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Remarks of Assistant Secretary Victory at the NARUC National Summit on Broadband Deployment II

On the Path to Making the Broadband Vision a National Reality

"On the Path to Making the Broadband Vision a National Reality"

Remarks by

Assistant Secretary Nancy J. Victory, U.S. Department of Commerce

at the

NARUC National Summit on Broadband Deployment II

Hyatt Regency Crystal City

April 29, 2003

Carpe diem, as we know from the movie, "The Dead Poets' Society," means "seize the day." Today, the stars and moons have come into alignment to present a unique window of opportunity - a moment when the choices we make and how well we make them can have profound consequences. We are at that point in time when our actions can define the shape of things to come for our citizens, our country and our world.

Broadband is not about some grubby industry food fight over sharing, collocating or unbundling. Broadband is about finding the keys to unlocking a fresh flood of investment, innovation and competition. Broadband is about building a foundation for a dramatic leap forward in how we communicate, how we educate, and how we live our lives. Accordingly, our broadband actions must be as broad as our broadband vision.

President Bush has "seized the day" by calling for the removal of barriers to broadband deployment at all levels of government and by emphasizing that, "[i]n order to make sure the economy grows, we must bring the promise of broadband technology to millions of Americans." Secretary Evans has mobilized the Commerce Department to achieve the President's goal. Under Secretary of Commerce Phil Bond has been working long and hard to tackle the technology challenges to broadband deployment, and, to reshape the Commerce Department team into a modernized and nimble organization that reflects the convergence of tech and telecom. At NTIA, my part of the Commerce team has been focused on targeted telecom regulatory issues and initiatives that advance the broadband ball without duplicating or distracting from efforts undertaken by our federal and state colleagues.

As President Bush and Secretary Evans have recognized, we are on the verge of a tectonic shift in telecom and technology. The circuit switched analog world of the past is rapidly morphing into an IP, packet switched digital world of the future. The intelligence once embedded in the telecom network is migrating to the edges of the network. And, the network itself is being transformed from a wireline network into a collage of wired and wireless networks. Tech and telecom, wired and wireless, services and products are becoming rapidly intertwined and inextricably linked.

For its part, the FCC has been working hard to "seize the day." In its Triennial Review decision, the FCC has created a framework for the broadband future. The Commission has taken the bold decision to remove future fiber-based broadband from the legacy rules applicable to today's narrowband, copper wire.

FCC Chairman Michael Powell has expressed his belief that the decision on fiber-based loops "will stimulate and promote deployment of next generation infrastructure, bringing a bevy of new services and applications to consumers." Although, like everyone else, I'm anxiously awaiting the full text of the FCC's decision, I am encouraged that the FCC recognizes the importance of broadband to our nation's economy and I look forward to working with Chairman Powell and his fellow Commissioners to fulfill the President's goal of widespread broadband deployment.

Now the time has come for you, the state commissioners, the state commissions and NARUC to "seize the day" in furtherance of our country's broadband future. The FCC's Triennial Review order places you, the front line regulators of telecom, in a pivotal role in managing the transition from the legacy narrowband world to the future broadband world. As they say, "you asked for it, you got it." We have great confidence in your commitment to doing the job and doing it right.

Today, I would like to provide you with a quick progress report on where things currently stand in the marketplace - the availability, the competitive alternatives, and the take rate for existing consumer choices. The second part of my broadband progress report will focus on what the Bush Administration, Secretary Evans and my NTIA team are doing to fulfill the President's commitment to remove barriers to broadband deployment at all levels of government. Last, but not least, I will give you a quick overview of work in the spectrum arena to open opportunities for everything from the wireless "third screen" to a wireless "third line" for broadband to the home.

Progress Report - Broadband Is Gaining Momentum.

As Americans desire more sophisticated services, they recognize that they need faster, bigger pipelines to get those services. Analysts have noted that despite the slow economy, consumer demand for broadband was remarkably strong in 2002, when the U.S. market grew by more than six million subscribers. As one analyst (James Penhune, of the Strategy Analytics Global Broadband Practice) recently stated, "Over the next five years, high-speed access will become the norm for residential Internet users as broadband becomes more widely available, more flexibly priced and a more powerful vehicle for new kinds of entertainment, content and services." To quote The New York Times, the difference between a high-speed broadband connection and a regular phone connection is the difference between the movies "Speed" and "Driving Miss Daisy."

