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Remarks of Commissioner Pai

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Released: July 18, 2012

Remarks of FCC Commissioner Ajit Pai

“Unlocking Investment and Innovation in the Digital Age:

The Path to a 21st-Century FCC”

Carnegie Mellon University

Pittsburgh, PA

July 18, 2012

Audrey, thank you for that kind introduction. I also want to thank the Pittsburgh
Technology Council for organizing today’s event and Carnegie Mellon University for providing
us with this great venue.
When I announced that I was coming to Pittsburgh to give my first major speech as an
FCC Commissioner, many people asked me the same question: Why Pittsburgh? Well, the
answer is quite simple; as part of my new diet, I wanted an excuse to try one of those famous
Primanti Brothers sandwiches stuffed with French fries.
In all seriousness, though, Pittsburgh is the ideal setting for talking about unlocking
investment and innovation in the digital age. Your city has been at the forefront of innovation in
the communications sector. The nation’s first commercial radio broadcast was made from a shed
on top of the K Building at Westinghouse’s East Pittsburgh Plant in Turtle Creek when KDKA
aired live returns from the 1920 presidential election between Warren Harding and James Cox.
Our host today, Carnegie Mellon, has played a critical role in technological innovation.
It was here in 1993 that the world’s first wireless Internet network was constructed. That
network, named “Wireless Andrew” after Andrew Carnegie and Andrew Mellon, was the
forerunner of the Wi-Fi networks that we now all take for granted. The effort to build “Wireless
Andrew” was led by Professor Alex Hills, who still teaches at Carnegie Mellon. All of us with
mobile devices owe Professor Hills a debt of gratitude.
I also wanted to come to Pittsburgh for another reason: Just as the city sits at the junction
of three rivers, it also stands at the crossroads of the old economy and the new economy. When
many Americans think of Pittsburgh, the first thing that comes to mind is steel, both for the mills
that used to dot the Western Pennsylvania landscape and for the name of the football team that
represents the city so well. But as you know, most of those steel mills are now shuttered, and
employment in the Pittsburgh-area steel industry has declined by at least ninety percent from its
peak. The loss of those manufacturing jobs hit this region hard. Between 1960 and 2010, a time
when the population of the United States grew by over seventy percent, the Pittsburgh
metropolitan area lost approximately fifteen percent of its people. So many back in the 1970s
and 1980s thought of Pittsburgh as a Rust Belt city whose best days were behind it.
What too many of them have yet to recognize, however, is that decline is not the last
chapter of this city’s story. Rather, Pittsburghers have rolled up their sleeves and gone to work,
scrubbing away the rust and building up 21st century industries. Take, for example, the rise of
Pittsburgh’s high-tech economy. According to figures compiled by the Pittsburgh Technology
Council, at the end of 2010, there were over nine thousand technology firms located in the

