activists to have a measure of anonymity on the facebook site. facebook, google, twitter, youtube, have they become defacto political forces? >> yes, and that article was interesting because as you know, google tried to reengineer with say it or something, there was a company called say it so that the egyptians could tweet through their phone. as a free phone number because they wanted to square activism whereas facebook is like we are not in the business for activist purposes. so, we are going to have to -- they are in the business practice and whether they want to be or not. >> so what role did facebook and twitter play in what has happened in egypt in the last week or so? >> you can say well, it made all the difference, look at the people that they mobilized using the social media. but then you can say it didn't

play that big of a role as we might have thought because when they shut down the internet, the mobilization group. so i think that it's definitely -- i think looking at this particular event or the particular ascent in tunisia that created this change or the particular event and iran that created a mobilization. what we need to look at is the way that the culture and the society of the economy and the political structure is changing because of these information technology's success within the context and the context help to shape the technologies and tools. >> and what is the context? >> it is the culture and the economy and the unemployment rate and all these other things. so the way that i look at it, when people become used to use in communicating tools it changes how they live and if the of grievances and they feel like the had a chance to express those grievances whether it is

online or in the privacy of their own home they tend to get expressed. and when they collect that is when the social media comes in to see i am not alone in this, i have a million people here feel exactly and are going to go to the square and challenge government. the media tools allow the egyptian people to reach critical mass in a way that was ousted the seem to not be able to do. >> professor wheeler, have you been monitoring tweets etc from yemen, doherty, the other countries that seem to be having a little bit of rebellion? >> yes. jimenez an interesting case. 1.8% of the society in yemen has access to the internet. 1.8. that represents more than 2000% growth from 2000-2010. >> is it because the poverty or government restrictions? >> it's both, illiteracy, poverty, government restrictions, put it altogether,

lack of literacy and the english. but the basic point is we are having a rebellion in yemen without massive access to the internet. so there would be a case where if you are trying to make a case for the social media you don't want to include yemen. but jordan, 28% have access to the internet starting in 2000 but going full throttle to 2,004. throughout the country including the impoverished areas and wants to be part of the digital economy but it's a double-edged sword. you give people access and they're going to communicate in their demand and the jordanians have said they want freely elective representative governments. he doesn't have to be elected for his government and we need to see how that plays out. >> have you seen any more

governments in the middle east restricting access to the internet or restricted mobile services? >> wife and observing is the opposite, that for a sample, in algeria the president is saying that we are going to have an end to the emergency law coming soon. jordan results the cabinet, dismisses the prime minister come up with an interim prime minister in place and is trying to work towards change. the syrians supposedly this weekend are mobilizing against emergency laws. so it seems like people are trying to learn from the egyptian tunisia examples to change in more moderate ways rather than face the resolution. >> of the other side of this is terrorism and the use of the internet by al qaeda etc. is that if factor? >> one person i was having a conversation with him in the intelligence community and said look at al qaeda at the arabian

gulf, aqag my guess is what they are calling it and that group is actively using the internet for recruitment purposes, they have a journal called inspire, "inspire stop what is the name of their journal and is it they've gotten a skilled at westerners. jihad jane got recruited by them. i say to my students this is a small percentage of the people in the region. it is different movement, and really i hope that's what happening in egypt and tunisia and jordan and yemen focuses people's attention on the masses and what they are asking for which is the same thing you and i want, freedom, good job, good life. >> what are you currently teaching at the u.s. naval academy? >> well, i have a seminar called new world disorder released. [laughter] >> why is that important to teach at the naval academy?

>> we have future marine corps and naval officers who in that particular seminar within months or going to be in the services of the country and many of the regions that we are talking about today, and it just gives them an opportunity to do a research paper on a topic of their choice as long as it relates to that theme in some way shape or form. >> why is it important? >> i think the middle east isn't going anywhere quickly. it's an area of strategic importance. general petraeus said we are interested in the oil and stability and the palestinian conflict and those issues are going to be more important in this information age so we need our men and women to be aware. >> finally if you have to make a definitive statement about a role of a social media in the least and in what is happening in egypt, what would that definitive statement as of today be? >> it's a game changer de weeks

demint deborah wheeler is a professor of u.s. naval academy. we appreciate your participation on the communicators. >> thanks for having me.

up next, fcc chairman julius genachowski of a plan to promote a broad and expansion to rural areas by redirecting a federal subsidy now used to support phone service. he spoke in washington for half hour about the sec's national broadband planned and priorities for this year.

>> well, good morning everyone. welcome to a itif eve ensler we are honored to feature julius genachowski to talk about impending universal service reform efforts at the fcc. as you all know, universal service is a critical component of our nation's telecommunications and broadband policies, but it really hasn't been updated in a long, long time would be the kind way of saying that, and the chairman is leading a major effort to do that, so we are really honored to hear from him today. let me start by if you all know the background, but let me start, chairman of genachowski was nominated by president obama as the chairman of the fcc on march 3rd, 2009, sworn into office june 29. he had a long and distinguished career in high technology and telecom. he spent more than ten years

working in the industry as an executive and an entrepreneur. he co-founded launch fox digital and rocks triet ventures where he served as the managing director and was a specialist dysart at general atlantic. he also, from 97-2005, was a senior executive at iac interactive, which is where he was the chief of business operations and general counsel. this is his second stint at the fcc from 94 to 97 he was chief counsel to fcc chairman reed hundt, and before that, special counsel to the fcc general counsel and a leader chairman bill canard. he's also been a law clerk at the supreme court and was the other distinguished background will degree from harvard kuhl mechem alladi. but the major thing the chairman and i have in common besides passion for broadband and telecom is we are both basketball players. he plays with the president and i don't, that is the major

difference. [laughter] anyway, please welcome -- please join me in welcoming chairman julius genachowski. [applause] >> the other difference is rob tama dunk. [laughter] >> used to. >> thank you to you and itif for hosting this event. i want to thank the sec staff who are here, many of whom have worked very hard on what we have been doing in the area of broadband and what we will continue to do in particular the universal service perform i will talk about today. but before that i have one more thank. i'd like to thank the blackeyed peas for not causing trouble during halftime last night. [laughter] last year the fcc released america's first national broadband plan, the plan identified broadband, high-speed

internet as vital infrastructure for economic future and global competitiveness in the central platform for innovation and job creation crucial to the success of our businesses large and small and to building stronger, more connected communities. broadband is also the key building block the national broadband plan taught us our education, health care and energy futures. but we won't fully realize the promise of broadband and the fundamental american promise of opportunity for all if large swaths of the economy are left out. history tells us that universally available infrastructure can drive our economy and improve our quality-of-life. lincoln understood this when he opened transportation to the american west with the transcontinental railroad. fdr understood this when he brought electricity to the rural parts of the country lighting up farms and homesteads from one human to west virginia.

eisenhower understood this when he built the national highway system unleashing and connecting communities. in his state of the union this year president obama called on the nation to invest a 21st century infrastructure that will enable the businesses to grow, innovate and compete in a global economy the indispensable infrastructure of the 21st century is broadband. the good news is we are not at the starting line when it comes to broadband connectivity. our country has made real strides and expanding access to broadband, innovative technology like five dsl and cable modem service and many billions of dollars of private investments that make wider the broadband available to more then 100 million homes and thanks to policies that are unleashing spectrum for the next generation of mobile connectivity and revolutionary mobile devices applications and services created and sold by american companies and billions more in

private investments. the u.s. is well positioned in the global mobile revolution to the opportunity to lead the world for years to come. >> but there's bad news. when it comes to the broadband infrastructure, we are not where we need to be. we risk falling behind our global competitors if we don't accelerate our great progress. this is a race we cannot afford to lose. a concerted to lead to a study that itif with robert atkinson and robert put together is a study that impressed us at the fcc a great deal that leaves no doubt that our country needs to step up the game. the study looked at the 40 industrial countries and rank them on a small number of metrics relating to competitiveness and innovative capacity. things like i.t. investment and broadband to plummet and adoption. on a snapshot basis it ranked

