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Commissioner Rosenworcel FCC Oversight Hearing Statement

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Released: March 12, 2013
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STATEMENT OF COMMISSIONER JESSICA ROSENWORCEL

FEDERAL COMMUNICATIONS COMMISSION

BEFORE THE

UNITED STATES SENATE

COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

“OVERSIGHT OF THE FEDERAL COMMUNICATIONS COMMISSION”

MARCH 12, 2013

Good afternoon, Chairman Rockefeller, Ranking Member Thune, and the distinguished

members of the Committee.

I am honored to appear before you today as a Commissioner at the Federal

Communications Commission. Prior to serving in this position, I had the privilege of serving

this Committee as Senior Communications Counsel. But of course, joining you here today

behind the witness table is a different experience altogether. I am grateful for the opportunity.

Let me start by noting that there is no sector of the economy more dynamic than

communications. By some measures, communications technologies now account for one-sixth

of the economy in the United States. We have more ways to connect, create, and access content

than at any point in history. These technologies are changing the way we educate, entertain, and

govern ourselves—in communities all across the country.

But our communications triumphs to date are no guarantee of future success. Laurels, are

not, in fact, good resting places. So I think it is important to start with what we know. We know

that we are witnessing the breaking down of old barriers between local and long distance; voice,

video, and data; and wired and wireless. We know that the scope of communications

convergence is immense—and the digitization of all aspects of our economic and civic life is

well underway.

There is no question that this transition is exciting. But it also brings challenges. So in

these transitional times, what should guide the Commission as we carry out the laws developed

by Congress? I believe that our policies must always do two simple things.

First, they must promote confidence for private investment in digital age infrastructure.

Second, they must promote confidence for consumers to realize the full potential and

opportunity that our emerging digital world provides.

This is the prism through which I view all of the Commission’s actions. It is the prism

through which I believe the agency should approach the challenging issues ahead. It is the way I

believe we can best foster growth and opportunity through communications—in urban areas,

rural areas, and everything in between.

Now I want to move from the big picture to the particular, from method to mechanics—

and discuss the major communications issues that lie ahead.

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Implementing Successful Wireless Incentive Auctions

The Commission embarked this past September on the complex but critical task of

conducting wireless incentive auctions. As you undoubtedly know, incentive auctions are a new

tool that Congress provided us with in the Middle Class Tax Relief and Job Creation Act to

address the near-term demands on our nation’s airwaves.

The demands on our airwaves are very real. Consider the fact that we already have more

wireless phones in this country than we have people. Half of those phones are smartphones.

Today one in five households owns a tablet computer—and that number is growing fast.

Smartphones generate 35 times the traffic of traditional wireless phones. Tablet computers

generate 121 times the traffic of traditional wireless phones. And over the next five years,

mobile data traffic is expected to grow 13 times what it is today.

So we must get these auctions right. Because if we get them right, we will facilitate the

voluntary return of spectrum from commercial licensees and promote its efficient reuse. If we

get them right, we will ease congestion on our airwaves and expedite development of new

wireless services and applications. That will mean confidence for carriers to invest in wireless

networks and confidence for consumers to take advantage of the growing array of new and

innovative services that wireless broadband can put in our hands.

But before we get there, it is useful to consider what has come before. For nearly two

decades, the Commission’s path-breaking spectrum auctions have led the world. The agency has

held more than 80 auctions; it has issued more than 36,000 licenses; and it has raised more than

$50 billion for the United States Treasury. The Commission’s simultaneous multiple round

ascending auctions have been a model for governments and commercial wireless providers

across the globe.

We are now again poised to be the world’s pioneer with incentive auctions. To ensure

our success I believe that four basic principles should guide us: simplicity, fairness, balance, and

public safety.

Simplicity is key. Incentive auctions are undeniably complicated. But at every structural

juncture, a bias toward simplicity for participants is crucial. A broadcaster should be able to

quickly and transparently evaluate the opportunities auctions provide.

