Federal Communications Commission

Remarks on Pew Center on the States Panel on “The Role of States in the National Strategy”

July 1st, 2010 by Phoebe Yang - Senior Advisor to the Chairman on Broadband

Sue Urahn, thank you for having me here. I’ve read the report and it’s a much-needed synthesis of the state of play for broadband in the states.

We look forward to seeing much more great work from the Pew Center on the States in the broadband arena.

And Steve Fletcher, it’s also great to have you here from NASCIO. What you’ve done in Utah, streamlining your enterprise social services system – and really, IT throughout state government - and ultimately improving service delivery, is exactly the kind of proactive effort that the National Broadband Plan recommends.

When our team at the FCC began developing the National Broadband Plan, we said that we wanted to be data-driven and to break through traditional silos that may have hemmed in high-level strategic thinking about broadband in the past.

This approach ended up being strikingly apt for the challenge we were facing, because broadband breaks down more silos than any other technology the world has yet seen.

As the columnist Tom Friedman has noted, broadband is a “flattener” that dramatically reduces barriers to connecting with ideas, with opportunities and with other citizens.

Twenty years ago, two friends from different states that wanted to stay in touch might mail each other pen-pal notes, or place an expensive long-distance call.

Today, they can video-chat in real time and book flights online to visit each other in-person – all from the convenience of their smartphone.

But it is important to remember that the “flattening” nature of broadband cannot only create value, but also to constrain value creation, or even destroy value, in certain circumstances.

Broadband isn’t bound by state lines, but state laws and regulations can determine whether or not broadband can create value for the citizens of a state.

This morning, let me suggest a few parts of the broadband ecosystem where this is particularly true – and suggest ways that states might work with each other, and the FCC, to tip the balance from value constraint to value creation.

One key example is the area of licensing.  In 1847, Nathan Smith Davis founded the American Medical Association, one of the country’s oldest national professional organizations. In order to improve the quality of the practice of medicine, Davis argued that the right to license physicians should be transferred from state and county medical societies and colleges to newly formed state licensing boards.

Since that time, the medical technology – and communications between doctors and doctors and doctors and patients -- have changed.

In an era when doctors lugged their black bags on house calls, it took them several days to consult  with colleagues in other states – not milliseconds.

But in an era when doctors use broadband, the relatively low cost of video connectivity means that physicians can diagnose and treat patients thousands of miles away – leveraging particular expertise that is often sorely needed.

This is particularly important for high physician shortage areas and rural regions of the country, which almost every state has. For example, today 27 states have fewer developmental-behavioral pediatricians than they need to meet demand.

But we still rely on the same state-based licensing system pioneered by Nathan Smith Davis over 160 years ago to determine where those pediatricians can perform their good works - at the same time that European thought leaders have begun thinking about moving to transnational medical licensing.

So the Plan calls upon the nation’s governors and state legislatures to revise their licensing requirements to enable e-care, and to collaborate through groups like the NGA, NCSL and the Federation of State Medical Boards to craft an interstate agreement that makes it easier for doctors to treat patients across state lines.

We applaud the early efforts of State Alliance for E-Health, convened by the NGA’s Center on Best Practices, to streamline the licensing processes across states via online tools for quick updates to credentials and other qualifications.

Or take the example of taxes. Currently, businesses face a patchwork of state and local laws and regulations relating to the taxation of digital goods and services. For example, New Jersey and Vermont explicitly tax ringtones delivered through electronic means, but Nebraska only taxes “digital audio works (music).” This begs the question: is a ringtone a digital audio work? Is it music?

And because more and more products and services can be downloaded in a mobile environment, several taxing authorities may try to lay claim to the same transaction. If I start downloading Iron Man 2 on my iPad on one side of the Key Bridge in Virginia and finish in DC, who gets to collect the sales tax on that transaction?

