 Welcome to New America Foundation. I am Michael Calabrese. I direct our wireless feature project, which is part of the Open Technology Institute here at New America. And of course, the event is the state of competition in the business broadband marketplace. And there are additional seats up front. As people filter in, please don't be shy to come up front and sit. We had one change in the program. Unfortunately, at the last minute, Bob Quinn from AT&T had a health issue that he had to deal with. But he has sent his, I guess they're almost a kind of a Batman and Robin together here. But not to put Hank necessarily into this, down to the Robin level, but he has joined at the hip. He has joined at the hip with Bob on these issues. And thankfully, for us, was able to change his schedule and jump in and replace Bob. So thanks a lot, Hank. We'll have what we are going to hear first from Commissioner Cops for opening remarks and then go right down the line with this panel, three to five minutes of opening remarks, just to tee up the various perspectives, have some interactive discussion, maybe a little bit of disagreement, considering who we have here. And then your questions at the end, and when we do that, please certainly identify yourself. There is, of course, sandwiches out there, for which I'd like to thank the Broadband Coalition for offering to buy sandwiches for the event when they heard that New America is typically too poor to do that. So if any of you, for any of you if it made the difference between that and watching this on the live webcast, I'm certainly grateful. But it is being live webcast, so we have many more people online than here. And it will be recorded and available for your colleagues who couldn't watch it live, probably by Monday or so. So I think, in fact, I may have said this at our very last event a month ago, the fact that increasingly broadband, like electricity, is an input into everything else in the economy. So this isn't a typical product. It isn't a typical commodity. It really is becoming, as you know, lifeblood for economic growth and innovation. And fast and affordable broadband is essential to the productivity, not just the big firms, but of small firms and medium-sized firms from branch banks to local health clinics. The national broadband plan that the FCC came out with a couple of years ago dedicated an entire chapter to this, to competition and its relationship to innovation. So what we're going to focus on today is really the question about whether the FCC has done enough to foster competition in the business broadband market. Represented here, we saw a couple voices on behalf of competitive providers of telecommunication services to the small business market in particular. So Jim Geiger, who is the CEO of C-Beyond, has argued in op-eds and elsewhere that we could have a cashless stimulus for small business and job growth that could result from fairly straightforward rule changes that would give small and medium businesses the same access to last mile connections as large enterprise has had. Whereas the incumbent local exchange providers, you might be hearing this term ILEC, meaning like AT&T, for example, Verizon, CenturyLink, they'll argue actually that the remaining legacy regulations that require unbundled access to the last mile copper connections like the traditional T1 lines are outdated and should be abandoned and not extended to the new fiber-enriched last mile connections that the competitive providers say are actually essential to bring the same cloud-based services, video conferencing, virtual desktops, secure data, and so on to all the businesses now that need them. It's not just a large enterprise thing anymore. So with that, I would like to introduce one of my heroes, Michael J. Cops, who, as everyone knows, he needs no introduction, but I have to do it and I'd like to do it, served for more than 10 years as a member of the Federal Communications Commission from 2001 to 2011 and now leads the media and democracy reform initiative at Common Cause, where he also sits on the boards of free press and public knowledge to the groups that are part of our regular coalition to promote ubiquitous affordable broadband. So I thank him for continuing his public service. And in fact, I just lastly mentioned that as a commissioner, it was always a joy to come in and meet with Commissioner Cops and to see him in action because during a period where I think more than usual the FCC, the culture of the FCC was one of being a referee among industry interests rather than focusing on the public interest and consumers, Mike Cops really emphasized going the opposite way of really putting the consumer and the public interest first and being a referee among competing industry interests in second place and he and Jonathan Adelstein were a tremendous duo in that regard during their years together on the FCC. So Commissioner Cops. Thank you. Thank you very much for that very nice introduction, Michael. Thanks for inviting me to be part of this distinguished panel, not only of experts, but several old friends too who I knew when I was in different venue and they were in different venues too, but still friends. Plus I see a lot of familiar faces out there in the audience so I am pleased and honored to be here. First thing I wanted to do, Michael mentioned that I'm spending some time over at Common Cause these days. We have this Media and Democracy Reform Initiative and we've got a director of that program who's working at Common Cause, title boil, who's right here. Can stand up, Tyler, let people take a look at you. I know he's no stranger around here at the New America Foundation and others, but he's kind of the go-to fellow on our Media and Democracy Reform. It will come as no surprise to most of you that the competitive marketplace I envisioned when I arrived at the Federal Communications Commission in 2001 is not the marketplace I see today. Let me go back just briefly to then. I was never one of those who thought that the Telecommunications Act of 1996 was lacking in providing a vision and significant guidance to the Federal Communications Commission. In telecommunications, the statute makes crystal clear that the FCC's mission is to encourage the delivery of the most advanced telecommunications feasible to every citizen in the land no matter who they are, where they live, or the particular circumstances of their individual lives. Reasonably comparable services and reasonably comparable prices for all are the clear mandate of the law. And from there, Congress went on to make plain the need for competition among providers, consumer protections, and providing for the safety of the American people. That's the public interest as applied to telecommunications. And let's remember that that term, public interest applies every bit as much to telecommunications as it does to media. So good, I thought, let's get on with it. But it got complicated very quickly. Back when I joined, the commission was in the middle of deciding how to allow the bell companies to enter the long-distance markets, which were of increasing value to them for the purposes of data transmission, in exchange for opening their local markets to local competition. Congress had very wisely stipulated competition and clearly had not voted for a reconstitution of my bell. I joined some of my colleagues and worked with the competitive carriers, the C-Lex and my friend Bob Quinn, who's not here today, and others to make sure that there was indeed a competitive quid for the long-distance quo. Some competition was already developing, much of it through wholesale leasing, including the leasing of local loops and switching by the competitive carriers. One idea behind wholesale leasing and the then-famous UNIP was to provide an entry strategy so that down the road, we could have more facilities-based competition. All the while, the bells were fighting this and they make a very long story, very short. A compliant FCC killed UNIP and shackled wholesale leasing, at which point the prospects for expanded competition pretty much disappeared. Meanwhile, the bells had picked up 45 million long-distance lines, although they were careful not to compete directly against one another. And the commission did a poor job once it granted all those 271 entry petitions, which a lot of people on this panel remember very well, and following through to make sure that commitments were kept and that competition developed. And among its other anti-competition sins, the commission also granted big telecom companies forbearance from certain unbundling and dominant carrier obligations in areas that were anything but fully competitive. But worse than all of that, the FCC at the same time was voting over the strenuous objections of Commissioner Adelstein and myself to remove advanced telecommunications, broadband, out from under the purview of Title II of the Act, that place where consumer protections and competition and privacy and public safety were clearly mandated by the Congress and moving them to the nebulous land of Title I, where regulatory authority was uncertain, consumer protections were virtually non-existent, and where the huge companies, their legions of lobbyists and courts of various opinions could and did wreak havoc on the promise of competition. And let's be clear, there was no legislative or judicial mandate for the commission to do what it did. Had the commission decided otherwise in the brand next case, for example, the Supreme Court would very likely have a court of deference to the commission as a number of justices discussed in their opinions on that case. In any event, we spent the next several years at the commission engaged in all sorts of mind-boggling linguistic analysis, all aimed basically at making sure that the public interest and broadband never cohabited. All the while, of course, other countries were hard at work building their broadband infrastructures, hammering our number two ranking and broadband penetration down to number 15 or 20 or 24 in just a few short years. You can quibble about the precise rankings, but the point is that's not where your country and my country belongs. Sometimes the commission's parsing and ledger domain were borderline amusing, but the results were anything but funny. Basically, the commission pretty much mirrored the hands-off approach to the two Bush administrations trusting to the market to take broadband everywhere, even to places where there was no incentive for business to go. And while I have been critical of business many times, what bothered me even more was the abdication by government of its public interest responsibilities for much of the past three decades, and the FCC was center stage in much of it. It took many in Washington a long time to realize, and maybe some still haven't, that this head in the sands approach was totally at odds with the urgent telecom needs of the American people. Those with eyes to see quickly came to realize that there was no problem confronting our country, and I think Michael just alluded to this, what this lack of jobs or inadequate healthcare or challenged schools or growing energy dependence or deteriorating environment or lack of equal opportunity, no problem that did not have a broadband component as part of its resolution. They understood that this is the central infrastructure challenge of the 21st century, as Michael said, it's not a product. Not just something that happened to come along, but it's the urgent national infrastructure challenge facing us right now. And it was crying out all those years for national attention, but