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Commissioner McDowell's Speech Before the GSMA Mobile World Congress

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Released: February 28, 2012

REMARKS OF

THE HONORABLE ROBERT M. MCDOWELL

COMMISSIONER

FEDERAL COMMUNICATIONS COMMISSION

BEFORE THE

GSMA MOBILE WORLD CONGRESS 2012

BARCELONA, SPAIN
FEBRUARY 28, 2012

[AS PREPARED FOR DELIVERY]

AN UNFETTERED AND MOBILE INTERNET:


THE BEST ENGINE FOR GLOBAL ECONOMIC GROWTH


Muchas gracias a GSMA por invitarme a hablar ante el Mobile World Congress y
felicitaciones por otra exposición sin precedentes. La semana pasada en Madrid, tuve la
oportunidad de conversar con los nuevos funcionarios del gobierno español y con
representantes de la industria de la telecomunicación. Fue un diálogo muy productivo.
Me alegra visitar este país otra vez, y quiero decirles que, según la leyenda familiar mis
padres viajaron por España unos nueve meses antes de mi nacimiento...así que, quizá yo
debiera decir: ¡Qué bueno es regresar a casa! Les dejo el resto de esa interpretación a su
criterio.
Es un gusto enorme para mí volver a la magnífica Barcelona. Aunque he
aceptado la oportunidad brindada de hablar en español, creo que ustedes estarán de
acuerdo conmigo en que tal vez sea mejor, por el bien de todos nosotros y de las
relaciones internacionales, que continúe esta charla en inglés.
It is exciting to be here at the GSMA Mobile World Congress. Exploring the
exhibits at this show gives us all a chance to peer into the future of wireless technologies.
What was mere science fiction a few years ago is now affordable for mass markets
around the globe and across income levels. Mobile Internet connectivity is improving the
human condition more rapidly and fundamentally than any other disruptive technology in
history.
In the United States, a lightly regulated and competitive wireless market has
sparked a sustained cycle of investment, innovation and job growth, as well as lower
prices and increased functionality for consumers. Sophisticated devices and complex
mobile applications are tugging hard on present day spectrum availability. Recognizing
the need for spectrum to flow toward its highest and best use, just over a week ago the
U.S. Congress passed legislation that some estimate could place up to an additional 80
megahertz of prime television broadcast spectrum into American consumers’ hands.1 It


1 Middle Class Tax Relief and Job Creation Act of 2012, Pub. L. No. 112-96, §§ 6402-6404, 126 Stat. 156
(2012). The Senate and House of Representatives voted on the conference report accompanying H.R 3630
on February 17, 2012. H.R. REP. NO. 112-399, at 69-76 (2012) (Conf. Rep.).

is now up to the FCC to implement Congress’s intent for what will be the most
complicated spectrum auction ever conducted.
Before the ink on the new law has even dried, however, a debate has escalated
over whether or how the government should shape the outcome of this upcoming 700
MHz auction. Time and again, history has proven that regulators’ attempts to over-
engineer spectrum auctions result in harmful, unintended consequences.
For instance, before the 700 MHz auction of 2008, over my partial dissent, the
FCC placed onerous encumbrances on spectrum that promised to: 1) attract a new
national wireless competitor through what became known as the “C Block”; 2) increase
the number of small business licensees; 3) create a nationwide, interoperable public
safety network through a new public/private partnership for use of the “D Block”
spectrum; and 4) generate additional revenue for the U.S. Treasury.2 In reality, what
those complex auction rules and conditions produced was: no new entrant in the C
Block; fewer small business licensees overall; not even a serious bidder for the
public/private partnership to build a public safety network; and reduced revenue for the
U.S. Treasury.3 In short, the U.S. government’s attempt at central planning failed.
The lesson learned from that auction and others is that when governments attempt
to conduct social and economic engineering by foisting unnecessarily complicated
mandates on the use of spectrum, their efforts frequently backfire. Private sector actors
have a difficult enough time trying to predict market trends. Governments shouldn’t
make matters worse for them. If nimble entrepreneurs swimming in the whirlpool of a
dynamic marketplace have difficulty keeping pace with the rapidly shifting currents of
consumer tastes and new innovations, how are inherently slow moving and inefficient
governments better equipped to do so?
As the FCC implements Congress’s vision for incentive auctions, I will work with
my colleagues to ensure that our auction rules are minimal and “future proof,” allowing
for flexible uses in the years to come as technology and markets change. Furthermore, I
am optimistic that we can create band plans that offer opportunities for small, medium
and large companies to bid for and secure licenses without having to exclude any player
from the auctions. In 2007, I proposed a band plan that would have done just that in lieu
of the counterproductive conditions that were eventually adopted. I am confident that the
FCC can get it right this time. And “getting it right” means avoiding regulatory hubris by
keeping governments’ hands off of the marketplace’s steering wheel as much as possible.
The same theme holds true for Internet governance. This year is pivotal for the
Internet’s future and, therefore, the global economy. Industrialized and developing
nations alike are awash in debt and face flat growth curves, or worse, shrinking GDPs.
Not only must governments, including my own, tighten their fiscal belts, but they must


