AGL Magazine - AGLM - June 2017

Guest Commentary — Light-Touch Regulation Supports Broadband Service Growth

Ajit Pai 2017-06-01 07:43:46

Guest Commentary — Light-Touch Regulation Supports Broadband Service Growth Broadband means economic opportunity. The internet has enabled the democratization of entrepreneurship. Today, with a powerful plan and a broadband connection, you can raise capital, start a business, immediately reach customers worldwide and disrupt entire industries. Never before in history has there been such opportunity for entrepreneurs with drive and determination to transcend their individual circumstances and transform their worlds. There are opportunities in every city in every corner of the world, if — and this is a big if — you have high-speed access to the internet. That’s why, as chairman of the FCC, I will pursue policies that promote infrastructure investment, foster innovation and expand next-generation networks across the United States. Cusp of Advances Within living memory, it was thought that radio-frequency spectrum above 3 GHz could not be used for mobile communications. Today, one can use millimeter-wave spectrum to produce multi-gigabit speeds. That means 5G could transform the wireless world. And when you add the potential of new satellite and fixed broadband technologies, as well as further innovation in 4G LTE, we stand on the cusp of exciting advances that will bring unparalleled choice and competition to consumers. But it’s not a forgone conclusion that we will fully realize this technological potential. After all, building, maintaining and upgrading broadband networks is expensive. And our 5G future will require a lot of infrastructure, given the densification of 5G networks. In the United States, operators will have to deploy millions of small cells, and many more miles of fiber and other connections to carry all this traffic. Doing all this will demand massive capital expenditures. Broadband Investment The key to realizing our 5G future is to set rules that will maximize investment in broadband. If we don’t, the price could be steep. After all, networks don’t have to be built. Risks don’t have to be taken. Capital doesn’t have to be spent in the communications sector. And the more difficult government makes the business case for deployment, the less likely it is that broadband providers big and small will invest the billions of dollars needed to connect consumers with digital opportunity. As we move toward 5G, regulators must also recognize something many people often don’t: Innovation is not limited to the so-called edge of networks. Innovation within networks is also critical, especially in the mobile space. To realize the 5G future, we need smart infrastructure, not dumb pipes. And we need to make sure our rules recognize this reality. Investment and Innovation We are in the process of returning to the light-touch approach to regulation that produced tremendous investment and innovation throughout our entire internet ecosystem, from the core of our networks to providers at the edge. Let me highlight a few parts of that framework. First, during the Clinton administration in the 1990s, American policymakers forged a historic consensus across party lines that the internet should be free from heavyhanded regulation. Second, in the early 2000s, the United States rejected the notion that the broadband market was a natural monopoly. Third, we embraced a flexible-use policy for wireless spectrum, which enabled our wireless networks to evolve with technology, including the rollout of 4G LTE on a timeline that matched consumer demand. Fourth, we freed spectrum for mobile broadband, auctioning AWS-1 spectrum in 2006, 700-MHz spectrum in 2008 and 65 megahertz of mid-band spectrum in 2015. The incentive auction will reallocate 70 megahertz of spectrum from TV broadcasters to wireless providers. We also opened nearly 11 gigahertz of spectrum in the bands above 24 GHz for mobile use. Light-touch regulation, facilities-based competition, flexible-use policy and freeing up spectrum have produced impressive results in the U.S. market. Our private sector has spent $1.5 trillion since 1996 to deploy broadband infrastructure. And consumers reaped the rewards of all this investment. On the wireless side, for example, 98 percent of Americans now have access to three or more facilities-based providers. And the United States has led the world in the deployment of 4G LTE. Not long ago, cars, appliances and other things were analog islands unto themselves. Today, we are at the dawn of the internet of things, with 15 billion internet-connected devices and over 50 billion expected by 2020. Likewise, a generation ago, a cellphone was a big, clunky piece of equipment that enabled scratchy voice calls, if you were lucky. Today, there are nearly 250 million smartphones in the United States alone. Consumers use them for everything from uploading live-stream videos to playing games — and even placing the occasional phone call. We would not have seen such innovation if, in the 1990s, the government had treated broadband like a railroad or water utility. Last-century Regulation However, two years ago, the