Tom Tauke

New Democrat Network Keynote Speech On Internet Ecosystem

delivered 24 March 2010

 

[as prepared]

Well, thank you very much, Simon. You have provided such insight and shown so much leadership in this area. It really is a pleasure to be here with you. Thank you for hosting us. (Guess I'll get my glasses so I can [see the text]).

In San Jose, in the heart of the high-tech world, sits whatís known as the Winchester Mystery House. It started out in the late 1880s as a small farmhouse and by the 1920s was transformed into a 160-room, seven-story Victorian mansion with doors and stairways that lead no where, dead-end hallways, and mazes that can leave you lost for hours. The house grew that way -- with no logic or plan -- because the owner just kept adding, adjusting and adding again as needs or desires required; the result is an architectural white elephant.

In the world of communications policy, we have our own version of the Mystery House.  It started as the Radio Act of 1929 [1927], was subsumed by the Communications Act of 1934, and after numerous amendments during the last three-quarters century, itís become an interesting maze that the Federal Communications Commission and all of us attempt to navigate as we play various roles in the Internet ecosystem.

Itís time we turned our attention to this Mystery House and figured out how it can be remodeled to meet the needs of a new era.  This task is all the more important because, thanks to the efforts of the Federal Communications Commission, we now have a National Broadband Plan, which lays out a vision for a vibrant broadband and Internet marketplace. In my view, the current statute is badly out of date. Now is the time to focus on updating the law affecting the Internet. To fulfill broadband's potential it's time for Congress to take a fresh look at our nation's communications policy framework.

Verizonís effort over the last year or two to find common ground with Google and others on the issues of net neutrality, behavioral advertising and privacy protection, and other Internet policies, really brought home to me the dilemma we face. Too often these important discussions about policy for the Internet degenerated into disputes over the statutory authority of the FCC.

Then, with the Comcast-Bit Torrent case it became clear that the debate over jurisdiction wasnít just an intellectual exercise.  The authority of the FCC to regulate broadband providers under the so-called ďInformation ServicesĒ title, or Title I, of the Communications Act was at best murky.

One idea recently floated to solidify the FCCís jurisdiction was to place broadband under the old rules that applied to telephone networks under Title II.  To us, that clearly was outside the scope of the statute.  It also highlighted the danger of attempting to apply statutory provisions intended for the telephone industry of the 1900s to the communications and Internet world of the 21st Century.

In confronting this hard question about jurisdictional authority, we also faced this policy question:  if Title I and Title II donít apply to the Internet space, what are you saying about the authority of government in this space?

As our efforts to find common ground on the key issues became more difficult because of the disputes over agency jurisdiction, it is clear to me that we need a fresh look at what the role of government should be in the Internet ecosystem, and specifically at the statute governing the communications industry.  Weíve spent some time thinking about that, and today Iíd like to share our perspectives.

First, letís talk about whatís working in the Internet ecosystem, and then Iíll offer some suggestions for a fresh start at developing a workable Internet policy.

Back in 1999 FCC Commissioner Bill Kennard said America would get broadband ďby letting a competitive marketplace thrive. We need an intentional restraint born of humility Öthat we can't predict where this market is going.Ö In a market developing at these speeds, the FCC must follow a piece of advice as old as Western Civilization itself: first, do no harm. Call it a high-tech Hippocratic Oath.  So with competition and deregulation as our touchstones, the FCC has taken a hands-off, deregulatory approach to the broadband market.Ē   There is no doubt that those policies put in place by the Clinton Administration and the Bush Administration to jumpstart innovation and the spread of broadband worked.

Broadband providers have invested hundreds of billions of dollars for deployment of broadband networks.  Verizon alone has deployed more fiber than all the countries in Europe.  The result: today about 96 percent of Americans have access to at least two providers of wireline broadband and as many as three wireless providers, and more than 55 million Americans can connect to a broadband network capable of delivering at least a 50mbps stream.

