Transcript of Remarks of Chairman Michael K. Powell

**Before Cellular Telecommunications Internet Association's**

**CTIA Wireless 2001**

**March 20, 2001**

**Las Vegas, NV**

**Format:** Conversation with Tom Wheeler, President and CEO of CTIA.

TOM WHEELER ("WHEELER"): Chairman, thank you for being with us.

CHAIRMAN MICHAEL POWELL ("POWELL"): Good to be with you, Tom, always.

WHEELER: Are you used to that title yet -- Mr. Chairman?

POWELL: No, not yet.

WHEELER: I mean, do you turn around when somebody says, "Hey, Mr.
Chairman?"

POWELL: A little bit.

WHEELER: A little bit.

POWELL: It's a little daunting.

WHEELER: So, you've just seen a dog and pony show here about the issues
of spectrum, and what wireless can mean in rural America and elsewhere.
What's your reaction?

POWELL: I think it's outstanding. You know, we're certainly in an
extraordinary period of innovation across all of the sectors of the
communications industries, and wireless is exciting because it's at the
cutting edge of innovation. I think it's at the cutting edge of
competitive principles. We're learning a lot from the way that industry
is evolving, the way those technologies are evolving, and they're
constantly instructing us about the power and the potential of
technology to change peoples' lives. So, it's instructive to us. We
always look forward to having an opportunity to work with the industry
on continuing to realize that great promise for consumers.

WHEELER: You know, it is really significant that you're sitting here
today talking with us instead of talking at us. What's that say about
the Powell chairmanship?

POWELL: "It says" my mother taught me well. \[laughter\] The problems
are too daunting, they're too great, they're too challenging. The future
is too speculative and uncertain for anyone to pretend that they have
all of the answers and all the solutions. And I think that that points
both government and industry to partnership, to sharing their collective
resources and their collective insights, so that as a total package we
make thoughtful decisions, meaningful decisions, efficient choices. So,
that is the goal that we're both trying to achieve, which is that
consumers reap the highest and best values from these changes. And I
think the humility with which we recognize that, or recognize the
uncertainly and the challenges and the fascinating products and
services, is a good way to build a relationship.

WHEELER: Does the role of the FCC change as a result of the changes in
the marketplace and the kind of things you're seeing here?

POWELL: I think, absolutely. I think there's no reason that the
government doesn't have to rethink its business model. I don't think
there's any reason that the government doesn't have to understand and
digest the way that technology changes the way you run your business,
the way you run your institution -- your agency. We are in the process
of systematically reviewing and thinking through what is the optimal,
organizational model for the Commission. What's the best way to
structure it? How do we create procedures and processes that allow us to
be efficient and responsive in internet time? We are acutely aware that
a decision that is way too late is worse than a bad decision early. We
need to be more effective and quicker at doing that. And I think that we
need to be a lot more technology-savvy -- fluent in the technologies of
the agencies with which we interact -- or our relevancy is at issue. And
if we are not a partner and participant as we were talking a minute ago,
we're a distorting influence, and I think that's something we deeply
want to avoid.

WHEELER: In internet time -- in internet time[s]{.underline}, and at
internet time -- can a regulatory agency be a participant and a partner
in the terms you just used?

POWELL: I think you can. It has to, in some ways, take humble stock of
what it's appropriate role is . . . where it can make a meaningful
intervention and where it can't. I think it needs to understand, at
times, the futility of its involvement even when seemingly it has a good
idea. There are a number of ways, both substantively and procedurally, I
think we can do that. We are putting an increasing emphasis at the
agency, for example, on an enforcement model, as opposed to the
traditional regulatory model. You know, a great many of the regulations
that we steward are what I call "by the grace of us" regulations. You
want to do something you come get permission, you wait nine months, we
say yes, and the opportunity is gone. We're trying to get more and more
out of kind of up-front, prophylactic, permissive kind of regulatory
environments, to one in which we provide greater flexibility, greater
opportunity for innovation and change, but when you cheat and break the
rules, we'll kill you at the back end.

