*Pages 1--6 from C:\Pdf2Text\Ready4Text_in\pdf\50627.pdf* Text As Prepared Remarks by Chairman Kevin J. Martin Federal Communications Commission To the NARUC Summer Meeting Austin, TX July 26, 2005 Thank you very much, Diane. It is a pleasure to be here this morning. It has been just over 4 months since I assumed the Chairmanship. I can’t tell you how many times during that time people have asked me about my “vision” of where the industry is headed. Each time, I am hesitant to respond. At almost every turn, even the most forward- looking individuals have failed to accurately predict the development of technology. For example, Ken Olson, founder of Digital Equipment Corporation, once concluded that “there is no reason for any individual to have a computer in their home.” And it is not just technologists themselves who have wrongly predicted the development of communications. When Alexander Graham Bell patented his telephone in 1876 and subsequently tried to sell it, Western Union politely declined. Their reason? They said that “this ‘telephone’ has too many shortcomings to be seriously considered as a means of communication.” So with some trepidation -- I looked up the word “vision” -- and discovered that it really means “an imaginary or supernatural sight beheld in sleep.” Seriously though, what people appear to mean when they talk about “vision” is some forward- thinking ideal of what the industry and regulatory landscape ought to look like in the future. Though I cannot predict the future, I can tell you about what I would like to see in the future. Advances in technology are leading to a convergence of multiple platforms. This development of intermodal competition is fundamentally changing the way that both carriers and their customers use telecommunications and technologies. Given these market changes, we can move towards a more deregulated, competitive environment. One undistorted by regulatory arbitrage and artificial distinctions. And one with competition leading to higher quality, more innovative services, and cheaper rates. Such an environment should be governed by a flexible policy framework that promotes broadband infrastructure investment and is technologically neutral. And what does this future tell us about how we should face our problems today? 1 4 Some advocate a unitary rate of zero – or “bill and keep.” I am not sure that such a proposal, which also necessitates large increases in end- user charges and/ or the creation of a new universal service high cost fund, is as politically viable – especially in the short run. Indeed, the ultimate goal is to get to the size of the universal fund under control, not to inflate it. But moving quickly to a unitary rate would be a step in the right direction – eliminating many arbitrage opportunities. Fortunately, the Commission is not tackling these thorny intercarrier compensation issues alone. In addition to the widespread industry input, I am particularly grateful for the input of the state commissions through the NARUC Task Force on Intercarrier Compensation. Under the leadership of Elliott Smith, you have been on the front lines dealing with these issues and your active participation in this proceeding has been of tremendous value to us. Many thanks to Elliott and the other members of the Task Force for their dogged pursuit of a workable resolution that can be supported by a large segment of the industry. The last regulatory challenge that I listed at the outset was broadband. As I have said on several occasions, promoting the deployment of broadband is the Commission’s highest priority. I intend to do whatever I can to help meet the President’s goal of “universal and affordable access for broadband technology by the year 2007.” Right now, however, the broadband story is mixed. On one hand, I am proud to say that the most recent Commission data reveals that the United States leads the world in the total number of broadband connections – nearly 38 million. This amount of broadband subscribership represents a 34 percent increase over last year and reflects a 45 percent increase in DSL penetration and 30 percent increase in cable modem subscribers. This is all good news. Moreover, we have begun to see how the removal of legacy regulation on new investment helps spur deployment of new broadband networks. For example, Verizon has already spent 1 billion dollars to deploy fiber to 1 million homes and intends to reach another 2 million this year. Similarly, SBC expects to spend 5 billion dollars to deploy fiber covering 18 million homes over the next 3 years. And, BellSouth has recently announced that it has 1.1 million customers served by fiber and anticipates adding fiber to 60% more locations this year than it did in 2004. And we are seeing significant deployment of WiFi and other wireless broadband networks, along with new technologies such as broadband over powerlines. On the other hand, our work is far from over. Perhaps the most important action we need to take in furtherance of broadband deployment is to place wireline and cable providers of broadband Internet access services on a level- playing field. Right now, cable modem providers operate free of most regulation. As you know, this is not the case for the telcos who must provide their services subject to legacy 4 5 regulations. This disparity continues to distort the marketplace. Again, we need to make the broadband regime, as well as the universal service and intercarrier regimes, technology and competitive neutral. The Supreme Court’s Brand X decision last month provides us the opportunity to make this happen. By affirming the Commission’s determination that cable modem services should be treated as a less regulated information service, this decision provides a clear regulatory roadmap. Now that the Supreme Court has spoken and provided us much needed clarity, we can move forward. To this end, I have already shared with my colleagues a proposal that would give telcos the same deregulatory treatment as cable. It is my strong hope that this order will be adopted as soon as possible so that consumers can reap the benefits of continued infrastructure investment and the increased deployment of broadband services. I believe that we must treat all broadband providers in the same manner. And while I believe the government should play a lesser role in this competitive market, this does not mean that government has no role to play in the broadband market. To the contrary – for example, together with our state colleagues, the Commission must vigilantly ensure that public safety, law enforcement, and consumer protection needs continue to be met. For example, it is critical to our nation’s security that broadband Internet access providers and VoIP providers cannot escape the ability of law enforcement to conduct legitimate surveillance. Although I believe that new technologies and services should operate free of economic regulation, I also believe that law enforcement agencies must have the ability to conduct electronic surveillance over these new technologies. We must strike a balance between fostering competitive broadband deployment with meeting the needs of the law enforcement community. Similarly, states and the Commission must continue to work together to ensure that public safety and consumer protection goals are met. An excellent example of the type cooperation that I hope will continue is the new federal- state Task Force that we have just formed with respect to enforcement of our VoIP 911 requirements. This Task Force will work in conjunction with the public safety community to ensure timely compliance with our 911 rules so that no lives are lost due to lack of access to emergency services. This VoIP 911 federal- state Task Force is just one of many ways in which the FCC and the state commissions can work together in a dynamic marketplace that operates free of undue economic regulation. So, with all of the innovations that are happening today, what observations can we make about where the industry is heading? 5 6 First, if the broadband penetration rates that I described earlier continue at the same rate, we are going to see all Americans – including those in rural and underserved areas – with access to a broadband connection. Everyone is going to want to be connected all of the time and from anywhere. Second, we are going to see an explosion in how this broadband access enriches peoples’ everyday lives – the way they work, are entertained, are educated, and even access healthcare. The variety of new applications and services that can be used over a broadband connection is limitless. Using broadband, customers will increasingly be able to access highly customized, individualized service offerings that are tailored to their own needs and preferences. Third, we are seeing the impact that broadband mobility has on the ability of customers to access voice, video and data applications. The customers are in control and they can choose when and where to receive their individualized service offerings. Wireless networks have experienced, and are continuing to experience, exploding growth that can barely keep up with consumer demand. The government cannot create these new and innovative services and applications. But, we do have a role in ensuring that the regulatory environment promotes, rather than stifles, such offerings. This means that, more often than not, the government must get out of the way and trust in the ability of market forces to deliver these benefits to consumers. I can’t predict the future. Nor can I predict with any certainty what the technological innovations of tomorrow will be. I can, however, employ a blueprint for a change in the existing regulatory framework that will allow the technologies of tomorrow to flourish. Thank you for your time and I would be happy to take your questions. # # # # # # 6