Remarks by Michael Copps at New America Foundation

Remarks of Commissioner Michael J. Copps (retd.)

“Competition in the Business Broadband Marketplace”

Michael Copps, director of Common Cause’s Media and Democracy Initiative, delivered these remarks today at a meeting of the New America Foundation in Washington, D.C.

Thank you, Michael, for inviting me to be a part of this distinguished panel of not only experts on the topic, but several old friends, too. Plus, I see a lot of familiar faces in the audience, so I am pleased and honored to be here.

It will come as no surprise to most of you that the competitive marketplace I envisioned when I arrived at the Federal Communications Commission in 2001 is not the marketplace I see today. Let me go back briefly to then. I was never one of those who thought the Telecommunications Act of 1996 was lacking in providing a vision and considerable guidance to the FCC. In telecommunications, the statute makes crystal clear the FCC’s mission to encourage the delivery of the most advanced telecommunications feasible to every citizen in the land, no matter who they are, where they live, or the particular circumstances of their individual lives. Reasonably comparable services at reasonably comparable prices for all are the clear mandate of the law. From there, Congress made plain the need for competition among providers, consumer protections, and providing for the safety of the American people. That’s the “public interest” as applied to telecommunications-and let’s remember that term-“public interest”-applies every bit as much to telecom as it does to media.

Good, I thought. Let’s get on with it. But it got complicated very quickly. Back then the Commission was right in the middle of deciding how to allow the Bell companies to enter the long-distance markets (which were of increasing value to them for the purposes of data transmission), in exchange for opening their local markets to local competition. Congress had wisely stipulated competition and clearly had not voted for reconstituting Ma Bell. I joined some of my colleagues, and worked with the competitive carriers (the CLECs) and my friend Bob Quinn, to make sure there was indeed a competitivequidfor the long-distancequo. Some competition was already developing, much of it through wholesale leasing, including the leasing of local loops and switching (the then-famous UNE-P) by the competitive carriers. One idea behind wholesale leasing and UNE-P was to provide an entry strategy that down the road could lead to facilities-based competition. All the while, the Bells were fighting this and, to make a very long story very short, a compliant FCC killed UNE-P and shackled wholesale leasing, at which point the prospects for expanded competition pretty much disappeared. Meanwhile, the Bells had picked up 45 million long-distance lines, although they were careful not to compete directly against one another. And the Commission did a poor job, once it granted all those Section 271 entry petitions, in following through to ensure that commitments were kept and that competition developed. Among its other anti-competition sins, the Commission also granted big telecom companies forbearance from certain unbundling and dominant carrier obligations in areas that were anything but fully competitive.

Worse even than all that, the FCC at the same time was voting, over the strenuous objections of Commissioner Adelstein and me, to remove advanced telecommunications-broadband-out from under the purview of Title II of the Act-where consumer protections, competition, privacy and public safety were clearly mandated-and moving them to the nebulous land of Title I where regulatory authority was uncertain, consumer protections were virtually non-existent, and where the huge companies, their legions of lobbyists, and courts of various opinions could-and did-wreak havoc on the promise of competition. And let’s be clear: there was no legislative or judicial mandate for this. Had the Commission decided otherwise in the Brand X case, the Supreme Court would quite likely have accorded deference to the Commission, as a number of Justices discussed in their opinions. In any event, we spent the next several years engaged in all sorts of mind-boggling linguistic analysis, aimed at making sure the “public interest” and broadband access never cohabited. All the while, of course, other countries were hard at work building their broadband infrastructures, hammering our Number Two ranking in world broadband penetration down to Number 15 or 20 or 24 in just a few short years. We can quibble about the precise rankings, but the point is that’s not where your country and mine belongs.

Sometimes the Commission’s parsing and legerdemain were borderline amusing, but the results were anything but funny. Basically, the Commission majority pretty much mirrored the hands-off approach of the two Bush Administrations, trusting to the market to take broadband everywhere, even to places where there was no incentive for business to go. While I have been critical of business many times, what bothered me even more was the abdication by government of its public interest responsibilities for much of the past three decades. And the FCC was center-stage in most of it.