the commission was busy doing other things. After all, we had all kinds of great big telecom mergers to approve, we spent a lot of time doing that, a multitude of services to deregulate and reclassify. Talk about frustrating. Well, in 2009, we finally got some change and appreciation for broadband and a realization that the country needed a strategy to encourage its deployment and adoption. I welcomed that change and saluted the new direction that came with new leadership at the FCC. But this is a job requiring more, not just more from the FCC, but more than the FCC. We have a telecommunications infrastructure that holds such extraordinary promise to expand opportunity for all Americans. Get this country back on track, but we lack still a sense of national mission to get the job done. The commission is in the process of making universal service work in the broadband age, and that's good and essential, and I was happy to be a part of that, but we cannot expect changing universal service by itself to magically bring ubiquitous broadband to every home and hearth in the United States of America. The broadband build out that I'm talking about can come only from a deeper commitment, a far deeper commitment of resources than has thus far been made, and that commitment has to come from both the private and the public sectors. When nearly one third of our homes lack access to high value opportunity-creating broadband, it's time to ponder what another generation of Americans did when it discovered that one third of its population was ill-housed, ill-clad, ill-nourished. Times were pretty tough then too, tougher than they are now, and resources were strained, but we responded with reform rather than reluctance. We had to build and repair, and we did both. We dared to think big, and we found ways for the private and public sectors to work together to accomplish big goals. The private sector as the lead locomotive, but encouraged and scented by visionary public policy. It's how we build America over the course of our national history. We built roads and canals and bridges and railroads, interstate highways and rail electricity, even plain old telephone and service, working together, enlightened public policy, giving some sense of direction, working with the private sector. Fast forward, and today we see the infrastructures we built back then collapsing all around us. We endure second-rate roads, disintegrating bridges, dysfunctional transportation, ancient utilities, the very investments that powered this country to prosperity, going to seed. People from other industrial nations sometimes can't believe what they see when they visit our country. And as an aside, sometimes I'm surprised by what I see in other countries. Many of you heard my tale a couple of years ago. My wife and I went to China, floating down the Yangtze River having instant 3G service back then, just about everywhere, even in the most remote rural areas. Better service that I can get in many urban areas here at home at that time. And I have to make a little bit off the topic, parenthetical comment here, just to kind of keep you up in my travel experiences. Although this talks more to US equipment shortfalls than anything else, but when my wife and I took a trip to South America a couple of weeks ago she rented a phone from a very large US telecom company, not one represented on this panel today. So we could occasionally text our family and report to end the best doctors about her health while we were gone. Worked fine in Rio, so we thought, what be, this is great, got to Argentina, got to Chile, didn't work at all. So here's America first in technology and I couldn't even receive or send a text message from Latin America, but I digress a little bit. I just had to kind of get that off of my chest. More to the point, it's here at home that we are short changing the information infrastructure of the future. While we should be immersed in the business of investing in the development of our human and infrastructure resources, we have been led instead into a mind-numbing preoccupation about chopping more from the budget and more from our future. My friend Blair Levin put it so well and I'm not trying to marry Blair to my talk here today, but he observed that instead of talking about investment for growth, we're talking about harvesting for dividends. And there's so much in that, but make no mistake about it. We're not going to have the telecommunication and information infrastructure we so urgently require. We're not going to be able to tackle all these other problems that I talked about without a major national commitment to increase our broadband performance by orders of magnitude. And that kind of commitment is in my mind lacking today and it is costing us a whole lot. This commitment to a viable broadband future needs to be accompanied by renewed emphasis on competition. I know there are those who say we should just recognize telecom as a natural monopoly, forget all this competition stuff and get on with it. I say there are still multiple ways to breathe life back into competition. The competition envisioned by the Telecommunications Act and that broadband has to have to flourish. By the way, about three quarters of those natural monopolist enthusiasts are also advocating for the total elimination of anything that remotely resembles government oversight or that dreaded word regulation, which means what they really want is unregulated monopoly. So we'll all be clear about that with a stake. The other one quarter of that natural monopoly crowd would accept the monopoly or the duopoly, but impose some public oversight to protect consumers and competitors. And that may sound better to some, I guess, but good luck getting any of that done in today's Washington environment. So what are some ways to stimulate competition? Competition could grow if we learned how to say no to more industry mergers and consolidations. It doesn't mean all mergers are bad, but it does mean that we have allowed far too much industry concentration at the expense of the public interest over the past 15 years. It was a welcome change with an odd here to my good friend, Gene Kimmelman, and the Department of Justice and also to Chairman Genekowski and the FCC to see the break supply to the AT&T T-Mobile deal. I only wish both agencies had demonstrated equal tenacity when it came to the Verizon cable transactions. Vigorous antitrust enforcement then is always critical to competition. Competition could grow if we encouraged more innovative approaches like municipal broadband. My way or the highway may be the mantra of the big telecoms, but it's bad business for everybody else. And here's just one example. New enterprises increasingly factor in areas broadband level of service into their calculations, but when they're figuring out where to locate their firms. Simply put, business owners are wary of moving to an area with inferior connectivity. The private sector, perhaps understandably, has often avoided deploying fiber optics into low density rural communities. That's a market failure, but it also represents an opportunity for the public sector or creative public private partnerships. How silly it is and costly for a major carrier to say I'm not gonna build here, but nobody else can either. What's going on here is not the prevention of unfair competition. It's ensuring there will be no competition and perhaps no service. So our largest telecom companies are spending heavily to derail public investment in broadband connectivity. So far 19 state legislatures have erected barriers to public provision, typically via American Legislative Exchange Council, so-called ALIC that I hope you're reading about model bills. Our two largest telephone companies are members of ALIC. State prohibitions on municipal broadband and laws to new state regulatory commissions are touted as leveling the playing field, but most municipal networks are in rural areas where there would be no next generation connectivity where not through some innovative provisioning like this. This legislative and lobbying activity at the state level is a huge and until recently untold story. It's really important if we had a media infrastructure in this country worth its salt, what's going on here would be front page news. Thank goodness we have vigilant public interest groups, one of them is Common Cause that I'm associated with now to shine light into these dark corners and to bring grassroots pressure. So they're big companies like General Motors, General Electric, Walmart, Wells Fargo and some 35 others are canceling their ALIC memberships. I have more companies, especially in broadband, follow their example. Competition would grow if our spectrum policy really encouraged it. That doesn't mean just wholesale transfer of big broadcaster spectrum rights to even bigger wireless companies. It means making careful and balanced decisions about where such transfer enhances the public interest. It also means looking more to unlicensed spectrum, database-driven spectrum access, shared spectrum, smart radio technologies, set-asides for small and minority enterprises. It means clear roaming requirements and strict enforcement. And it means doing something finally about special access. The potential of special access reform for backhaul and competitive wireless and local governments and schools and universities and small businesses is, I think, huge. And to me right now, special access is a multi-billion dollar disincentive to competition and a serious drag on the deployment of badly needed telecommunications infrastructure. Coming at competition from another angle, we should be looking at how other countries are deploying broadband and how they make it happen. We were very quick to dismiss facility sharing, for example, but if we can't figure out how to incent competition through other means, then revisiting that option might yet be necessary. It's something that should remain on the table. Finally, there's another aspect of broadband competition that we also need to grow, and I won't dwell on it here, but broadband has many dimensions, and one of them is the internet as a major purveyor of news and information. We have a news and journalism deficit in this country that is every bit as pernicious as the budget deficit that everybody keeps talking about. If we allow broadband and the internet to consolidate further, like radio and television and cable and newspapers consolidated, and if we allow toolboosts and gatekeeping to pop up on every lane of the information highway, we will have lost a golden opportunity to enhance our civic dialogue. And we will have betrayed the open and dynamic and competitive vitality of this opportunity-creating technology. That's another speech for another day, but I just wanna drop it in here because it's part and parcel of broadband competition, and there is urgency, real urgency in facing up to it. We can only succeed in achieving the lofty aspirations that Congress set out in 1996 if all of us get involved. Electing officials from whom we have not secured commitments on these issues is a prescription for inaction. Letting others do the work is a prescription for weakness. Not working for these issues at the grassroots level is a prescription for disaster. That's why you'll be seeing more of me out across the country in the months ahead as part of our new media and democracy reform initiative at Common Cause will be talking with citizens about the importance of promoting competition and putting the brakes on broadband concentration. We will be energizing a national discussion on how our news and information infrastructure has been short-circuited. Short-circuiting the country's ability, I think, to address all of these other problems that I mentioned earlier on. And we're gonna be encouraging people to get involved in charting the way to a broadband future that will help America regain its economic footing and open the doors to a future rife with new opportunities for all of our citizens. That, to me, was the promise of broadband. And I really hope that that is its future. Thank you very much. Thank you, Commissioner. So now we'll move onto the panel. And as I said, we'll go on down the line and the panels can either jump up here or stay seated, whichever you prefer. They're gonna do about three to five minutes to put, their perspectives forward. So I want to start by introducing Chip Pickering. And by the way, I'll just say a few things because we have a handout with the biographical information if you want more detail. And in fact, I think you know most of these folks. But Chip Pickering was elected to Congress in 1996 and served six terms representing, excuse me, Mississippi's third district. And he served on the House Energy and Commerce Committee and was vice chairman of the committee from 2002 to 2006. Today he's representing the Broadband Coalition, which is competitive telecom providers to the small and medium business market. Chip. Well, Michael, thank you. And I want to thank the New America Foundation for hosting us. This is a very important discussion that we are having today. Commissioner Cops, I want to thank you for all of your public service. And even though we're from different parties and we may not always agree on every issue, there is one common principle that I think has united both parties and is a core American character, or part of the core of American character. And that is a belief in competition and that it makes us all better. As we begin this discussion, my purpose is to one, set the stage. And in doing so, what I'd like to do is look at the last 30 years of competitive telecommunications policy and the history and the benefits of having a competitive policy versus a monopoly or duopoly policy. Second, I would like to look at the current state of competition and the broadband business market. And then third, consider the very stark and conflicting policy options being proposed by those of us on the panel today and those we represent on my behalf, representing the competitive providers and the competitive industry. And as we hear from the incumbents and others, what is the best way as we go forward? And there are some very different choices that have great significance for the country and for all of us. So first, the history. As we go back 30 years, Ronald Reagan's anti-trust division breaks up mall bell. And what happens when the monopoly was broken? Now I happen to believe that in 1934, our nation made a mistake of adopting natural monopoly policy. I don't believe it was necessary and it was not right then. And in 1982 and 83, our country corrected what was a wrong policy decision of going away from a core principle of competition and adopting monopoly policy. And what happened? Sprint, MCI, hundreds of wholesale competitors began competing and we went from copper to fiber networks which formed the fiber internet backbones that ushered in the information age. Our world, could you imagine, if we had not broken AT&T in the 80s, what would have been our history today? Second, in 1993, Congress on a bipartisan basis decided we will not have a duopoly and wireless. They adopted a competitive policy where they would auction spectrum and there'd be seven competitors to a market. It's one of the great accomplishments of the last two decades. Could you imagine what the wireless world would be today if we had maintained a duopoly policy? And then third, in 1996, a Republican Congress for the first time, with a majority for the first time in 40 years, with a Democratic President, President Clinton, ended all monopoly policy across all communication, telecommunication sectors. They decided that competition was the solution and that creating market forces, pro-market functioning competitive markets across all sectors is the policy that best helps our nation grow. So as we look back now over those 30 years, it is the greatest expansion of wealth, the greatest expansion of economic freedom, the greatest period of innovation and investment that this world has ever known. If you look at any domestic policy that the US has adopted over the last 30 years, you can find none that has had more significance and made more contribution to both economic freedom or political freedom around the world. Can anybody here stop and think and say monopoly policy and duopoly policy would have done what we've experienced over the last 30 years? If you just stop and think, it is unimaginable that we could have had what we've had over the last three decades if we had maintained the old ways instead of the new way of competition. It was the right policy then and it's the right policy to guide us going forward. So this gets us to the present. The present, if you look at the business broadband market, where you have about 30% of the small and mid-sized businesses served by competitive providers. Now what is the significance of small and mid-sized businesses? They are the engine of our economy. They represent about 75% of our jobs. Most of the growth of our nation comes from that sector of our economy. Served by competitive providers. Now why is that important? Now incumbents play a very vital and important role in our economy. But one thing that they do not do very well is innovate. Almost all innovation comes from competitors. So as you look over the last 10 years, DSL, voiceover internet, ethernet, cloud-based computing services, that all came and was all led by the competitive sector. So if we end competitive policy, as some recommend today, the innovation and the investment and the networks that are the backbones of our internet, the backhaul of our nation, and the fiber rings around all of our cities and towns that give us a network of networks that serve an economy in the most efficient, innovative way possible. And that serves the businesses that create the growth for our nation. That would be lost. So it's significant that as we look at this specific market that we can maintain what has worked and see how we can modernize it and keep it for the next century. Of the last 20th, for the 20th century, telecommunications competitive policy gave us the greatest boost and growth and change. And how do we continue those policies and principles as we go in to the 21st century? There are two very stark and different options before us. If you look at the AT&T proposal that was just made at the end of August and an ex parte filing by Bob Quinn, he recommends that we end the TDM, we are the PSTN, that we sunset that, we end interconnection policy as we know it. And as that occurs, we take away the ability for competitors to maintain in the marketplace. Now, we may have a duopoly, but I believe we can do better than that. If we lose the interconnection policies that are the lynchpin of the 1996 act and the access to last mile facilities, then we will lose the dynamic, competitive nature of telecommunications. And we will go back to the past of at best a duopoly and what AT&T recommends that instead of having market forces spread networks, we'll have government subsidies and taxpayer subsidies build and spread the networks. Now, all of the companies I represent are entrepreneurs, innovators, small, mid-sized businesses that don't receive subsidies from the government. They are the example of the free market engine of our economy that Republicans and free marketers want to promote. So as we look at the policy choices, the very clear between a competitive framework that we know after three decades of experience works versus a return to monopoly and duopoly and subsidy policy, I think that we know what the best option is and what the best choice is. And so what I encourage us today is to keep our eye on the core character of competition and why it would make AT&T and Verizon and incumbents better as companies as well as our nation's economy, more prosperous, more productive, more innovative and would continue to make us the leader around the world. Thank you. Next is Hank Hulquist, who is VP for Federal Regulatory Affairs at AT&T. Hank has been there at AT&T since 2004 and was at MCI for eight years prior to that, Hank. Thanks, Michael. Is this on? I'd like to thank Michael and the New America Foundation for inviting me to be here today. I just begin with a quick apology to those of you who are expecting Bob Quinn to be up here. I will not do my Bob Quinn impression in the interests of my career, but I'll be happy to try and answer things as best as I think he would. Before responding briefly to some of the statements that were made previously, I'd like to start out by saying that you have to be a little careful with generalizations about the business broadband market. It's really a continuum of markets from the smallest businesses up to the largest enterprises and across a host of different geographies. At the small end, it's really not that distinguishable from the consumer broadband market. At the high end, it's a completely different world with, you know, in terms of the services that are offered, in terms of the way they're sold, in terms of who sells them. So I would encourage people to not think of the business broadband market as a monolith. And then if you try to understand these markets, I think the fact is there's no perfect source of information about them that's out there. With that said, a useful starting point for people who are interested in learning more about these markets, I would suggest the most useful starting point we have today is NTIA's broadband map. And while it's not perfect and not all providers report to the state mapping agencies, I would encourage people who are interested to sit down with that map and, you know, over the course of some free time, enter a variety of different addresses. And just to get some sense of the different providers that are out there in the marketplace and what the different levels of service that they're offering in this business broadband market. I'd like to respond a little bit now to the comments that Chip Pickering previously made. I hope no one's disappointed to hear that I'm actually not going to put something on me that says I'm here to support monopoly policy. I think this is a false dichotomy. I think that we are all trying to come up with how do we address the issue Commissioner Cops raised, which is how do we bring investment into broadband networks into different communities? I will, I could argue with Chip about whether AT&T is in fact innovative. I can remember when AT&T introduced AT&G U-verse when we said that we were going to provide high speed internet and multi-channel video on a VDSL line. I think there were some cable, I remember a cable executive who said that that was a science experiment, not a network. Well, the experiment worked out it's doing quite well. I think AT&T, if you look over any number of years has not just been the single largest investor in networks in the US, but the single largest investor of all US companies. So AT&T is clearly committed to investing in this country, investing in the capacity of its networks. The question we have is, what is the best approach to policy, to yield competition, to bring about investment? I think that the proposal made previously is that we need to, that the suggestion was that it would be a mistake to sunset, for example, TDM networks. I would tell you our TDM network is sunsetting. We are shedding customers rapidly off of our TDM networks. We anticipate that within a very small number of years fewer than 20% of our lines, of our twisted copper pairs that we at one point in time had something like a 95% penetration, fewer than 20% will actually be in service. So this evolution of networks of the sunset of TDM as a networking technology and the success of IP is going to happen. The question is whether we do it in an organized or a chaotic fashion. So this is clearly an area where I would agree that regulation can make a difference, that to do this in an organized fashion would be far better from an investment and a consumer perspective than to allow it to happen chaotically. When I look at this question of how do we bring about investment, to me the biggest opportunity has to do with removal of barriers to entry. In many places where AT&T, whether it's wireless investment or wire line, we have seen in some cases years of struggles to get permits, to get past litigation, to place facilities, to site antennas. I think these kinds of policies obviously are a huge hindrance to deployment of networks and investment and successfully dealing with them is very successful way to bring about investment. I would just suggest we look at the example of Google in Kansas City. I mean Google went out and got a very clean, very quick approval process to get their network built in Kansas City. If every network provider in the country had that kind of cooperation from local permitting authorities, I think you would see much more investment than you're having today. I look forward to the questions. I would just reiterate that I don't think this is a question about monopoly policy versus competitive policy. The question is, what is the right vision for competitive policy? Thank you. Thank you. Thanks, Hank. Next up is Todd Tibido, who is President and Chief Executive of CompTIA, which is the Computing Technology Industry Association. Todd has been CEO since 2008 and spent 17 years prior to that at the Consumer Electronics Association. And I should mention, I'm particularly familiar with CompTIA because they were strong allies of ours during the debates over getting unlicensed access to the vacant TV channels, TV White Space, back particularly in the 2006 to 2008 period. So, Todd. Thank you, Michael, for inviting us here today and it's a pleasure to see all of you. I'd like to share some of my travel log, as the commissioner did. I've traveled to, I think, about 22 countries in the last two years, been on five or six continents at least, and I've had a chance to experience broadband in places like Botswana, Mauritius recently, Singapore, Malaysia, Thailand, Indonesia coming up, all parts of Europe. And I have to say, without question, the US broadband infrastructure is far and away the best, most consistent, highest quality of consistent service that you'll find anywhere else in the world. And when I come back often, people say, well, what about all these statistics about lack of penetration, lack of access? And you have to go and experience the broadband in some of these lands to understand that in highly concentrated areas where most of the people live, they don't have the rural challenges that we do here in the United States. So looking at some of the statistics that we're commonly looking at to rank ourselves, we may be 15th in one stat or another, but in terms of the actual quality of service that you get for the price, it wasn't that long ago in London that a small IT business in London was paying as much as $1,000 a month for a quarter of a frack T1. Or people in a country like Mauritius paying $200, $300, $400, $500 for 512K. So the ability for people to tap in to the broadband costs and access that we have here in the United States is far and away, a much better deal for a small business person operating here as opposed to these other markets. We do speed tests everywhere. We stop to see where they are. And yeah, in some places the 3G networks are a little bit faster. Sometimes they drop calls just as much in South Korea as they do AT&T in New York. So it's definitely a mixed bag. The other thing that's interesting to notice is a lot of the countries that are ahead of us on these lists have done so and have built their networks out by government mandate, by instituting monopolies, by duopolies that exist in these countries. NTT, Dokomo, and one other carrier in Japan have virtual control of the entire market there sanctioned by the government. And so we really see a different route in lots of different countries. And it doesn't mean that we should go away from competition, I don't think so. The ability to build the best broadband networks, the ability to deploy cloud computing, the ability to have millions of additional mobile devices like you're all holding and using today on top of the PC network that we have, adding in Netflix, adding in iTunes streaming, all these different things that we've piled on to our network, the ability to have that tells us that we actually have a pretty robust system. But can it be a lot better and does it need to be a lot better? It absolutely does because the small enterprise who is serving other small enterprises hasn't begun to bring those people into the next world of cloud computing, of remote backup, of managed services, remote monitoring, all these different things that the small restaurant down the street, your accountant, your dentist, all these people who haven't begun to take advantage of some of the things that enterprises have and we need to have a system, whatever that ends up being, that can create a redundant and much more robust network than we have. So when we talk to our members who are small IT providers as well as the big companies, the biggest complaint that we hear is about quality of service. It's not so much the costs, they're not talking about the lack of competitors, it's the ability to find redundant quality backbones to tie into. We have a small company who does backup for dentist. He can no longer do overnight backups of his customers' dental records. This person has gone, dentist has moved to electronic medical records, he has all his patient information scanned, he has this huge database now, but because he lives in his office is in an area where there happens to be a lot of nighttime streaming of video content, his quality of service has diminished, where the nighttime bandwidth is half of what he's paying for at the peak top end and he's not able to provide the service. So that dentist is going to the extent of carrying a hard drive home with him every night because he doesn't have what he needs to be able to make that happen. There are no more off-peak times in any parts of the network really. Part of the addition of the mobile devices onto the network has really tapped out networks in a lot of places. And if we're gonna be able to provide all these services simultaneously, in addition to bringing thousands and millions of businesses into the cloud, into using web-based apps with the same quality of service that they do from a desktop PC, we're gonna need a lot more robust infrastructure and we're gonna need to have a lot more redundant pipelines feeding into the same areas that are already fed by what we think is enough, but it won't be going forward. So if we're advocating for anything, it's to create a system that can build that robust network, build that quality of service into what people are paying for, because that's the biggest complaint that we're hearing right now. Thanks, Todd. Next is Larry Spiewak, who is president of the Phoenix Center for Advanced Legal and Economic Public Policy Studies, a think tank here in D.C., and Larry has a particular emphasis on the law and economics of telecommunications and high-tech industries. Thank you very much. Thank you. It's nice to be back here at New America. Chip, the catering was delicious. My name is Larry. For those of you who don't know me, I write term papers for a living, except for we actually have a lot of math, so excuse all the lawyers, don't read the math. Let me give a slightly different take on the discussion today. Sort of take a step back for a moment. We're gonna talk about the state of competition given the introductory remarks we've heard so far. This wasn't where I was intending to start, but I think I've gotta go back to sort of my standard lecture about reasonable expectations of market structure and then start from there and then go forward. This is, when you're talking about telecom broadband policy, you can have two approaches to the problem. You can either think that this is an easy business or it's a hard business. I've fallen to the category that it's a very hard business. Other people say, oh, just show up. No, it's very expensive, very difficult to be in this business. And so when you talk about industry structure, okay? You know, Chip had talked, oh, we got seven firms. Well, maybe seven is the wrong equilibrium here. The equilibrium number of firms in any segment of the market is a function of the size of the market, the intensity of price competition and the amount of sunk costs. So the more intense price competition is, fewer firms. The larger the market, the more firms. Higher the sunk costs, fewer the firms. This was basically the analysis that the FCC used in its national broadband plan. So we're talking about few firms. So if we are talking about few firms, then it seems to me that the policy priority has to be, how do you make sure that those firms are investing in competing rather than colluding or worse yet exiting the market? The broadband plan was very clear, and this is something that Susan Crawford loves to cite, that you will have a tipping, that you have cable, and then the phone companies are not gonna wanna invest in their copper network and they're gonna exit the market. That could be. So where are current policy priorities that we need to be thinking about? As we move to more and more wireless usage and we continue to face massive spectrum exhaust. I don't even, we're ever gonna get over spectrum exhaust. The only way you can start increasing the capacity of the network is start A, building more towers and B, driving fiber deeper and deeper and deeper into the network. So our priorities I think has to be, how do we get fiber deeper and deeper in the network so we can maximize our wireless capacity? That's one of competing different policy priorities, but I think it's an important one. So then we get to the question of not how many, we should get out of these questions of how many chickens does it take to make a market competitive, but ask the more fundamental question of, will regulation make things better or worse? That's the question. We keep using antitrust as a proxy for regulation. It is not a proxy for regulation. It's whether the cost of the regulation outweigh the benefits or not. So then the question that becomes is imposing more price regulation going to get us where we wanna go in a policy-wise, i.e. in this particular example I'm using, driving fiber down deeper into the market. I would submit that the answer is probably not. The FCC is very clear in the National Broadband Plan that again, you've gotta recover your investments. Price regulation, the FCC does not do a very good job at it by their own admission, it isn't in exact science. And so one of the things if you, we look at special access, for example, okay. First off, we don't know what the state of competition is. You