Pittsburgh metropolitan area. These companies employ more than 25 percent of the region’s
private-sector workforce and account for an even higher percentage of its private-sector wages.
It should come as no surprise that Pittsburgh has been named one of America’s Top Ten Tech
Towns by Wired Magazine and one of America’s Top Up-and-Coming Tech Cities by Forbes.
Key to Pittsburgh’s ascent in the technology space has been its world-class educational
institutions, such as Carnegie Mellon and the University of Pittsburgh. I recently spoke with the
representative of a well-known international technology firm about why the company had
decided to open an office in Pittsburgh. It was simple, she said: “We go where the talent is.”
And since Pittsburgh is home to some of the finest engineers in the world, it is natural that high-
tech companies are coming here. Later today, I will be heading to Monroeville to visit one of
these companies: Compunetix. Started locally in 1968, Compunetix today has a global reach.
Employing more than 320 people in the Pittsburgh area and more than 650 people around the
world, Compunetix is an industry leader in video conferencing, audio conferencing, and data
In many ways, the story of Pittsburgh is a microcosm of the history of the United States.
Over time, in a free-market economy, some established industries will fade and new ones will
rise to take their place. The automobile crippled the buggy-whip business; the light bulb meant
“lights out” for candle makers. Those transitions are tough on the incumbent industries, as this
city well knows, but—again—we can see in Pittsburgh that there are more chapters to be written.
As Ronald Reagan put it, “America remains a voyage of discovery, a land that has never become
but is always in the act of becoming.”
That sense of ever-renewing opportunity drew my parents to the United States from India
more than forty years ago with just ten dollars and an old radio to their names. And perhaps
because I still draw inspiration from their example, I remain fundamentally optimistic about the
future of our country.
That having been said, something feels different in America today. Millions of jobs have
disappeared in a host of industries, some fear permanently. And Americans are increasingly
worried about where economic growth and job creation will come from. You can see the
pessimism in the polls. In April, CBS and The New York Times asked Americans what lies in
store for the next generation. The results were sobering. Almost half, 47 percent, of Americans
believed that the next generation would be worse off than we are today, while less than one-
quarter embraced the traditional American view that the next generation would be better off. I
worry that many people are losing faith in a fundamental tenet of the American Dream: that our
children will have a better life than we did.
One beacon of economic hope should be the information and communications technology
(or ICT) sector. Unfortunately, recent numbers paint a dreary picture. According to figures
released by the Labor Department less than two weeks ago, there are now fewer jobs in the
information sector of our economy than at any point since November 1989. Just think about
that: Despite the ubiquity of personal computers, the advent of the Internet, and the rise of
smartphones, we now have fewer Americans working in the information space than we did more
than two decades ago, when Bubby Brister was quarterbacking the Steelers. Over the last three-
and-a-half years alone, 165,000 telecommunications jobs in the United States have
disappeared—that’s more than 15 percent. And since the government started keeping statistics


on the manufacturing of communications equipment, employment in that area has fallen by more
than 42 percent.
This state of affairs is unacceptable. The ICT sector of our economy should not be
shedding jobs at this rate—instead, it should be leading the way when it comes to job creation
and economic growth. It may be clichéd to say that we are living in the information age, but it is
in fact true. And given the ICT sector’s potential, the FCC’s top priority should be to reverse
these trends.
In order to solve our growth problem, we must first identify its causes. So during my
first two months in office, I have spent much of my time trying to do just that. I’ve met with
those in the private sector who decide whether to make investments and to create jobs and have
asked what’s holding them back. The principal answer that I have received has been remarkably
consistent, and it can be summed up in two words: “regulatory uncertainty.”
Some of the factors that contribute to this uncertainty fall outside of the FCC’s
jurisdiction, such as taxes, health care, and financial regulation. But concerns are expressed
regarding the FCC in two general ways. The first involves inaction, or delayed action, by the
Commission. At first blush, it may seem odd for those in the private sector to be complaining
that its regulator is moving too slowly. Entrepreneurs are usually happy to be left alone, free to
innovate without government intervention.
But the communications industry often doesn’t fit that stereotype given the FCC’s
pervasive role. If a company wants to market a new mobile device, it needs the FCC’s approval.
If a company wants to purchase another firm’s spectrum licenses, it needs the FCC’s approval.
If a company wants to provide a new wireless service, it needs the FCC’s approval. And if a
company finds that there isn’t any spectrum available and proposes the reallocation of
inefficiently used spectrum, it needs the FCC’s approval.
Given these responsibilities, the FCC must act with the same alacrity as the industry we
oversee. That’s not to say we should rush to regulate, but delays at the Commission have
substantial real-world consequences: new technologies remain on the shelves; capital lies fallow;
and entrepreneurs stop hiring or, even worse, reduce their workforce as they wait for regulatory
uncertainty to work itself out. The FCC has long had a reputation in Washington as an agency
that moves too slowly, and our current Chairman, Julius Genachowski, and the hardworking staff
at the Commission have made improvements on this front by reducing the agency’s backlog.
But we need to do much more to fix the problem. As the pace of change in the industry
accelerates, the costs and lost opportunities associated with delays at the FCC grow over time.
The second concern I have heard is about uncertainty over where the Commission is
headed on the big issues. Some of that uncertainty stems from the anachronistic laws we are
required to apply. Today, the FCC operates under a Communications Act that was last
substantially revised in 1996—an Act that divides the communications marketplace into silos of
technologies and services. But convergence and competition have rendered this approach
hopelessly outdated. Cable operators offer phone and Internet services. Telecommunications
carriers promote video service. Voice over Internet Protocol (or VoIP) providers sell voice
service and video teleconferencing. Companies like Netflix use the Internet to deliver video
service. And wireless providers, once known for selling phones the size of a brick, give
consumers new, multifunctional ways to connect on the go.


