Federal Communications Commission

The Fourth Challenge

April 21st, 2010 by Admin User

[Omnibus Broadband Initiative Executive Director Blair Levin prepared this speech April 30, 2010 for delivery at a forum at the Stanford Institute for Economic Policy Research at Stanford University.]

It’s getting to be graduation time, both for the class of 2010 and for those of us who spent the last year working on the National Broadband Plan.

So this speech is kind of a valedictory address, a capstone that implores policymakers today—that’s us—and in the future—that’s you—to confront the most critical challenge to our national broadband future.

Before I discuss that challenge, I want to thank all of you for hosting me here today. 

Thanks in particular to Greg Rossten for that kind introduction.

Last June, I rejoined the FCC to assist in writing the National Broadband Plan.

Already, one-third of the time Congress had allotted to write the Plan had passed. There was no staff dedicated to its completion and it had no clear budget.

To be clear, I expect no sympathy, because this is Silicon Valley, where projects short on time, people, and money are standard protocol.

Moreover, we had two assets every VC would recognize as the most important for any start-up: a great mission, and a thick stack of resumes of people willing to work long hours for low pay.

I’m here with two of those people today. Phoebe Yang provided extraordinary leadership for the broadband team. She’s a Stanford Law alum and her intelligence, dedication, and affability speak volumes for your school.

Phil Bellaria is also here from our team. He led our special ops unit—tackling big, often controversial issues, including our proposal to repurpose some broadcast spectrum and to open up set-top boxes. Diligence and humility like Phil’s are often hard to come by in Washington, and we all owe him for his great contributions to the Plan.

In addition to Phoebe and Phil, hundreds more at the FCC contributed to the Plan. With their help, we found that for the Plan to be successful, we initially had to confront three challenges.

The first challenge was to meet the Congressional Directive.

It’s unusual for Congress to ask an agency for a Plan.

It’s even more unusual for Congress to ask an agency for a Plan that implicates a lot of activities outside the normal jurisdiction of that agency.

But in this case, Congress did, and with good reason: broadband networks aren’t valuable in and of themselves. 

They derive their value from how we use them.

So Congress asked for a Plan that not only outlined how to bring broadband to every American, but also to set out how to use broadband to advance a series of national priorities, including education, health care, energy efficiency, job training and public safety, among others.

This was a broad mandate; one we could have achieved a number of different ways.

Some suggested the plan stay at a high level of principle, shying from controversy and limiting its recommendations to platitudes everyone would applaud.

But in the long-term, that would not have resulted in the kind of action Congress wants and the country needs. 

So we instead made concrete recommendations— recommendations that are already setting the gears of government into action, with over 60 new rulemakings announced at the FCC, a number of bills being drafted in Congress, and the establishment of an interagency implementation group out of the White House.

But to determine those recommendations—and ultimately, execute them—we needed to confront a second challenge: transforming the FCC.

We needed to collect and present data completely differently, including being candid about where the data was flawed.

Instead of just gathering data and being the sole source of analysis, we needed to become a platform for data gathering and enable a broader community to analyze its implications.

Instead of just announcing a decision at the end of a process, we needed to publicly discuss throughout the process the key data points and issues, and the direction of our thinking.

Instead of just discussing those issues behind closed doors with selected lobbyists, we needed an open debate in public. We needed input from a wide array of interests. We needed to hear more about technology and economics, and less about politics.

We did all those things, but here too, that transformation would not be sufficient unless we confronted a third challenge: the need to galvanize activity beyond the FCC.

Problems like adoption, connecting anchor institutions, transparency could only be successfully addressed if there were organized, non-FCC groups focused on the long-term mission.

And since the Plan was released, we’ve seen a number of these groups spring up; a public-private-non-profit partnership to promote adoption by older adults; another to make discounted equipment, service and training available to low income Americans; a coalition to provide broadband tools to small businesses; a contest to develop broadband applications with a social purpose; and a consortium developing creative ways to upgrade institutional connectivity to community anchor institutions.