WHEELER: That's subtle.

POWELL: Not so subtle.

WHEELER: You've been using the term "vision matters" to try and explain
to your troops where you want to go. Explain that to us. What do you
mean by "vision matters?"

POWELL: You know, it's another thing that . . . I've spent the better
part of my life in government and it tends to be an institution that is
very reactive. Things come up -- it's the problem of the day, the item
of the day, the issue or the order of the day. But what is needed more
and more is to try to have some coherency -- some vision -- as to what
you're trying to get to so that you can harmonize more of your decisions
toward the same goal. Vision, though, in my view of it in a regulatory
sense, is not "I know what the model . . . I know what the industry
looks like . . . I know what the products and services look like." I
don't know any of those things. But I do know that there are certain
persistent trends that we take account of, certain distortions and the
lack of harmony among different regulatory environments that we have to
work to remove as we sort of drive toward that flag. I've described it
recently to people like a good basketball team \-- apropos of March. You
don't know how every game is going to go. You don't know what are the
challenges of the game. But you build the team for any game, and you
build the assets to adapt and change as conditions change. And you
recruit the right people, and you train them, and they're disciplined,
and then that team can take on whatever uncertainties are presented in
any game, and with good coaching can adjust and make adjustments to
that. But if it understands it's basic game plan, it's strengths -- what
it does well, it's weaknesses -- what it does less-well, I think that it
will increasingly be proud of its service and proud of its contribution
to the revolution.

WHEELER: Can a regulatory agency shoot three-pointers?

POWELL: \[chuckle\] We're going to try.

WHEELER: Let's talk about your vision on some issues, then, for a
second. I mean, we've been spending the last half-hour up here talking
about spectrum. Tell us the Powell vision for the world of wireless
spectrum.

POWELL: I think that spectrum becomes an increasing challenge. I think
the country needs to spend some collective thinking on trying to have a
more coherent, nationally harmonized spectrum policy. We're trying to do
that, as I touched on, to some degree in the Commission, itself. We have
many spectrum challenges across many different bureaus, many different
priorities, many different policies woven into them. We're certainly
looking at ways to create kind of a better over-arching coordination of
those policies so that, at least the policies emanating out of the
Commission are more coherent. But, as you are well aware, we don't own
the entire problem. Critical spectrum is spread all across the United
States Government, with different points of decisional responsibility --
the government users themselves, the Department of Defense, the Federal
Aviation Administration. So, we really do need, as well, to partner with
. . . the Administration has to play a critical role, Congress has to
play a critical role, so that the policy has some coherence, and the
nation can make some more thoughtful decisions about where it places the
highest value on, and arguably and definitely, scarce resources.

WHEELER: Let's see if we can parse the spectrum issue into three parts.
You just mentioned all three of them . . . two of them. One is lack of a
plan. I mean, spectrum planning today is an exercise for the budget
committees in the Congress when they say, "oh, let's sell some more
spectrum and make some money." How do we get to a plan? Second part is
-- that plan, as you just indicated, is going to have to access spectrum
that is currently occupied by others in the government -- particularly
the Defense Department. And the third component is, because the second
component is going to take awhile, we've got perhaps an interim solution
in spectrum caps, and the free-flow spectrum amongst various licensees.
Can you kind of ad seriatim 1, 2, 3 go through those?

POWELL: \[Chuckle.\] Those are a lot of steps. I think the first
recognition is that there is value in having a plan. That sounds
obvious, probably, to this audience. It's not so intuitive to some
quarters of Washington and I think the case is continuing to be
developed for greater coherency out of recognition that many different
users have very different interests that have to be coordinated. I do
think the Administration has to take a central role with respect to the
government portion of the piece. I think, as you mentioned, Congress has
to take a sober role about to what degree it's going to see spectrum
policy as a matter of budget policy. Fortunately, I'm not a budgeteer --
it's not my job to figure out where each and every dollar comes from in
the total collective federal budget -- but I do have growing concerns
that if maximization of money is the interest, you can countermand or
undermine the communication policies that are associated with the
efficiencies of spectrum. So, I think that they have to play a central
role.