know why? Because the FCC won't collect the data. So I have no idea. We have these asymmetrical ideas. Let's look at ARMA's data. ARMA's data is not a good proxy to decide whether or not regulation is a good idea or not, okay. Or we're gonna look at profitability, well, big deal. The issue is we don't know what the state of competition is. So to think that we can then transpose that and go, well now we can price regulate in an accurate way is laughable, okay. I would submit that actually as more and more people are jumping off these landline networks and special access, you know, the backhaul is bearing more and more of the cost of these networks. I would imagine that if the FCC actually were to conduct a real rate case, which I doubt they're going to do, I would expect that actually the prices for special access would probably have to go up because the cost of the network would have to be more and more by special access. But we're not gonna get there because that we won't wanna do that. So we need to be thinking very, very carefully again, about how do we provide the correct incentives? I think Hank had a very good point. I would use the phrase policy relevant barriers to entry. They're still there. We want to be encouraging. This is the task that the broadband plan set out. We just did a paper two weeks ago where we're talking about what's the effect of regulation on investment, okay? And what we said is the problem is firms are continuing to invest in their networks. So the argument is always, oh the companies are crying fiber as opposed to crying wolf. And the issue is not, of course they're investing. They've got huge costs in the ground, sunk plant in the ground. They're generally publicly held. And I think their shareholders would be very upset if they let their plant just weather and die. That would not be good. The issue, the question again, is not how much are they investing, but how much would they invest but for the regulatory environment? And it's not just one piece of regulation. It's the overall, because you're not making investments in today's plan. You're making investments, these are long-term assets. So how am I gonna make, what's the climate? Am I gonna get a return? And so if you look at, for example, what this commission has done, data roaming, interoperability. Let's commoditize the network and increase price competition. If everything's the same, you only need one. Net neutrality, which is zero price regulation. I can't charge the people who impose the cost on my network, like Netflix. Just a whole bunch of stuff. So we need to be thinking very carefully. I mean, one thing about, I think all the people, there are no white hats in telecom. Special access is a classic example of quibbling over the rents. So if we're gonna do serious policy, we need to identify our policy priorities and the work towards moving there. So if our priority is investment in the network, more deployment, then let's start acting accordingly. All right. Thanks, Larry. Next up, a contrasting economist, Joe Golan, who is a consultant specializing in the economic evaluation of regulatory policies in the telecommunications industry. And he previously served on the staff of the Illinois Commerce Commission and at US Switch. Joe? Thank you. First, I'd like to thank Commissioner Cops, whose comments brought me back to the fact that even though something's difficult, it doesn't mean it's impossible. There's still an opportunity to get sound policy in this country and I wanna thank you for your remarks. Secondly, I would also throw you with stories about my broadband experiences in foreign countries, but they're primarily limited to Wi-Fi availability in bars. However, afterwards if anyone would like to know which countries have the best Wi-Fi availability in bars, I've developed a pretty extensive sample set. My comments, my prepared comments, I basically have four points. And then I realize that I have an unspoken word rule actually it's not unspoken because I'm about to speak it, to never have an even number of points. So fortunately, Larry allowed me to add a fifth point which is Larry's wrong, details to follow. The four points I came prepared to speak. First, and bringing us back to the topic of competition in the business market, the access market and the market of connections, physical connections to customers is always gonna be concentrated, all right? Whether there's one or two or if you're in really lucky maybe three pipes, it's always going to be concentrated. And one of the reasons for that quite frankly, particularly in a wire line environment is the fewer number of potential consumers at the end of an investment, the fewer number of people you're gonna have building to the consumer. Either, you know, if you build to a house either win the customer or you lose. Well, in that kind of economic game, not a lot of, nobody was gonna wanna step up and say, gee, let me be the third one to double down and try and bet. That isn't, and that's pretty true as you look around the marketplace. We are going to have a concentrated market and that's going to have competitive consequences. Second, we do have wireless service in the room. Second, when you look at the characteristics of competition in the business market, it's really made up of players that you're not primarily thinking about. Yes, we have broad cable-based competition in the residential market, but when you look in the business marketplace today, it is still heavily dependent on leased facilities from the incumbent. And that's not likely to change anytime soon. I recently looked at some statistics in Michigan and if you looked in the residential marketplace and asked, okay, for residential customers, what percentage of the competitive activity is on the cable plant? The answer is 85%. It's not surprising. If you ask what percentage of the competitive activity is in the business market, how are people reaching those customers? 75% of the competition in the business market is depends on loops and facilities leased from the incumbent. So when you look at competition in the business market, you have to be talking about what types of facilities are going to be made available by the incumbent to reach these business customers. People aren't gonna build their way out of this problem anytime soon. People aren't gonna get pixie dust from anywhere. It's still gonna be largely dependent on how do I connect to customers using facilities from the incumbent. Third point, there is no question that we have underway a transition of the PSTN from a circuit-switched architecture to an architecture using IP technology. Now, bear in mind, I was very careful not to say that we have a sunset of the PSTN. The PSTN is not going away. It's just gonna change the technology that it rides on from a circuit-switched architecture to an IP architecture. The PSTN has gone through a bunch of technological evolutions before. These new networks are not being built to Novo. They're heavily dependent, extensions of the existing architecture. Same rates away, same poles, same conduit, same towers. Sometimes when fibers deployed, it's strapped onto the copper that's already there. And as Hank pointed out, the AT&T architecture and other architectures actually continue to depend on the copper facilities that are in place. So this isn't some new wires, new world scenario. This is the old network is gonna evolve into a new architecture. Big chunks of that old network are gonna be used in the architecture. Those advantages of incumbency aren't disappearing as the new technology comes about. So let's not pretend that somehow being an incumbent, that everyone was born new with fresh clothes just because IP showed up, it's a natural extension of the existing network. So that takes us to, well, if that's all that's happening, is this IP transition, is it a big deal? And the answer is, oh my God, yes. All right, if the only thing you hear me say today, please hear me say that the transition to the IP architecture is a really big deal. And the vision of that transition being portrayed by Verizon and AT&T is the largest regulatory ask, if not in history, certainly in my lifetime, okay? You heard Hank make the comment that, gee, in a very few short years, only 20% of his customers are gonna be relying on the old architecture. Well, another way to say that is, hey, if you want to actually get to an all IP world, you gotta go out and forcibly evict 20% of the customers off of a network that's offering them the services that they're continuing to choose onto an architecture that has different characteristics and different features. This is not a small thing. This is no less dramatic than the country deciding we're gonna get rid of unleaded gasoline and go to unleaded gasoline and all the things that had to happen in this country for that kind of transition to occur. Now, having said that, just because it's the world's greatest regulatory ask by these companies doesn't mean that I'm up here telling you that you should get in the way of it. That's the next thing I want you to understand. This is not a transition you should stop, but it is a transition you need to understand. And it's a transition that you need to think about not only in terms of what does AT&T and Verizon want, but what should AT&T and Verizon and the others agree to in order to go from a world where we have these TDM facilities and world to a world where it's IP? And this is my fourth point. The things that they should be held to so that you bring across that boundary the same type of competition in the business market that you see today into that new vision and are relatively simple. But for the fact that they would allow competition to continue, they wouldn't even be a big deal. But because they will allow competition to continue, they're gonna be portrayed as an enormous deal. First, the act. The act is not broken. It's technology neutral. It has some very basic principles in it. Those principles can easily be applied to IP networks in the same way they were applied to TDM networks. This is not a question of the act is broken. The act was technology neutral. This needs to be implemented in a technology neutral way. Second, the access market, the access network is still gonna be concentrated. Where today, as I pointed out, 75% of the market, the business market depends on facilities leased from the incumbent, those facilities need to be modernized, okay? The IP equivalent to the types of access connections that people can obtain from the incumbent today need to be brought into the market. Basically, that's a generic bit stream type of product, a broadband transmission product that you purchase at rates that are reasonable and which are recognized to be designed to support downstream competition. Now, is that a hard thing to do? I'll actually throw out a really simple solution. That product is today offered in the NECA tariff by the nation's 1,400 small rural telephone companies. At prices that are actually pretty reasonable. So if the nation's 1,400 small rural telephone companies can figure out how to put a product in the market at reasonable prices that could support competition, and they're not gonna support much competition in rural markets because the realities are small, but you make that product available in urban markets, hey, you got yourselves a winner. Have AT&T and Verizon concur in that tariff? How hard is that administratively to achieve? Next, Copper. As Hank pointed out, AT&T has shown that Copper has a remarkable value. Verizon has decided they don't wanna use it. All right, but it's there. If Verizon