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Remarks of Michael K. Powell
Federal Communications Commission
At the
National Summit on Broadband Deployment
Washington, D.C.
October 25, 2001

(As prepared for delivery)

Broadband is on the tip of everyone’s tongue. It has certainly become the central communications policy objective in America. It is, at once, trumpeted as the elixir for everlasting life and the cure to all our ills. Though our euphoria for broadband may, at times, be quite over-inflated, I share the view that deployment will have very positive benefits for the Nation and the world.

I must say, however, I continue to find the broadband discussion and debate hazy and muddled. I have attended many conferences on the subject and often the central conclusion is nothing more than broadband is really great stuff and we all want it. What I think is lurking in many of these forums, is what role government should play in quenching our thirst. I believe to address that question we need to dig deeper than endorsing the benefits of faster deployment and reciting the challenges. I believe we need to have a more focused discussion on a very key set of questions:

1. What is broadband?

Oddly enough a clear, uniformly accepted definition evades us. It is accepted that whatever broadband is, it is fast (the Commission has defined it as 200kbs). We have very forceful debates about how fast is fast enough. I submit, however, that broadband is not a speed. It is a medium that offers a wide potential set of applications and uses. With the telephone, we knew what the “killer app” was. It was voice. The “broad” in broadband should be recognized as meaning more than the “fat, fast pipe.” It should represent the nearly infinite possible uses and applications that might be developed and that a consumer might use. I think broadband should be viewed holistically as a technical capability that can be matched to consumers’ broad communication, entertainment, information, and commercial desires.

I start by trying to come together on what are the indispensable components of broadband functionality. It is, to my mind, (1) a digital architecture, (2) capable of carrying IP or other multi-layered protocols, (3) that has an “always on” functionality, and (4) that is capable of scaling to greater capacity and functionality as uses evolve and bandwidth hungry applications emerge.

I also believe that we should conceptualize broadband capability as a function that can ride on many different electronic platforms. Broadband is not a copper wire. It is not a coaxial cable. It is not a wireless channel. It is all of these things. The capability can ride on many platforms (and should) in order to tailor solutions to consumer patterns and interests.

2. How should we measure broadband deployment progress and success?

As I have said, we all want some broadband. There also is some angst that it is not here, or that it is not coming fast enough. There is a feeling of disappointment and anxiety. Yet, before we argue for particular actions, especially government actions, we should have some common understanding of what to measure.

I believe that the key measure is availability of the service, not adoption rates. I emphasize availability, because there are many questions that remain as to what services consumers will value, and to what degree they will be willing to subscribe. I am hesitant to let adoption rates drive government responses, for a developing market needs the cues provided by consumer free choice.

By some measures, we have fairly wide deployment of broadband service. According to J.P. Morgan, 73% of households have cable modem service available, and 45% of households have access to DSL. Combined, broadband availability is estimated to be this year almost 85%. The intriguing statistic is that though this many households have availability, only 12% of these households have chosen to subscribe.

There are many possible reasons for this demand gap. Consumers may not yet value the services at the prices they are being offered. That is, the prices may be too high, in the minds of consumers, for the value they get. This highlights the classic chicken and egg dilemma. Broadband applications that consumers value are not yet offered to justify broadband service, yet the lack of broadband subscribers inhibits subscription—similar problems exits in many network industries.

The content-egg/distribution-chicken is a common, and major obstacle in industries that have complimentary network effects. The CD player would not be successful without available CDs to play. Game consoles like PlayStation struggle with the same problem, and digital television is facing this challenge as well.

Broadband hungry applications are still trying to make their debut. It is important to observe that much of the broadband-intensive content that is likely to be the core of broadband applications (like movies and music) is in the hands of major copyright holders that are unlikely to make it widely available without stringent protections and a way to profit from its distribution (see, for example, the Napster experience). This will take some hard work and time.

There are many things, other than availability, that can and should be measured. Demand may not be the right measure to justify government intervention, but it tells us a great deal about how central this innovation is to our lives and how highly consumers value it. It is important to identify patterns of deployment to see if market failures are barring deployment in certain areas of our Nation. Policymakers that are concerned about education, telemedicine, public health and safety, and other important areas may wish to focus on demographic differences as well.

3. Do we have a problem that needs a solution, or are we arguing for an industrial policy?

As we discuss and debate what to do, we must make clear what government role we are arguing for. On the one hand, there is the view that we are trying to study the market and diagnose problems that might be addressed. Here, I think we should be looking for clear market failures. I caution, however, that we have to thoughtfully distinguish between a true market failure, and what is simply hard or challenging. Market participants will pound away at difficult challenges in order to deliver service. They are very often capable of solving those problems through technological innovations, marketing, creative financing and many other skills that solid businesses possess. In struggling through the challenge, it will be common for some to want to try and leap ahead by securing government assistance. Market failure might demand a government response, but market challenges should be left to market players.

The broadband debate often echoes not as a discussion over the need for government solutions, but as a call for a national industrial policy to affirmatively drive broadband deployment. I will not dismiss that such an approach might have merit, though I am generally skeptical of this role for government (incidentally, it is the approach we took with digital television). Yet, we need to be very clear which exercise we are talking about, so as to focus our energies on the right problems and the right solutions.

4. What are the tools and solutions available to government?

A lot of energy has been expended on whether there is a case for government involvement, but it is often divorced from what form of involvement is possible or realistic. Affirmatively, government has only a handful of tools and it may be useful to tailor discussion about broadband deployment around them. Those tools are:

5. What Dangers must we avoid?

As we wrestle with developing a coherent broadband policy, it is very important to hone in on dangers and pitfalls to consciously avoid. I have tried to identify a few that are critical in my own mind: