 The next conversation is wonderfully counterintuitive it's can't we leave it to the AT&T's and Googles of this world and I think it's wonderful that Jonathan Cappell is the moderator of this because he's wonderfully counterintuitive he lives in Arizona and I discovered last night that he hates palm trees and he's gonna cut one down at his first opportunity in his own yard and I'm gonna help him if I can but anyway Jonathan is Dean of the College of Public Programs and Director of the School of Public Affairs at Arizona State University. His research concerns the design and administration of complex organizations especially those at the intersection of politics and markets and he has examined global governance organizations that promulgate international rules dealing with everything from whales to bicycles to derivatives. Jonathan. Great thank you Joel and so it's it's my it's my pleasure in this session to facilitate a conversation with our guest Jim Sikoni who's a senior executive vice president for external and legislative affairs at AT&T responsible for AT&T's public policy. I think a name that most people in this room are familiar with has been involved in information policy for as long as I've been following the subject previously served in the White House under George H.W. Bush as deputy chief of staff and under President Reagan as well. I should also mention chair of the AT&T Foundation. So what I was thinking as the conversation was going on about the stakes for changes in internet governance. There was a lot of discussion of how this affects governments. There was a lot of discussion of how this might affect individual users and their freedom and so on all of which are important matters but it struck me that there was very little discussion in that conversation. It's what's at stake for businesses. American businesses businesses and other parts of the world. So when AT&T looks at this question of what the future internet governance looks like what's it worried about? Well many of the same things that the earlier panel talked about. I had to kind of contain myself when Andrew was speaking. I wanted to get up and cheer. He said a lot of things. I was thinking that I thought would be in politics to say but I think companies are in different places depending on where they are in their own transitions especially in the communications industry. I think in this country we have a remarkable alignment of positions between the industry frankly between the advocacy groups with the administration. I think everybody is pretty much in the same place and it's a place I think that was outlined earlier. I think it's been summarized by Ambassador Conard who's former FCC chairman who's now our ambassador to the EU and he basically said if it ain't broke don't fix it and Deely Crows representing the EU itself echoed pretty much the same stance on the part of the EU. What's interesting to me is of course you don't have a similar alignment between the communications industry in Europe and the governments in Europe which is fascinating actually and I think the explanation for it is really that I think we're farther along in the broadband IP revolution in this country. It's a big transition. It's well underway and we've been turning the corner on this and we've had a lot of these wrenching debates and I think in fact I think the net neutrality debate was really an outgrowth of this transition but five or six years ago seven years ago our company's primary business was selling minutes which is what we've done for a hundred years and increasingly that is simply going away and I think we had to confront the fact that on a going forward basis our business was going to be selling bits not minutes and that leads to a host of change but if you think about that it's a remarkable and radical thing that companies as big as this that were once monopolies in fact could totally transform the core product they sell but we've turned that corner we've done it and frankly it caused us to have to assess issues like net neutrality and policies of openness which we've embraced throughout our network because at the core of it if you're selling bits you're pretty agnostic as to whether it's a voice bit or a video bit or a Skype bit or something of this nature and in fact your interest economically is in carrying the most traffic and because it's pretty simple that in a high fixed cost business like operating a network the more traffic you carry the more money you make and so so our interests in have ended up very much aligned I think at this point with the high tech community and and with companies like like Google who Andrew used to work for and and and we find ourselves actually partnering in this ecosystem now I don't think the European companies have turned that corner yet and I think the etno proposal is really almost a plea to move backwards into this more comfortable zone of of of a PSTN and PSTN regulation and PSTN means of compensation public switch telephone network and I thought I'd get away with it because Andrew used it and got away with it but but but and and so it's very difficult to move from from from one you know sort of ecosystem with with all the dependencies of that ecosystem including including the regulators who are dependent on it and institutions like the ITU that subsist based on that and and and and I think in this country we've recognized the importance of replacing this this this this old legacy telephone network and telephone regulatory network with with something more modern more modern networks IP broadband networks and and frankly a more modern regulatory structure designed for those and I I think that I think the FCC is has begun to confront these things I give I give Chairman Genekowski a lot of credit for that you know we had the debate about whether we're going to have a subsidy system you know for university this is a universal service fund and if we are going forward as opposed to looking backwards what is it subsidized and and he's he's drawn the right and logical conclusion which is we shouldn't keep subsidizing ad infinitum a copper line voice only network that's increasingly antiquated it's going away people are leaving it okay and instead that