**REMARKS OF\
COMMISSIONER MICHAEL J. COPPS\
QUELLO CENTER SYMPOSIUM\
WASHINGTON, DC**

**FEBRUARY 25, 2004**

***"DISRUPTIVE TECHNOLOGY...DISRUPTIVE REGULATION"***

Thank you for your kind invitation and thank you Quello Center for the
continuing contribution you make to America's telecommunications
dialogue. Like Jim Quello himself, you just keep on giving and
contributing and helping us all work together in the great and glorious
goal of bringing the best and most advanced telecommunications service
and products possible to every single American citizen.

I am asked in these introductory remarks to address the imposing topic
of "Infrastructure Strategy and Policy in the Presence of Disruptive
Technologies." So I'll try to do that and then maybe talk a little about
talk a little about "Infrastructure Strategy and Policy in the Presence
of Disruptive Regulation."

The past year has not only been a busy, but a momentous, one at your
favorite regulatory commission. Important votes have been taken, some of
them supposedly tentative but illustrative of where this Commission is
heading nevertheless. We have teed-up and voted on issues that have the
potential to remake dramatically the communications landscape of this
country for many years to come. The changes we have made and those being
contemplated have breathtaking consequences for competition and
innovation and, most of all, consumer well-being.

Technology, it's almost trite to say, is developing at a blistering pace
and forces us to confront new issues---to think anew and to act anew.
How do the legal and regulatory frameworks apply and keep pace? How do
regulators make good decisions in this fast-moving, paradigm-shifting
environment? How do we create a landscape that really fosters
innovation? How do we create an environment of regulatory stability and
predictability that helps businesses to make right decisions about the
future? And, most importantly, how do our actions benefit consumers? We
need to be thinking bigger thoughts. And if ever we needed to have a
national discussion about how we are going to accomplish all this while
technology change engulfs us, that time is now. So the issue you're
gathered here to discuss is critical---how to deal with the question of
disruptive technology, the issue posed by Joseph Schumpeter's "gales of
creative destruction."

So let's go to my assigned "Infrastructure Strategy and Policy in the
Presence of Disruptive Technologies" topic and let's use broadband as
our case study. Some of you have already heard me say that I think
broadband ***is*** the great infrastructure challenge of our time. If
you double back over the course of our nation's history, you will find
that just about every major era has had its own particular
infrastructure challenge. It might be opening new lands to settlement
way back at the beginning. Then, once those lands were settled, it was
building the roads and turnpikes and canals and ports to get the bounty
of the newly-settled lands to market. After that, as we began to
industrialize before the Civil War, the need was to start building
regional railroads and then, as we spread across a continent after the
war, to bind us together through the great transcontinental railroads.
Closer to our own era, in the Eisenhower years, came the Interstate
Highway System. Indeed, you can see that same role in the build-out of
the nation's telephone infrastructure in the 1900s. After the invention
of the telephone, rural communities not having telephone service ended
up, if anything, more isolated than before. So we came to realize that
we had to tackle that infrastructure problem, too, and tackle it we did.

In all of these infrastructure build-outs, business and government
worked together and there was, in each instance, a critical and clearly
proactive role for enlightened government policy to help achieve a great
national objective. Public sector and private sector working
together---it's how we grew the country. It's the story of America.

When I talk to technology innovators, they tell me that broadband
networks ***are*** the canals and railroads and highways and byways of
the Information Age. They tell me that our future will be hugely
impacted by how we master, or fail to master, advanced communications
networks and how quickly and how well we build out broadband
connectivity to all our people---and ***all*** the people is indeed the
challenge. If Americans have widespread access to broadband, we'll see a
new era of innovation. If they are denied this access, we'll see another
era of stagnation and we'll find it impossible to compete against
countries that are more aggressive in meeting infrastructure challenges
than we are. Many countries are already far ahead of us.

The challenge here is not about finding some "killer app." On that
score, maybe bandwidth itself is the killer app and we should wake up to
how deeply it has already entrenched itself already in our daily lives.
Or maybe the killer app is lower cost, like in Japan or South Korea or
many other places where consumers are signing up in droves because they
get significantly more speed at significantly lower prices than we can
get.

No, the question here is this: how do we get infrastructure deployment
done? And I think most of us in this room would agree that the private
sector can, should and will be the lead locomotive for the broadband
deployment train. That's entirely as it should be. But given the scale
of the challenge, given the difficult economics of rural areas, and
given the rapidity with which other counties are building out their own
broadband networks, we would be remiss if we didn't ask whether the
market alone can get the whole job done.

