Commerce Assistant Secretary Nancy J. Victory
Before the National Association of Regulatory Utility Commissioners
Committee on Telecommunications
February 12, 2002
TOGETHER ON THE RIGHT TRACK:
MANAGING ACCESS TO PUBLIC ROADS AND RIGHTS OF WAY
Good morning Commissioner Nelson, Commissioner Smith, Commissioners, and ladies and gentlemen. It is my great pleasure to be with you this morning, and at long last to make my official NARUC meeting debut. Unfortunately, previous scheduling conflicts have prevented me from visiting you before now. You should know, however, that nothing short of a Presidential order to substitute for Becky Wilczak in today's women's luge competition, would have prevented me from being here. Of course, no less than a Presidential order could get me to don a crash helmet and lay on a sled traveling through 17 curves along an icy track more than 4,000 feet long at speeds approaching 90 miles per hour! So, I'm happy to have this opportunity to speak to you today. And trust me, America's medal chances are greatly enhanced by having me here and not in Salt Lake City! Let me first thank Committee chair Joan Smith for this gracious invitation, and NARUC's able General Counsel Brad Ramsey, who along with NTIA staffer Jim McConnaughey, regularly apprise me of what's happening in the state commissions.
And we all know that so much is happening so quickly. Even Olympic luge competition training isn't enough to prepare us to keep pace with the rapid changes in the telecommunications industry! Friday, February 8th marked the sixth anniversary of the Telecommunications Act of 1996. While the debate rages as to whether the Act should be amended, I am sure that all sides would agree that the world of telecommunications has changed significantly since the 1996 Telecom Act became law.
In the years before the Act, the telecommunications world consisted mostly of circuit-switched analog service provided principally by incumbent local telephone companies through their wireline facilities. During that time, telephony, cable, and wireless providers delivered neatly packaged services to distinct users for distinct uses. Today, the word is convergence. Wireless companies are winning local telephone customers. Cable operators are rolling out analog telephony, and experimenting with more efficient packet-switched protocols for voice service. Telephone companies have begun limited video programming in competition with cable, as satellite providers steadily gain viewers. Meanwhile, regional Bell operating companies are demonstrating competition in local markets to gain regulatory approval to offer in-region long distance service.
Broadband is the technology now on the tip of everyone's tongue. It exemplifies technological convergence by creating high-speed, interactive services delivered across several different platforms. Local phone companies, both incumbents and new entrants, are offering consumers broadband using DSL, while cable, satellite, and terrestrial wireless networks are vying for their share of the advanced services market.
President Bush and his Administration recognize broadband's importance. These high-capacity networks and the services they support promise to improve the quality of life for all Americans. They can expand educational opportunities, improve health care, increase governments' responsiveness to its citizens, and enhance our global competitiveness. And, thousands of new jobs could result from greater broadband deployment, both directly through network construction, and indirectly through industries related to advanced networks and services.
Consequently, NTIA has been advising the Administration as it seeks to determine the appropriate role for the federal government in facilitating the roll-out of broadband networks. NTIA has led this process by convening a Broadband Forum in the fall, requesting public comments on the issues, and extensively engaging public interest groups, industry representatives, academics, and other interested parties in discussions on broadband issues.
And, recognizing that effective and efficient advanced services deployment requires a strong partnership with the states, I made a personal appeal for your views on these critical issues. My staff and I have gained many valuable perspectives from Alaska Regulatory Commission Chair Nan Thompson, and Commissioners Joan Smith, Dave Svanda, and Brett Perlman. In addition, we are delighted that several state utility commissions, including Florida and Texas, as well as the state members of the Federal-State Joint Conference on Advanced Telecommunications Services, led by Florida PSC Chair Lila Jaber, submitted insightful comments in our broadband proceeding. Although the comment period has expired, we encourage other states to provide input as we develop policy that sets the nation on the right track to achieving widespread broadband deployment.
Getting on the Right Track: Learning from the Lugers
Unless we're on the right track, we won't reach our goal of a strong and competitive broadband marketplace that offers widely deployed advanced networks and services available to all Americans. Like Olympians preparing for competition, policymakers must understand the rules, the challenges, and the correct course to travel. NTIA's efforts have yielded much information about broadband and the factors that various parties believe are affecting advanced network deployment in the United States.
