Remarks of Harold Furchtgott-Roth

Commissioner, Federal Communications Commission

At the Satellites and the Internet '99 Conference & Exhibition

Sponsored by Advanced Communications Technologies

# July 23, 1999

Arlington, Virginia

I.  It is odd to look back 100 years. People then thought that they had
    the greatest technologies around. Great ideas. Major investments in
    new products and services. They thought that they were doing well.

> How little they knew. If only they had known what we known. They would
> have known which few of their investments were worth making, and which
> were folly.

II. It would be easy to say such words today. It would have been easy to
    say them in 1900 as well. Or 1800. Or 1700. Or 1600. There is a
    conceit in every generation that we have finally found it: the end
    of technological advancement. Things cannot get any better. Conceit,
    however, in this instance, is a recursive process. It begins where
    it ended in the last period, and starts all over.

III. It is easy to imagine a successful entrepreneur in 1900, or a
     would-be successful entrepreneur in 1900, saying to friends and
     anyone who will listen: "Whatever you do, don't make it difficult
     for me, and others like me, to develop" the airplane, or the
     automobile, or radio, or electricity, or any of the thousands of
     new products and services that emerged a century ago.

IV. Yet if one looks back on the many innovations of the past century,
    or of any century, it is often impossible to fail to see the
    possible effects of government activities: some intended, some not;
    some direct, some indirect; some beneficial, some harmful.

V.  I am perhaps as guilty of this as anyone: pleading for deregulation
    in the name of the advancement of new technologies and innovations
    while at same time painfully aware that the heavy hand of government
    has touched many aspects of technology already.

VI. It is easy to misty-eyed and speak of innovation and new
    technologies as having been immaculately conceived without the
    polluting help of government interference. Sometimes it is true;
    sometimes it is not.

VII. I am one of those people who rail against the excesses of
     government regulation. I firmly believe that there are diminishing
     returns to the activities of government, and that at some point
     they become counterproductive. And I also believe that in many
     instances we have already reached the counterproductive points.

VIII. Today, we have a conference on technologies for which the
      government has been all too present, and I am painfully sobered.

It is great to be here today for a conference on a topic that was
unthinkable just a generation ago. Communication by satellite was the
material of science fiction. And the Internet---that was doubtlessly
some sort of fishing tackle to catch that obscure fish known as the
"Inter."

No doubt I could stand here and tell you what many government officials
in my place would tell you---how wonderful the technology is, some of
its "Gee-Whiz" characteristics, and what a great job we in the
government are doing for you. It would be easy to do that.

A couple of weeks ago, I asked the FCC's International Bureau for some
background material for this conference. Internet of satellite
technologies and markets are very impressive. There is little doubt that
satellites are great, and the Internet, and the combination is greater
still. You don't need me---or any other government official\--to tell
you that. Many people at this conference, all far more qualified than I,
have already told you that. Indeed, I would be a little nervous, more
than a little nervous, if government officials were the experts in a
commercial technology or a commercial market.

Instead, I am going to talk about a little word that might strike terror
in the hearts of people interested in the Internet or interested in
satellites. It is a word I perhaps am little bit too familiar with. It
is *regulation*.

For those in the satellite business, government regulation is all too
familiar if not comforting. The satellite industry was born and bred and
nursed by governments or by heavily regulated enterprises. Around the
world, we hear of various forms of deregulation of the satellite
industry, but rarely do we hear of completely severing the regulatory
linkage to governments.

But the Internet is oddly different. Like the satellite industry, it was
born, bred, and nurtured by government, particularly the U.S.
government. Yet it has become sacrosanct for government officials to
speak of the absence of regulation.

OPP of the FCC just in the past week issued a paper on the "FCC and the
Unregulation of the Internet" by Jason Oxman in OPP. It is just a staff
working paper, not an official FCC document, not voted out by the
Commission. I had not heard about it, much less seen it before it was
released. But it is a very good paper, and describes the history of how
the FCC has eschewed explicit regulation of data services including the
Internet.

We have in America something akin to a worship of the Internet. It is
part of the catechism of Washington to say that neither the federal
government, nor any level of government, should regulate the Internet.
Whatever you do, don't regulate the Internet.

\[Pause\]

Of course, with the possible exception of this little eesnie-weensie
issue over here.

The problem, of course, is that every one has their own little
eensie-weensie issue. You add up all of the eensie-weensie issues, and
pretty soon you have full-blown regulation.

Let me just remind all of us that we, in fact have regulation of the
Internet today. In each case, the regulations apply to all internet
companies, to greater or lesser, degrees, but they may be even more
difficult for satellite-based providers.

General regulation

Businesses in America face all sorts of regulations: labor practice,
workplace safety, land use, accounting practices; you name it and it may
well be regulated at the federal, state, or local level. Ordinary
businesses face these regulations, and the mere act of opening a web
site or an ISP does not absolve a business of responsibility to comply
with these regulations. Similarly, satellite companies that offer
Internet services do not suddenly avoid ordinary business or satellite
regulations.

Access

Today the federal government regulates both access to telecommunications
services and interconnection with telecommunications facilities and
equipment. Some of these telecommunications services may provide access
to the Internet, as do some of the telecommunications facilities and
equipment.