Meeting all three of these challenges were critical—and if we hadn’t met each of them, the long-term prospects for the plan would have been nil.

But the most important, and most daunting, challenge still looms.

I’m going to spend the balance of my time today talking about this fourth challenge: how to realize the transformative power of broadband.

In some ways, this is a task tailor-made for the United States.

We have proven time and again that we know how to invest to seize the future—as with railroads and electricity in the 1800s and highways and communications networks in the 1900s.

One of the distinguishing characteristics of this country over the past two centuries is the way we embrace the future.

But we haven’t yet embraced broadband.

For example, in nearly every metric used to measure the adoption of health information technology (IT), the United States ranks in the bottom half among comparable countries, even though electronic health records could alone save more than $500 billion over 15 years.

Much of the electric grid is not connected to broadband, even though a Smart Grid could prevent 360 million metric tons of carbon emissions per year by 2030, equivalent to taking 65 million of today’s cars off the road.

In education, online courses could dramatically reduce the time required to learn a subject and greatly increase course completion rates, yet only 16% of public community colleges—which have seen a surge in enrollment—have the high-speed connections such institutions need.

Nearly a decade after 9/11, our first responders still require access to better communications.

Why are we having a problem capturing this opportunity?

One answer can be found in the 1990 paper by Stanford Economics Historian Paul David, “The Dynamo and the Computer.” 

His paper explored why major innovations in microelectronics, fiber optic communications and computing had not yet shown up in productivity statistics.

He pointed to a “diffusion lag”—that it takes time for one technical system to replace another.

He pointed out that factories didn’t reach 50% electrification until four decades after the first central power station opened.

After all, why invest in electricity when you’ve already built a bunch of factories that use water power?

Even when electricity made it into factories, it didn’t cause a quick transformation, as it wasn’t profitable to replace “production technologies adapted to the old regime of mechanical power derived from water and steam.” 

In other words, the problem wasn’t just getting the electricity.

It was overcoming the cost of completely reengineering factories and processes to benefit from electric power.

In preparing the Plan, we learned that certain sectors face significant obstacles in reengineering processes to fully realize the benefits of broadband.

It could be that time will solve that problem, and it may, but we need to recognize the enormous potential cost, one that can be seen by reading the 1997 business classic, The Innovator’s Dilemma.

In that book, Harvard Business School Professor Clayton Christensen examined the difficulties large companies had in innovating.

One of the patterns he pointed to was how well-established companies develop their systems to most efficiently meet their clients’ current needs.

Reluctant to cannibalize their own products, these companies are late to employ new, more efficient, radically different approaches to meeting their clients’ needs.

For example, he notes that five-and-dime giant Woolworth’s was a leader in the retail market for many years. 

Yet it could not capitalize on the discount store trend, unable to abandon its high margin, low inventory turnover strategy.

Innovation instead happened from the outside—which is why today, Wal-mart is the world’s largest retailer, while Woolworth’s has been out of business for more than a decade.

The United States, too, has led the world for at least several generations.

But past leadership does not guarantee future success.

In fact, as Christensen teaches, past leadership threatens future success.

We don't want to be the Woolworth’s of the 21st century.

As we looked at broadband in America, we could see elements of both diffusion lag and the innovator’s dilemma threatening future American leadership.

Certainly, competitive markets will play the primary role in driving enterprises, both public and private, to take advantage of the opportunities broadband creates.

So we targeted areas where we thought government could effectively act to improve the competitiveness of a market.

As examples, I’ll focus on a few of the sections Phil spearheaded. 

We recommended opening set-top boxes to greater competition and innovation.  We believe this will stimulate private investment in the device market, of course.

But we also believe that an innovative set-top box market could drive the convergence of TV and the Internet, increasing bandwidth demands and, ultimately, driving greater private investment in networks, too.

What’s more, we made a number of recommendations on spectrum that we believe will drive private investment. For example, partly as a result of our planning process, the FCC clarified its rules, which encouraged an owner of MSS spectrum to commit to building a new 4G network. That commitment that will require billions of dollars, create tens of thousands of new jobs and will represent the first new facilities-based entrant in the broadband space in nearly a decade.

