Today, I have circulated to my fellow Commissioners a draft of the Commission’s latest report to Congress on entrepreneurs and small businesses.
Among the many pro-competitive provisions Congress adopted in the Telecommunications Act of 1996, section 257 directed the FCC to pay more attention to small business, a sector that had played little or no role in the communications industry during the decades of monopoly local telephone service. Eager to inject more competition into the industry, the authors of the 1996 Act wisely looked to the fast-moving, risk-taking culture of entrepreneurial small businesses for help and inspiration. Opening up the telecommunications networks to new and small players, they hoped, would bring disruptive innovation and new choices for consumers.
In many ways, the policy choices that motivated section 257 and the other pro-competitive sections of the 1996 Act have been wildly successful. The high-speed digital networks that have developed since 1996 have made it easier than ever for small upstart companies to challenge incumbents. A 2011 McKinsey report called the Internet ecosystem “a great leveler” for small businesses, “making it possible to be a global company from day one, with the reach and capabilities that once only large companies could possess.” And it has only grown more important since. Our digital networks have not just disrupted existing sectors; they have also nurtured the development of entirely new marketplaces. The $120 billion “app economy,” for example, where entrepreneurs are having incredible success marketing their products and services, did not exist ten years ago. The nascent “Internet of Things” marketplace may grow just as quickly over the next ten years.
Diversity of voices is another area where our digital networks have been a game changer. Our open broadband ecosystem has democratized the media landscape and given innovative new content creators a way to find their audiences outside of the established distribution systems. As Commissioner Clyburn explained in our last section 257 report: “the Internet is the great equalizer for minorities and women who have struggled for a foothold in the traditional media and other businesses.”
But the 1996 Act did not change the basic economics of building and running large communications networks. Whether they are wireless or fixed, operating these networks is a capital-intensive undertaking. It requires the purchase of expensive inputs like spectrum, optical fiber, and radio antennae, plus the additional administrative and legal expenses of deploying these resources in the cities, towns and rural communities where network users live and work. While the FCC has taken many steps over the years and is still working to promote competition among network service providers, the fact remains that the financial barriers to building these networks are formidable, and most American consumers have few or no choices when it comes to this service. Our most recent Broadband Progress Report, for example, found that only 38 percent of Americans have more than one option for fixed advanced telecommunications technology.
One of the biggest challenges I have confronted in my time at the Commission is facing down the false choice between investment and openness. I believe our Open Internet Order took the right approach, by protecting entrepreneurs and small businesses’ free and open access to the Internet, while also forbearing from sections of Title II like rate regulation and unbundling that might reduce network owners’ incentives to continue building out their networks and investing in new technologies like 5G.
As we continue to carry out the 1996 Act’s command to promote competition and diversity, we should stay focused on how entrepreneurs and small businesses, especially businesses owned by women and minorities, can harness the power of our digital networks to disrupt, create, innovate, and ultimately drive economic growth in our country.
Finally, section 257 invites the FCC to propose statutory steps Congress could take to remove barriers and create opportunities for entrepreneurs and small businesses. Our report offers a number of proposals for Congress’ consideration, including preferential tax treatment for small communications businesses, support for the NG 911 transition, and policies like “dig once” that will speed up the deployment of broadband infrastructure to unserved communities.