So I ask just about every business leader I meet if he or she is
convinced the market alone ***can*** get the job done. Some answer
"yes." But even more of them tell me that for the last 10 or 20 percent
of Americans, maybe not. And I would point out that leaving 10 percent
behind amounts to about 29 million people, and leaving 20 percent behind
would abandon 58 million people. So this issue has a human face. I'll
tell you this: if we get to the year 2020 and we have 29 or 58 million
Americans without broadband, we will have a Broadband Chasm that denies
our fellow citizens the tools of opportunity and denies our country
critically needed economic growth.

Now let me try to marry these thoughts back to a new and hot and
disruptive technology of the moment: Voice over IP. If we needed another
wake-up call that a national broadband policy is needed, here it is.
This technology may be a substitute for more traditional circuit
switched telephony, or it may be a complement. It comes in many flavors
already, with undoubtedly more to follow. We know that IP technology
means huge changes in the mechanics of how we communicate. It may confer
a universal language for communications, whatever the device---phones,
laptops, personal digital assistants, you name it.

So we all marvel at the transformative potential of new IP services.
They sizzle with possibility for consumers and businesses alike. We all
talk about the competition and new services that VoIP can bring---and
we're right.

But we need to realize that---no matter how enthusiastic our rhetoric,
no matter how strongly investors pledge devotion, and no matter how
supportive a regulatory environment we craft---IP technologies will
***only*** reach their potential if the infrastructure is there to
support it. IP applications will only revolutionize communications if
everyone has access to really high capacity bandwidth. Have you ever had
a VoIP conversation over a dial-up connection? It . . . is . . . not . .
. an . . . appealing . . . prospect. And how much of a competitor will
Voice Over be if a third of all Americans have to pay \$100 a month or
more on top of VoIP in order to get the required broadband because we
haven't figured out how to bring low-cost broadband to everyone? If
that's the case, maybe this new technology won't be so disruptive after
all.

Our actions in the *Pulver* decision and the *IP-Enabled Services*
rulemaking week before last garnered a lot of attention. But for Voice
Over to be truly transformative and disruptive---rather than just being
a marginal change that doesn't shake the system---we need ubiquitous
broadband deployment. We shouldn't be debating this technology in terms
of how it can help us to game the system or to create yet another
generation of arbitrage maneuvering. We should be thinking larger
thoughts.

Part of this thinking must focus on whether we believe that market
forces alone---practically and not just theoretically---will blanket
this land with broadband. And, yes, that means we have to struggle with
universal service rather than say it doesn't matter anymore in our brave
new world. It matters. If we don't start this dialogue right now, I'm
afraid we'll be ignoring history. And having been an historian, I would
never do that. It also means we'd be ignoring Congress, and having spent
many years on the Hill, I would never, ever consider doing that! After
all, we enjoy a basic telephone penetration rate in this country that is
one of the highest in the world. More than 95 percent of households have
access to basic phone service. Credit universal service with much of
that. Why, then, when it comes to broadband, would we turn our backs on
what has been so historically effective?

Sure, what I'm talking about is expensive. So is it expensive to deny
opportunity to so many citizens. So is it expensive to put those 29 or
58 million people I mentioned off limits to our entrepreneurs and
innovators. Providing meaningful access to advanced services for all of
our citizens, on the other hand, would have a significant impact on
changing continued stagnation to economic revitalization because access
to broadband is absolutely essential if every area of this country is
going to be able to compete for high-quality jobs and investment. A
twenty-first century system of universal service also matters for
innovators---for innovators in the Silicon Valley and for innovators
working away in garages and collaborating in cubicles and laboratories
all across the country. If having broadband available everywhere is the
prerequisite for IP services and for all the other applications that are
sure to come out of these garages and back-yard labs, then why not
address it first. Wouldn't we be a lot better off thinking about this
rather than spending all of our time trying to shoe-horn new
technologies into old regulatory categories? Isn't planning for the
future better than gaming the present? With ubiquitous
deployment---which is really what universal service means---new
technologies would have a chance to prove how disruptive they can be.
Otherwise we'll never know. Technology could do the disruption rather
than having poor regulation disrupt the promise of technology.

