Speech by Kevin Martin. Re: Broadband deployment. Date: September 18, 2002. Editor's Note: TLJ transcribed most of Martin's speech, responses to questions from the audience, and responses to questions from reporters outside the event. The transcription was made from TLJ's audio recording of the event. The quality of the audio recording was poor, and Commissioner Martin spoke over a noisy breakfast audience. Hence, this transcript includes many omissions, and is certain to contain errors.

[Introductory comments regarding the audience and hosts omitted.]

The Alliance for Public Technology and the High Tech Broadband Coalition have done some great work over the last year ... in trying to continue to push and make great strides in broadband deployment ...

As you know, the potential benefits that broadband connections can bring to every American are substantial and significant. As demonstrated in the most recent case studies that they filed with the Commission, progress in distance learning, public safety and emergency response, telemedicine, and rural medicine, are just a few of the ways that continued broadband deployment can enrich our lives.

The Alliance for Public Technology, in particular, has been a vocal advocate in the Commission's Section 706 proceedings, calling for deployment of advanced services to all Americans in a timely fashion. As the Chair of the FCC's joint conference on advanced telecommunications services, I appreciate their commitment and their involvement in Section 706.

The digital conference has been working very hard to identify ways to further the deployment of infrastructure needs, especially to rural and traditionally underserved areas. In fact, we know the joint conference, now meeting in Greeneville, North Carolina, last spring, where we had the opportunity to examine broadband deployment in rural areas. As a part of that program, we actually visited East Carolina University Medical Center. We had a chance to see distance learning and telemedicine up close ___ very impressive. We were able to see doctors diagnose and treat patients across the state using high speed Internet access. They were able to listen to a patient's heartbeat, look at their ears and throats, and prescribe their patients with ___ despite the fact that they were miles away.

I look forward to these kinds of further developments in telemedicine so that all Americans can enjoy the highest quality medical service, no matter where they are. But telemedicine is only one of the potential benefits that Americans can experience with greater high speed connections.

In fact, telecommunications has been responsible for much of the nation's economic growth in the past decade. The availability of advanced telecommunications is essential to the economy of the 21st Century. It dramatically reduces the cost of exchanging information, improving efficiency and productivity, and allowing what is previously local businesses to serve (global?). I am confident that broadband deployment will lead to a new period of growth. I believe that we (should?) continue to make broadband deployment the national priority.

Last October, I gave a speech where I set out several focuses. And I believe ___ government on broadband competition framework. In my view, these principles still remain relevant today. So, let me share with you some of those principles, in discussing how I think you can help me and my colleagues to take quick action on advancing broadband deployment (and?) facilities based competition in current proceedings before the Commission ___.

The first principle is the importance of establishing a stable, reliable and fast regulatory environment. These are turbulent economic times for the telecom industry. The Commission contributes to ____ stability by establishing a more ___ and more reliable regulatory environment. Broad proceedings that remain pending for extended periods will contribute to uncertainty. More protracted uncertainty can prolong financial difficulty. Regulatory uncertainty and delay can function as entry barriers ___, limiting investment and impeding deployment of new services.

Particularly given the current financial ___, we need to act quickly on our major pending ____. Prompt decision making will provide greater certainty and stability in the market place. In return, a stable environment can further ___. We should work to be faster and more reliable (in reaching?) our decisions. Prolonged proceedings serve no public interest ___. I believe that it is time for the Commission to take action on these various proceeding involving broadband competition, including the UNE triennial, performance measures and the broadband proceedings that are currently before us.

Let me share a couple of my specific thoughts on those proceedings. First, the second principle is actually, I believe the Commission needs to focus more on facilities based competition. I believe the government, and ___ Commission, should place a higher priority on facilities based deployment (in? or and?) competition. In the past, the Commission has adopted a framework that may have discouraged facilities based competition by allowing competitors to use every piece of an incumbent's network at super efficient prices. This regime creates significant disincentives for the deployment of new facilities that are being used to ___. Under such a regime, new entrants have little incentive to build out facilities, since they can use the incumbent's cheaper and more quickly. And incumbents have less incentives to build new facilities, since they must share them with their competitors at regulated prices.

