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Commissioner Pai Keynote at FICCI FRAMES 2014, Mumbai, India

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Released: March 12, 2014

KEYNOTE ADDRESS OF FCC COMMISSIONER AJIT PAI

AT FICCI FRAMES 2014

MUMBAI, INDIA

MARCH 12, 2014

I have given many speeches during my time as a Commissioner at the U.S. Federal
Communications Commission, or FCC. But this one is truly special to me. I was born and
brought up in the United States, but my family’s roots are here in India. My mother grew up in
Bangalore, and my father was raised in Hyderabad. In 1971, they came to the United States with
just a radio and ten dollars in their pockets.
Now, forty-three years later, here I am, in the country of my forefathers, speaking to you
as the first Indian-American to serve on the FCC. The credit for this goes to my parents, who,
like many immigrants, sacrificed to give me opportunities not available to them as children. It
goes to my grandparents, who instilled in my parents the value of hard work and the vision to
dream big. And it represents one small aspect of an enduring link between India and the United
States.
Speaking of my grandparents, I remember how difficult it was to communicate with them
when I was a child. Back then, there were no cellphones, no free long-distance calls, no Skype.
Instead, my grandmother had to reserve a ten-minute block at a Bangalore post office well in
advance just to use a phone. These international calls were quite expensive, so my family’s
conversations were efficient rather than expansive. There was no email or WhatsApp, so I had to
wait and hope for those occasions when my grandfather sent me an Aerogram, his stories
scribbled into the margins.
The world today is nearly unrecognizable by comparison. At home, I shoot videos of my
two-year old son and five-month old daughter with a smartphone, upload them onto YouTube,
and within seconds, my relatives here in India can watch them on their mobile devices. And we
can talk on the spur of the moment as well, often for free. Our countries might remain separated
by about eight thousand miles, but my family feels a lot closer today than it did in the 1970s.
India, too, is changing fast. Over the past few days, I’ve had a chance to meet the
entrepreneurs at Little Eye Labs, a mobile app optimization startup that was just acquired by
Facebook. I’ve had a chance to hear from the leader of a major radio company who is bringing
content to millions of listeners and encouraging Indian women in all fields to join the executive
ranks. I’ve had a chance to learn from a technology company that last year grew by over 3,000
employees and is using the Internet to pioneer telemedicine. The company had no presence in
India at all when I visited a decade ago.
My experience, and India’s, are just two examples of what has been made possible by the
digital revolution. The theme of this year’s FICCI Frames is “Media and Entertainment:
Transforming Lives.” Over the next three days you’ll hear many speakers highlight ways that
content and technology are powering social change. I’m looking forward to learning from those
on the cutting edge when it comes to film and broadcast, animation and gaming, visual effects
and social media.

By contrast, I am not in the business of creating content. So be forewarned; my remarks
today won’t be as exciting as Hugh Jackman’s appearance at this conference three years ago.
Among other differences, there’s no way I will be dancing with Shah Rukh Khan or any other
legend of Indian cinema.
When it comes to content, I know what I like as a consumer. But as a regulator, I don’t
believe that it is my place to impose my preferences upon others. Everyone has different tastes,
particularly in countries as diverse as the United States and India. So I firmly believe that the
marketplace, not government, should sort out success from failure. The proper role of regulators,
in my view, is to create a framework that fosters innovation and allows content to be broadly
disseminated. And that means encouraging investment in the networks that connect those who
create content to those who consume it.
How important are those networks? Well, half a century ago, the Chairman of the FCC,
Newton Minow, proclaimed that television was a vast wasteland. But today is the golden age of
video. The marketplace gives Americans more choices than ever before. Broadcast television
stations (known here as terrestrial television) transmit high-definition programming and multiple
programming streams. Over five hundred programming networks are available through cable
and satellite providers. And almost half of Americans have digital video recorders that allow
them to record programming and watch it at their convenience.
Internet video providers (known in the United States as over-the-top providers) are
impacting the market in a big way. Connected devices like Roku let consumers stream Internet
programming onto their own TV sets. Mobile video is exploding with more Americans viewing
content on their tablets and smartphones. This freedom to watch what you want when you want
and how you want has even encouraged some consumers to drop cable or satellite service
altogether. Lest there be any doubt of the impact of Internet video, consider this fact: Today, the
largest Internet video provider, Netflix, has more American subscribers than any single cable or
satellite operator.
The ubiquity of broadband has opened up huge opportunities in Internet video. These
range from original, award-winning programs featuring Hollywood movie stars to the less
acclaimed, but still loved, uploaded home videos featuring our children and pets. Americans
also now enjoy watching old episodes of broadcast and cable programs at their convenience over
the Internet. Often, we watch numerous episodes in one sitting, a phenomenon known as “binge
viewing.” Our demand for Internet video is so extraordinary that just two video services—
Netflix and YouTube—account for over half of all downstream traffic on our fixed broadband
networks, and video makes up 56% of mobile data traffic.
The United States is at a point where broadband and video have joined to form a virtuous
cycle. Consumers’ appetite for Internet video is placing new demands on broadband providers to
expand the highways that carry that traffic. Providers are doing just that. Cable operators are
spending billions of dollars upgrading their technology using a new technical standard that
transmits data much more quickly. Telephone companies are deploying more fiber. Wireless
providers are expanding 4G LTE networks. And a new entrant, Google, is activating gigabit
fiber in cities across the country.
One might ask: How has this all happened? Well, it wasn’t government fiat. The
government didn’t invent the iPhone. It didn’t launch Netflix. It didn’t install fiber to the home.
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It was private enterprise, taking risks to innovate and build, and competing for consumers in the
free market, that brought about the digital revolution. It was our private sector that spent over
one trillion dollars over the past fifteen years to upgrade cable systems, launch satellites, lay
fiber, build towers, and deploy our broadband infrastructure.
Rather than owning companies or directing capital spending, the United States
Government has sought to create a regulatory framework that gives companies the right
incentives to make these investments. And this morning, I’d like to briefly highlight three
successful strategies we have employed in this regard.
First, we have removed regulatory barriers to infrastructure investment. Second, we have
created a free market for spectrum. And third, we have embraced free trade and foreign direct
investment as a way to promote capital formation. Each has played an important role in
fostering the innovation we see in America today. And I believe each serves as a valuable lesson
for regulators going forward.
For the last twenty years, it has been the policy of the United States that the Internet be
unfettered by government regulation. In other words, instead of micromanaging networks or the
content that rides over those networks, we have focused on removing obstacles to infrastructure
investment wherever we find them. That ultimately gives consumers easy access to the content
they want, when and how they want it.
This was a conscious decision by regulators. At the beginning of this century, the United
States faced a fundamental choice. Would we apply to the Internet the heavy-handed economic
regulations designed for telephone monopolies? Or instead, would we adopt a modern approach
that would give the private sector more flexibility to innovate? Thankfully, we chose the latter
path. In 2002, the FCC applied a light-touch regulatory model to cable operators offering
Internet service. In 2005, we did the same for telephone companies. And in 2007, we made
clear that this deregulatory model also applied to wireless broadband.
These decisions yielded major results. From 2001 to 2009, the number of Americans
with broadband at home skyrocketed from six percent to sixty-three percent. And during those
same eight years, the price of wireline broadband fell by more than fifty percent.
We have also removed regulatory barriers in the video marketplace. Entry into that
marketplace was often a challenge as we entered the twenty-first century. Cable companies had
to get permission from local governments to offer cable service, and that was often quite
difficult. This caused a problem for broadband deployment because building out is generally
profitable only if a provider is able to offer a competitive bundle of services: Internet, telephone,
and video. In the words of the FCC, broadband deployment and entry into the video market are
“inextricably linked.”
To fix this problem, the FCC, joined by many state governments, made it easier for
competitors to offer video services. This produced big benefits for consumers as telephone
companies, in particular, entered the video market, expanded their fiber networks, and
accelerated the deployment of high-speed broadband.
Even today, the United States is breaking down regulatory barriers to infrastructure
investment. The big question we face is how to fully transition from the analog world to a digital
one based on the Internet Protocol, or IP. Right now, our regulations require telephone
companies to maintain two networks: a legacy network based on copper lines and a new, IP-
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based network. This is inefficient, and it deters high-speed broadband deployment. For every
dollar spent to maintain the infrastructure of the past is a dollar that can’t be used to build and
expand the networks of the future.
That’s why the FCC recently decided to move forward with local experiments in which
companies can move customers from old networks to IP networks. We are going to see what
happens when aging infrastructure is turned off. These tests will give us valuable data. And we
will then use that data to make a successful national transition to all-IP networks. Once that
happens, companies will be able to focus their investments exclusively on high-speed networks.
The federal government isn’t the only one looking to make it easier for the private sector
to build and improve networks. Back home, we have an expression: “Not in my backyard.” Its
abbreviation is NIMBY, and it refers to a common attitude throughout the world. Everyone
wants the benefits that come with progress, but few want to have something built right next to
their house. For example, people want high-speed mobile broadband but they don’t want a tower
they can see from their kitchen window.
This poses a dilemma for governments at all levels. That’s why we are looking for ways
to promote the physical infrastructure needed for broadband while still preserving environmental
and cultural interests. One idea is to tailor government oversight to the size of the deployment.
Under this approach, what are called small cells—equipment for wireless networks that in some
cases is the size of a Parle-G biscuit—wouldn’t need the same level of regulatory review as the
construction of thousand-foot towers. Another idea is for government to streamline requirements
for permits and provide cheaper and easier access to the rights-of-way, poles, and underground
ducts necessary to build and upgrade wired networks.
So that’s our first strategy: infrastructure. Our second strategy is a free market for
spectrum. Here, the United States made some key decisions that set the stage for explosive
growth in mobile broadband. For one thing, we adopted what we call a flexible use policy.
Instead of prescribing how wireless carriers must use spectrum, we left those choices to the
private sector, which is much more attuned to consumer demand. That has enabled networks to
evolve with technology without the need for government sign-off at each step.
Second, the United States pioneered the use of competitive auctions to distribute
spectrum licenses. This market mechanism has allowed us to put spectrum to its highest value
use. Between 2006 and 2008, for example, the United States successfully pushed 142 MHz of
spectrum into the commercial marketplace. These auctions raised over $30 billion for the United
States Government. And this spectrum is now being used to provide tens of millions of
Americans with 4G LTE service and is the main reason that the United States is currently home
to almost half of the world’s 4G subscribers.
Today, we continue to make more spectrum available for mobile broadband. Last month,
we raised over $1.5 billion in our first spectrum auction since 2008, and we intend to hold
another auction later this year. Then, in 2015, we aim to hold the world’s first broadcast
incentive auction. This will be a two-sided auction where broadcast television stations will have
the option of selling their spectrum and wireless carriers will have the opportunity to buy it. The
television stations that decide to keep their spectrum rights will need to be relocated to different
channel assignments. It’s complicated to structure a spectrum auction when you don’t know
what the supply and demand is going to be. Indeed, it will be more difficult to pull off than a
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Bollywood dance number. But given the need to free up more spectrum for commercial use, we
have no choice but to be bold.
I believe that our experience with auctions, which now spans about two decades, offers
valuable insights to the rest of the world. For example, auctions are more successful when they
are kept simple, transparent, and market-driven. That means setting clear rules in advance and
sticking with them. That means avoiding onerous conditions on particular spectrum. That
means giving everyone a fair opportunity to bid. These are the best ways to promote network
construction, to raise money for the treasury, and to give consumers the benefits of innovative
new services. In short, the government should establish a level playing field when it comes to
auction rules rather than trying to micromanage who wins and who loses.
Our last strategy has been to send a loud and clear message that we welcome investment
in our telecommunications sector from around the globe. The FCC has found that “foreign
investment has been . . . an important source of financing for U.S. telecommunications
companies, fostering technical innovation, economic growth and job creation.” If foreign
companies want to spend capital building and upgrading networks in the United States, we think
that’s a good thing for American consumers. That’s why last year we approved a Japanese
company’s purchase of over 70 percent of Sprint, our nation’s third-largest wireless carrier. And
now, two of our four national wireless carriers are run by foreign corporations.
Historically, however, the United States has been more cautious when it comes to foreign
investment in broadcast stations. In fact, it had been virtually impossible for foreign companies
to own more than 25 percent of a U.S. broadcaster. That policy was outdated and harmful to our
country’s television and radio broadcast industry. As a result, the FCC last November voted to
change that approach.
I hope that other nations too will liberalize their own foreign investment policies.
Restrictions on investment in communications ultimately limit cultural interaction. After all, one
of the great things about the digital era is that there is “ek technology, ek duniya.” Technology
means connection across countries and cultures. It transforms lives everywhere. So just as my
kids’ YouTube videos link my family near and far, an open communications sector can maintain
and deepen the relationship between two of the world’s largest and most diverse democracies,
two allies, two friends.
In conclusion, I am deeply grateful for the invitation to speak this morning. And my
commitment to a strong relationship between the United States and India isn’t just professional.
It is personal. So consider this a return invitation: stay in touch. My office has an open door
policy, both literally and figuratively, so if you are ever in Washington, DC, stop by. You can
also reach me on e-mail, ajit.pai@fcc.gov, and even on Twitter, @ajitpaifcc. I look forward to
hearing from you.
Thank you and best wishes for a successful conference.
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