And, finally, and as to your question about caps -- I think that the
Commission recognizes that it has a duty and an obligation to reevaluate
and revalidate or get rid of rules that are artificial or structural
constraints on growth. It has at times employed these kinds of mechanism
for the facilitation of competitive markets in their infancy. But, as
those conditions change and markets become more competitive, I think the
government has a duty and an obligation to reevaluate whether the rule
continues to serve its purpose. With respect to the cap you are
concerned about, in particular, we do have vehicles on the road that
provide an opportunity for that reexamination that are coming up fairly
quick this year, and I think that'll be an opportunity to undertake that
exercise in this case.

WHEELER: That's a great piece of information, but I hesitate to point
out -- you bookended it -- you skipped the second point. These guys over
. . .

POWELL: I can only do two parts of . . .

WHEELER: These guys over across the river -- you know, in the Pentagon
-- and their spectrum. What kind of role does, or can, the FCC play in
that?

POWELL: You know, I think that that role is limited to a degree. You
know, the Federal Communications Commission is an independent agency.
It's not a component of the administration. I think it can be an
advocate for an understanding, collectively of the government, what the
trade-offs are, but we can't trivialize the uses of our spectrum for our
national security and national defense either. Those decisions are way
above my pay grade, in some respects. And, as the son of a four-star, I
respect authority in that regard. But I do think that it can be an
advocate, that it can be an institution that is able to lay out what the
challenge . . . help lay out what the challenges are for the country,
collectively, so that our President and the members of Congress can make
coherent decisions about where it places the national interest highest
and best. I think that we have not done as well with this as we could. I
think there are a number of initiatives under way, some which were done
under the prior administration that will continue in part, and I think
we'll have an opportunity to look at that.

WHEELER: You know, Jerry Yang is our next guest here and I've been
saying to the folks on our staff that there's a reason why Yahoo started
in the United States and not in, let's say, France. And that was because
of the fact that there was a backbone here. There was the ability for
guys with good ideas, like Jerry Yang, to test them and then to go to
scale quickly because the wired internet was here. It appears, from the
charts that John Stanton was showing a moment ago, as though the rest of
the world -- our trade partners -- have stolen a page out of our play
book and are saying they're going to build the infrastructure for the
next generation internet -- the wireless internet -- so that theire home
team can have an advantage against our home team. Do you think that that
message has gotten through in Washington?

POWELL: As we would have said in law school, I think that those
developments cause an issue-spotter. I mean that at least we have had
some circumstances that point out the need to examine that and see what
our response is to it. I'm not normally one who is quick to sort of take
up a national champion view of coherent policies. I think that they can
be misleading, but I do think that the situation in other parts of the
world have alerted us to the changes in the situation. This was always a
touchy trade-off, as we know. Going first is not always going to cause
you to be the winner. Going first also, in an innovative market, runs
the risk that you imbed inferior technology -- you bet too fast, too
soon, too early. When the government, itself, is so heavily involved in
sort of the industrial policy of infrastructure choices and innovation,
my view is that their record is not particularly noteworthy over history
on technological interventions. And so I think it's a very delicate
balance between the right involvement of government to facilitate the
conditions for markets. Because you know what, Jerry Yang also would
have only come to being in a United States that rewards entrepreneurs
and risk-takers and market mechanisms that allow them to reward and
profit from their innovations. And those same forces are also what
create a lot of energy and innovation. I think it's curious when some
people criticize the United States for its policy over multiple
standards in the second generation, and I giggle a little bit and, yes,
and CDMA wouldn't have been produced if we had bet on a technology at
the time we were asked to -- the very standard that's forming the
foundation of that third generation in other parts of the world. I would
also remind people that in Europe they had a high-definition TV
industrial policy infrastructure, too, that imbedded and inferior
technology prematurely. So, it's not a simple question of being ahead.
You know, like a good marathon runner -- I think sometimes being two or
three steps back in the race until you get closer to the end is not a
bad place to be.

WHEELER: Kind of like our demo did a minute ago.