There are many uncertainties, but that single change could have a great impact on innovation and competitiveness in the broadband market.

The impact may expand beyond the wireless market as greater competition could produce price points that cause low-end fixed providers, generally telcos, to reduce prices or upgrade their own networks, and in turn put greater competitive pressure on cable providers utilizing DOCSIS 3.0.

No one can be certain how this will play out—which is one reason why the plan has specific recommendations for what data needs to be gathered to monitor the market—but any impact will be better for private investment than the status quo of the spectrum sitting unused.

We also suggested rule changes necessary to use currently unutilized rural spectrum for backhaul.  This should reduce the transport costs in rural America—providing still greater incentives for private investment in rural broadband.

We also sought to stimulate innovation in wireless business models such as secondary and unlicensed models.

Over the next decade, mobile broadband will likely be a critical platform for productivity gains and innovation throughout the entire economy.

If we use our spectrum less efficiently than other countries, our businesses and consumers will pay more for worse service, discouraging investment across the economy.

Spectrum is likely to be the single most important piece of the Plan for driving private investment, and overcoming diffusion lag and the innovators dilemma. 

But as with electricity before, it won’t be adequate to just get fast broadband to every person, business, and community institution.

If we are to change the way America does business, we need to realign our processes for the possibilities of broadband.

In many cases, outdated, misguided regulations are hindering the development of broadband applications for our most critical national priorities. 

Benefits aren’t online; government data is rarely online; few policy processes engage the public the way ours did; our public safety networks still don’t utilize broadband capability.

As I noted before, in health care the United States lags behind comparable countries in using health information technology, which could decrease hospitalizations, improve quality of life and save hundreds of billions of dollars in the coming decades.

But regulations today hinder health IT:  doctors are not certified to practice across state lines. Telemedicine, remote monitoring, remote diagnostics, and more are face reimbursement difficulties.

In education, one study suggests that incorporating online tools and customized educational material into the classroom enables students to master the same content in half the time.

But few students currently have access to such material - the result, in part, of outdated teacher certification and course accreditation requirements, outdated approaches to the use of copyrighted materials for education, and an outdated textbook market.

Changing these rules is part of what we need to do to address this fourth challenge.

But the bigger part of that challenge is refocusing our public dialogue on how to seize the future.

I’ll close with an example.

In the past few months, we’ve heard a lot about textbooks in Texas. 

Countless hours of debate and indignation and abundant columns in newspapers and blogs have been dedicated to whether Texas schools should teach about the Contract for America and John Calvin.

I don’t mean to dismiss these questions—they are, no doubt, important to get right. 

But while we focus on these questions, we’re missing bigger, far more important ones. 

Why are we still using ink-on-paper textbooks?

Why are we still using a medium that can only be updated only occasionally, at the cost of millions of dollars, instead of instantly, at the cost of the tap of a keyboard?

Why are we still using a medium that can’t integrate easy access to videos, sounds, reference guides and other resources we know help students learn?

Why are we still using a medium that can’t undergo constant assessment and improvement, that can’t provide materials tailored to an individual students needs?

We ought to be leaders in developing a completely new category of broadband-delivered educational content, content that could resemble textbooks as closely as the movie Avatar resembled an old radio program: something wholly different; wholly new—an immersive, almost participatory experience.

And we ought to be the leader in using broadband to reinvent how we deliver health care, public safety, and other government services.

But instead, I fear we’re still suffering an innovator’s dilemma: spending all our time trying to optimize the methods of the past; ignoring the ways we could fundamentally change them for the better.

For us at the Plan and for many of you, it’s getting to be graduation time, and any good valedictory address issues challenges to graduates. 

This is our challenge as a country: to ask and answer these bigger questions, to realign these policies and processes, to realize the potential of broadband, to transform this country, and to continue to lead the world in the 21st century.

Thank you.

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