the u.s. six our 40 in the nation's in a survey which is an interesting, some people say six although it's not so bad. it's terrible. that should be a call to action but it's not the truly scary part of the study that itif did. the study looked at the same metrics and ranked each country on the rate of change in the metrics. all the countries were improving since the dayton prevent. rate of improvement, innovativeness, competitiveness. it ranked the u.s. 45th out of 40. that should do more than give us pause. it tells us moving forward slowly in these areas is moving backwards in our global economy other countries are moving faster and when it comes to this

fundamental infrastructure that's a platform of economic growth, job creation and opportunity for years to come. we have to take that kind of study seriously. that is seized the opportunities of broadband we need to improve across the broad economy. advances and applications, devices and networks tried innovation and investment across the full broadband ecosystem, maximizing benefits for all. as the national broadband plant found we also need to overcome real challenges. lummis spectrum, the invisible infrastructure that sustains the mobile network, david trafficking is exploding and we face a looming crunch with demand outstripping supply. that is why we are pursuing a strong multi part agenda to unleash more spectrum for broadband and drive spectrum efficiency. this includes options which would bring market forces to underutilized bands of spectrum freeing up spectrum from the

mobile broadband. another major challenge is broadband adoption and deployment. multiple studies like the itif show the u.s. lagging other countries in broadband metrics. you are familiar with the studies that rank the u.s. even the looking at broadband alone. roughly one-third of americans are not online. that figure is under 10% in singapore. to many parts of of our country are not connected at all. up to 24 million americans couldn't get broadbent today. even if they wanted the infrastructure simply isn't there in their communities. it is a problem and rural communities in the country and a similar areas. tomorrow by the commissioners and i will vote on a plan that is critical to overcoming quiberon and challenges and is one of the fcc's the five highest priorities to the proposal to modernize and reform

the universal service fund. some people call it usf. today i want to focus on this initiative to bring usf and the really to enter carrier compensation system into the 21st century. universal service has been at the core of the fcc's mission since the communications act of 1924. with the commitment to make the services available to all americans the program is called connect also our 20th century communications grid first bringing basic telephone service to places where there was no economic case for service. and extending the benefits of mobile phone service to more areas across the country. universal telephone service help spur american success in the 20th century. small businesses and the smallest towns have the country and later the world as markets open to them. this universal service brought new life to main street,

dredging commerce and aldrich's of the land and strength and community telling families and friends together. but of course the world has changed and it in the 21st century high speed internet cannot telephone, is our essential communications platform. americans are using wider band wireless networks to access the internet. but while the world has changed around it, usf and too many ways has stood still and even move backwards and the program is still designed to support traditional telephone service. it's a 20th century program suited for the challenges of the 21st century. where usf has changed over the years is too often changed for the worst. however well-intentioned, policies have been put in place that today far away in the program down. as the vice chair of the subcommittee that oversees the communications said last year

with rick boucher urged the democratic chairman of the subcommittee and this is a quote, the universal service fund is broken. that is why the commission lacked tomorrow. usf must be fixed, modernized and streamlined from the 21st century. the fcc has taken steps last year to address key aspects of usf. we modernize our reading program so schools and libraries can get faster internet connections to 21st century learning tools like digital textbooks. we are not in our rural health care programs patients at roel? can benefit from broadband enabled care like remote consultations with specialists in the country. the changes are helping deliver on the national broadband plan goal of ultrahigh speed broadband to anchor the institutions and every community in the country. late was to be proposed in mobility fund intended to spur the buildup of the advanced mobile wireless networks not

served in the next generation of that works. next month we will be taking a big part of the u.s. has called lifeline link up which helps low-income americans get and stay connected an important program that is in real need of reform and we are also considering proposals to the contribution system that supports the usf. today i want to discuss the largest part of the usf program, the part focused on supporting communications service for rural americans to be about to talk about a plan to modernize it, to directly support, six mobile broadband, make the program less wasteful, more efficient, more accountable and more fiscally responsible. i will respond with the challenges facing the program. first the program is plagued with inefficiencies. the fund pays almost $2,000 per month were $20,000 a year for some households to have phone service.

