our job, though, when it's brought to us, to try to digest it rapidly and see if we can't get out of his way. But, it's important to remember our job is tough because it's not just "get out of it's way." It's "get out of it's way and make sure we preserve the policies that were originally imbedded in the constraint" or to justify them or to eliminate them. And, so, it's a multi-faceted question.

WHEELER: But maybe that's where you're "and we're watching, and if you don't behave, I'm coming down on you" attitude comes from.

POWELL: Yeah, it's interesting. Because I think more and more in this kind of space, vigilance is becoming an important policy all by itself. Which is, if you're confident, like I am, that the government has to be careful not to intervene prematurely in an innovation market lest it distort the evolution or prejudge the winners, I think the concomitant obligation is that it has to be very smart about watching trends and observing changes. Because your industry and others would be the first to come to government, as well, if it ran into truly heinous anti-competitive activity - if it truly ran into jurisdictional limitations that were causing you problems. We recognize that government can be a big and important part of that, but what it has to be doing is not just purely reacting, but constantly watching and evaluating and understanding persistent trends so that it can start to get on top quicker when those challenges are presented.

WHEELER: Let's go back to your first priorities . . . one of your first values points. Let's stipulate that the systems for delivering narrowband services in remote areas of the United States has worked. Should there be a bright-line between that and delivery of broadband services? Do we need to say broadband is a different game and it's not just porting over old policies? We'll stick with the first principles here - we'll keep this going - but this is a different environment that ought to follow the kind of doctrine you were just talking about in terms of let's lay off and let's see what happens?

POWELL: I definitely think that it's very positive to kind of conceptualize what the challenge is. We're sort of standing in the middle between two worlds. One communication world and regulatory environment is one that is very, very mature. It's symbolized by the 100 year-old public switched telephone network. The technologies are relatively mature. We understand them and we understand their characteristics. The cost dimensions are relatively mature. We have some basic understandings of costing and pricing in that market after that 100 years of experiences. We have great understanding about quality control and those kinds of services. We have a great familiarity with the players. We know Bell operating companies, we know IXCs, long distance companies. I think that's a very mature part of the cycle. It's an engineering marvel, but it's a sophisticated version of tin can and string in the way that was when it was first invented.

What we start to see is we're standing in the middle between that and a legacy world that's trying to untangle itself and be more competitive and provide more opportunity. At the same time, on the other side of our world, is this innovation space that's in its infancy - where the technology and the architectures are virgin and new - and we're still understanding the optimal solution for the delivery of services. Wireless certainly is at the leading edge of trying to fiddle with and understand and experiment with optimal infrastructures. Optical technologies are phenomenal and what they will be. But, because those are in their infancy, too: our understanding of their cost dynamics, (for example intercarrier compensation); our understanding of the kinds of goods and services people will or won't deliver; whether consumers will brace any of this despite our techno-ecstasy about all of the possibilities. So we have a tough job because we kind of live in this no-man's land part of the tennis court. You know, you and I were talking the other night, this is the bad place to be. This is where you're picking balls up off your shoelaces. And we really need to sort of charge the net and get into a power position where we have a much greater understanding. But, we can't forget that we have a duty to untangle and continue to be concerned about the legacy legal questions, the regulatory questions, that are behind us as well.

WHEELER: Techno-ecstasy?

POWELL: Yeah, well.

WHEELER: Good term. Let me ask you . . . I mean, this has been terrific and, on behalf of all of our friends sitting out here . . . to be able to see inside your philosophical head, is the reason why we were talking about "this is the right man for the job." Clearly, you've thought about these things. Let me ask you some tough bullet questions on some tough specific issues that you've got to deal with. Privacy. We've petitioned the Commission to come up with . . . we've adopted our own code of conduct. We've petitioned the Commission to come up and enact that so that it applies across the board and to work out something with the FTC so that it applies to people whom you don't regulate. What's your thought about that?

POWELL: Well, on the petition specifically - we did receive that. We've put it out for public notice, I believe, just the other day. So we've taken the petition seriously. We've initiated the process to take a careful examination of it. I haven't examined it personally, so I won't comment on the specifics of that. But I think that the association recognizes, as I think people in the internet space, generally, are starting to recognize, the interplay between the potential of internet-oriented services and privacy is going to determine how greatly the promises of this stuff is realized.

One of the most fundamental truths about internet-based IP services or ubiquitous network-based services is that it allows for intimate tailoring. A personalized everything. You know, I like to joke that it's not the "me" generation anymore, it's the "my" generation. It's my Yahoo, my Amazon, my priceline.com. Everything is my, my, my. But that tailorization comes with allowing greater revelation of the most intimate details of your life. And the interplay between those two things is where both the producers and the consumers are trying to find the sweet spot of the value that they provide to each other. Consumers are very complicated on issues of privacy. In many ways, if you ask them the question flatly they'll be very, very concerned about it. In other ways, they're willing to trade or sell aspects of their life in exchange for something of value.