United States deviated from its successful, light-touch approach. The FCC decided to apply last-century, utility-style regulation to today’s broadband networks. Rules developed to tame a 1930s monopoly were imported into the 21st century to regulate the internet. This reversal wasn’t necessary to solve any problem; we were not living in a digital dystopia. The policies of the Clinton administration, the Bush administration, and the first term of the Obama administration had produced both a free and open internet and strong incentives for private investment in broadband infrastructure. Two years later, it has become evident that the FCC had made a mistake. The new approach injected tremendous uncertainty into the broadband market. And uncertainty is the enemy of growth: After the FCC embraced utility-style regulation, the United States experienced the firstever decline in broadband investment outside of a recession. In fact, broadband investment remains lower today than it was when the FCC changed course in 2015. And we have seen much concern about whether the FCC would permit or ban service plans. “The key to realizing our 5G future is to set rules that will maximize investment in broadband. If we don’t, the price could be steep.” New Generation FCC leadership has now passed to a new generation, dedicated to renewal as well as change. We are confident in the decades-long, cross-party consensus on light-touch internet regulation — one that helped America’s digital economy thrive. And we are on track to returning to that successful approach. We ended the FCC’s investigation into so-called zero-rating or free-data offerings. Free-data plans have proven to be popular among consumers, particularly those with low incomes, because they allow consumers to enjoy content without data limits or charges. They have also enhanced competition. Nonetheless, the FCC had put these plans under the regulatory microscope. It claimed that they were anticompetitive, would lead to the end of unlimited data plans or otherwise limit online access. But the truth is that consumers like getting something for free, and they want their providers to compete by introducing innovative offerings. Our recent decision simply respected consumers’ preference. Unlimited Data Plans The best evidence of the wisdom of our new approach is what happened afterward. In the days following our decision, all four national wireless providers in the United States announced new unlimited data plans or expanded their existing ones. Consumers are now benefiting from these offers — offers made possible by a competitive marketplace. And remember: Preemptive government regulation did not produce that result. The free market did. In the future, the FCC will not focus on denying Americans free data or issuing heavy-handed decrees inspired by the distant past. Instead, we will seek to advance the networks of the future and the innovative new products and services that take advantage of those networks. And as we do so, we will preserve a free and open internet. We know from two decades of experience that utility-style regulation is not necessary to achieving that goal. As one of my predecessors, FCC Chairman Bill Kennard, put it in 1999: “The internet is really blossoming, but some policymakers and politicians want to control it and regulate access to it. We should not try to intervene in this marketplace. In this space, it’s very difficult to mandate openness in a regulatory manner.” In my view, Chairman Kennard was not just practical, but prescient. Government Role At the same time, however, we recognize that government does have a role to play when it comes to broadband. For example, a marketplace that isn’t competitive doesn’t serve consumers well. So our approach will not be zero regulation, but light-touch regulation — rules backed by long-standing principles of competition law. We will also create incentives to deploy broadband in parts of our country that have not yet been reached by private investment. The FCC has announced a plan to spend $4 billion to expand mobile broadband in rural America. We will devote these funds to bringing Americans living in the analog age into the digital one. And we will do even more in the future to incentivize every sector, every company to build networks and to compete. In short, America’s approach to broadband policy will be practical, not ideological. We will embrace what works and dispense with what doesn’t. That means removing barriers to innovation and investment instead of creating new ones. That means taking targeted action to address real problems in the marketplace instead of imposing broad, preemptive regulations. And that means respecting principles of economics, physics, and law and acting with humility as we regulate one of the most dynamic marketplaces history has ever known. This vision will unleash the massive investments that will help the United States realize its 5G future. Ajit Pai is chairman of the Federal Communications Commission. Edited for length and style, these are remarks he made at the Mobile World Congress in Barcelona, Spain, on Feb. 28, 2017.

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