Federal Communications Commission

Speech at the Udwin Breakfast Group, Sept. 2, 2009

September 2nd, 2009 by Admin User

“A Framework for Universal Broadband”
Speech at the Udwin Breakfast Group, Sept. 2, 2009
By Blair Levin, Executive Director, Omnibus Broadband Initiative


Thank you Gerry. And I particularly want to thank you for opening up this event to the media.

In July, I gave a speech criticizing the content of the filings for the broadband plan as analytically weak and lacking a seriousness of purpose.

It elicited a number of interesting responses. No one defended the content but many offered different rationales.

The most frequent was no one thought anyone at the FCC would actually read them.

Late one night in August, I got the next day’s trades and read that one lobbyist justified poor filings on the grounds that Julius and I already know what we want to do.

My immediate reaction was, if I know what I want to do, why am I here… at 11 at night…in August?

Why did I cancel my family’s annual week in Maine?

And if Julius knows and he hasn’t told me, he is in big trouble with my family….

But seriously, the problem with that rational is not just that it is factually wrong but that it so misunderstands the nature of the task.

The plan is not a multiple choice test in which we are just going to wait another 167 days and then tell you we pick…b.

Moreover, if the only choices are those in the current record, there is no way to meet the congressional directives.

The math does not add up.

We have to develop a significantly more detailed, holistic and creative approach to the many challenges on our plate.

But there was a response to that speech I thought both fair and important; that we needed to be clearer about what we are looking for.

So what I want to do this morning is to clarify a bit.

Let’s start by acknowledging of the chicken and egg problem—the congressional mandate is broad.

We do not want to stifle any creative thinking, so we appropriately start with broad questions.

But to write a plan, we eventually have to narrow in on practical solutions.

We are now focusing on baseline facts and problems. We have held about 20 workshops and have already plans for a half dozen or so more later this month.

Some went great, some not so much, but we learned from everyone.

We have also started putting out public notices asking follow up questions so that we can get more detailed answers to the most vexing questions.

We have a long way to go in a very short time but progress is being made.

But to complete the job we need more.

We have heard the policy arguments but need the data to support them.

If you think the goal should be to connect everyone to a certain level of broadband, tell us how, how much and where the money should come from.

When you tell us that a technology passes a certain number of homes, tell us how you got to that number so we can verify it.

And as we move forward let’s remember the fundamentals.

At the heart of the congressional mandate is the principle that broadband carries with it positive externalities for our country that can only be maximized if everyone is connected and everyone uses it.

To the extent that universality is not achieved, our country has both an economic and social deficit.

The purpose of the plan is to chart a course to efficiently capture those externalities and erase those deficits.

A related principle is economic growth depends on foundational infrastructure and that broadband will be such a foundational infrastructure and is therefore essential for driving economic growth.

The plan should chart a course to assuring the building of that foundation. And universality is important to assure that that growth is wide spread, throughout our country.

So how should we think about the best strategy for capturing those externalities and driving that growth?

There are a few things which seem clear and non controversial to me, but to a remarkable extent, were not common in the record.

First, in capturing those externalities and building that foundation, the goal is not a static number but a dynamic process.

While we need to have goals, we should understand that a single number is in the long run, likely wrong. Rather, we want to think about mechanisms that drive a process in which we are constantly improving the entire broadband ecosystem.

Of course the market does a lot of that.

But, as is historically true for foundational infrastructure, the market will not capture all the externalities or build out the infrastructure to optimize for economic growth for society.

So there are limited, but important, government actions that have proven beneficial for society.

When one thinks of the best of the government policies in telecommunications—I would argue that Carterfone, the enhanced service provider exemption, program access rules, and the reduction of wireless to wired terminating access charges would be on the list—none were developed to achieve a static goal. All were designed to enable a dynamic process of innovation and improvement.

All were about unleashing a process rather than reaching an arbitrary goal.

All unleashed innovation by freeing up underutilized assets.

That should be our North Star as well.

So how do we unleash a process in the broadband ecosystem? The basic dynamics of that ecosystem are pretty clear.

Access, or deployment, drives adoption, which drives applications, which in turn drive more access and adoption, which drives better applications, and so the cycle continues.

The faster the cycle, the more economic growth we’ll enjoy. So the logical strategy is to unleash forces that quicken the cycle, and remove forces that slow the cycle.

So how do we do that?

To start accelerating that process of capturing those externalities and building that foundation, we want more deployment and adoption.

To do that we either have to increase the revenues associated with the ecosystem or we have to decrease the cost of the inputs required to produce more activity in the ecosystem.

That is a generic statement and I would caution anyone from drawing any conclusions about where we are going as there are a number of revenue streams and a number of inputs that we are required, as a matter of due diligence, to look at.

But for example, and this is already clear from the record, a key input is spectrum and everyone agrees, there is not enough of it.

Moreover, demand curves from new uses by smart phones suggest a massive increase in demand ahead for that input.

Indeed, CTIA has already declared that the lack of commercial spectrum will create a crisis for this country.

But we need details on where new spectrum will come from.

There are other inputs, such as fiber and Rights of Way, that should also be looked at.

Another example is adoption. Pretty much everyone agrees we need more of it and the government has a role with certain communities of non-users, to assist in helping people find a means to adopt. That will both cost money but also bring more revenues to the ecosystem.

Again, we need details on such programs and how to pay for them.

So at the core of our process is a search for where the government, consistent with its role, can find ways to increase revenues and decrease the costs of inputs associated with the broadband.

That is where we need significant assistance—in doing the hard work of figuring out how, consistent with the government’s role, to efficiently do that.

In doing so, one size will not fit all.

Whether we are looking deployment, adoption or the utilizing broadband to advance the dozen plus national purposes specified by Congress, we have to do what any serious analytic work would do—break the problem down into meaningful pieces.

The problems of deployment in the rural prairies are different than the problems of deploying in rural West Virginia. The low adoption rates among Spanish dominant Hispanics have a different cause and remedy than the low adoption rates among rural low-income persons.

Market segmentation is not a glitzy task—though fortunately, some of the people we have brought on board think it is so please, please don’t tell them otherwise—but it is essential to putting us in a position to capture the externalities and build that foundation.

As we look at the underlying economics and search for solutions, we have to keep in mind a few other principles.

All choices involve trade-offs. There is no solution that allows us to have our cake and eat it.

There are not unlimited funds.

We have to be hard nosed about how dollars are used to capture those externalities and build that foundation.

And as we look at proposed solutions we have to ask, can they be effectively implemented?

While there are a number of ways of addressing adoption, for example, do the proposals scale?

While there are many proposals to connect all the unconnected communities, which ones come with sustainable revenue streams?

We don’t, for example, want to suggest solutions where we solve a cap ex problem but ignore an op ex problem that results in the benefits of the solutions never being realized.

We can, and should, aspire to greatness and leadership in the world but aspirations are not self-effectuating.

Let me close by saying that I know many of you in this room. As we run at full speed over the next 168 days, I look forward to having candid, tough conversations about how to move forward.

I do not know what the plan will recommend but it’s probably unlikely any of you will be completely happy.

Life generally, and Washington D.C. specifically, doesn’t work that way.

But if we cast aside narrow self-interests, dig deep into the data, and approach the problems in a new way, we can propose a plan that will capture those externalities, build that foundation and make our country better and stronger.

Thank you.

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