It is clear from the comments that issues related to broadband are complex and multifaceted. An important recurring theme in the comments was the necessity for any broadband policy to reflect a holistic view that has carefully balanced the relevant interests to achieve a coordinated, comprehensive, and cohesive approach. Lugers (those who do the luge) know that balance is essential to keeping their sleds on course and finishing the race successfully. Even the slightest muscle movement in the wrong direction will cause an imbalance that can send the sledder careening off track and into the icy wall. Cautioning NTIA against a similar fate, commenters urged us to consider the respective regulatory treatment of all potential broadband providers - telephone companies, cable companies, wireless providers, satellite operators, overbuilders, and any others that might emerge. The comments also demonstrated that both supply and demand factors affect deployment, thus requiring examination of both sides of the equation.
I'd like to summarize briefly some of what we've learned generally about broadband, before delving more deeply into a state and local issue of interest to many of you -- public rights of way management. As a general matter, much of the broadband debate has focused on whether regulation is impeding deployment. Many of the comments we received addressed whether and how to deregulate new high-speed infrastructure to spur investment in broadband facilities and services. Many commenters raised unbundling issues. Some parties advocated the continuation of existing UNE requirements and the extension of those requirements to new network architecture. Others argued for the adoption of different unbundling regimes for "new" and "old" incumbent telephone companies' facilities, suggesting that unbundling of these new facilities would inhibit, rather than promote, competition. Pricing was another common issue - specifically, whether to transition away from the FCC's current pricing mechanism - the controversial TELRIC regime. Other commenters discussed possible detariffing of broadband services provided by incumbent telephone companies.
The comments also addressed the issue of open access obligations for cable, satellite, and wireless broadband providers. Some see open access as necessary to ensuring consumers' ability to choose how they access the Internet and as critical to the competitive viability of small niche companies that are not vertically integrated. In others' view, marketplace interaction and not blanket government mandates will most readily achieve open access.
A number of commenters noted a need for financial incentives. On this score, the Bush Administration has already taken some important actions. First, the President signed an extension of the Internet tax moratorium, which will prevent new access taxes from increasing the cost of Internet services for consumers and businesses. Second, the President has called for modern tax depreciation schedules, which will remove obstacles to new investment in information technology and broadband infrastructure. Third, the President has proposed permanently extending the research and experimentation tax credit to promote increased investment in the development of new technologies. President Bush also has proposed broadening access to the research and experimentation tax credit to make it easier for companies to deduct many costs of developing new technologies.
We recognize that a comprehensive and coordinated policy cannot be limited to a review of supply-side regulations. While many Americans have access to cable modems or DSL service today, only about 10 percent of American consumers have subscribed to broadband service. Thus, the government and the private sector need to look at demand issues, such as digital rights management and productivity-enhancing applications. NTIA raised these issues in our broadband Forum in October, including discussions about ways to aggregate demand and the impact of "killer applications" to stimulate broadband use. Our sister Commerce agency, the Technology Administration, is taking a closer look at broadband demand issues. Most recently, our colleagues there held a forum on digital rights management.
So, as you can see, the Administration is looking at a wide range of issues affecting broadband. We have come to understand that a comprehensive and coordinated approach is necessary given the extensive interplay among the issues. Like Olympic lugers, we're working to keep all the relevant factors in balance so we can formulate policy that will set -- and keep -- broadband deployment on the right track. For example, some have noted that, while facilities-based competition is an appropriate goal, efforts to promote facilities-based competition might not work and, indeed, might undercut competition unless efforts to promote access to rights-of-way are undertaken. With that in mind, I would like to highlight one of the supply issues that I touched on earlier that may provide a unique opportunity for effective federal, state, and local cooperation and coordination -- management of rights of way and its impact on the development of national broadband policy.
A Curve in the Track: Governance of Public Rights of Way:
A number of commenters in our broadband proceeding, including the state members of the Federal-State Joint Conference on Advanced Services, recommended that NTIA review laws and regulations at the federal, state, and local level because of their impact on the timely roll-out of advanced services. After hearing from a variety of telecommunications providers including regional Bell operating companies, competitive local exchange carriers, long distance providers, and cable overbuilders, we are concerned that constraints on accessing public rights of way might be inhibiting broadband network construction. While most of the concerns were voiced about municipality and county activities in this area, federal agencies that own public lands were also identified as posing potential roadblocks to rights-of-way access. Due to the nature of networks, only a few "difficult" jurisdictions can have a disproportionately adverse effect on the roll-out of uninterrupted statewide or regional advanced services networks, which ultimately can impair national broadband coverage.