Fairness is essential. This is especially true with regard to the treatment of broadcasters

that do not participate in the auction. Fairness demands that we consider how to accomplish

repacking by minimizing unnecessary disruption and maximizing the ability of the public to

continue to receive free, over-the-air television. At the same time, we ask that broadcasters make

a fair assessment of the opportunities that this auction provides. By offering incentives to share

channels and incentives to relocate from the UHF to the VHF band, this auction can mean new

resources for broadcasters to develop new programming and deploy new services.

Balance is necessary. None of the three legs of the incentive auction—the reverse

auction, the repacking, or the forward auction—can stand on its own. For instance, the

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interference rules we consider will not only impact broadcast services, but also how much

spectrum will be available for auction, which in turn will impact the revenues raised. Choices in

one area affect others. This also requires attention to the balance between licensed and

unlicensed use of spectrum across all frequency bands. The former provides reliability and

interference protection; the latter provides low barriers to entry and promotes the efficient use of

limited resources. Good spectrum policy requires both.

Public safety is fundamental. The Commission must remember that Congress designated

auction revenues to support the first nationwide, interoperable wireless broadband public safety

network. We must never forget that the success of these auctions requires delivering on our

promise to America’s first responders.

Finally, it is important to put our incentive auctions—and all of our spectrum auctions—

on a clear timeline. A date certain will focus all stakeholders, lead to capital formation, provide

certainty for broadcasters, and help ensure success.

Developing a New Approach to Federal Spectrum

Even with incentive auctions on course, demand for our airwaves will continue to grow at

a breathtaking pace. To keep up, more must be done. I believe this requires rethinking our

traditional approach to federal spectrum.

Federal authorities have substantial spectrum assignments. After all, critical missions

throughout the government are dependent on access to our airwaves. Federal authorities use

their spectrum assignments to protect us from attack, with tools like precision guided munitions

and early missile warning systems. They use them to manage our air traffic, enhance our crop

productivity, and monitor our water supplies. They use them to protect against forest fires, and

to predict weather patterns—like Hurricane Sandy—before they occur. These are essential to

our economic security and our national well-being.

Nonetheless, we are on a hunt for new opportunities for commercial spectrum, in order to

reach the 500 megahertz benchmark for new wireless broadband use in the Executive Order from

President Obama just under three years ago. With traditional auctions and incentive auctions in

the Middle Class Tax Relief and Job Creation Act we are already on our way. But meeting this

mark will require more. It will require a fresh look at federal uses.

The traditional approach to repurposing federal spectrum for commercial use entailed

three distinct steps: clear federal users out, relocate them, and auction the spectrum for new

commercial use. But while this three-part command worked well in the past, it is unlikely to

work as well going forward. Just as in the commercial sector, more government functions than

ever before are traveling over our airwaves and it is growing harder to find spectrum for federal

relocation.

So it is time for a new approach. It is time to develop a series of incentives to serve as

the catalyst for freeing more federal spectrum for commercial use. Government agencies are

mission focused. Once a communications network has been built, once a land mobile radio

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system is operational, agencies do not want to change because it disrupts their mission. This is

completely rational. But what if we were to reward federal authorities for efficient use of their

spectrum resource? What if they were able to reclaim a portion of the revenue from the

subsequent re-auction of their airwaves? Or enjoy a benefit in their budget every time they

increased their efficient use of the airwaves? Would they make new choices about their missions

and the resources they need to accomplish them? I think so. In short, instead of sticks, we

should try carrots. We must work with our government partners so they can realize the value of

their spectrum and the value of using it efficiently—instead of only seeing loss from its

commercial reallocation.

Fostering the Transition to IP Networks

When it comes to communications network infrastructure, we are living in a transitional

time. We have the public switched telephone network and an emerging Internet Protocol (IP)

ecosystem. Today they coexist. The new and the next interconnect. They are jointly

responsible for carrying our communications.

The numbers clearly demonstrate this transition. In 2001, there were 192 million circuit-

switched telephone lines. A decade later, this number declined by more than 40 percent to 107

million. In contrast, interconnected Voice over Internet Protocol (VoIP) subscriptions have risen

by more than 50 percent since 2008, and now number 37 million. Add to this that over one-third

of households have cut the cord entirely, with their wireless phone their only phone.