doesn't wanna use it, would it be of use by somebody else to the build networks that look like U-verse that bring broadband speeds into the business marketplace? There's a lot of companies today that wanna make the same type of network investments that AT&T has made onto the Verizon Copper and onto the remnant Copper that AT&T doesn't want to derive broadband, but they've gotten a reliability that it'll still be there because the FCC policies allow the incumbent to retire it and take it out of service without any serious review. Finally, there's a terminating monopoly problem. Most of the services that are gonna comprise the PSTN of the future are not gonna be on the internet. They're gonna be inside walled gardens, and those walled gardens, those private networks run by the AT&T, Verizon, cable company, COX, I'm not casting names, it's just the way people are going to provide service. Those walled gardens need to interconnect and exchange traffic in a way the quality service isn't harmed. Interconnection traffic exchange rights, which are so central to the way the act is written today need to make that transition. In summary, the evolution of the PSTN on the IPA is going to be difficult. I actually agree with Hank. I actually frequently agree with Hank because he typically leaves out most of AT&T's positions in his public talks. So the ones that are left are really not so bad. But his comment that this should be done in an organized fashion with regulatory oversight is a good one. It's just it shouldn't only be regulatory oversight to achieve the incumbents' ends, it needs to be regulatory oversight that brings about a competitive market. Thank you. All right, thanks, Joe. And batting clean up, although sixth, not fourth, is Gene Kimmelman who now sits actually upstairs right down the hall from me. And Gene joined Global Partners and Associates as a senior associate just in July after three years in the Antitrust Division at the Justice Department where he was chief counsel for competition policy and intergovernmental relations. And of course, Gene is mainly known as a consumer advocate for all the years he spent as a vice president of Consumers Union and Before Data Consumer Federation of America. Gene. Thanks, Mike, my new neighbor. Gosh, and I thought we were gonna be debating the T-Mobile deal here, Hank, I don't. But I can't do that anyway. I actually agree with almost all of what Joe said, although I'm more pessimistic about the consumer market than you might be, but you are focused on the business user side. I don't wanna repeat what others have said, but you've reminded me how I can tell this history story that Chip Pickering started a little bit more from a user perspective. This conversation back and forth reminds me of a time around 1984, approximately, when there was a movement in this country away from a theory of monopoly and actual tremendous vibrancy in the market towards competitive forces and a movement, the beginning of a movement away from really extensive network regulation. And the user side of that has had ups and downs because one of the first skirmishes that occurred, a few of you in this room will remember this, others should at least understand the implications of it. It was a little fight over what was called access charges. And there was a consumer side to this but what was most interesting about this is there was an explosion of small business revolt against price increases as this whole transformation of telecommunications was occurring. Almost at the exact same time, there was a major law passed to deregulate the cable industry and it took a few years but then there was a pretty massive consumer revolt about price increases and consolidation and efforts to thwart competition from the satellite industry. Now, why is any of this relevant to what was just discussed here today? Well, I think if you look out, no one on this panel has disputed that we have this tremendous vibrant set of services and applications that are considered the internet economy of today, which are driving economic growth, driving innovation, creating jobs, a source of massive explosion in opportunities in this country and around the world. However, where there seems to be a little bit of tension but actually I think probably more agreement than not is the fragility of an underlying infrastructure, which is truly as an essential building block, actually it is the foundation for that internet economy. So while on the one hand, we talk an awful lot about the unregulated internet and the importance of not regulating the internet, we often forget to mention that it rides upon this fundamental foundation that has always been regulated for better or for worse. And what I think, certainly from a user perspective, people are observing, Joe hit the business side and I could augment it with the consumer side is that market forces are trending more and more towards monopoly. You can blame whomever, whether it's the regulatory decisions, it's consolidation, whatever the cause may be. I think Larry was actually right. There's some fundamental economics at play here. There are very few players that are sustainable in almost any regulatory formulation and we need to accept that. Joe mentioned the high levels of concentration. So we're trending, call it toward monopoly and this includes I think the consumer video and broadband experience and it certainly includes the business infrastructure and however many markets there are, you wanna divide them up. I think it's perfectly fine to do it with analytical rigor. I think you're still gonna see there are not many players at the fundamental infrastructure layer. So what happens in this kind of environment? The 1984 experience around that time had a number of revolts and uprisings and changes and some of them were deregulatory and some of them were quite regulatory in response. One potential here is that we see a return to what I would call muscular public oversight. Some of the kind of things that former commissioner Cops was referring to. And the other possibility is that we see as we have also seen in this time period, the wielding of market power. And sometimes it is wielded in a very careful, thoughtful manner and sometimes not and I think history has shown that it's often more the latter than the former but not immediate. So to me the big question before all of us is what will US policy makers do today in this era in an environment where we confront at some point market failure and a lack of competition? What is the solution? Will we see history repeat itself? Will there be a strong return to some very muscular form of oversight? Will we take some major market implosion to drive an overreaction? I think the framing that Larry and Joe put out there was really well taken. The market conditions don't allow for competition of many but does that necessarily mean that regulation is always bad? I think we're at a point where it's time to really reconsider whether some of the arguments really started in the 80s around the need to think about some forms of social contract model regulations and forms of streamlined regulation are a way to go in order to prevent either wielding of massive market power to the detriment of consumers or an overreaction. Thank you. All right, thanks, Jean. The panel did a great job of covering the waterfront, I think. So I'd like to move to a bit of discussion in your questions. I think I'd like to ask one or two questions to try to crystallize some of the disagreement that we heard up here. So first, as Todd mentioned, small businesses are demanding access to cloud-based applications, such as off-site data backups and video conferencing. However, the competitive providers of these small business services only have regulated access to last mile copper connections. And these tend to be, these regulated connections tend to be one extreme or another, either they're sort of a station wagon, like a DS1, which is about 1.5 megabits per second, much slower than I get at home, or the 18-wheeler DS3s, which are too expensive for many small business services. So competitive providers say they need access to the upgraded fiber and hybrid fiber access loops to offer more advanced and flexible services to small business in, say, the five to 25 megabit per second range. So I guess I'd like to ask, and I would ask the panel so we can get through a bunch of questions to be very short in answering, what are the real-world consequences of unbundled access to fiber and hybrid fiber loops if we had it? What would it make much difference in reality? And what should the FCC do? Is this a case of kind of re-regulation or is there something else? Joe? I'll start. Well, the consequence, quite frankly, let's go back to the premise that was widely agreed upon. The infrastructural layer is going to be highly concentrated. So then the question is, do you want every vertical layer above that highly concentrated too, just because there's very few access connections available? Or do you want a structure where those access connections can be made available as a wholesale input to a variety of providers, and so you can have a high degree of competition along all the layers that you can differentiate, and which quite frankly, all the differentiation occurs anyway, to promote competition. One of the things people failed to appreciate about the small business market is that the reason smaller providers are so successful in that market segment is that the product they're ultimately selling is customer service. Now, you can be as big a fan of Comcast and AT&T and Verizon as you want as large corporations. They have shown a remarkable ability to create mass market products that they can get out into the market very efficiently and very affordably. But at the end of the day, if the goal is to have a product market where people sort of hand-tail the solutions and work closely with the company, large companies don't typically do that well. So what most small carriers are looking for the FCC to do is to modernize their ability to get that access, get off of those DS-1s, and instead have access to a bit stream product reasonably priced. Again, the Neckotariffs got it. Why can't that same product be made available by the large incumbents? Anyone else? Some of the demand for what you're talking about is happening with a small AT provider who will get access to that fatter pipe in a setting up cloud-lit type facilities. So you think of cloud facilities being the exclusive domain of a Microsoft, Google, Amazon, and others, but in that small space, when they do get access to those large bit streams, they're able to amortize that across a large number of customers, and in some cases even become an ISP to a local community. So I think we can unleash some of that innovation, some of that business innovation from some of the companies that are out there providing the frontline customer service to other small businesses in pretty creative ways that maybe haven't been fostered up to this point. I just think you can go back to whether you believe in the new wires, new rules type of approach. I mean, using your example that you gave earlier, why Verizon the size of, and they actually did finally come to my house this summer, why can't somebody else use the copper infrastructure? Well, Verizon, which is overbuilding cable, now faces a minimum 50% chance the customer may or may not take the service. And then you're gonna say, we'll give away the copper, so then you're actually even increasing the chances even more that they won't even take Verizon's new fiber service. You do have a demand