Indeed, once consumers experience that difference, there is no going back. According to Jupiter Research, the number of U.S. households using cable modems, DSL, or other broadband technologies to connect to the Internet will increase by more than 40 percent during 2003, when the projected installed base of residential broadband subscribers in the United States will grow from 17.9 million homes to 25.3 million homes. According to Strategy Analytics, an estimated 27 percent of all U.S. Internet homes presently use broadband connections, with expectations of more than 70 percent by 2008 -- that's approximately 64 million subscribers or 59 percent of all U.S. homes. Global sales of broadband modems in 2002 increased by 52 percent to 26.3 million units, and Strategy Analytics predicts annual sales of 60 million units a year by 2008, representing an average growth rate of 15 percent.

The cable modem and DSL horse race for the hearts and pocketbooks of broadband customers is well underway. Industry analysts forecast that 16.1 million homes will use cable modems by the end of 2003, while approximately 7.9 million homes will use DSL connections, and another 1.3 million homes will get broadband through other emerging technologies such as fixed-wireless services, two-way satellite links and fiber to the home. DSL's "broadband in a box" and cable's high speed modems are being aggressively marketed. Verizon, for example, recently noted plans to expand its mass-market broadband capabilities by some 30 percent this year.

Utility companies are also trying to make their way into the race. Trial projects to provide broadband over power lines are taking place now in Maryland, Ohio, Pennsylvania, and Missouri. In addition, AOL has just launched its $35 million marketing campaign for its high-speed offerings for the first time.

Wireless networks and devices are increasingly a part of the future of broadband. According to Jupiter Research, more than half (57 percent) of U.S. companies already support 802.11 networks. In addition, another 22 percent of U.S. companies plan to implement and support this technology over the coming year. Jupiter Research also found that small businesses -- those with less than $10 million in annual revenue -- are the deployment leaders, with 83 percent stating that they either support 802.11 networks today or plan to in the next 12 months. In contrast, 71 percent of large U.S. businesses (defined as those generating $100 million or more in annual revenue) are supporting 802.11 networks or will do so in the next 12 months.

According to Dataquest, the wireless local area network industry will continue to experience strong growth through 2003, with revenue reaching $2.8 billion -- up from $2.1 billion in 2002. Dataquest predicts that global wireless LAN shipments will total 26.5 million units in 2003, up from 15.5 million units in 2002, and that the market will experience healthy growth through 2007. The North American market will remain strong, while demand for mobile computing devices in the Asia-Pacific region is anticipated to increase.

Progress Report - Removing Regulatory Barriers.

To promote broadband deployment here in the United States, the Bush Administration and my boss, Secretary Evans, has first and foremost focused on fiscal policies that encourage job creation and economic growth. Bruce Mehlman, the Assistant Secretary for Technology, detailed some of these for you yesterday, ranging from tax policies to research and development to e-government and federal procurement initiatives.

The Bush Administration has also taken steps to ensure that the right regulatory structure for broadband is put in place. Market analysis shows that broadband services get deployed more rapidly and are more affordable where competition exists. The Bush Administration has been working hard to encourage full and fair competition that leads to new investment in broadband networks by all industry segments, using a variety of technologies. We must remove barriers and open new opportunities for wired and wireless providers, incumbents and new entrants.

A New Regulatory Regime. As I noted earlier, the Commission has taken the bold decision to remove future fiber-based facilities from the legacy rules applicable to today's copper wire. A new framework is being created for a new future. Obviously, I am compelled to say that I am eager to read the decision, even though its sheer length and complexity is sure to knock out more than one evening of bedtime reading.

While much has been made of the spirited policy differences among the FCC Commissioners, this focus on differences has tended to obscure the fundamental fact that a new path has been charted for new advanced facilities. The decision appears to mark a movement away from government intervention to allow the marketplace - not regulators - to drive the direction of broadband in our country. This was a collaborative, consensus effort of the entire Commission majority.

Reforming the Rights-of-Way Process. One of the ways that the Administration has been promoting broadband is not high-tech at all - it's reforming the rights-of-way process. Rights-of-way: the term conjures up distant memories of dusty law books and arcane legal terms like easements, leaseholds, and appurtenances. As you know, however, in the telecom arena, rights-of-way is about digging trenches, laying fiber, constructing towers, submerging cables, and all of the other things necessary to build-out and to upgrade the physical infrastructure for modern telecom networks.