POWELL: Yeah. That was pretty good.

WHEELER: Let's pick up on that point -- and the government as a
predictor or facilitator of infrastructure decisions. I was serious
about what I was saying about John Stanton up here. John has a vision
and has put his money where his vision is. Yet, it keeps doing this
against government policy that was designed for a narrowband world. How
do we get around that?

POWELL: We get around it the way we get around everything. We assess
what the situation is. We look at what it's constraints are. We try to
find out what the policy trade-offs were -- the first principles of the
rule that they're running into -- and we reassess whether those first
principles have any continuing validity in the context of that modern
innovation. One thing that we have to humbly accept in the government is
we will not be the first to walk into new pastures. It's going to be
people like John Stanton. It's going to be the industry. It's going to
be the market that is going to bring to us disruptions, changes, little
wobbles in the matrix, if you will. That will be brought to us and it
will be our obligation to sort of assess that and try to rapidly
reevaluate the kinds of constraints they're finding. It's fascinating if
you go back through a lot of communications technology history. It's
always the monster we tilt to -- to use George Gildr's term -- it's
always some entrepreneur that's breaking the rule, that has found a way
around something. Whether it was Bill McGowan and the use of microwaves
to circumvent AT&T's monopoly over long distance. Whether it be
Einstein's refusal to accept, you know, that in quantum mechanics things
can have two behaviors and change technology forever, against the
critics . . . I mean, we're always going to encounter that entrepreneur
who refuses to accept convention and shows us something that we've never
seen before. I think that's wonderful, that's exciting. It's not our job
to look ahead of that always and figure out what it is. It's our job,
though, when it's brought to us, to try to digest it rapidly and see if
we can't get out of his way. But, it's important to remember our job is
tough because it's not just "get out of it's way." It's "get out of it's
way and make sure we preserve the policies that were originally imbedded
in the constraint" or to justify them or to eliminate them. And, so,
it's a multi-faceted question.

WHEELER: But maybe that's where you're "and we're watching, and if you
don't behave, I'm coming down on you" attitude comes from.

POWELL: Yeah, it's interesting. Because I think more and more in this
kind of space, vigilance is becoming an important policy all by itself.
Which is, if you're confident, like I am, that the government has to be
careful not to intervene prematurely in an innovation market lest it
distort the evolution or prejudge the winners, I think the concomitant
obligation is that it has to be very smart about watching trends and
observing changes. Because your industry and others would be the first
to come to government, as well, if it ran into truly heinous
anti-competitive activity -- if it truly ran into jurisdictional
limitations that were causing you problems. We recognize that government
can be a big and important part of that, but what it has to be doing is
not just purely reacting, but constantly watching and evaluating and
understanding persistent trends so that it can start to get on top
quicker when those challenges are presented.

WHEELER: Let's go back to your first priorities . . . one of your first
values points. Let's stipulate that the systems for delivering
narrowband services in remote areas of the United States has worked.
Should there be a bright-line between that and delivery of broadband
services? Do we need to say broadband is a different game and it's not
just porting over old policies? We'll stick with the first principles
here -- we'll keep this going -- but this is a different environment
that ought to follow the kind of doctrine you were just talking about in
terms of let's lay off and let's see what happens?

POWELL: I definitely think that it's very positive to kind of
conceptualize what the challenge is. We're sort of standing in the
middle between two worlds. One communication world and regulatory
environment is one that is very, very mature. It's symbolized by the 100
year-old public switched telephone network. The technologies are
relatively mature. We understand them and we understand their
characteristics. The cost dimensions are relatively mature. We have some
basic understandings of costing and pricing in that market after that
100 years of experiences. We have great understanding about quality
control and those kinds of services. We have a great familiarity with
the players. We know Bell operating companies, we know IXCs, long
distance companies. I think that's a very mature part of the cycle. It's
an engineering marvel, but it's a sophisticated version of tin can and
string in the way that was when it was first invented.

