> **A Regulatory Framework for**
>
> **Convergence and Competition**

**An Address by**

**The Honorable Kathleen Q. Abernathy Commissioner,**

**US Federal Communications Commission**

**The India Television Summit 2005**

**Mumbai, India**

**September 29, 2005**

It's a pleasure to be with you today to discuss a subject that's very
much on the minds of regulators throughout the world in this day and age
of digital convergence. It goes by different names at different times:
regulatory reform, regulatory restructuring, developing new regulatory
paradigms. But whatever name it goes by, it all comes down to the same
thing: how best to adapt government *regulation* to the *reality* of new
technologies.

The rapid growth of digital technology is driving convergence in telecom
services and in the companies that offer them. Everywhere in today's
world we see the evidence of this twofold convergence, as formerly
separate service markets morph inexorably into one another.

Cellphones that began by offering voice telephone service now provide
data services like email and text-messaging as well as audio and video
programming. Computers that initially provided data services now offer
voice telephone service. Cable TV and direct-to-home satellite companies
that formerly provided multichannel video service now offer nonvideo
voice and data services, and broadcast TV and radio stations are only
beginning to determine how to best use their digital channels.

Small wonder, then, that this digitally-driven convergence in telecom
technology is also driving the convergence of telecom companies.
Converged services make converged companies economically rational and,
that is why in the US we are seeing a seemingly endless progression of
industry mergers and acquisitions.

What is the appropriate role of the regulator in this new world? We are
confronting a world that is developing in ways that were unforeseen and
that remain, to a considerable extent, unforeseeable. How do we conform
our own structures and processes to this ongoing convergence of
services? To what extent, if any, are the old approaches to telecom
issues suitable to the Digital Age? How do we accommodate and embrace
changes in technology and economics that have few reference points in
existing law or regulation?

All excellent questions, and all these excellent questions demand
answers. And yet, the fact that regulators all over the world are asking
these *same* questions underlines the wisdom of the old saying that
those who understand everything must be misinformed.

For the truth is, no one today can authoritatively say how, or when, the
ongoing digital transformation will finally resolve itself. We cannot
predict with any certainty how many dominant providers of converged
voice, video and data services there will ultimately be, because we
cannot finally predict what packages of services consumers will demand
and what prices they will be willing to pay. So, while we can perhaps
understand some of the reasons why existing markets are changing, we
cannot yet say definitively what the ultimate shape of things will be.
And the digital transformation will vary from country to country
depending on population density, economic conditions, geography, and
governmental involvement.

Given all these variables it is impossible beyond a point to say that
any one regulatory framework is clearly better than another. For
example, even in simpler times when monopolists dominated and
broadcasting, cable TV, telephones, and satellites could safely be
regulated *along*, rather than *across,* industry lines, debates went on
in the US over the proper regulatory framework for telecommunications.

This is not to say that because there are no easy answers there are no
answers at all. In fact I think most regulators would agree that new
digital technologies hold great promise for delivering greater
connectivity and improved economic conditions. Broadband connections can
erase distances, dissolve geographic isolation and link citizens to
government services.

Therefore, my job and the job of other regulators is to create a
regulatory environment that provides incentives for investment in new
digital technology and broadband networks and to adjust our regulatory
frameworks to accommodate this revolution. Regardless of whether the
regulator is a single person, a board, or an agency convergence and
competition impose four important regulatory responsibilities:

The first of these responsibilities is to replace extrinsic regulation
with trust in the market. Why, because a fully-competitive market is the
best protection against harm to consumers and providers. In the US
digital convergence is spurring a level of interindustry competition the
likes of which we have seldom seen before. While the growth of
competition will vary from country to country the goal should remain
constant; that is to gradually step away from micro-managing the
industry and trust the discipline of competition to restrain prices and
spur innovation. We must adjust, alter, or reform our regulatory codes
to dismantle unnecessary rules that may have been appropriate in
traditional markets emerging from monopoly but which may stifle
innovation and competition in a converged environment.

Regulators must also minimize disparate regulation of like services.
This is a particular challenge in the US. The days when television,
telephone, and wireless companies competed only with one another rather
than across industry lines, led to very different regulatory regimes.
This legacy of disparate regulation perpetuates irrational line drawing
and represses interindustry competition.

The second responsibility for regulators is to appreciate that increased
competition requires us to place more reliance on educating consumers.
At the FCC, we have created a Consumer and Governmental Affairs Bureau
with direst responsibility for assuring that consumers' interests are
being served, and the ability to intervene when they are not.

But what happens in this brave new digital world in individual
situations where markets, consumer education, and private negotiation
fail to safeguard rights provided by law or regulation? That leads to
the regulator's third responsibility: assuring prompt and efficient
enforcement of rules. The ability to bring a bad actor to heel is the
indispensable element of any responsible regulatory body, at any time,
no matter how competitive the market may otherwise be.

And finally we come to the regulator's fourth responsibility, the
ultimate safeguard: imposing across-the-board regulation. In today's
world, once competition takes hold regulation should be applied only
when there is a compelling showing that substantial harm is occurring in
its absence.

These four responsibilities are not mutually exclusive: rather, they
represent a regulatory continuum calibrated to the competitiveness of
each market we regulate. For example, in the US the wireless industry
best reflects the competitive market in which trust in market forces is
an effective safeguard of the public interest. Over time, as other US
communications markets become more effective, more of them will
transition to that regulatory model.

Notwithstanding how common-sense these recommendations might appear,
they can be more difficult to achieve than one might think. This is
because every single telecom regulator \-- no matter who, no matter
where \-- looks at this new age of convergence through three eyes: an
eye on the past, an eye on the present, and an eye on the future.

There's nothing inherently wrong with this. Lessons learned from the
past contribute to the development of informed policy in the future, as
long as our policy predicates are relevant and we do not refuse to
recognize fundamental changes in the market. Similarly, foresight is not
to be foresworn, as long as it is trained on avoiding real, as opposed
to theoretical, problems. As long as our main focus remains on what
exists *today,* a sense of what has occurred and what is likely to occur
rightly belongs in, and balances, the regulatory process.

Nevertheless, there is no set recipe for accurately seasoning
present-day realities with a dash of the past and a pinch of the future.
Small wonder, then, that convergence and competition pose such real-life
dilemmas for regulators, and that different countries reach widely
varying results when they implement regulatory reform.

But in a larger sense, perhaps this is as it should be. The challenge of
assuring that digitally-spawned competition produces the best for people
is individual to each country and each culture. Different countries can
and should approach these issues somewhat differently, based on their
own unique history, perspective, and expectations.

My friend, former FCC Chairman Michael Powell perhaps put it best when
he said that competition is a *process,* not a *product.* And if
*competition* is a process, so also must be *regulation*. And so it
follows that successfully balancing past, present and future is a
governmental art form in which we sometimes succeed and occasionally
fail, observe others and learn from their mistakes, and share with them
our own hard-won lessons.

I look forward to sharing with you what we in the US have learned, and I
know I will take back with me valuable insights from you.