Underlying this convergence has been a revolution in technologies. Analog signals have
gone digital; coaxial cablecasting has given way to IP video; copper wires are now fiber; and
first-generation cellular has been replaced with ultra-fast LTE. We are fast transitioning to an
all-IP world.
Or we should be.
But the text of the Communications Act doesn’t provide clear guidance on how IP-based
services should be regulated, if at all, and the FCC has been unwilling to supply a definitive
answer. Firms facing major investment decisions want to know how they are going to be
regulated. If they don’t get an answer, they will be reluctant to make long-term financial
I know that it has become fashionable in some quarters to dismiss “regulatory
uncertainty” as a phantom, an excuse cooked up by corporate America for keeping cash on its
balance sheets. But I am convinced that the problem is real – not only because industry leaders
have emphasized it privately, but because it makes sense. After all, just think about how
uncertainty affects you in your life. If you were looking for land on which to build a new house,
for example, would you purchase a plot if the zoning board refused to tell you whether you could
build the house? Probably not. As someone put it to me recently, “Regulatory uncertainty is
business uncertainty.” And when businesses are uncertain, they, like you or I, are hesitant to
invest. It’s therefore no surprise that billions of dollars of capital are staying on the sidelines in
the communications industry.
The FCC’s reluctance to tackle many of the big-ticket issues facing us is understandable.
Making a decision will inevitably please one set of people and leave another group very
unhappy. But we are put in office to make the tough decisions, and we must not shirk that
responsibility. We must carefully study the issues, call them as we see them, and then move on
to the next challenge.
Now, as is often the case in life, identifying problems is easier than coming up with
solutions. And after two months in office, I’m not going to pretend that I have all of the answers.
In fact, on the day that I leave the Commission, I am confident that I still won’t have all of the
answers (and that my wife will not hesitate to remind me of that fact). But I did want to share
with you today three principles that I think should guide the FCC as we try to promote
innovation, investment, and job creation in the months and years to come. And I want to offer
some specific proposals for putting these principles into action.
The first principle is simple:

The FCC should be as nimble as the industry we

oversee. As the pace of private sector innovation accelerates, it is imperative that the FCC
become more agile. Bureaucratic inertia should not be a barrier to the deployment of new
services or capital investment. Rather, the Commission should facilitate economic growth and
job creation by making decisions in a timely manner. As one Member of Congress put it to me
last month, what we need from the FCC is speed.
Acting with dispatch should be a top priority at the agency, and to ensure that it is, I am
proposing today that the Commission create an Office of Entrepreneurial Innovation (or OEI for
short). OEI would have as its principal mission the promotion of innovation, including
enforcement of Section 7 of the Communications Act. Now, you might be wondering: What is