It can all sound pretty basic - yet, I can think of no issue more fundamentally important to the widespread deployment of broadband, and just about any other network technology, than rights-of-way.

Since last spring, NTIA has been focusing considerable attention on rights-of-way management. We have participated in NARUC's rights-of-way discussions, particularly its Rights-of-Way Study Committee. I would particularly like to commend the Committee for its leadership on this issue. NTIA has also met with representatives of the cities and their associations, such as the National Association of Telecommunications Officers and Advisors and the National League of Cities, to identify means for improving and simplifying current processes where needed, while ensuring sufficient flexibility for municipalities to best serve their citizens.

We have worked with state and local officials and associations as well as industry to develop a website on rights-of-way issues, success stories, and resources at the state and local level. The website has yet to be unveiled - it's going through the clearance process now. But I think that I can give you a sneak preview of what it will look like.

First, we are going to have a collection of rights-of-way success stories. Although we have heard many concerns about access to rights-of-way, we also know that many communities across the nation have developed solutions that benefit all stakeholders: state and local governments, the communications industry, and consumers. Thus, we will be providing summaries of these solutions or "success stories." We will also be including contact information for government and industry representatives for each success story, and we encourage interested parties to seek additional information from these representatives. Although we realize that the solutions may not be successful everywhere, we believe that they provide useful examples that other communities may want to emulate.

Second, we will have compiled a matrix of rights-of-way laws in all 50 States and the District of Columbia. Rights-of-way statutes often vary greatly from state to state. The matrix provides citations to the relevant statutes, together with descriptions of key statutory provisions relating to jurisdiction, compensation, timelines, nondiscrimination, mediation, and condemnation.

Finally, we will provide links to other rights-of-way resources. Many state and local agencies, industry coalitions, and other stakeholders have issued a variety of useful materials regarding rights-of-way. Through the various resources on this website, we hope to advance the discussion on rights-of-way and to promote the further deployment of broadband services.

And while state and local rights-of-way policies will be crucial to widespread broadband deployment, we're also acutely aware that the federal government manages important rights-of-way over millions of acres of federal land. To make sure we're doing our part to eliminate any unnecessary impediments in this area, the Administration has formed a Federal Rights-of-Way Working Group - headed by NTIA - which includes representatives from all of the federal agencies with major rights-of-way management responsibilities.

The Federal Rights-of-Way Working Group has focused its efforts in four basic areas:

(1) Information Collection. Broadband providers operating across multiple jurisdictions are often required to supply the same information in applications to numerous permitting authorities. The Working Group is looking for ways to streamline and standardize applications to save time and reduce costs.

(2) Timely Process. Broadband providers have an important need to obtain rights-of-way permits on a timely basis. Otherwise, undue delay can increase the costs of deployment and can sometimes prevent deployment altogether. The Working Group has been examining rules and procedures that help ensure timely and appropriate action on both rights-of-way applications and appeals. One thing we are considering is whether identification of a lead agency can help expedite the process.

(3) Fees. This is perhaps the most contentious issue in the rights-of-way debate. The nature and amount of fees charged to broadband providers vary widely across different jurisdictions. We are scrutinizing various fee structures, looking for approaches that are appropriate, reasonable, and do not unfairly impede the deployment of broadband networks.

(4) Compliance. We recognize that rights-of-way managers have a legitimate interest in ensuring that broadband providers take appropriate action to repair and maintain the rights-of-way that they use. We are looking at examples of remediation and maintenance requirements that accomplish those important objectives without placing undue burdens on broadband providers.

In addition, we have conducted several outreach meetings. First, we met with industry representatives, both large and small, wireline and wireless, terrestrial and marine. Next, we met with state and local officials to get their point of view. Ten days ago, we met with environmental, historic preservation, and other interest groups.

Working in subcommittees, the Working Group has closely examined federal rights-of-way practices and policies, looking for ways to improve the process for both industry and government. We want to see the federal government lead by example, and create a model of cooperation that others can emulate. The Working Group is on track to issue a report this summer with our findings, as well as recommendations for how the federal government can reform its approach to rights-of-way to help bring the promise of broadband to all Americans.

Ensuring Spectrum "Highways" for New Wireless Broadband Services and Products

One of the factors contributing to the sure and steady growth of broadband in the United States is a set of spectrum policies that support the broadband world of the future. Let me highlight a couple of key spectrum policies that begin the march down the path to making the vision a reality.