These commenters suggest four impediments that errant rights-of-way administration can impose on broadband deployment: delay, unreasonable fees, a third tier of regulation, and discriminatory treatment. They described their experiences with processes and payments for rights of way permits that they contend are unreasonable. These carriers point to municipalities with lengthy and unclear applications processes. They complain of jurisdictions that charge fees based on revenue and other non-cost measures such as conditioning rights of way access on a carrier's contribution of free network capacity. Some telecom providers have challenged that local ordinances recreate state certification procedures by requiring extensive disclosure of corporate business plans, ownership and control documentation, financial, legal and technical qualifications to provide service, and current future and service plans. Finally, some suggest that municipalities favor some competitors over others. While litigation is an option that some communications firms pursue, they claim that the expense and uncertainty of trial and the inevitable appeals further delay their infrastructure deployment. Sometimes these challenges even force companies to abandon installation of broadband and other facilities.
We are mindful that there are always two sides to every story. Representatives of city and municipal interests argue that as trustees of the public's roads and rights of way, their fiduciary duty demands that they recover the fair value of private use of the public's property. Therefore, they contend that local governments should have the flexibility to use market pricing, including revenue-based mechanisms, for efficient allocation of rights to use scarce public resources. These commenters maintain that prohibiting localities from charging market rates for rights of way access unfairly subsidizes telecom carriers at the expense of the community. They also dispute that local regulation impedes new entry.
Several parties have commented favorably about innovative state approaches like those of Michigan, Texas, and Florida. In Michigan, Governor Engler has proposed legislation to create a state office that would serve as a backstop to the local process. The Texas legislature has adopted a uniform method of compensating cities for use of public rights of way, in an attempt to achieve a competitively neutral means of reducing entry barriers. A Florida statute, effective last fall, requires that municipal and county rules on rights of way access be reasonable and non-discriminatory. As advanced services networks grow, these efforts may motivate other jurisdictions to tackle the problem of unreasonable rights of way regulation. By addressing this vexing issue with regulatory reforms, states send an important message that facilitating advanced network deployment in local communities is critical to the development of more robust infrastructure both in those communities and throughout the nation.
Although it's now too soon to assess the effectiveness of these state measures, we'll stay tuned for reports on their impact on broadband roll-out. NTIA encourages other states to monitor these states' experiences, and learn from them, as we intend to do.
NARUC is demonstrating its customary leadership by discussing concerns about the barriers that local rights of way administration may erect to the development and deployment of advanced telecommunications networks. I commend you for focusing needed attention on this important issue. Federal, state, and local officials share the responsibility for removing unnecessary impediments so that telecom providers of all sorts can deliver competitive voice service and two-way, high-speed data and video services. The sooner we can make progress on this issue, the sooner we can enjoy the potential fruits of broadband deployment.
We all know the challenges the issue presents are difficult and that, as demonstrated by your lively discussions during these meetings, consensus will not likely emerge quickly or easily. But like preparing for Olympic competition, nothing worthwhile ever comes easily -- it takes hard work. So I encourage state and local governments to continue to work with NTIA, the FCC, and with each other to find ways to overcome the challenges to removing any unnecessary broadband deployment obstacles that rights of way regulation impose. And, to make sure that the federal government's rights of way management is on the right track, we will be examining our own procedures for accessing public lands and rights of way and exploring ways to eliminate any unreasonable obstacles to companies' use of these areas. Your resolve, combined with ours, and that of local government representatives can result in a championship effort to create a workable and flexible policy on rights of way management that helps, not hurts, infrastructure deployment.
Inspired by NARUC's interest in removing regulatory roadblocks to broadband deployment, I'm renewing my request for help from state and local officials in understanding the "reasonableness" of their regulations as they balance the many interests in their own communities. Through this exchange, NTIA hopes to identify valuable lessons that it may share to help federal and state governments administer public rights of way and other regulations effectively, so communities reap the remarkable potential of broadband, while preserving the integrity of their public property. We have great respect for the states' abilities to experiment with alternative approaches to this issue, and know that your "best practices" are vital to NTIA's effort to develop a sound broadband policy. Therefore, I remain anxious to work with NARUC to identify positive experiences that may serve as models not only for other states, but for the federal government also as it seeks to remove obstacles to broadband deployment.
Developing effective policy to foster the growth of competitive broadband markets requires the same diligent preparation and teamwork as Olympic competition. The states are critical members of the team and together we can achieve the broadband future that President Bush envisions for us. Advanced communications services offer a world of technological convergence that can stimulate innovation, create new entrepreneurs, and bring our American family closer by allowing us to share in new exciting ways, our society's rich mix of cultures. We can only reach that goal if federal, state, and local policymakers work together to ensure that government actions are on the "right track" leading to robust competitive markets, and the value they bring. We look forward to your ideas, and shared commitment to removing impediments to the deployment of advanced services and networks. Let's "go for the gold" and make all our citizens winners through the benefits of broadband! Thank you.