Section 7 of the Communications Act? You’re not alone; many communications lawyers don’t
know what it is.
Let me quote the important part of Section 7, the neglected stepchild of communications
law: “The Commission shall determine whether any new technology or service proposed in a
petition or application is in the public interest within one year after such petition or application is
Looking at that provision, the message from Congress is clear: The Commission should
make the deployment of new technologies and new services a priority, resolving any concerns
about them within a year. Therefore, when a proposal is filed, OEI should decide within 60 days
whether it qualifies for Section 7 treatment. If so, it should be placed on OEI’s one-year “rocket
docket.” Additionally, OEI should assess agency proposals to ensure that new regulations don’t
slow down innovation. To be sure, these are ambitious objectives. But I think that it is past time
for the Commission to tackle them head on.
Some might ask: Why do you need to create a new office to do that? Well, existing
Bureaus and Offices at the FCC have many responsibilities, and handling petitions for new
technologies or services is but one task among many. But if we create an Office of
Entrepreneurial Innovation, shepherding proposals for new technologies or services through the
FCC will become an institutional priority and send the right signals to the marketplace.
Entrepreneurs need an advocate at the FCC—one that will hold us accountable if we delay,
rather than decide. And if OEI succeeds in its mission, we will see faster innovation, greater
investment, and more job creation.
We can accomplish this goal by transforming an existing office—the Office of Strategic
Planning and Policy Analysis, which does not have a specific portfolio—into an office dedicated
to innovation, coupling its existing resources with expert staff from the Wireless
Telecommunications Bureau and the Office of Engineering and Technology.
Aside from Section 7’s one-year time limit, we need to start taking our other statutory
and internal deadlines more seriously. When Congress tells us to produce an annual report on a
segment of the industry, we should do it each year, on time. When a court withholds judgment
so that we have the first crack at an issue, we should respond promptly. And when we tell the
industry that we’ll review major transactions within 180 days, we should follow through. In fact,
we should rededicate ourselves to making the transaction “shot clock” stick. Codifying it in our
rules would be a start.
Additional transparency—and the accompanying scrutiny by Congress, the press, and the
public—may be just the motivation we need to keep items moving. For example, if you dig for
it, you can find how long it’s taken the Commission to resolve specific transactions. But we
should consolidate on a single page our performance in meeting the 180-day shot clock for
reviewing transactions so that it’s easy for watchdogs to figure out how we’re doing. And this
works for other deadlines as well: on a single webpage, just list the petition, its filing date, its
status, and the relevant deadline. Shining a little more light on our proceedings would certainly
give me an incentive to keep the process moving, and I bet it would help keep the rest of the
Commission on time as well.
Taking existing deadlines seriously, however, just isn’t enough. We must also establish
them where none yet exist. For example, we should establish a nine-month deadline to act on


petitions for reconsideration and applications for review—basically, requests that the full
Commission take a second look at an earlier decision. We should implement a suggestion from
my friend Andy Schwartzman to use something like the Supreme Court’s cert. process to speed
our disposal of applications for review. And we should set a six-month deadline for acting on
requests for a waiver of the Commission’s rules. All of these improvements will send better
signals to industry and the public in general as to what to expect and when to expect it.
This leads me to the second principle that should guide the Commission’s efforts to
promote economic growth and job creation:

The FCC should prioritize the removal of
regulatory barriers to infrastructure investment.

We need a modern communications infrastructure. The copper-wire networks of the past
must become the fiber networks of the future; the 2G voice networks of yesteryear must evolve
into 4G data networks. We need modern infrastructure to compete in the global economy. And
we need it to create American jobs. Studies estimate that every $1 billion the private sector
spends on fiber deployment will create between 15,000 and 20,000 new jobs. Many of these
jobs are in construction, a field hard hit during the recession. And keep this in mind: Jobs
building networks and laying fiber in the United States will be done by Americans. And those
jobs will offer good wages and benefits.
Since taking office, I have heard many complaints that the FCC is currently standing in
the way of infrastructure investment. As I mentioned earlier, capital expenditure is lagging
because of uncertainty—in this case, uncertainty over how the Commission intends to regulate IP
networks. And to unlock this investment, I believe that the Commission must clearly signal that
IP networks will not be subject to a 20th century model of economic regulation.
That model, based on a monopolist providing voice services over copper-wire networks,
is obsolete. Today, customers can obtain voice service from traditional incumbent carriers,
competitive carriers, cable operators, or VoIP providers, not to mention from one of our
numerous facilities-based wireless providers. And we are quickly headed to a future where voice
is only a digital application riding on a broadband network. I applaud the Chairman and my
fellow Commissioners for recognizing this fundamental technological and marketplace shift last
year and responding appropriately by overhauling the Universal Service Fund and modernizing it
to focus on broadband. In other areas, however, the Commission has been tardy in establishing a
framework for the all-IP world.
It is time for the Commission to establish an IP Transition Task Force. This Task Force
would develop a holistic set of recommendations for expediting the transition to an all-IP world
and modernizing the Commission’s regulations to account for this dramatic competitive
revolution in the industry. Given the pace of change, the Commission should give the Task
Force a strict deadline and follow up promptly: it should have nine months to develop
recommendations, and the Commission should act on those recommendations within nine
months of their release.
Although I would not want to prejudge the work of the Task Force, there are a few
guidelines that I think should shape their deliberations. First, we must ensure that vital consumer
protections remain in place. For instance, when consumers dial 911, they need to reach
emergency personnel; it shouldn’t matter whether they are using the public-switched telephone
network (or PSTN), a VoIP application, or a wireless phone. Second, we must not import the
broken, burdensome economic regulations of the PSTN into an all-IP world. No tariffs. No