2 See generally Service Rules for the 698-746, 747-762 and 777-792 MHz Bands, WT Docket No. 06-150,
Second Report and Order, 22 FCC Rcd 15289 (2007).
3 See generally Auction of 700 MHz Band Licenses Closes, Public Notice, 23 FCC Rcd 4572 (WTB 2008).
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also spur economic expansion. An unfettered mobile Internet offers the brightest ray of
hope for growth during this dark time of economic uncertainty.
As we head towards the World Conference on International Telecommunications
(WCIT) in Dubai in December, we should study and appreciate how we got here – how
we created an environment that allowed for Internet connectivity to penetrate faster than
any technology in human history. It started with the 1988 adoption of the International
Telecommunication Regulations (ITRs).4 Then, 114 countries gathered in Melbourne,
Australia to put into motion a positive and constructive liberalization of the international
telecom market. Insulating computer-to-computer communications – and what we would
later call the “Internet” – from traditional telecom regulation allowed for a massive
explosion of investment and entrepreneurial brilliance.
Shortly after the Internet was privatized in 1995, a mere 16 million people were
online worldwide.5 By the beginning of this year, approximately 2.3 billion people were
using the Net.6 Internet connectivity quickly evolved from being a novelty in
industrialized countries to becoming an essential tool for commerce – and sometimes
basic survival – in all nations, but especially in the developing world. In fact, developing
nations stand to gain the most from the rapid pace of deployment and adoption of Internet
technologies.
A McKinsey report released last month examined the Net’s effect on the
developing world, or “aspiring countries.”7 In 30 specific aspiring countries studied,
including Malaysia, Mexico, Morocco, Nigeria, Turkey and Vietnam,8 Internet
penetration has grown 25 percent per year for the past five years, compared to only 5
percent per year in developed nations.9 Obviously, broadband penetration is lower in
aspiring countries than in the developed world, but that is quickly changing thanks to
mobile technologies. Mobile subscriptions in developing countries have risen from 53
percent of the global market in 2005 to 73 percent in 2010.10 In fact, Cisco estimates that