component to this, and that makes no sense. If, again, our policy is to incent more fiber, more deployment, we have to make that trade-off over whether or not we wanna regulate it. I mean, we went through this experiment with OVS and franchising. OVS was, you said the phone coming, so if you wanna get into video, you have to build out 50% extra capacity for your competitors. And guess what? Nobody did it. So I'm not quite sure how a regulated rate of bitstream access may or may not help the process. And I think what we're talking about here is, I think if there's a product, people will sell it. What we're equivalent of, again, is price, and whether or not that price should be regulated. And I'm not sure. One of the things that I think we've learned the hard way out of the unbundling experience is that trying to get regulation to force somebody to do something that they don't wanna do does not work out very well. And that was the end problem with unbundling was just the problem of inherent sabotage. You can't have a customer, wholesale supplier, retail competitor, and expect, as I used to say, it's like your mother telling you, go be an Olympic swimmer, but don't get wet. The incentives don't line up, and that was the end of the, why unbundling fell apart? Well, it is true that regulation is always about getting somebody to do something they do and otherwise do. Or, I mean, that goes without saying. That is true. The unbundling system didn't fail us. The political system failed us. It was working. You know it was working. All I have to do is pull out all of your pre-19 2004 papers that demonstrated it was working. It was the political system that failed us. And the political system... They're unbundling. This idea, these are not new buyers. But that's my point. But the whole process, okay, and then the sabotage is not just, oh, I'm gonna delay doing a hot cut. It's fighting in the political arena. The whole system came crashing down because companies did not want to engage in this behavior. There's some regulations companies can live with. Unbundling, which was such a financial burden, that's, and I'm agreeing with you, but that's my point. To start trying to bring this back is socially inefficient. We've learned our lesson. Okay. A country made a decision. We learned our lesson the hard way. It was a tough pill to swallow. Going back to point five of my summary. You're wrong. You're wrong. I'm going to intervene in this situation. It's 2012, Joe. I feel like I'm at a comp-tel meeting circa 1998 here. I'm not sure. Anyone else need an understanding of that? The only person I've ever heard who claimed that you could do, the I-Lags did a cost study on special access that rates would go up. I didn't say that. I said, if we did that, my suspicion is is that rates probably would go up if we did it actually and did real serious rate making at the FCC, which is something that they've never done, nor have any intention of doing. It's a theory. Right. But your point, your point that this is 2012 is precisely my point of reminding people about 1984 because in 1984, cable was deregulated and there was nobody in their right mind who thought they ever would be re-regulated again. And I'm not going to say that that history will repeat itself, but it's if we end up with unrestrained market power in any of these sectors and it is abused, policymakers will react whether you think it's rational or not. And that is what people need to confront. If we're getting close to that point of high level of concentration and unrestrained market power, people need to figure out what is the appropriate solution in 2013. So the 1992 act was a resounding success? Prohibition lasted longer than that law. I don't think the satellite industry would agree with that. Chip, did you have something or? The only thing that I have to add is that as we transition to an IP world, I do think that Joe is hit on the right solution. And what was at the guts of the 1996 act? And that is that we apply interconnection on a technologically neutral basis. So whether it is TDM or packet mode interconnection, that is the policy solution that will bring competition and hopefully will give us a modernization of what works. And as I look into the history of the last 30 years, more competition, wholesale and retail, functioning markets, even if it's three to four players, will always lead to greater investment, greater build out and greater innovation. That was it. Oh, I'm sorry, go ahead. Yeah, I'd just like to respond to a couple of points. I think the discussion between Joe and Larry actually brings out a point I wanted to make earlier about Joe's point that the 96 acts still works. I just don't think that we could credibly say that when we think about this transition to IP networks and where we do have, you know, at a minimum, we have a ubiquitous cable infrastructure in addition to other infrastructure, certainly phone company, but again, I encourage you to look at the NTIA map. If you're a large business in the central business district of DC, you actually have multiple fiber providers connecting to your building. But in any case, the idea that what we need to do is have IP bitstream regulation of this guy who we call the incumbent lack, I think in that world is not a good outcome. Now, to Chip's point about interconnection and regulation, I think we have two in the IP world. We already have one model for interconnection and traffic exchange. Miraculously, it arose without regulation. It continues to function without regulation and there's one place in the world where people are seeking regulation of it and it's at no through the ITU. And most people in the United States think that's a really bad idea. On the other side, we have the PSTN with a long history of regulation and an even longer history of legal fees. So I think we have to seriously look at these two models and make a decision about which of them is better for the future of IP networks. I think that clearly I would say it comes down on the side of the internet peering and transit agreements that have never been regulated. So Chip mentioned, can preview the other question I had in mind was whether this technology-based distinction between these different access lines makes sense. So we have this huge regulatory and it seems like that's what a lot of this is about, whether it gets clear to everyone or not, is we have this huge regulatory distinction between the unbundling access for legacy copper, glass-mile loops, and the elimination, on the other hand, the elimination of unbundled access for packet mode, glass-mile facilities. That is over IP through fiber, hybrid fiber loops. So does that, the National Broadband Plan said we should be moving away from technology, from regulation that's not technology neutral. So how do we resolve this distinction? Is this just sort of, that we fought to a draw? Or is there a good reason to go one way or the other? Of what? Go ahead, you go first this time. Is there a good reason to maintain this distinction because just because we're in an IP world? The distinction between, the distinction between- Unbundling the legacy copper loops, as opposed to not, we're not doing it for, the new, more fiber-enriched facilities that are coming online. That was clearly a mistake by the FCC. So the question is, how do you rectify the mistake? The bottom line is, if you want to move to an all IP world and not end up with it having really horribly concentrated economic characteristics, you need to create the competitive conditions for the IP network of the future that basically brought you the competition, particularly in the business sector that you see in the old world. And Hank uses this wonderful term, peering in transit, and if you're not inside baseball, all of this tends to sound right, but here's the difference. The 1996 Act on Interconnection has a really basic logical framework to it that says, large networks really don't want to treat small networks as equals, so we're gonna have a law that says, you can't use size against them. A small network has certain rights to be a co-carrier with a large network. They don't have to knock on the door and be treated as a customer, all right? Now the reason you have that is because you recognize that you have these giant networks that aren't going to want to give non-discriminatory terms to small networks, but you want small networks to be introduced and to grow. Peering and transit are the polite way of saying discriminate like hell against small networks, because peering says, hey, if you're as big as me, and look around the room, guys, I mean, you know, there's big like AT&T and Verizon, and you know what, compared to them, everybody's small, including some of my cable friends, and so peering says, well, if you're really big, I might treat you as a co-carrier, but boy, if you're not as big as me, you get over there at the customer line, and I will sell you access to my customers at a price. And that's the fundamental issue about the interconnection debate. Small networks want the 96 act to continue to apply so they're treated as co-carriers and not as customers, because when you're a customer, you know what you're gonna get. You're gonna get hosed. Technical term. There's probably a fiber equivalent to hosed, but. Well, I mean, look, I mean, I, Joe was right in the sense, I mean, I believe that we shouldn't go back before the Kingsbury commitment. You know, I think the duty to interconnect is very important at any technical point, but let's look at this a little bit different way. Again, you know, interchange of traffic is how carriers make money, and I remember when I got out of the commission 18 years ago and one of the first projects I was working on was actually a small SEALAC in Brazil, believe it or not, and it was run by a guy named Dennis Gundy, and Dennis was the ninth employee of MCI and one of the founders of Sprint, and he sat me down to the great head, Jimmy Johnson-Hair, and I used to work at Harley-Davidson or Corvette Outfits. The guy was a complete character, had his own phone room in his house, and he said, Larry, understand something. This is an easy business. If you know the rules, you can make money. So, you know, once we start, I mean, we just went through this giant zeitgeist of inter-carrier compensation reports. If you start having regulated interconnection rates, you know, here's what's gonna be amazing. There has been arbitrage going on in this business ever since there was two tin cans and a piece of string. Okay? So the more we start trying to push this, the more we're gonna have arbitrage, and we're gonna go back to this whole world of phantom traffic and, you know, a Recip Comp, and we're trying as hard as we can to move away from that. I'm not quite sure what the solution is, but I certainly know where the problems are, and we've got to find a way, this is what I think we just tried to go through with the whole inter-carrier compensation reform earlier in the year, and I think the commission deserves a lot of credit for that. We got rid of access charge, moving to Bill and Keith. We're trying to avoid all of the dysfunction that regulation imposes in this very, very difficult and very, very complex problem. I'm not sure what the answer is, but you do have that as a result, and pretend that doesn't exist, I think it's been disingenuous. Okay, I guess I have to respond back to point five. You're just wrong again. Yes, we went through that whole mess with inter-carrier comp, and you started to think, well, inter-carrier, you know, traffic exchanges where carriers make money. No, actually, there's