Regulation of access to cable services and information services is far
more limited. But some of the most contentious debates before the
Commission involve definitions of telecommunications services, cable
services, and information services. These issues are at least indirectly
raised in the dispute between the City of Portland, Oregon and AT&T.
There the dispute is whether a local franchising authority may require a
cable operator to unbundle its cable modem and internet access services
so as to be available to competing internet access providers.

For satellite-based Internet services, access issues go far beyond
whether competing ISPs have access to specific facilities. Access issues
also include access to earth stations, access to antennae in buildings,
access to local loops and wiring within a building.

How do issues of access affect satellite-based Internet services and
their providers? I think that it is too early to tell for sure. However,
investors in an enterprise whose business plan at least in part is based
on providing exclusive Internet access customers over specific plant and
equipment may be troubled by the prospect that a current or future
regulator, in the U.S. or abroad, may by government fiat require the
enterprise to make the specific plant and equipment available to
competitors. Can regulators require competitive access to satellite
pods, or earth stations, or antennae, much less the cables or wires that
access a home? If U.S. regulators, whether at the federal, state or
local level, have the conceivable authority to require any such access,
is it plausible that foreign regulators have any less authority? If
anything, satellite-based internet services face many of the same access
issues faced by wireline providers and then additional ones that are
unique to satellite services.

At the same time, satellite-based access may provide the competitive
basis for regulators to abstain from regulating access at all. Why
regulate access if there a multiple sources of access?

Pricing

Neither the FCC nor state and local officials currently directly
regulate rates for access to the Internet. We do however, regulate rates
for such services as access charges at the federal level, and state
regulators may regulates rates for local loops, local access, and
reciprocal compensation, all of which may indirectly affect Internet
access rates. In the U.K., where all calls, both local and distant, have
metered rates, the price of internet access has recently dropped to
zero, but consumers must still pay the phone company for every minute of
phone access. Consequently, for these and other reasons, the rates that
ISPs can charge customers is indirectly affected by government price
regulations.

Satellite-based internet services may face these and other forms of
price regulations.

Content

Efforts to limit or outlaw certain content on the Internet have largely
failed in practice; but these failures have not curtailed legislative
efforts to attempt to limit what has proved to be impossible. Even
today, different nations have different laws about what types of
information may lawfully be transmitted. Enforcement of these content
laws is difficult where networks and ISPs are dense, but these law are
potentially more easily enforced where access is less dense. Satellite
providers may prove to be particularly easy targets for liability if not
enforcement of local content laws.

Taxes

Taxes are perhaps the greatest bugaboo of regulations potentially
affecting the Internet. How many people in Washington have said: "Don't
tax the Internet!"? A simpler question might be: Who has not? Taxation
is often in the eye of the beholder. Do Internet companies not pay
taxes? Can an ordinary business avoid taxes by establishing a web site
or going into the ISP business? I don't think so. The only way that
Internet companies actually avoid taxes is that many of them lose money
and therefore have no taxable income.

State sales taxes are one of the most contentious issues. People often
compare Internet transactions to 1-800 transactions and claim that such
sales are tax free. Technically, such sales within are subject to a
sales tax, and even purchases from other states are subject to state
taxes. Many states have tax forms for such transactions. These tax forms
and their force of law are unknown to many tax specialists, to
practically all businesses and individually. These are largely ignored
and raise little revenue. Yet presumably, Internet purchases would fall
under these state taxes.

Access to the Internet itself is often taxed indirectly. We have
federal, state, and local taxes on practically all forms of
telecommunications services that in turn are purchased by ISPs and that
are ultimately paid for by Internet customers.

All of these Internet tax issues may be somewhat more complicated for
satellite providers. Suppose a jurisdiction wants to tax some aspects of
internet service, or e-commerce over the internet. Is the basis for the
tax the location of the end user, the location of the selling business's
remote server, its corporate headquarters, or the location of an earth
station that provides remote access? How are taxes to be collected: on
businesses, on end users, or on ISPs? Satellite providers are simply in
a more awkward position because they have access to more jurisdictions.

Privacy

One Member of Congress recently described Internet privacy as the
surprise issue of this Congress. Many Members of Congress, on both sides
of the aisle have introduced legislation to protect consumer privacy.

These laws, in some instances, would be hard to enforce for most
Internet activities, but all the more so across national boundaries and
for services provided by satellite-based companies.

An analogous problem is faced for CALEA, a law that enables U.S. law
enforcement agencies to gain access to telecommunications messages. It
all works well with POTS. It works less well with digital signals and
wireless communications. And sorts of problems break loose with Internet
communications. And how does it work across national boundaries? Not at
all. Yet U.S. telecommunications carriers, quite possibly including
satellite companies, will be investing billions of dollars to comply
with CALEA. That compliance may be troubling to governments in other
jurisdictions served by the same satellites.

Intellectual property

Different countries have different intellectual property laws, and
enforcement of them. How does e-commerce protect intellectual property
across different jurisdictions, particularly where transactions are
difficult to monitor, much less trace? How does the U.S. limit access to
pirated intellectual property distributed legally, or at least without
fear of enforcement, in another country? These issues may be
particularly problematic for internet companies serving multiple
countries, again by satellite.

This is a major issue for intellectual property companies, particularly
music, video, and software.

Conclusion

Where does this leave us? A century from now, people will look back at
our generation with technological disdain. How primitive we were. If
only we knew what they shall know.

And perhaps they will even say how overregulated we were. But at least
in the area of satellite-based internet services, I hope that they will
be able to say that we were aware of the regulations we faced.