4 International Telecommunication Union, Final Acts of the World Administrative Telegraphy and
Telephone Conference, Melbourne, 1988: International Telecommunication Regulations (Geneva 1989),
available at http://www.itu.int/osg/csd/wtpf/wtpf2009/documents/ITU_ITRs_88.pdf (last visited Feb. 21,
2012).
5 Internet Growth Statistics, INTERNET WORLD STATS, http://www.internetworldstats.com/emarketing.htm
(last visited Feb. 21, 2012).
6 Id.
7 See McKinsey High Tech Practice, Online and upcoming: The Internet’s impact on aspiring countries,
MCKINSEY & CO. (Jan. 2012) (“McKinsey Aspiring Countries Report”),
http://www.mckinsey.com/Client_Service/High_Tech/Latest_thinking/Impact_of_the_internet_on_aspiring
_countries (last visited Feb. 21, 2012).
8 Id. at 22 (categorizing the following as aspiring countries: Algeria, Argentina, Brazil, Chile, China,
Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Iran, Kazakhstan, Malaysia, Mexico,
Morocco, Nigeria, Pakistan, the Philippines, Poland, Romania, the Russian Federation, Saudi Arabia, South
Africa, Taiwan, Thailand, Turkey, Ukraine, Venezuela, and Vietnam).
9 Id. at 1, 3-4, 23.
10 Id. at 1.
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the number of mobile-connected devices will exceed the world's population sometime
this year.11 Increasingly, Internet users in these countries use only mobile devices for
their Internet access.12 This trend has resulted in developing countries growing their
global share of Internet users from 33 percent in 2005, to 52 percent in 2010, with a
projected 61 percent share by 2015.13 The 30 aspiring countries mentioned before are
home to one billion Internet users, half of all global Internet users.14
The effect that rapidly growing Internet connectivity is having on aspiring
countries’ economies is breathtaking. The Net is an economic growth accelerator. It
contributed an average 1.9 percent of GDP growth in aspiring countries for a total of
$366 billion in 2010.15 In some developing economies Internet connectivity has
contributed up to 13 percent of GDP growth over the past five years.16 In just six
aspiring countries studied by McKinsey in 2010, 1.9 million jobs were associated with
the Internet.17 And in other countries, the Internet creates 2.6 new jobs for each job it
disrupts.18 Don’t we want such trends to continue?
While we are enjoying the Mobile World Congress here in Barcelona, 624
kilometers away in Geneva, the ITU’s Member States19 are convening to take the ITR
negotiations a step further in this diplomatic journey toward Dubai. We are at a
crossroads for the Internet’s future. One path holds great promise, while the other path is
fraught with peril. The promise, of course, lies with keeping with what works, namely
maintaining a free and open Internet while insulating it from legacy regulations. The
peril lies with changes that would ultimately sweep up Internet services into decades-old
ITU paradigms. If successful, these efforts would merely imprison the future in the
regulatory dungeon of the past. Even more counterproductive would be the creation of a
new international body to oversee Internet governance.


11 Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2011-2016, CISCO, at 3
(Feb. 14, 2012),
http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-
520862.pdf (last visited Feb. 21, 2012).
12 McKinsey Aspiring Countries Report at 1.
13 Id. at 3-4, 23.
14 Id. at iv, 4, 23. And 73 percent of Internet users do not speak English as a first language. Id. at iv.
15 Id. at 2, 8-9, 26-27.
16 Id. at 2.
17 Id. at v.
18 McKinsey Global Institute, Internet Matters: The Nets Sweeping Impact on Growth, Jobs, and
Prosperity
, MCKINSEY & CO., at 3, 21 (May 2011),
http://www.mckinsey.com/Insights/MGI/Research/Technology_and_Innovation/Internet_matters (last
visited Feb. 21, 2012).
19 ITU’s membership includes 193 Member States, along with information and communication
technologies regulators, leading academic institutions and some 700 private companies. Overview, ITU,
http://www.itu.int/en/about/Pages/overview.aspx (last visited Feb. 21, 2012).
4

Some of the arguments in support of such actions may stem from frustrations with
the Internet Corporation for Assigned Names and Numbers (ICANN).20 Whatever the
complaints are regarding ICANN, they should not be used as a pretext to end the multi-
stakeholder model which has served all nations – and the developing world now more
than ever – so well. Constructive reform of the ITRs may be needed, but they should be
limited to traditional telecom services. Modification of the multi-stakeholder Internet
governance model may be necessary as well, but we should all work together to ensure
no intergovernmental regulatory overlays are placed into this sphere. Not only would
nations surrender some of their national sovereignty in such a pursuit, they would
suffocate their own economies as well, while politically paralyzing engineering and
business decisions within a global regulatory body.
It would be a travesty to create a world where the Internet is partitioned between
countries that live under an intergovernmental regulatory regime and those Member
States who decide to opt out. A balkanized Internet would be devastating to global free
trade and rising living standards. It would also render an engineering morass. Nations
that value freedom and prosperity should draw a line in the sand against new regulations
while welcoming reform that could include a non-regulatory role for the ITU. Venturing
into the uncertainty of a new regulatory quagmire will only undermine developing
nations the most. As a world community, we cannot afford to make that mistake.
Thank you for having me, and I look forward to listening to this impressive panel.


20 Internet Corporation for Assigned Names and Numbers (ICANN), which was formed in 1998, “is a not-
for-profit public-benefit corporation with participants from all over the world dedicated to keeping the
Internet secure, stable and interoperable. It promotes competition and develops policy on the Internet’s
unique identifiers.” About, ICANN, http://www.icann.org/en/about/ (last visited Feb. 21, 2012).
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