The goal of the Telecommunications Act was to establish a competitive and deregulated environment. But to get to true deregulation, we need to facilities based competition. Without it, we will also be a regulatory body that is setting wholesale __ rates. Thus, I believe we __ dramatically ___ the broadband deployment issue, and the UNE triennial issue, with an eye towards what decisions within the framework of the Act will help spur domestic ___. Contrary to what some may argue, I believe such a framework would not favor any particular industry. For example, to facilitate the CLECs' deployment of new equipment, detailed ___ ___ ___. The Commission has taken important steps. Similarly, such rules are, are, regarding the deployment ___s the Commission has adopted, may be necessary. Additional guidelines and performance measures for ___ of elements of the incumbent's network are essential ____ to be able to obtain access to what is necessary. Such rules are important for the incumbent to be able to deploy ____________.

On the other hand, I do think the Commission needs to finish its reconsideration of how to apply the "necessary and fair" which is used to determine what elements of the network must be ___. As many of you know, the U.S. Court of Appeals for the D.C. Circuit recently remanded the UNE remand order, the Commission's previous effort to set out a list of network elements that incumbent local exchange carriers must make available on ___ basis. The Commission sought rehearing on the D.C. Circuit's decision, but that was denied a few weeks ago. The Court criticized the Commission's unbundling requirements as being overly broad. The Court found that the FCC had failed to take into account the competitive nature of particular geographic ___. But even before the Court reached its decision, the Commission had started a proceeding asking some of these various (new?) questions, asking how the review, what incumbent carriers should provide, the network access, to the ___ carriers, on a ___ basis.

The question remains, however, where do we go from here. How do we encourage the next generation of networks, with even higher speeds, the kinds of networks can handle content (for?) video on demand, which is likely to lead to much greater adoption by the public. And how do we continue to establish such a framework that facilities competition. This calls for an important but delicate balance. We need to make sure that incumbent networks remain open to competition, but at the same time, provide incentives for incumbents and ________.

This results in many questions that are currently pending before the Commission. For example, if the Commission chooses to establish more granular, or more geographical ___ standards, should we adopt broad rules, that allow state commissions some flexibility to examine _______, or should we adopt national rules. What level of granularity is appropriate. To the extent an element is deemed no longer necessary, is that discussion, should that decision occur at the national level, the regional level, or in a central office by _____.

How can we develop transitions for the impact that these rules may ultimately have. For example, to the extent that some elements are no longer available, for example, a switch, should we slow the transition from prices of those elements up, so that they reach wholesale rates, as opposed to having a flash cut which could adversely affect consumers. How should our standards apply to elements that are readily available to competitors. What is a new facility ________. And even if, going back to my previous example, a switch is readily available from alternative carriers, because there are other conditions that are necessary for, before competitors can actually have access to the remaining elements. For example, electronic ___ provisioning. Is that important. And is that necessary prior to eliminating ____ current elements.

Consider the questions the Commission is currently grappling with. And in answering these questions, I think it is important that we all hear from you, and we a constructive dialogue with specific input on these kinds of questions to determine how we should proceed, and what should be the issues that we are trying to access.

I believe the next six to eight weeks is actually critical. And, I encourage all of you to come and see myself, and all of my colleagues, so that we will be able to understand the framework that you all think is important, as we try to grapple with these issues, as we try to determine how we should be addressing these complex set of problems that the Commission is currently facing so that we can continue to foster competition, encourage the deployment of new facilities, and create a viable wholesale market.

In addition to the issues currently pending before the Commission ____. I think we need to make sure that, the next principle, removing financial incentives. I believe the government should be focused on eliminating financial and regulatory disincentives to broadband deployment that already exist. Specifically, I believe that the government either change the way it taxes and regulates the provisioning (and?) consumption of broadband.

There are several different legislative proposals for providing direct and indirect financial incentives for broadband deployment. And I agree more targeted relief, and sometimes, for example, such as much needed reform and modernization of depreciation schedules can actually help spur deployment. But even more important than providing direct relief right now, I believe the government should first commit itself to exercising self restraint by placing additional financial burdens on broadband. Currently, at every level of government, we often, we too often see broadband deployment and telecommunications as a potential revenue stream. I know that this is particularly a propos, for today, with my speech, the Wall Street Journal article "New Taxes, Fees Hit Everyone's Phone Bills". [Link to subscription web site.] This is on page ___ of the Wall Street Journal today.