What we start to see is we're standing in the middle between that and a
legacy world that's trying to untangle itself and be more competitive
and provide more opportunity. At the same time, on the other side of our
world, is this innovation space that's in its infancy -- where the
technology and the architectures are virgin and new -- and we're still
understanding the optimal solution for the delivery of services.
Wireless certainly is at the leading edge of trying to fiddle with and
understand and experiment with optimal infrastructures. Optical
technologies are phenomenal and what they will be. But, because those
are in their infancy, too: our understanding of their cost dynamics,
(for example intercarrier compensation); our understanding of the kinds
of goods and services people will or won't deliver; whether consumers
will brace any of this despite our techno-ecstasy about all of the
possibilities. So we have a tough job because we kind of live in this
no-man's land part of the tennis court. You know, you and I were talking
the other night, this is the bad place to be. This is where you're
picking balls up off your shoelaces. And we really need to sort of
charge the net and get into a power position where we have a much
greater understanding. But, we can't forget that we have a duty to
untangle and continue to be concerned about the legacy legal questions,
the regulatory questions, that are behind us as well.

WHEELER: Techno-ecstasy?

POWELL: Yeah, well.

WHEELER: Good term. Let me ask you . . . I mean, this has been terrific
and, on behalf of all of our friends sitting out here . . . to be able
to see inside your philosophical head, is the reason why we were talking
about "this is the right man for the job." Clearly, you've thought about
these things. Let me ask you some tough bullet questions on some tough
specific issues that you've got to deal with. Privacy. We've petitioned
the Commission to come up with . . . we've adopted our own code of
conduct. We've petitioned the Commission to come up and enact that so
that it applies across the board and to work out something with the FTC
so that it applies to people whom you don't regulate. What's your
thought about that?

POWELL: Well, on the petition specifically -- we did receive that. We've
put it out for public notice, I believe, just the other day. So we've
taken the petition seriously. We've initiated the process to take a
careful examination of it. I haven't examined it personally, so I won't
comment on the specifics of that. But I think that the association
recognizes, as I think people in the internet space, generally, are
starting to recognize, the interplay between the potential of
internet-oriented services and privacy is going to determine how greatly
the promises of this stuff is realized.

One of the most fundamental truths about internet-based IP services or
ubiquitous network-based services is that it allows for intimate
tailoring. A personalized everything. You know, I like to joke that it's
not the "me" generation anymore, it's the "my" generation. It's my
Yahoo, my Amazon, my priceline.com. Everything is my, my, my. But that
tailorization comes with allowing greater revelation of the most
intimate details of your life. And the interplay between those two
things is where both the producers and the consumers are trying to find
the sweet spot of the value that they provide to each other. Consumers
are very complicated on issues of privacy. In many ways, if you ask them
the question flatly they'll be very, very concerned about it. In other
ways, they're willing to trade or sell aspects of their life in exchange
for something of value.

I think the challenge for producers is, are they really providing,
number one, fair notice and opportunity to make that choice thoughtfully
and with full knowledge of its consequences and, secondly, whether
they're really getting something in exchange that's valuable to them for
me to give away to you my phone number or my buying habits or my working
habits. But, as we know, there will be public policy issues as a
consequence. The day somebody is arrested and there is a whole log
record of what they do. That's going to be a serious issue to people.
But this interplay, in my opinion, as a matter of public policy, is the
critical interplay between consumers, government policy and producers,
because the killer ap of the internet -- whatever it is -- is
personalization at some level. And personalization is the diminution of
some degree of privacy, at least to those service providers. It's
interesting -- you know I made an observation about universal service
and broadband. In many ways, how much ubiquity and affordability we get
in the country is simply a matter of how much privacy we're going to be
willing to exchange. You know, there are access companies out there who
will give you free access. There are computer companies out there giving
people free computers -- depending on whether you're willing to share
enough of your life with them -- and so where that line gets drawn is
going to have a lot to do with where we land as a matter of mass-market,
ubiquitous services, and whether the promise of the technology is fully
realized.