now a consensus that traffic exchange is not where carriers should be making money. We should go to a system that looks like Bill and Keith, that is Bill and Keith, for purposes of traffic exchange, but the peering and transit model is not that. The peering and transit model is just a nicer way of saying access charges, and so why is it that AT&T can say access charges with one breath and say Bill and Keith with another? They want Bill and Keith on the old network, but they want an opportunity to have imposed transit prices on you. You know, transit prices look just like access charges to the guy who's writing the check. That's why we want to have a regulatory safeguard to prevent that kind of system, and I forgot to blame the FCC for the complexity of the access charge regime when the FCC in whatever, 80, 82, when it first started to look at the question of access charges, it said, you know, this whole thing of inter-carrier compensation payments, this was all designed by AT&T, and it looks like it's a historical accident, but it's going to take us a long time to unwind it. It was, they didn't create it. They were part of the process of continuing it, but the idea that commercial agreements are going to give us a non-discriminatory rate schedule, that's just absurd to me. What was the whole point of IP traffic to get us out of, with whole VoIP debates in 2003 and four, right, to get access, and then on the international side, so we get out of paying the ITU settlement rates? I mean, it wasn't at the whole point, so now we're kind of there, and now people, as Hank mentioned, with AT&T going, no, no, no, now I'm not getting any settlement rates, I need to get a source of revenue, so now I'm going to start imposing charges on data. I don't get this. Yeah, I know you don't get it, but AT&T know is trying to get money. I'm telling you that every competitive carrier that I talk to that wants to make sure that traffic exchange is subject to the 1996 Act is after the word reciprocal, not after the word compensation. They don't want a system where- They don't want money? They don't want the money from inter-carrier comp. They will just want a system where, look, if AT&T isn't going to give me any money to terminate AT&T's calls to my customers, I don't want a system where I have to pay AT&T to get my calls to their end users. And you know what? Peering and transit is a way for asymmetric compensation to be forced out on competitors. So I do want to make sure everybody understands I've never actually heard Joe stake out this view that the internet system of interconnection which exchanges God knows how many petabytes of data daily successfully among thousands of networks that don't even, in many cases, have any relationship with each other is somehow a bad thing. And what we have under section 251 is a good thing. I think that that is directly contrary to the positions of the United States State Department. God knows how many people have written papers on this. I think that the system of traffic exchanger to 251 is perversely inefficient compared to what we have on the internet. I just got to correct him on this because I did not say anything about changing the internet systems of compensation. I was referring solely to the fact that is these walled gardens into which the PSTN is going to move, that the traffic exchange agreements between that traffic should not be set up to be asymmetric compensation between AT&T and its rivals. What you said was peering and transit are bad. You said peering and transit, I'm saying peering and transit to the voice in the future, looks just like access charges, which is bad. A bit of a semantic dispute at this point. So let's, since we're almost out of time, let's get to a couple rapid-fire Q&As from the audience. And so, yeah, right here in the middle, please identify yourself. Oh, and by the way, I should mention that Commissioner Cobb said that he is also willing to answer any question. No room for him up at the table right now, but feel free to ask Commissioner Cobbs as well. Thank you. Debbie Goldman, I'm with the Communication Workers of America. This most recent exchange, I think, moved us away from what I thought in the beginning was a really useful panel, which is that I saw a recognition among all of you that this is an industry in which there are high sunk costs, high capital investment, and the market structure is one of a few dominant players. The question then becomes within that number one, how do we incent investment, which I apologize to Mr. Spiewack and Mr. Gillan, but you lost me. The focus is how do we incent investment, and from our members, the CWA members who build, maintain, and service the networks, investment is linked with job creation, which is so critical in this economy. And then, how do you within that structure make sure that users, consumers, and the public interest is protected? What are the regulations we need? What's the government oversight that we need? It seems to me we need to make sure that everybody has access to the network. We need to make sure, which gets at state regulation of carrier of last resort issues, that basic voice services are affordable. And then, because we are primarily a system of private investment, that those who invest have an opportunity to make a reasonable profit, otherwise they don't invest. I don't personally agree with the history I heard of the uni regime. While it may have been working to foster resale competition, in fact it was not working to foster investment in new technologies in the next generation. Now we have a deep, I know I haven't gotten to my question. Oh, is there a question? Okay, we'll move quickly though. But I wanna bring us back to the key questions. What I really feel started to get lost. The key question now is that carriers have decided where they're going to be making money. And we're leading toward a one-wired infrastructure to the end user. Not big business, but consumer small business. And to me the question is, what are the regulatory policies? Competition is not the end. Competition is a means to an end. Resale competition is not the means to that end. How are we going to get competitive investment in infrastructure in a wired infrastructure? Okay, and you know, yeah, all right, if there's a quick. I mean, I'll respond Debbie. I think to some extent it's already been said that first of all, you know, if the view is that there's something that a policy that will itself create that investment, I'm dubious, I'm skeptical of that. I think most of this investment is private investment. And the key policy question is, are there barriers to entry? Are there barriers to investment that from a policy basis could be removed that will produce better or more investment? And you know, I would go back to, I think there probably are. I don't think they're probably at the federal level. I think it's probably at the local level, sort of the nuts and bolts of how do you get this investment into the ground? Whether it's towers, antennas for distributed antenna systems, or fiber investment for fiber. So I think that's, from a policy perspective, if you wanna do something from this perspective, that's what you do. From a regulatory perspective, we have a system of, I would say, monopoly economic regulation that we still have vestiges of on the telephone side. As we make this transition to IP networks, that legacy, that vestige of monopoly regulation no longer makes sense, should be removed. That's not to say there should be no regulation, however. We may have social goals or other things that are important to us and we decide, you know what, we're gonna have that regulation. But regulation of prices, entry, exit, sort of the fundamentals of the traditional monopoly regulation, I don't see a role for that. Let me try to summarize the best I can of the panel. I think, you know, Larry would, when he's talking about market structure, this may be my interpretation and you can crack me if it's not. But he would probably say a duopoly structure, two to a market is probably the most realistic, maybe three to a market in an industry like telecommunications. And as Hank talks about where we have interconnection that works in the internet backbone market, he's correct. But where we can have a minimal competitive rule to maintain functioning markets, and functioning markets means willing buyers and sellers. It is key that we keep the last mile facilities open to competitors. You don't have to go beyond that IP interconnection on a technologically neutral way. Access to last mile facilities is the competitive solution that can as we have a concentrated industry structure still allow competitive entry and all the innovation and benefits. And what happens in that type of environment is that we see competitors forcing the incumbents to upgrade and invest and build networks and that's what's happened over the last 30 years. Look at, we went from copper to fiber, we went from analog to digital and it was because of forces of competition. With minimal interconnection, it works. One piece that's missing from that conversation is that it's not any of these rules. I don't think that drives that investment, but ultimately it's the applications that are used on the network. And you don't have to go far to look at the FaceTime issue on AT&T and Verizon just recently with the new iPhone. And where were they gonna charge for FaceTime or not? And the massive investment that AT&T has put into their 4G LTE network came as a result of the iPhone and the app world that evolved around that. At first, you couldn't even update apps on your device through the 3G network, you could only do it on Wi-Fi because they didn't have the structure there to take advantage of the data pool that would come through that. So I think sometimes even large companies like AT&T and Verizon have both made significant investments when the applications have been there for them to take advantage of. That doesn't go to the competition point, but creating an environment where you can have the maximum potential utilization of new and exciting applications on the network is what ultimately drives usage and what ultimately drives investment, whether it's from small competitors or large competitors. So as we go forward, I mean, look what Skype has done to the telephone market in itself. Video conferencing market that Cisco thought they were going to own has died as a result of an application like Skype in the IP world. So don't ever forget that it's creating a great environment for the applications to flourish when they come up is what plays, I think, the biggest part in driving the investment for companies like we have up here. And again, I would just commend you to the paper we just did two weeks ago. I think probably the biggest issue is just regulatory certainty. I mean, just pick a policy and stick to it. But I think if firms don't know what's going on or they perceive more strict regulatory environment, there will be less incentive to deploy advanced structure. But the certainty is a big issue. I'm just gonna add one thing that I'm not in any way to disagree with anything I know I'll said, but we shouldn't forget that part of the answer to the question I asked is the $8 billion a year that the government is gonna keep pumping into this market in terms of infrastructure. Any, yeah, cause I think we're out of time. So any last word, Gene? Let everyone go. All right, well, I'm sure the panelists will be happy to answer questions individually, but we're out of time. So thank you very much. Thank you very much. I just went. Thanks a lot.