arcane cost studies. And no hidden subsidies that distort competition to benefit companies, not
consumers. But promises are not enough: I expect that the Task Force would recommend the
repeal of old-world regulations that no longer make sense in a competitive all-IP world. While
they remain on the books, wholesale expansion to IP may just be too tempting. Third, we must
retain the ability to combat discrete market failures and protect consumers from anticompetitive
harm. Fourth and finally, we must respect the statute Congress gave us and not overstep our
One unnecessary barrier to infrastructure investment that we don’t need a Task Force to
identify for us can be found in the FCC’s implementation of Section 652 of the Communications
Act. That section generally bars certain transactions between cable operators and local exchange
carriers (or LECs). I support using the Commission’s forbearance authority to make clear that
Section 652’s requirements do not apply to transactions between cable operators and competitive
LECs, or CLECs, who almost by definition do not exercise market power. Mergers between
cable operators and CLECs are likely to increase, not decrease, competition, particularly in the
enterprise market, as well as advance the deployment of infrastructure in downtown areas.
Finally, we must recognize that communications infrastructure requires not a one- or two-
year investment, but a ten- or twenty-year commitment. As such, a constant stream of reforms
every year or two is unlikely to give investors much certainty. Instead, the Commission needs a
long-term strategy and must sometimes be patient before demanding more from the industry.
Indeed, Congress recognized that smart infrastructure investment takes time when it instructed
the Commission to make universal service support “predictable.” Now we can argue over the
proper size of the Universal Service Fund, but all of us should be able to agree that given its size,
it should be distributed consistent with the law and common sense. For price-cap carriers and
wireless providers, this means moving past the one-off distributions of funds in Phase I and
moving onto the long-term support envisioned by Phase II of the Connect America Fund. For
rate-of-return providers, this means rethinking the decision to limit investments and operating
expenses using an analysis that changes each year. And for all providers, it means settling the
nine-year-old contributions reform question so that companies can stop spending on lobbyists
and start investing in next-generation networks.
Turning to the wireless world, the third principle that should guide our efforts to promote
innovation, investment, and job creation is this:

The FCC should accelerate its efforts to
allocate additional spectrum for mobile broadband.

Much has been said and written recently about our impending spectrum shortage. In my
college chemistry class, I learned the concept of a “rate-limiting step,” which is the stage in a
chemical reaction that determines the rate at which the entire reaction will come to completion.
For the communications industry, putting more spectrum in commercial hands is the rate-
limiting step. Whatever products are developed and whatever services are conceived, they will
be useless if the wireless pathways are clogged, inefficiently used, or off-limits altogether.
Simply put, with Americans’ use of mobile devices skyrocketing, we need to free up
substantially more spectrum for wireless broadband service.
Allocating additional spectrum for mobile broadband is important for another reason: It
will facilitate private-sector investment and job creation. According to a recent study by
Deloitte, a more rapid rollout of 4G wireless technology in the United States could produce as
much as $28 billion in additional capital investment and create up to 400,000 more American