I think the challenge for producers is, are they really providing, number one, fair notice and opportunity to make that choice thoughtfully and with full knowledge of its consequences and, secondly, whether they're really getting something in exchange that's valuable to them for me to give away to you my phone number or my buying habits or my working habits. But, as we know, there will be public policy issues as a consequence. The day somebody is arrested and there is a whole log record of what they do. That's going to be a serious issue to people. But this interplay, in my opinion, as a matter of public policy, is the critical interplay between consumers, government policy and producers, because the killer ap of the internet - whatever it is - is personalization at some level. And personalization is the diminution of some degree of privacy, at least to those service providers. It's interesting - you know I made an observation about universal service and broadband. In many ways, how much ubiquity and affordability we get in the country is simply a matter of how much privacy we're going to be willing to exchange. You know, there are access companies out there who will give you free access. There are computer companies out there giving people free computers - depending on whether you're willing to share enough of your life with them - and so where that line gets drawn is going to have a lot to do with where we land as a matter of mass-market, ubiquitous services, and whether the promise of the technology is fully realized.

WHEELER: Boy, I'd love to go down some of thoughts with you, but I'm going to hit you with the next issue. Okay? Numbering. There's two scarce realities - two scarce resources - in this country right now - spectrum and telephone numbers. How do we develop governmental policies to make sure that the inability to get numbers doesn't retard growth?

POWELL: Yeah, well. Numbering is an exhausting issue. But . . . I know, I know . . . I didn't rehearse that. I think the first point you made is critical - which is the recognition that it is a scarce resource - it can be depleted and it will be depleted. Normally, in an economic system you cure that by having market allocation measures that help allocate to their highest and best uses. You would charge for it or you would have a market for it. Regrettably, in this context it's generally believed that there isn't existing authority for introducing those kinds of mechanisms, and so you really do get into kind of a central planned, heavy governmental involvement mechanism in which we try to sort of create mechanisms and resources that cried for efficient use of numbers and try to police inefficient numbers and reclaim numbers that are not being used. There are any number of vehicles that are out there that are being experimented with and attempted - everything from number pooling to utilization benchmarks. If you're not using numbers, you will release them or you will not be able to get others. Service-specific overlays, technology-specific overlays - which can be controversial, depending on the state or the jurisdiction of the circumstances. It's also complicated by the fact that it's not perfectly one-size-fits-all. That is, the numbering challenges in some markets and jurisdictions are greater and more acute than in others. And all of that is to say that there are a lot of variables in that soup. I think the Commission recognizes this is an issue close to the heart all over the country - in the wireline context as well - and I think we are increasingly trying to work with states and others to find ways to help solve that problem. But, it does start from the premise it's scarce and it does start from the premise that new services will deplete those numbers. But, there will be other critical parts that the industry will have responsibility in, too. It doesn't work if there's not number portability. If you can't move numbers around, you lose the flexibility and you've lost resources permanently, if when people make moves around this innovation space they can't take their numbers with them. So, there are a lot of those pieces in there and I just think this is one of those you just slog through the mud on and continue to hope you make a difference.

WHEELER: Okay. Last issue but on that same kind of theme. The involvement of the regulatory agency in new technology . . . in the ability to deliver new technologies. There is a back-log at the Commission in terms of type-acceptance of phones. Our manufacturers are saying "hey, we have to spend too much time. . . that the life-span of phones is going downhill, increasingly becoming shorter." In Japan, now, it's down to six or nine months. Here, it's a couple of years. But they need to be bringing out the new phones that can do the kinds of things we were demonstrating here. The back-up in the approval process at the Commission - is there a way that we can work on that together?

POWELL: Yeah. I think you and I have talked about this. We certainly accept that the increased pace of product cycles, a greater premium on new services, is putting a greater premium on trying to have rapid and expeditious review procedures and effective procedures, so that we're not the bottleneck in innovation. I think that working with you, we can do, and we've already begun some systematic review of our processes, to see where we can create greater uniformity, more efficient streamlined procedures, and to try to identify clearly what really are the problems. Some of them are really intriguing. A good portion of the backlog you refer to is the growing concern about RF emissions, and on the extreme end, concerns about everything from an individual's health. Regrettably, it's an area where there are very few standards or consensuses to the right testing standards and regimes among engineers and standard bodies like IEEE. We have to try to drive a recognition of that problem and an understanding that we do need a coherent standard in order to efficiently test for those things that I think consumers are going to insist that we test for. And, I think you'll want the protections of having the government having looked at those questions.

WHEELER: And there is a new standard coming on . . .

POWELL: There's a new standard coming on it and our engineering group, which is outstanding, has been working to try to take the lead on that, as well. But, we're more than happy to work with you and other interested players to make that process a much better one for you.

WHEELER: Well, Chairman Powell, we look forward to working with you through your chairmanship. We look forward to you coming back and visiting with us again at subsequent wireless shows. We're particularly grateful for you being here today. Thank you very much.

POWELL: Thank you, Tom. Thank you.