The, from federal and state excise taxes, the kind of taxes that have traditionally been reserved for decreasing demand for certain products, such as alcohol and tobacco, to local franchise fees, which are sometimes designed to recoup more than the cost that the government bears for allowing services to be deployed, such as repairing streets, governments impose taxes that actually discourage demand, and therefore discourage the deployment of broadband telecommunications services. To truly help spur broadband deployment, every level of government needs to be committed to minimizing, eliminating, these excessive financial burdens.

And this includes the Commission. For example, I do not support the FCC's proposal to extend universal service contribution obligations to the providers of broadband Internet access. In my view, the contribution requirement, essentially, such a contribution requirement, would be essentially an Internet access tax that represents an unnecessary financial burden on such Internet service providers and actually creates a barrier to broadband deployment. I know that APT has actually communicated some support for this idea (of taxing?) to help everyone take advantage of advanced services. But I urge caution. I know that the Universal Service Joint Board just rejected the idea of extending the idea of universal service funding to broadband, because the current proposal would provide such an Internet access tax merely to support phone service. And, I would encourage everyone to make sure that we are trying to eliminate the financial disincentives, the taxes to be placed on broadband services.

But, we also need, my fourth principle, is we also need to removing regulatory barriers. For competitive carriers, many of these regulatory hurdles occur at the state and local level. These include local rights of ways, permits for zoning and tower citing, and as I have just alluded to, franchising. Many of these local restrictions are the most cumbersome and difficult for broadband providers to navigate. Some state and local governments, and the federal government, with respect to federal lands, could be more proactive in facilitating deployment by streamlining any permitting processes that are necessary.

___, I know that several states have taken it on their own initiative to evaluate their local communities to determine which of those are open to broadband deployment, and which are not. I hope that that kind of an effort, to spotlight local communities, and maybe a team deployment, and those that are facilitating, will encourage and spur all officials to take a critical look at existing local regulation. And I hope that when we continue to ____ we will be able to continue to explore these issues at the Commission's upcoming forum on local rights of way, __ in October.

So, in conclusion, I would say that I believe that it is ____ goal, it is ___ broadband dilemma. Instead, we need to we need to begin to remove financial and regulatory disincentives that discourage broadband deployment. By following all of them, and working together with industry, I believe we can make an important difference in helping achieve our common goal _____. Thank you again for the opportunity to speak to you this morning about the issues that I think are critical for the Commission. And I would be happy to answer any questions that you have. Thank you.

[Tim Reagan of Corning asked an inaudible question about the timing of an FCC proceeding.]

I hope so. I have been advocating that for the last several of months. And I think we need to have this be a priority that we should finish by the end of the year. I don't know whether the Commission will actually be able to, will actually make that kind of a time frame. ...

I am still hopeful that we can make it by the end of the year. ...

[Charles Crawford, of the American Council for the Blind, spoke about universal service obligations.]

... The Commission had before it a proceeding. Actually, the joint universal service joint board before it a proceeding, in which we asked whether we should extend the universal payments that go out to other advanced services. And the universal service joint board actually rejected that proposal at this time. And actually, I was one of the, one of the things I said in my ______, I at least wanted to leave that open. In fact, we should open, and I thought we should have studied it further, whether or not, the demand, the deployment of that kind of services in urban areas was significantly ___, that we needed to look at what should happen in rural areas as well, or to other recipients of universal service. But, the joint board at this time recommended against that. And it is in that, particularly, in that vein, that I am hesitant to be allowing for the so called taxation of broadband services, when none of the benefits of that will actually go to recipients who are providing broadband. Instead, it would go to just provide telephone services. So I think that we should be, so what you are saying is that you thought that some of the benefits might outweigh some of these costs for these new services, but the statutorially, or at legally, the broadband services cannot receive any of that universal service at this time. ... At this time, I don't think we should be using it to expand a revenue base, because none of the benefits of that revenue base will actually accrue to broadband services.