Itís not an accident that over the past decade, the Internet Ecosystem has become a critical global economic engine, or that so much of the innovation from the core to the edge is based here in the United States. It isnít only companies like Amazon and e-Bay and Google. We have companies like Salesforce.com innovating around cloud computing, and Medtronics pioneering medical implants that transmit vital signs over the Web to physicians.

Across the Internet Ecosystem you have many players crossing their traditional lines of business to offer consumers products and services they want.   The marketplace is increasingly characterized by collaboration and partnerships among various companies. So Google, Motorola and Verizon Wireless created the Droid to compete against the Apple-AT&T iPhone.  The collaborating partners are ever-changing, creating a new dynamic of what some have called Modular Competition.

The approach Bill Kennard talked about years ago of using a light regulatory hand to create a highly competitive marketplace has worked.  Now, we need to put in place a framework that will continue to encourage ongoing investment and innovation for this vibrant ecosystem we see. This should be the cornerstone for a refreshed policy framework.

So whatís the problem?  The problem is that the statute is irrelevant to the ecosystem that has developed.  The Internet today hosts a quarter of the worldís population -- close to two billion users. The Verizon network alone connects 100 million of these users with over 1.7 billion text messages and 50 million video/pictures exchanged, 400 million e-mails received, 8.7 petabytes of video streamed. There are new pressures and challenges and problems cropping up that policymakers didnít consider a decade ago -- such as the 5 billion potential cyber-threats monitored and acted upon each day.

The issues that arise from all of these new players and cross-platform competitors donít fit nicely within the boundaries of traditional communications regulation. The instinct is to impose regulation, but itís a balancing act.  We want order, but we also donít want to hinder investment and innovation in this dynamic broadband and Internet marketplace.  How do we accomplish this?

I certainly donít have all the answers for exactly what a 21st century policy framework would look like, but if I may, I would like to suggest four general principles that constitute the foundation on which such a framework should be built.

First, consumers must be fully empowered. Any new policy should put the users in charge.  Consumers should have the ability to choose the devices and software they want, access whatever lawful content and applications they need, and obtain the products and services they desire on the move or at home.  Empowered consumers are also well-informed consumers, who are able to make choices and decisions based on easily understood language and transparent business practices. Providing consumers with more easily understood and relevant information about how their broadband connections will perform, for example, or how their applications may affect their broadband experience, or what consumersí privacy expectations should be when they download content, helps promote competition and innovation.

Second, the consumer must feel safe.  If we want consumers to use broadband in all of the ways we envision -- social networking, online shopping and banking, online medical records and remote medical monitoring, online education, cloud storage of such personal content as family photos -- consumers must be confident that their online security and privacy are protected.  These policies should be consumer friendly and uniform across the ecosystem.  For example, a behavioral advertising policy that requires an easy to use process for affirmative consent from a user before that user can be tracked on-line should apply to all players engaged in behavioral advertising, regardless of where they sit in the space and what technology is used.

Third, consumer access and adoption should be priorities. In order to ensure that broadband technologies are fully deployed everywhere, we must tackle one of the most vexing issues from the old communications world: the subsidy issue. Over the years there has been a great deal of talk on Capitol Hill and the FCC about addressing subsidies like Universal Service and for good reason.  The National Broadband Planís recommendations for addressing facility-based deployment in high cost areas is headed in the right direction.  But we need a new approach to addressing the challenge of giving low-income Americans access to the Internet.

When you look at other consumer-assistance programs for food or fuel, you donít see energy companies or food companies collecting fees from their customers and then figuring out how to split those fees among themselves. The consumer receives direct support from the government and then uses it to purchase fuel or groceries. We should look at the model for fuel assistance and food stamps.  Competitive subsidies that are technologically neutral and targeted solely for the benefit of consumers, not corporate intermediaries, would be one alternative to ensuring full national broadband deployment.