It took many in Washington a long time to realize-and some still haven’t-that this head-in-the-sands approach was totally at odds with the urgent telecom needs of the people. Those with eyes to see quickly came to realize that there was no problem confronting our country-lack of jobs, inadequate health care, challenged schools, growing energy dependence, deteriorating environment, lack of equal opportunity-that did not have a broadband component as part of its resolution. They understood that this is the central infrastructure challenge of the Twenty-first century and that it was crying out for national attention. But the Commission was busy doing other things-after all, we had huge telecom mergers to approve and a multitude of services to reclassify and deregulate. Talk about frustrating!

In 2009 we finally got some change-an appreciation for broadband and a realization that the country needed a strategy to encourage its deployment and adoption. I welcomed that change and saluted the new direction that came with new leadership at the Commission. But this is a job requiring more. Not just more from the FCC-but more than the FCC. We have a telecommunications infrastructure that holds extraordinary promise to expand opportunity for all Americans, but we lack a sense of national mission to get the job done. The Commission is in the process of making Universal Service work in the broadband age, and that’s good and essential and I was happy to be a part of that, but we cannot expect changing Universal Service by itself to magically bring ubiquitous broadband to every home and hearth. The broadband build-out I am talking about can come only from a deeper commitment of resources than has thus far been made. And this commitment must come from both the private and public sectors. When nearly one-third of our homes lack access to high-value, opportunity-creating broadband, it is time to ponder what another generation of Americans did when it discovered one-third of its population ill-housed, ill-clad, and ill-nourished. Times were tough then, too, and resources were strained, but we responded with reform rather than reluctance. We had to build and repair, and we did both. We dared to think big. And we found ways for the private and public sectors to work together to accomplish big goals-the private sector as the lead locomotive but encouraged and incented by visionary public policy. Over the course of our national history, we built roads, canals, bridges, railroads, interstate highways, rural electricity, even plain old telephone service, working together-enlightened public policy combined with private-public partnering. That’s how we built America.

Fast forward and today we see the infrastructures we built back then collapsing all around us. We endure second-rate roads, disintegrating bridges, dysfunctional transportation, ancient utilities-the very investments that powered us to prosperity and to first-among-the-nations standing-going to seed. People from other industrial nations can’t believe what they see when they visit our country. And, as an aside, sometimes I’m surprised by what I see in other countries. Many of you heard my tale a couple of years ago about floating down the Yangtze River in China and having instant 3G access just about everywhere we went, even in remote rural areas -better service than I could get in many urban areas here at home.

(Just to keep you up-to-date on my travel experiences, although this talks more to U.S. equipment shortfalls when we were overseas, my wife and I took a trip to South America a couple of weeks ago and we rented a phone from a very large U.S. telecom company-one not represented on this panel today-so we could occasionally text our family and report in to Beth’s doctors back home. It worked fine in Rio, but absolutely refused to work at all in Argentina and Chile. America: first in technology and I couldn’t even receive or send a text message home!)

But I digress. More to the point, it is here at home that we are short-changing the information infrastructure of the future. While we should be immersed in the business of investing in the development of our human and infrastructure resources, we have been led instead into a mind-numbing preoccupation, financed by enormous big money, about chopping more from the budget and more from our future. My friend Blair Levin put it so well-and I’m not trying to marry him to my remarks-when he observed that “Instead of talking about investment for growth, we are talking about harvesting for dividends.” Well, make no mistake about it: America is not going to have the telecommunications and information infrastructure we so urgently require without a major national commitment to increase our broadband performance by orders of magnitude. That kind of deep commitment is lacking today-and it’s costing the country a lot.

This commitment to a viable broadband future needs to be accompanied by renewed emphasis on competition. I know there are those who say we should just recognize telecom as a natural monopoly and forget all this competition stuff. I say there are still multiple ways to breathe life back into the competition that the Telecom statute envisions and that broadband must have to flourish. By the way, about three-quarters of those “natural monopolist” enthusiasts are also advocating for the elimination of anything that remotely resembles government oversight or-the dreaded word-“regulation”-which means what they really want is unregulated monopoly. The other one-quarter of the “natural monopoly” choir would accept the monopoly or duopoly but impose some public oversight to protect consumers and competitors. That may sound better to some, but good luck getting any of that done in today’s Washington environment! So what are some ways to stimulate competition?