What we have is a trend. The ways consumers choose to connect are growing more

diverse, and so are the networks over which our conversations and content travel.

The Commission is guiding the course for this transition right now. It has petitions

before it that pose basic questions about fostering the migration to IP network infrastructure. It

also has a task force charged with comprehensively considering issues posed by this transition.

These are good developments. Because we must do more than just apply the laws of the present

to the networks of the future. We must make choices that inspire confidence and private

investment in our nation’s infrastructure.

To this end, companies need to understand what policies guide the Commission’s actions,

both from a regulatory and enforcement perspective. We will undermine investment if we are

not clear. So as we develop a framework for the IP transition, I think we should be clear and not

get lost in legal minutiae. We need to ask big questions about the basic values in our

communications laws. For my part, I see four: public safety, universal service, competition, and

consumer protection.

First, public safety is paramount. In the very first sentence of the Communications Act,

Congress instructed the Commission to make available, “to all the people of the United States . .

. a rapid, efficient, Nation-wide, and world-wide radio and communication service” in order to

promote the “safety of life and property.” In light of this directive, any technological or network

transition must, first and foremost, be judged by its ultimate impact on public safety and network

resiliency.

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But as the numbers I just shared with you demonstrate, we are migrating to wireless and

IP networks. That means that we are choosing to go without the independent electrical source

that traditionally powered wireline copper plant. Our new wireless and IP technologies are

dependent on commercial power. When that goes out, so do connections. But as consumers

switch to new networks, I do not believe we have to sacrifice safety in the process.

So as a result, I think it is time for an honest conversation about network reliability in the

wireless and digital age. It is time to ask hard questions about back-up power, and how to make

sure our networks are more dependable when we need them most. We also need to make sure

that consumers understand the benefits—and limitations—of new technologies when they reach

out for emergency assistance. Hurricane Sandy demonstrated this need with painful clarity.

Second, universal service is still essential. No matter who you are or where you live,

prosperity in the 21st century will require access to broadband services. The Commission’s

ongoing efforts to promote broadband deployment and adoption are built on this simple truth.

But as we transition to new technologies, we must ensure that no American is left behind.

Third, competitive markets are critically important. Competition inspires private sector

investment. The competitive markets that have spurred so much technological innovation in the

past will be the most effective means of making sure that consumers reap the benefits of this

network transition in the future. This requires special attention to a key element of the

Telecommunications Act that has made our patchwork of competitive networks work

seamlessly: interconnection.

Fourth, consumer protection is always in the public interest. In a transitional world,

consumers rely on both old and new technologies. We need to help consumers understand what

different technologies offer, help them make informed choices, and inspire confidence in the

range of new services this transition is making available.

As we assess changes in the public switched telephone network, I think these principles

are good guideposts. I think we can work within this framework and promote confidence in

network investment across the country.

Updating Universal Service and E-Rate for the Broadband Age

Universal service is a cherished notion in communications. After all, it was back in 1934

when Congress first directed the Commission to make “communication by wire and radio”

available “so far as possible, to all the people of the United States.” And it was Congress who

expanded on this notion by adding new principles to guide universal service policy to the law in

1996. As a result, today, the duty to preserve and advance universal service is the law of the

land.

Technology changes, but these basic legal principles have not. That is why, a little over a

year ago, my colleagues at the Commission updated the high-cost universal service and

intercarrier compensation system. This was a historic effort. They refocused the fund from last

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century’s technology on to the broadband and wireless communications challenges of this

century. They put it on a budget. And they increased accountability throughout.

But I do worry that our reforms to the high-cost universal service system are extremely

complex. I fear that this complexity can deny carriers dependent on it the certainty they need to

confidently invest in network infrastructure. So when opportunities arise to simplify our rules in

a manner that is fiscally sound, good for rural consumers, and bound to inspire investment—we

should seize them. Our policies must strive to provide carriers with confidence to invest in

broadband and wireless infrastructure and provide rural consumers with confidence that they will

have access to first-rate communications services.