WHEELER: Boy, I'd love to go down some of thoughts with you, but I'm
going to hit you with the next issue. Okay? Numbering. There's two
scarce realities -- two scarce resources -- in this country right now --
spectrum and telephone numbers. How do we develop governmental policies
to make sure that the inability to get numbers doesn't retard growth?

POWELL: Yeah, well. Numbering is an exhausting issue. But . . . I know,
I know . . . I didn't rehearse that. I think the first point you made is
critical -- which is the recognition that it is a scarce resource -- it
can be depleted and it will be depleted. Normally, in an economic system
you cure that by having market allocation measures that help allocate to
their highest and best uses. You would charge for it or you would have a
market for it. Regrettably, in this context it's generally believed that
there isn't existing authority for introducing those kinds of
mechanisms, and so you really do get into kind of a central planned,
heavy governmental involvement mechanism in which we try to sort of
create mechanisms and resources that cried for efficient use of numbers
and try to police inefficient numbers and reclaim numbers that are not
being used. There are any number of vehicles that are out there that are
being experimented with and attempted -- everything from number pooling
to utilization benchmarks. If you're not using numbers, you will release
them or you will not be able to get others. Service-specific overlays,
technology-specific overlays -- which can be controversial, depending on
the state or the jurisdiction of the circumstances. It's also
complicated by the fact that it's not perfectly one-size-fits-all. That
is, the numbering challenges in some markets and jurisdictions are
greater and more acute than in others. And all of that is to say that
there are a lot of variables in that soup. I think the Commission
recognizes this is an issue close to the heart all over the country --
in the wireline context as well -- and I think we are increasingly
trying to work with states and others to find ways to help solve that
problem. But, it does start from the premise it's scarce and it does
start from the premise that new services will deplete those numbers.
But, there will be other critical parts that the industry will have
responsibility in, too. It doesn't work if there's not number
portability. If you can't move numbers around, you lose the flexibility
and you've lost resources permanently, if when people make moves around
this innovation space they can't take their numbers with them. So, there
are a lot of those pieces in there and I just think this is one of those
you just slog through the mud on and continue to hope you make a
difference.

WHEELER: Okay. Last issue but on that same kind of theme. The
involvement of the regulatory agency in new technology . . . in the
ability to deliver new technologies. There is a back-log at the
Commission in terms of type-acceptance of phones. Our manufacturers are
saying "hey, we have to spend too much time. . . that the life-span of
phones is going downhill, increasingly becoming shorter." In Japan, now,
it's down to six or nine months. Here, it's a couple of years. But they
need to be bringing out the new phones that can do the kinds of things
we were demonstrating here. The back-up in the approval process at the
Commission -- is there a way that we can work on that together?

POWELL: Yeah. I think you and I have talked about this. We certainly
accept that the increased pace of product cycles, a greater premium on
new services, is putting a greater premium on trying to have rapid and
expeditious review procedures and effective procedures, so that we're
not the bottleneck in innovation. I think that working with you, we can
do, and we've already begun some systematic review of our processes, to
see where we can create greater uniformity, more efficient streamlined
procedures, and to try to identify clearly what really are the problems.
Some of them are really intriguing. A good portion of the backlog you
refer to is the growing concern about RF emissions, and on the extreme
end, concerns about everything from an individual's health. Regrettably,
it's an area where there are very few standards or consensuses to the
right testing standards and regimes among engineers and standard bodies
like IEEE. We have to try to drive a recognition of that problem and an
understanding that we do need a coherent standard in order to
efficiently test for those things that I think consumers are going to
insist that we test for. And, I think you'll want the protections of
having the government having looked at those questions.

WHEELER: And there is a new standard coming on . . .

POWELL: There's a new standard coming on it and our engineering group,
which is outstanding, has been working to try to take the lead on that,
as well. But, we're more than happy to work with you and other
interested players to make that process a much better one for you.

WHEELER: Well, Chairman Powell, we look forward to working with you
through your chairmanship. We look forward to you coming back and
visiting with us again at subsequent wireless shows. We're particularly
grateful for you being here today. Thank you very much.

POWELL: Thank you, Tom. Thank you.