(1) The Third Screen

This year's wireless convention was marked by enormous enthusiasm for transforming the plain old cell phone into what Motorola's CEO Chris Galvin calls "the third screen" - a multi-media device that will begin to rival the television set and the computer terminal for consumer "eye balls" and consumer "bucks." The cell phone has become the instrument of choice for interactive games, video streaming, digital photography and advance business applications.

At NTIA, we have been working hard to ensure that spectrum is available to support the advent of advanced mobile services. 3G spectrum allocations, spectrum relocation legislation and the 5 GHz Wi Fi spectrum allocations are the important steps down the path to bringing enhanced capabilities to consumers. Let me provide you with a brief update on the progress to date.

For NTIA, 3G posed the question of whether and how the federal government could make frequencies available for Third Generation advanced wireless services in the United States. With guidance from the President, the U.S. Department of Defense, the FCC, NTIA, and the private sector sat down and had honest discussions on what was doable and what was not. As a result of these candid discussions, NTIA and the FCC announced that an additional 90 MHz of spectrum would be made available to accommodate advanced mobile (3G) services and articulated a plan for how to accomplish this. One of the basic premises of this plan was that the allocation would be technology neutral and thus the private sector could decide the technology that would ultimately be used. It was also imperative that the spectrum provided not be generation-specific, thus enabling the marketplace to determine whether the spectrum is going to be used for 2G or 3G or 4G or whatever lies ahead.

(2) Spectrum Relocation Fund

Spectrum relocation fund legislation potentially embodies another significant step toward facilitating the deployment of new wireless broadband services and products. The current process for compensating federal agencies that relocate to make spectrum available for commercial use is time consuming and resource intensive for both government incumbents and auction winners. A spectrum relocation fund, however, could streamline and shorten the process for reimbursing incumbent government users, which in turn, could facilitate their relocation to comparable spectrum and thus expedite the opening of the original spectrum to new services and technologies.

Under the leadership of House Telecommunications Subcommittee Chairman Upton, such legislation has been introduced and recently marked up by the subcommittee. The Administration worked with Chairman Upton to craft a bill that provides: (1) full reimbursement of all reasonable relocation expenses for government users; (2) a streamlined mechanism for drawing down funds; and (3) certainty for auction bidders and incumbents. During the mark-up of H.R. 1320, both House Commerce Committee Chairman Tauzin and Ranking Minority Member Dingell expressed support for the bill. We expect the full committee to address the bill tomorrow.

And in the Senate, Senator McCain has introduced a companion bill. We look forward to working with the members of the Senate Commerce Committee to move forward expeditiously on that legislation.

(3) 5 GHz

WiFi and its offspring on steroids, WiMax, offer new ways to bring broadband to users. Earlier this year, the U.S. Government and the private sector also reached an agreement on how to make an additional 255 MHz of spectrum available for unlicensed use in the 5 GHz band -- resolving another complex spectrum management issue that posed a potential barrier to deployment of devices using the 802.11(a) Wi-Fi technology. For nearly a year, the players at the table could not agree on the technical parameters that would permit sharing between the new unlicensed devices and incumbent operations. Government and industry were able to find common ground and a consensus approach that paves the way for industry to bring these products to the marketplace.

Last, but not least, there is a pressing need for renewed examination of the potential for wireless to become a third broadband "line" to the home. In furtherance of that purpose, it is essential for us - as spectrum managers - to understand the spectrum requirements and the practical realities of trying to use spectrum-based options to compete with cable modems, DSL and fiber to the home. NTIA in conjunction with the FCC and the State Department, will be holding a Washington, D.C. summit on May 12th and 13th to look at the issues surrounding advanced wireless technologies. We hope to use that event to gain the benefit of the experts' insights and experience.

Carpe Diem - Teamwork to Seize the Day.

In the final analysis, we need teamwork to make the broadband vision a national reality - teamwork at the federal level, teamwork at the state level and teamwork with the industry. In particular, it's long past due for the key industry players to rise above their parochial interests and to simply "get on with it." We all must work together to ensure that America's citizenry continues to enjoy the best that tomorrow can offer. There are many speed bumps and potholes still ahead in making the vision of broadband a national reality. Every one in this room is an indispensable part of navigating our way to a bright future for the American public.

Thank you.