subsidy system is gonna is gonna be geared toward the provision of broadband and and everything is really moving that way I don't think in Europe it's it's quite there yet and I think that the communications companies there have put forward proposals which I think would be destructive of an IP broadband world and in ecosystem and we've opposed those but the European governments themselves have opposed them the European Parliament the other day put out a resolution opposing it so and and I think if you if you consider that it's not hard then to understand how in some of these developing countries where the government itself owns that legacy network and operates it why they would be attracted to some of the ideas for for you know increasing regulation of the internet so let me push on that point a little bit because I think it's interesting I one thing that I find is that the conversation about what countries are looking for in an ideal takeover of the internet it's almost cartoonish in the sense it's like oh it's just authoritarian regimes that want to repress their citizenry when it it falling from your observation a lot of it has to do with the underlying business model of the telecom providers in those countries and the connection between the regulator the regulator which is the state and the telecom provider which is in many cases also the state so how is how is the business model if you will in these countries and the regulatory power countries threatened by the status quo and what is the protection they're seeking right from a business point of view I I think it was stated earlier I can't remember who said it but I I you do have bad actors here okay you do have authoritarian countries who simply who simply want to want control in this space for purposes of repression and and then you have a group of other countries that that that may want control maybe not for that purpose but just have trouble abandoning the old model I I I think and I think it was said earlier and I agree with it that that the danger is not that the ITU takes over the internet and and you know that's not what AT&T is worried about but but we are worried that it does provide a legal underpinning for nation states being much more repressive much more controlling about the internet and and and and even authoritarian governments I think look for international legitimacy for their repressive actions okay it's it's why in the old days you know communist states named themselves democratic republics okay because as if the word itself would would would make it so but they they looked for international legitimacy for their for their policies and I think it would be a shame and an embarrassment if the ITU provided that to them I I think for for for the great middle as was was mentioned earlier that of other countries who are there there I think in many cases having trouble getting their minds around this transition much like it knows having trouble getting its mind around it it's it's happening so fast I think the over the last decade internet penetration of usage in Africa is like double what it is in Asia it's the fastest in the world and and and if you if if if you're a nation state in Africa and you you you control what was you know previously only only a short years ago the the only monopoly communication system in the nation and you find all of a sudden that now the increasingly the population is connected globally you know you know it it could worry you for any number of reasons and and not the least of which is that how do you how do you continue supporting the the legacy system if the if the money is all draining away in the other direction you know it's it's it's I think a global example of what we are dealing with at AT&T right now which is you know in in the in the in the 22 states where we have our wire line footprint only 30% of homes are connected with it with with a with a copper wired telephone and that and that numbers continuing to decline of course the costs of maintaining that network are continuing to increase and and so we're dealing with and that's one of the reasons we we announced you know a faster program of investment upgrade just two weeks ago we're put $14 billion over three years and in modernizing and upgrading to IP as much of that base is as possible I mean we're going to lose the customers otherwise but you know but but in doing that we have to as we build a new network be able to shut down the old network currently under FCC rules were barred from turning off the old network and so if you think about that sort of dilemma which we're working through with the FCC here you multiply that across all these countries globally you know you could I think understand why some of them may be looking to the ITU to kind of slow things down I want to immediately I want to open things up right away and get people into the conversation so I know Jim is interested to hear what people what people want him to talk about so one so one thing that that I've studied a bunch of these different global organizations including the ITU and what always struck me as being the reality on the ground not with standing what's written on paper right so they these formal rules that say one country one vote and then there's how things really work which bear a resemblance to the formal agreements but they're certainly not accurately represented by them I wonder forget about this internet stuff just in the status quo there's lots of other stuff that AT&T is affected by that goes on in the ITU would when AT&T as a corporation or the leadership of AT&T fear that this is an organization that actually might produce and finalize something that you felt was fundamentally destructive that is to say that something could actually go through the process and be approved and be adopted that you would think of as being anathema well I hope not I think one has to approach these things at least you know with care because I think the stakes the stakes are high and and I think some of the proposals that are on the table from other countries including including Russia are things that would be anathema and and I don't think you can take for granted in a in a process where it's where it's one state one vote