[There was a question about Martin's personal use of broadband access. Martin referenced "professional research and just enjoying it", but not "purchasing".]

[Harold Feld of the Media Access Project spoke at length about several issues, including seeking "cert in the UNE remand matter" and "the important role of ISPs in encouraging deployment".]

... On the cert petition, at the Commission, the Chairman has essentially made the decision on whether or not to be appealing the D.C. Circuit on that issue. I personally am hesitant about seeking the cert petition on the D.C. Circuit. I am concerned that, in light of the fact that we have an open docket on the triennial review, that I think, ask many of the same questions that the D.C. Circuit sent back to us, that I think that it could potentially delay the decision making that is involved there. And, that, that is concern, as I talked about, I think that it is important that we have a more stable environment and try to ____. So, I personally think that. But, I don't know what the decision is ultimately going to be.

On the second issue of ISPs, I am sensitive to it. I do think that we need to make sure we, that ISPs are not just, not just say that others continue to some kind of continued access to the end user customer. I do think that as we are trying to make this balance, that I talked about, that needs to continue to be something that is a priority, and I think we need to address that when we are trying to bring together the kind of converging regulatory ...

[Martin also restated his opposition to imposing taxes on ISPs.]

[Martin then left the dining room, and spoke with reporters in the hallway.]

[Martin was asked several questions about primary video, Powell's position, and an item removed from the agenda of last week's open meeting.]

I think that trying to address the primary video issue is critical to the digital television transition, and I think that the Commission needs to go on and address it, and address those reconsideration petitions in one way or another. And so, I am hopeful that we be soon, I mean ...

There was some thought of getting this on the previous agenda, as I think that that may be what the Chairman indicated. So, I think that there is a real effort to try to get moving on that.

[Follow up question on must carry.]

Well, I don't want to, I don't want to prejudge the issue, but I do think that might, that, the carriage of, potential multiple signals, could end up being important to the transition. And I also think that one of the things that we have to look at is the burden that the cable industry would end up bearing. One of the questions for me, that I have, is, is whether, currently, our rules say that if you carry a high definition signal, if you put out a high definition signal, that should end up being carried. It is unclear to me if someone decides to do two standard digital, as opposed to a high definition signal, that the cable company, how, how and if, the cable company can actually recapture that extra capacity if that is not all put through. So, that is one thing that I am not sure, what is exactly in the record about the technical capabilities of the cable companies to do that. But, regardless, I think that it is important to the transition, and I think that hopefully we will end up dealing with this issue.

[Question re "UNE proceeding" timing.]

Well. I am still hopeful by the end of the year, but I was saying that if we didn't make that, that I hoped that then we got to it in January ...

[Question about the timing of "the other two broadband proceedings".]

Well. I am not sure which of the proceedings we will end up doing first. The Chairman ends up setting the agenda. I think that the UNE triennial at this point should the first one, and that is my sense of where the most attention seems to be right now. Now, there are some other issues as it relates to universal service funding that bleed into some of the broadband issues, so that could end up changing that priority, I don't know for sure. But, the other proceedings, that you are, I think that the performance measures proceeding is another proceeding that we should have done by the end of the year as well. So, I think that, while I do think the UNE triennial, I think performance measures is actually very related to that. The UNE triennial issue involves what of the elements should be unbundled, and the performance measures involve the rules for how those elements should be unbundled. So, I actually think that we should be both of them done by the end of the year. I think that if we do do the UNE proceeding prior to the broadband proceeding, the question of whether or not January or February is an appropriate time frame for them, depends on when we actually do the UNE. I mean, if we did that proceeding in December, then yes, January of February would be appropriate. If we don't get to that until February then that one might get pushed back.

[Question regarding application of dual must carry to DBS.]

In the DBS context, I believe, well first of all, the rules are both similar and different. I mean, the must carry rules in same ways apply the same, but DBS _____. So, I think that some of these decisions will ultimately apply to both.

[Question about cable programmers being able to sell channels on an a la carte basis. Martin said that "that is an issue that Congress would end up dealing with".]

[Question on E-911 waivers to waivers and fines. Martin said that he wants "to make real progress on enhanced 911".]