Without greater clarity and consistency across the country with regard to what counts as a digital good or service -- how that good or service will be taxed -- it’s hard for us to create an environment in which innovation in digital products and business models can fully flourish. And it will be hard for entrepreneurs and small businesses to understand the tax obligations they face.

That’s why the Plan recommends investigating the establishment of a national framework for digital goods and services taxation. This framework would not usurp the authority of states to set their own taxation regimes; but much like the Uniform Commercial Code in the past, it could provide a means for moving from value constraint to value creation in our approach to online commerce.

The Plan also suggests reforms to streamline the process of gaining access to rights-of-way.

One of the most significant sources of cost and delay in building broadband networks is the process of gaining access to rights-of-way and preparing those rights-of-way for broadband deployment, a process called “make-ready.”

For large broadband network builds, the rights-of-way process is highly fragmented and often involves dozens of utilities, cable providers and telecommunications providers in multiple jurisdictions. This process remains expensive, and there is no established process for the timely resolution of disputes.

Some states, like Connecticut and New York, have managed the rights-of-way process well, including the establishment of firm timelines to which rights-of-way owners must adhere and direct regulation of the make-ready process. But in other states, it can take half a year to complete make-ready work.

If we want to move from value constraint to value creation, we need to break down barriers that may be standing in the way of broadband deployment.

So in May, the FCC issued a Pole Attachments Further Notice of Proposed Rulemaking o ask for comment on proposed rules to streamline the process.

The Plan also calls for the creation of a joint ROW task force with state and local policymakers to craft guidelines for rates, terms and conditions for access to public rights of way. We intend for that task force to be up and running by the end of September and look forward to working with our state colleagues on crafting an approach to the rights-of-way challenge that will enable more and better networks.

And while we’re on the topic of building networks, it’s worth pointing out that the Plan encourages Congress to clarify that state, local, and tribal governments can build broadband networks themselves.

Much like rural electric cooperatives emerged in the early 20th century to fill the void left when investor-owned electric utilities neglected rural areas in their rush to electrify urban centers
In the absence of investment, local communities should have the right to move forward if they deem it in the best interest of their citizens and their economy.

I’ve only focused on a few elements of the Plan today, but I’d be happy to answer any questions you might have on other parts that are likely to impact states, including the Universal Service Fund, demand aggregation to allow states and localities to take part in federal IT contracts, public safety, consumer protection, or any other topics.

To close, we all know that the states play a crucial role in making broadband accessible to all Americans. The Plan is a launch-pad, not a landing, and we need states to be actively engaged in solving the problem of making broadband available, affordable, and accessible to all Americans. 

As we move forward with proceedings, we’re looking forward to getting your input through the filing process on several specific topics.

We want to learn more about efforts that you have undertaken or contemplated on universal service  and intercarrier compensation, and about state-level efforts to deploy broadband generally, including information on how states are evaluating current Carrier of Last Resort requirements as we shift to IP-based networks.

We want to get your input on infrastructure issues, and the impact of the Plan’s proposed recommendations on traditional wireline carriers.

We’d like to receive more information on state experiences with demand-side initiatives to reach people with disabilities, people on Tribal lands and other underserved groups.

And of course, we encourage you to comment in response to our E-Rate Fiscal 2011 NPRM – e.g., wireless connectivity, our Rural Health Care NPRM, and our Broadband Data NPRM (which will come out in the 4th quarter of this year).

Thanks, and I’m happy to answer any questions you might have.

One Response to “Remarks on Pew Center on the States Panel on “The Role of States in the National Strategy””

  1. John says:

    It seems unlikely more than one taxing authority would be battling over the tax revenue in the download on a bridge scenario you presented. I suspect this would fall under the The Federal Mobile Telecom Sourcing Legislation which allows only those taxing authorities that have jurisdiction over the customer's place of primary use to collect tax on mobile charges. This also presumes that the DC authorities would have some way of knowing that your download was completed in their jurisdiction. That would be a neat trick.

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