Fourth, governmentís role should be to protect consumers and ensure a properly functioning free market. Put another way, the test for government intervention in the marketplace is to prevent either harm to users or anti-competitive activity. Today, there are a host of consumer-protection concerns -- online fraud, child protection, privacy Ė that need to be addressed. Thatís one bucket of issues that I wonít focus on today. The other set of issues focus on ensuring the properly functioning free market.  Let me offer some thoughts on this issue.

Government also has a legitimate interest in ensuring a functioning marketplace -- one that incents investment and innovation and provides choice. Itís the free market being free for competition. And, I believe, the threat to a functioning marketplace does not arise from only one set of players; it can arise from any place in the ecosystem where market power can be abused.  From the perspective of the consumer, it matters not whether competition is constrained by a network company or an applications providers or anyone else in the system of linkages that add up to the Internet.

In fact, today, by the very nature of the Internet Ecosystem, many are working together or competing in other companyís turf.  Computer companies sell phones, and quite successfully. Search engines sell open operating systems. Network providers create their own apps stores. That means that the value proposition to the consumer is really a package created by many companies acting together with little, if any, regard to their previous corporate histories. So no set of companies should be immune from scrutiny.

Think about the evolution of cloud computing. It is the cloud that will allow consumers to have access to their content wherever they are, regardless of device. But who controls the cloud? If itís anyone, itís not likely to be a network provider -- itís much more likely to be some entity that came to control access to the data or the software.  For example, consider the messages sent by users on a social network. They are the functional equivalent of an email message. But the functionality, and therefore the potential control, is in the cloud.  If we worry about the movement of email and other content along networks, then we need to worry just as much about their movement and treatment in the middle, not at the edge of the Internet.

The bottom line is this. Harm to consumers and competition should not be permitted, from any source. So the level-playing field needs to be big enough to include all of the players. If youíre on the field, then the referee can blow the whistle. Thatís a simple principle -- and a good one. Good public policy is always good for companies that want to play by the rules.

Now letís spend a moment on process.

Traditional regulatory models based on rules written to shape and control more static, ďone purposeĒ industries -- such as TV or telephone service -- are not only out of step with todayís dynamic, converged Internet ecosystem, they are harmful to the innovation process that characterizes broadband and the Internet.  Traditional agency ďfact findingĒ Ė often through notices or public requests for comment -- are usually geared towards specific rules or regulatory outcomes.

Instead, we could structure a process that uses the innovative, flexible and technology-driven nature of the Internet to address issues as they arise.  Instead of the traditional rule-making process, federal enforcement agencies could structure themselves around an on-going engagement with Internet engineers and technologists to analyze technology trends, define norms to guide such questions as network management, and understand in advance the implications of new, emerging technologies.

Technology leaders and experts from all players involved in the Internet should set up voluntary organizations and forums to provide advice, recommendations, and advisory opinions to government agencies. This will help inform the agenciesí role as backstops that deter damaging activities that undermine the vibrant competition and openness that defines the Internet.

In pursuing bad actors, the government should use understandable principles that can provide guidance but are informed by experience.  Some will suggest that more detailed rules are needed, but by adopting the approach I have outlined, we can both protect consumers and competition and assure the flexible, adaptive oversight that fits the innovative nature of the Internet that we want to preserve.

This will require clear statutory authority for the implementing agency.  In other words:  this is a job for Congress.

Earlier, I referenced the quote from Bill Kennard, in which he spoke of the role humility played in setting policy. I offer these observations today in that same spirit.  In putting forward this policy framework Verizon hardly views it as the capstone to a discussion, but rather the beginning.  We donít have all the answers.  We want to work with all of you to ensure a vibrant Internet Ecosystem, and fulfill the vision for the technology and the networks laid out in the National Broadband Plan.

Thank you.


Book/CDs by Michael E. Eidenmuller, Published by McGraw-Hill (2008)

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