"Well fine," some of you are thinking, "but that goes far beyond what
our favorite regulatory agency should be doing. Your job is to tend the
regulatory categories and not get carried away with the big picture." I
disagree. Sure we have to work with the system we have and implement the
laws we have as best we can, but the Commission also has an obligation,
I believe, to think larger thoughts. We should be devising creative
options and suggestions, and if we lack the authority to implement such
changes, then we should be up in the Congress saying here are the
options, here's what we think would work, and we need some additional
authority to get it done.

I believe we have a statutory obligation here. Section 706 of the
Telecommunications Act directs the Commission to encourage the
deployment of advanced telecommunications capability---broadband---to
all Americans. If the Commission finds that this is not being
accomplished in a reasonable and timely fashion, Congress directs us to
take action to accelerate such deployment. In fact, Congress directs us
to take ***immediate*** action. It's worth dwelling on that word
"immediate" for a moment, because it has been two and a half years since
the Commission even teed-up questions for a Section 706 Report. That's
just the 706 ***study*** that I'm talking about, ***not the deployment
action***. Rumor around the Commission is that we might get around to a
study shortly, but why such a long delay for so important a topic? I've
been calling on the Commission to move forward on this for a long time.
It's our duty under the law to perform this study, to use it as a tool
to craft our broadband approach. By putting it off, we've been flying
without the fuel that makes for good decisions.

Here are some of the things we need to do in that report. First, we need
a serious study of what other countries are doing to ensure that their
consumers get attractive broadband services at attractive prices. We do
know this: nearly all of the industrialized countries, except the United
States, have national plans for broadband deployment. It's not that we
need to emulate what others with different traditions and economies and
even population densities may be doing, but can't we be serious enough
to at least look at what they're doing? There are some pretty creative
deployment initiatives going on out there beyond America's borders.
There may just be a lesson or two there for us.

It should also be a concern that consumers in other lands are getting a
lot more capacity to a lot more people at a lot lower cost than we are.
Investment here is nowhere near where it could and should be, and
statistics show we now rank 11 rungs down in global broadband
penetration, behind South Korea, the Netherlands, Japan and a number of
others. The USA---Number 11! What more of a wake-up call do we require?

I might add that, in the Commission's hoped-for future effort to measure
broadband deployment, let's not use data and standards that are passé.
For example, who still thinks the broadband revolution will happen at
the 200 kilobit figure the Commission has been using as its key
benchmark? I mentioned the 200 kilobit figure to someone and the
response I got was: "How 1997." Nor can Commission measurements be
credible if we continue to claim that reasonable and timely deployment
in an area means that one subscriber has signed up in a zip code. These
are not the analytical methodologies needed to help the nation cope with
so momentous an infrastructure challenge.

We need to look within our own borders, too, specifically at what so
many towns and municipalities have done to deploy broadband themselves,
issuing bonds and taxing themselves to get the job done. What does
***that*** mean? Why are they doing it? With what success? And what
lessons does this have for other localities?

We ought to be convening expert panels, community roundtables,
Congressional discussions and a national dialogue on this. Then, as I
said, use the powers we have for reasonable and timely deployment and if
they are not enough, then ask Congress for whatever else is needed. You
may not agree with my analysis here, but shouldn't we at least be asking
the questions and teeing up the options on a matter so clearly important
to the country's future?

So, yes, I worry about our approach. We're nickel-and-diming huge
issues. We're backing into classifying all the new technologies that
come along without clearing away the regulatory underbrush that keeps
them from fulfilling their potential. Here's another example:
intercarrier compensation. Our intercarrier compensation system is
Byzantine and broken. We have in place today a system under which the
amounts and direction of payments vary depending on whether carriers
route traffic to an incumbent local provider, a competitive local
provider, a long-distance provider, an Internet provider, a CMRS carrier
or a paging provider. In an era of convergence of markets and
technologies, this patchwork of rates should have been consigned by now
to the realm of historical curiosity. Certainly no one should be
surprised that with new technologies in the mix, carriers are disputing
when and where charges apply. The dialogue is heated, the disagreements
between carriers are substantial, and I suspect we're having a lot of
disputes that we probably didn't need to be having.

It may be the easier course for the Commission to answer only narrow
questions about how to keep the current system afloat and to twist new
technologies so they can somehow be brought into the rubric. But bailing
wire can only hold this system together for so long. At some point---and
we're long since there---more patches and band-aids don't help. In fact,
they hurt.