jobs by 2016. To meet these projections, however, we urgently need to take action to make
available additional spectrum. As Deloitte put it, “Insufficient spectrum could cause the United
States to go from leader to laggard in the global competition to claim the benefits of 4G
The good news is that the FCC recognizes this problem. The Chairman’s National
Broadband Plan, which was released in March 2010, set two goals: first, to make available 300
MHz of additional spectrum for wireless broadband use within five years; and second, to free up
500 MHz of new spectrum for wireless broadband use within the next ten years. I strongly
support these objectives. Unfortunately, it has been more than two years since the release of the
National Broadband Plan, and we have fallen behind schedule in meeting these goals.
Here are the facts. Since the release of the National Broadband Plan, we have made
available no new spectrum that can be used effectively for wireless broadband. The timeline set
forth in the National Broadband Plan called for holding at least two major auctions of some of
the spectrum it identified by 2011. We haven’t done this. Indeed, the last major auction that we
conducted for wireless broadband spectrum took place back in 2008. The timeline also called for
the FCC to issue orders in 2010 and 2011 making available 90 MHz of spectrum currently used
by satellite providers for terrestrial wireless broadband. But it is now 2012, and none of that
spectrum can be used in that manner.
If we stay on our present course, we cannot meet the targets of the National Broadband
Plan. In order to meet the first benchmark, we need to free up 300 MHz of spectrum for wireless
broadband in the next 32 months. If we are to have any chance of meeting this goal, we will
have to act quickly. To paraphrase the noted telecommunications policy expert Elvis Presley, we
need a little less conversation, a little more action.
When it comes to spectrum policy, I believe in an “all of the above” approach. Does the
FCC need to make available more spectrum bands for wireless broadband? Yes. Do we need to
reform the federal government’s management of its spectrum so that more can be made available
for private-sector use? Yes. Does the FCC need to expedite its review of secondary market
transactions? Yes. Is there a place for geographic spectrum sharing? Yes. Is there a place for
unlicensed use? Yes. Do we need to do more to promote the efficient use of spectrum? The
answer, again, is yes.
In the coming months, I will be setting forth a comprehensive strategy for meeting our
nation’s spectrum needs. Today, I want to offer three specific ideas that we could implement in
the short-term to put us on the right path for meeting the targets established in the National
Broadband Plan. First, by the end of September, the Commission should adopt service,
technical, and licensing rules so that 40 MHz of AWS-4 spectrum can be used for terrestrial
mobile broadband. According to one estimate, deploying this spectrum would create 28,000
jobs. Second, by the end of August, we should take action on pending petitions for
reconsideration so that 4G LTE technology can be deployed in the so-called WCS, or Wireless
Communications Services, band. Third, the Commission should kick-off the rulemaking process
for implementing incentive auctions this fall and set a deadline to conduct those auctions no later
than June 30, 2014. In all, these three actions alone could get us more than halfway to the 300
MHz goal envisioned in the National Broadband Plan.
Taken together, I believe that the principles and proposals that I have discussed today
constitute a common-sense jobs and growth agenda for the ICT sector. Moreover, while


Washington often gets bogged down these days in partisan gridlock, this agenda fits squarely in a
proud bipartisan tradition. It was Chairman Bill Kennard during the Clinton Administration who
first applied a light regulatory touch to broadband, thus paving the way for tens of billions of
dollars of private-sector infrastructure investment. During the Bush Administration, Chairman
Michael Powell built upon Chairman Kennard’s work and established a deregulatory framework
for cable Internet service. Chairman Kevin Martin, in turn, built upon Chairman Powell’s
policies by creating a deregulatory framework for DSL service and spurring the deployment of
fiber through reform of the video-franchising process. And Chairman Genachowski has been an
eloquent advocate of the need to address our looming spectrum shortage.
Finally, the agenda that I have described today is a work in progress. This speech should
be the beginning of a conversation, not the end of one. If you have thoughts on how the FCC can
help accelerate economic growth and job creation, tell me. If you have a new idea for how the
FCC can become more nimble, promote investment, or allocate additional spectrum for mobile
broadband, let me know. Please do not hesitate to contact my office. We have an open-door
policy, and we encourage you to take advantage of it. You can even reach out to me on Twitter;
my handle is @ajitpaifcc. It doesn’t matter whether you represent a Fortune 500 company, a
start-up with three employees, a public interest group, or just yourself. A good idea is a good
idea, and I want to hear as many of them as possible.
Although our nation has been going through tough times these last few years, I am
confident that our economy will rebound strongly, and that the ICT sector can help lead the way.
We see a glimpse of that future here in Pittsburgh. And if we pursue the right policies in
Washington, DC, we can remove barriers to investment and innovation and unleash a wave of
economic growth and job creation all across the country. Working together, I know we can
make it happen. Thank you very much.


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