Competition could grow if we learned how to say “No” to more industry mergers and consolidation. That doesn’t mean all mergers are bad, but it does mean that we have allowed far too much industry concentration at the expense of the public interest over the past 15 years. It was a welcome change, with a nod here to Gene Kimmelman and the Department of Justice, and also to Chairman Genachowski and the FCC, to see the brakes applied to the AT&T/T-Mobile deal. I wish both agencies had demonstrated equal tenacity when it came to the Verizon-cable deals. Vigorous anti-trust enforcement is always critical to competition.

Competition could grow if we encouraged more innovative approaches like municipal broadband. “My way or the highway” may be the mantra of the big telecoms, but it’s bad business for everyone else. Here’s one example. New enterprises increasingly factor an area’s broadband level of service into their calculations about where to locate their firms. Simply put, business owners are wary of moving to an area with inferior connectivity. The private sector, perhaps understandably, has often avoided deploying fiber-optics into low-density rural communities. That’s a market failure, but it also represents an opportunity for the public sector or creative public-private partnerships to deliver service. How silly-and costly-it is for a major carrier to say, “I’m not going to build here, but no one else can either.” What’s going on here is not the prevention of unfair competition; it’s ensuring there will be no competition. So our largest telecom firms are spending heavily to derail public investment in broadband connectivity. So far 19 state legislatures have erected barriers to public provision, typically via American Legislative Exchange Council (ALEC) model bills. Our two biggest telephone companies are members of ALEC. State prohibitions on municipal broadband and laws to neuter state regulatory commissions are touted as “leveling the playing field,” but most municipal networks are in rural areas where there would be no next-generation connectivity were it not through innovative provisioning. This legislative and lobbying activity at the state level is a huge and, until recently, untold story. If we had a media infrastructure worth its salt, what’s going on here would be front-page news. Thank goodness we have vigilant public interest groups, like Common Cause that I’m associated with now, to shine light into these dark corners and to bring grassroots pressure so that big companies like GM, GE, Wal-Mart and Wells Fargo are cancelling their ALEC memberships. I hope more companies, especially in broadband, follow their example.

Competition could grow if our spectrum policy really encouraged it. That doesn’t mean wholesale transfer of big broadcaster spectrum rights to even bigger wireless companies. It means making careful and balanced decisions about where such transfer enhances the public interest. It also means looking more to unlicensed spectrum, database-driven spectrum access, shared spectrum, smart radio technologies and set-asides for small and minority enterprises. It means clear roaming requirements and strict enforcement. It means doing something-finally-about special access. The potential of special access reform for backhaul, competitive wireless, local governments, schools and universities, and small business is, I believe, huge. Right now special access is a multi-billion dollar disincentive to competition and a serious drag on the deployment of badly-needed telecommunications infrastructure.

Coming at competition from another angle, we should be looking at how other countries are deploying broadband and how they make it happen. We were quick to dismiss facilities sharing, for example, but if we can’t figure out how to incent competition through other means, then revisiting this option might yet be necessary. It’s something that should remain on the table.

There’s another aspect of broadband competition that we also need to grow. I won’t dwell on it here, but broadband has many dimensions, and one of them is as a major purveyor of news and information. We have a news and journalism deficit in this country that is every bit as pernicious as that budget deficit everyone keeps talking about. If we allow broadband and the Internet to consolidate further-like radio, TV, and newspapers consolidated-and if we allow toll-booths and gate-keeping to pop up on every lane of the information highway, we will have lost a golden opportunity to enhance our civic dialogue. And we will have betrayed the open, dynamic and competitive vitality of this opportunity-creating technology. That’s another speech for another day, but it’s part and parcel of the broadband competition challenge and there is urgency-real urgency-in facing up to it.

We can only succeed in achieving the lofty aspirations that Congress set out in 1996 if all of us get involved. Electing officials from whom we have not secured commitments on these issues is a prescription for inaction. Letting others do the work in a prescription for weakness. Not working for these issues at the grassroots is a prescription for disaster. That’s why you’ll be seeing more of me out across the country in the months ahead as part of a new Media and Democracy Reform initiative at Common Cause. We will be talking with citizens about the importance of promoting competition and putting the brakes on broadband consolidation. We will be energizing a national discussion on how our information and news infrastructure has been short-circuited. And we will be encouraging people to get involved in charting the way to a broadband future that will help America regain its economic footing and open the doors to a future rife with new opportunities for all our citizens. That was the promise of broadband. I hope that’s its future.

Thank you.