The harder course here is also the right one. We have a two-year old
proceeding on intercarrier compensation. We need to act on it. We
desperately need to create a level playing field that will provide more
rational investment signals. Amid converging technologies and blurring
jurisdictional boundaries, we are challenged to justify a system that
treats similar intercarrier connections differently. We may not be able
to fully migrate to a one-size-fits-all approach. We obviously have to
keep in mind the important element of cost recovery here, especially for
rural carriers. That's important for rural consumers and it's important
for rural America. Our goal must be a system that relies to the greatest
extent possible on market forces---and not arbitrage---to drive
technological advances and innovation.

I am encouraged by reports that industry is talking---dare I say
collaborating---on an intercarrier compensation proposal for the
Commission. That could be a tremendous public service and get us a good
ways down the road toward some solutions. It's a huge order, but I'd
like to see us get a plan for discussion and I'd like to see the
Commission formally resolve to get the job done---*finis*---by December
31 of this year. I think it will take that kind of priority and that
kind of commitment from us. And it will take tremendous commitment from
you in this audience and the captains of your industries to bring us
something that contains at least the seeds for success.

Going forward, then, we need to develop a real national plan for
broadband deployment. Over the long-term, the debate over what is
"telecommunications" or "telecommunications services" or "information
services" cannot be the single-minded focus of our broadband dialogue.
Think about it: we have all spent the better part of the last two years
classifying, reclassifying and declassifying. What do we have to show
for it? We're all exhausted, that's for sure. We're in free-fall when
compared with broadband penetration in other nations.

Worse, we have no plan for the future. The Commission needs to start
thinking now about how to get us out of our Broadband Ditch. Let's think
anew and act anew. We need to be gathering the data---far more
extensively than we do now so that we can make intelligent decisions. We
need to be doing the analytical studies---far more extensively than we
do now. We need to be engaging stakeholders of every kind in a national
dialogue about America's broadband future---far more extensively than we
do now. And then we need to take our authority under Section 706 and use
it to the extent we can, to get advanced communications deployed---truly
deployed---across this nation.

What we don't need to do is wait around to begin thinking until after
Congress rewrites the Act. We ought to be producing the data and
analysis and developing the options and recommendations ***for***
Congress---and we ought to have started this process long ago. In other
words, let's use the authority we have and ask for whatever else may be
needed. Isn't that a legitimate function for a Commission charged with
great public policy responsibilities?

Maybe we can actually get to a broadband regulatory regime that is
constructive rather than destructive. Probably all of us would agree
that regulatory regimes can sometimes be destructive. But my point here
is not so much to debate recent decisions of the Commission---you know
where I stand on these---but to say that we need to be thinking about
the future. And this doesn't reduce to a debate about regulation versus
deregulation. Ideology can't get us from here to there. There are
regulatory provisions that are hurting us and there are regulatory
safeguards that are helping us. The national challenge of building
broadband infrastructure deserves better than this tired old
regulation-versus-deregulation fixation. Sometimes good policy is
deregulation, sometimes it is regulation. No, what we need is good data,
serious and substantive analysis, broad stakeholder dialogue to chart
our course, and considered options and recommendations to meet the
broadband challenge. Failure to do justice to the larger questions I
have posed---and I'll bet you can come up with many others---is
precisely the kind of disruption that our country and our children
cannot afford.

Summing up, we are dramatically changing the ways we communicate in this
country---and around the globe. We are challenged to adjust our rules
and polices not only to accommodate, but to facilitate, this process of
change. We need to create an environment where competition flourishes
and innovative services thrive. When disruptive technologies erupt---and
they will---we need to ensure that value is transferred as seamlessly as
possible and that consumers are the real beneficiaries of these changes.
In what I think is going to be a truly transformative chapter in our
country's history, the Commission needs to step up to the plate and do
its part.

These are not easy issues and far be it from me to suggest that any of
them is a slam-dunk. Despite the frustrations I have discussed this
morning, however, I remain an optimist about the future of
communications, about the paradigm-creating new technologies that are
becoming available to us. I still believe that communications
technologies will be the lead engine of American prosperity in this new
century. And I remain committed to the idea that the best infrastructure
development occurs, as it always has in the United States, when the
private and public sectors find creative ways to work together. I have
spent the overwhelming bulk of my years in Washington trying to build
exactly these kinds of partnerships because I believe this is how we
best serve the common good, the public interest. And that is how we will
ensure that the Digital Revolution of our time leaves no American
behind.

Thank you.