To this end, I am pleased that the Commission recently made adjustments to the universal

service reforms it put in place for rate-of-return carriers serving rural areas. Specifically, it

combined separate capital and operating expense benchmarks into a single new benchmark. As

technical as this sounds, it simplifies our regression analysis and provides carriers with more

flexibility and more confidence to invest in their networks. This is a good thing.

However, going forward I would like to see similar adjustments made for price cap

carriers serving rural communities. Specifically, I would like to see the Commission distribute

incremental support from its first phase of the Connect America Fund as soon as possible. With

more than 14.5 million rural consumers without broadband today, these funds could be put to use

right now to expand service and create jobs in rural America. Delaying their distribution until a

long-term cost model is developed under the Connect America Fund would only further delay

rural broadband deployment.

Going forward, we also need to update the E-Rate program to meet 21st century education

needs. In my current role, I have met with school superintendents in communities as diverse as

Miami, Florida and Kotzebue, Alaska. They are uniform in one thing—their praise for the power

of E-Rate to bring high-speed communications to their schools and libraries. They believe it is

essential for digital age learning. But year-in and year-out, the demand for this program is

double the amount the Commission makes available. Moreover, our surveys suggest that 80

percent of schools and libraries believe their broadband connections do not meet the current

needs. So I believe it is time for E-Rate 2.0. I think it is time to reboot, reinvest, and

reinvigorate this program and put it on a course to provide higher speeds and greater

opportunities in the days ahead.

Recommitting to Consumers

Communications and media services are becoming a more substantial part of all of our

household budgets. Consumer expenses on communications bills average more than 4 percent of

disposable income. For many households, that can mean thousands of dollars a year. To be

clear, we are getting a lot more value from these services. We have more channels than ever

before. We have faster broadband. We have mobility, and with it the expectation that wherever

we go, the ability to connect will follow.

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But consumer wallets are not without limit. Pocketbooks have their bottom. In a world

where consumer choices have become both vast and complex, information is power. So it is

vitally important to get consumers the information they need to make choices with confidence in

a marketplace that can be bewildering to navigate.

Consider, for example, the dizzying array of wireless plans available: shared and

individual plans, limited and unlimited voice, data, and text. To stay within a plan can require

keeping track of voice, data, and text usage across multiple devices. But I believe that nobody

should need to hire a lawyer to understand their wireless contract and nobody should need to hire

an accountant to explain their bill. That is why the Commission’s bill shock initiative, developed

with wireless carriers, is an especially terrific effort. As a result, going forward, wireless

customers will get alerts before they reach their voice, data, text, and international roaming

limits. So they will no longer unknowingly rack up unexpected charges on their bills. It’s a nice

demonstration of how good information can provide consumers with the confidence to adopt

new technologies and services—and benefit from their functionality.

But we can do more. For starters, I believe our consumer complaint process needs an

upgrade. While the digital age advances, our consumer complaint process is stuck in the analog

era. Consider that every year the Commission receives roughly 400,000 complaints and

inquiries. The interfaces we have, however, are dated and the information we provide has too

much of the special charm of regulatory legalese. We can do better. It is time update this

process and so we can answer questions, direct queries, and help consumers navigate the range

of communications services they use in every aspect of their lives.

But we should go further. This is the era of big data. We should not just collect this

complaint and inquiry information from consumers and publish it in snapshot form. We should

take these numbers and make them accessible in machine-readable formats, and if possible, with

common metadata tagging schemes. We need to use these data to inform the Commission’s

policy activities and ensure consumers are treated fairly. We can also turn to others to slice and

dice these numbers and identify meaningful trends that deserve our national attention, concern—

or even praise.

In this way we can recommit to consumers, help them get good information about their

communications services, contracts, and options—and help them make better choices.

Let me close by saying that it is an exciting time in communications. The issues before

us present real challenges. But their smart execution can also yield great things: confidence for

private investment in infrastructure and confidence for consumers to realize the wide range of

opportunities new digital age services provide.

I look forward to working with you and answering any questions you might have.

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