that those don't get adopted and so you know I think it I think it's very important for us to be participating they're taking it seriously the government is the administration's been all over it and and I'm very hopeful coming out of this that we'll be able to persuade enough enough other countries to reject these these more radical notions which I think would be very destructive there's a couple of David Johnson New York law school the discussion is conflated regulation of the infrastructure with regulation of actions people take on infrastructure and on the latter point I guess my question is should we be afraid of the Democratic Republic of AT&T insofar as ISPs have the power to ultimately disable access by people who do things that violate whatever rules they establish and are not subject to the same kind of political feedback loops that governments are what assurance can you give us that if we get a cross ISP agreement on you know six strikes or that kind of policy decision being made at the level of the infrastructure that that will remain a kind of governance that is self-governance well I I think you have you have protections at several levels number one our economic self-interest is you know would would be damaged by doing that number two you know you're right we could do it we haven't and we have a history of not ever you know doing things of that nature I think number three in the example that you gave on on copyright we've been pretty vocal and public in saying we're you know we're not going to be you know the content owners enforcement agent we're not you know we we have no desire no interest in trying in exercising some police power on behalf of of other claimants I mean if if they go and get a court order will comply with the court order but we're not gonna we're not gonna cut people off I mean it's it's forwarding notices from the content owners and you know who alleged copyright violations is a bit different but but we've we've been pretty clear that that we're not going to cut people off from the internet without a court order so I you know and I you know and I think if we started acting in any other way I think I think we'd certainly be hearing from the Congress and the regulators pretty quickly but but it's not in our self interest to do that and we've not done it so what so as it as a political actor who knows the landscape I'm curious to project out this idea that Andrew laid out that what if what if the administration comes back with a treaty that does that does allow for this little nose under the tent of the of the to the ITU gets an internet regulation does that have does that have salience in Congress do you think that that's something that people would be that people in Congress would say no that's a lot that's actually a bad enough thing for us to reject an international agreement that does that well I think people were shocked by the response on the net neutrality well well I mean you're you're talking to the guy that worked out the compromise on the rule and testified in support of the Congress but you know I you know I think you know net neutrality just to take that part of it I think was was a symbol of this larger transition and I think that it you know I was I was there at the unfortunate takeoff of on that issue and I think it was frankly a natural result of of two industries being thrown together very quickly that had always been separate being thrown together by technology technological change and and they're being a lot of distrust between them I think there was a there was a there was a fear in the part of the high-tech community and this one that long ago is about like 2005 or so there's a there if you're on the part of the high-tech community that ISPs would would be an act like gatekeepers and that would get into the the content or website business and would favor their own stuff over others or would or would charge and and provide favorable treatment you know in return for payment and I and I honestly think that it at our end of it we were ill-equipped to to deal with that at the time because we really we hadn't fully absorbed what this meant for our business yet again we're still we're still you know get most of our money from selling voice minutes not not the internet and we found ourselves hands having to answer business model questions for future years that we really hadn't confronted yet I think I think the good thing that came out of the net neutrality debate and I don't think there were many good things but and I think both both all sides of it would probably agree that they'd rather not repeat it but but one of the good things that came out is it forced these decisions within these companies I think it forced them earlier than than they would have occurred otherwise and I think it and I think I think by and large they've all come out in a good place you don't you don't find accusations of ISPs acting as gatekeepers shutting cutting people off cutting off websites things of this nature we we're not in the content business we don't have content that that we own that that to favor over somebody else's you know we you know we've we've we've assimilated the notion that the again the more bits we carry the more money we make and and we're pretty agnostic as to what bits they are we weren't there you know you know five or six years ago that's what's going on I think with with some telecommunications carriers today and probably with some of the nationally owned carriers that are really worried and petitioning the ITU so you know with that you know that your question about the the nose under the tent I do worry about an outcome at the ITU that that that sets up an ongoing process that becomes inexorable that you know that UN processes don't tend to tend to toward a radical kind of you know you know step from one paradigm to another they tend to be more incremental but but also inexorable and yes you have what was described earlier is this is this vested interest you know the soft the I'm not even sure I want to use the term but but the the people involved in the ITU certainly become invested in the process at a very personal level and and and their institutions do as well and and and and so there's always one more meeting and one more step and and and you find yourself in that bad place just you know it takes a little longer to get there and that so there is a danger of that yes sure Alex Howard from Raleigh Media I happened to be an AT&T customer had been here since I think 2008 when I switched over to an iPhone and 3G and FaceTime came up as an issue you said that you don't produce content but clearly as a one of the biggest providers now of internet mobile broadband you're moving a lot of bits so the the question for mobile carriers and this is true across the world is which bits you might favor or not which services you might favor or not now you changed the policy around FaceTime do you anticipate that as being a principle that you would support around the United States anywhere else here networks operate in terms of allowing services that might potentially compete with things that you offer going forward well I mean first we don't have a FaceTime like application to favor secondly FaceTime has been enabled on our phones in terms of on our Wi-Fi for a long time so if we were worried about it from a competitive standpoint we'd never have done that you know it's enabled you know on our on our mobile share you know which is which is the main plan we're marketing and we recently opened it up to to you know our our tiered data customers who have an LTE device it's been a gradual implementation and it's based on on network management concerns I know some others just did it like that but but but the short explanation of what happened is is this we've got you know probably twice as many iPhones as everybody else put together on our network you know a lot of that of course is the result of of having the exclusivity with the iPhone for a couple years and you know but but we continue frankly to sell more than anybody else and when Apple implemented its new iOS they put the default to on and so all of a sudden we got facetime on an installed base of tens of millions of phones and and no engineer knows how to model the network usage is something like that and since we have simultaneous voice and data our concern was you know haven't spent all this money to to pretty much you know try to eliminate as much as we could drop calls all of a sudden we were worried about a big spike on that so we've we've done more of a gradual implementation on it so that we could assess the impact on the network but but our commitment and as we've said publicly is to is to fully implement it you know we're just we're you know we're being a little cautious about how we do in it so we're going to be doing it over a period of months you know as we feel pretty confident about that it does it does bring up one other point though and that is that the concern about gatekeepers really we're sitting there hostage to what to what the you know the the dominant OS providers decide and they can cause us you know millions or billions even in cost simply by what they decide to deploy without even talking to us you know through these automatic updates on the phone if they had if they had implemented FaceTime with the default to off and the person had to go activate it we'd have had no concern with the default to on you know the engineers again have no way to model it when you got you know 30 plus million you know potential simultaneous users you know so so that's that's what went on there you know thank you for your question so I want to bring a question this will be the last question because try and keep us on schedule there was a point raised by one of the questioners earlier about how much governance we really even need regardless of who's doing it and I wonder from from your perspective is there anything above and beyond what's being done today in terms of this you know the making the domain name system work and and the and the and the and that and so on that really ought to be regulated forget about who should be regulating but that there's a that there's a chaos or that there's a lack of rules that is standing in the way of the development of the internet the development of your business what what's not being governed that should be governed honestly I think that the current system works pretty darn well and it's bringing enormous benefits to to billions of people across the globe not just in this country and I you know I I think that anybody who argues to change it or that we need more governance or regulation whether it's at the ITU or some nation-state level you know in the current situation I think bears a heavy burden of demonstrating why now we're gonna we're gonna confront a lot of these questions here in the in this country you know as we make our own broadband transition we have to modernize our own regulations everybody understands this because the the regulations we have in place today are still designed for a monopoly voice-only phone system that doesn't exist anymore okay they're not designed for an IP broadband world and I think I think just as we're resisting the etno proposals you know we need to we need to resist similar notions here of just reflexively taking those old style rules designed for 1934 and applying them to a 21st century technology and I'm not saying that this has to be a regulation-free zone or something but I am saying that that we ought to design the regulations for the technology we have today and for the problems that we face today not simply assume you know that things are going to be like they were 70 years ago and apply the same model it's the president talks about smart regulation I think this is the epitome of it and you know it's silly as heck that when you build a modern IP network you can't turn off the old network okay the regulations bar you from doing that whether you've got any users on it or not it makes no sense and and of course it it it it costs you money forever not being able to do that so so we need to modernize this and and I think it can be done in a in a tempered way and in a careful way but but but it needs to be done and and we need to resist this notion I think that's being pushed by by other carriers and other countries that we should somehow just treat the internet like it's one big telephone system it's not great thank you very much