according to one study approximately $100 million to serve areas with competing providers without a single dollar of government would offer service to all households. in many places the existing system funds for more foreign companies to serve as an area. second, the program lacks necessary accountability. usf guarantees hundreds of companies significant rate of return on expenditures they choose to make related to the phone service. but when public dollars are at stake, no company should control their own spending, funding spigots. there needs to be oversight and accountability to ensure public money is being used wisely. accountability applies to the government as well. we need clearly stated goals and performance metrics to gauge how the program is being administered. third, some of the rules are creating a perverse incentives.

for example, one of royal to encourage new investment is instead rewarding companies are losing customers. believe it or not they actually get more usf support and meanwhile, the overall growth of usf is not constrained. these and other problems have combined to produce a rolled a fight where some parts of america are fully connected to it sometimes with the stat of the art brought a bit faster than anything available in many urban areas. while other parts of rural america are left behind. a couple of months ago i was in west virginia with chairman rockefeller who has been a champion of surfing the and served. during the visit by spoke with people who can't get high-speed internet one mobile coverage up their home or business even though communities right next door are connected. how frustrating is that and how can that be acceptable that millions of americans and small businesses are missing out on the upside of the digital

economy and 21st century education and opportunities. the role digital divide isn't a one state problem. it is a national problem affecting oregon, maine and most states and between. the closely related in our carrier compensation system has its own set of challenges. the enter carrier compensation is a complex system of payments passan companies mick to each other when they connect calls. it's long served as an implicit subsidy for the carriers with the rates set well above the cost so that long-distance service would subsidize local networks. as a result, it can cost ten times more to call a friend a few towns over the and to call someone on the oversight of the world. that doesn't add up. to gain the system some phone companies enter arrangements with chat line or conference call providers to inflate the volume of incoming calls in order to increase payments they

receive. some call this traffic pumping. on the flip side there's the problem people call sansom traffic where some disguise the source of calls to reduce or avoid payments to other carriers. the in our carrier compensation system is in only small it is unstable. overall, the revenues are in a rapid and unpredictable decline as more and more people drop landline phone service. there's also considerable uncertainty on the litigation about how the inner carrier should work in the modern era with a voice over ip services. to top it off, the inner intercarrier discourages investment cost saving 21st century infrastructure. some companies fear losing millions of dollars and intercarrier if they agreed traditional equipment to ips equipment enabling more inefficient connection. simply put, the current

interrelated usf and on ucc systems is unsustainable. it was designed for the world with a separate local and long-distance telephone companies, the world of traditional, a land line telephones before cell phones or skype, the world without the internet, the world that no longer exists, so what should we do now? some say we should eliminate the social service fund altogether. i reject that idea. while the world has changed, the importance of the universal service has not. we simply shouldn't that millions of americans be typecast by the broadband revolution. americans like the 17 year old ll to the county florida who's doing her homework in the parking lot of the local library at night because her family can't get broadband and the hot spot is the only option to read or americans like president of the community in georgia the was being considered by a major

airline carrier as the site for mccaul center. those jobs could have replaced the ones that left the local textile mill. the airline eventually passed because the community didn't have adequate broadband infrastructure. without a modernized usf, people and people like them will be continued to be left high tied. people say the universal service want fund doesn't need a major change. they like the status quo and say the status quo was largely find. i reject that proposition, too. in its current state, the program is not getting the job done. it's leaving millions on the outside looking in and wasting taxpayers' dollars every day. that is unacceptable. we need to be responsible fiscal stewards to get the most bank for the buck. particularly in light of its inefficiencies we need to control the cost of usf and we need to ask tough questions.

flexible, should the government use consumer dollars to guarantee double-digit returns to companies receiving usf on this. if we reform usf and intercarrier along with pursuing other key broadband initiatives, broadband can drive the economy and provide broader opportunity in the 21st century as universal telephone service and electrification did in the 20th century. so building on the excellent ground breaking work of the broad plan our usf and icc reform agenda rests on the four pillars. modernizing the programs to support a broadband networks, ensuring fiscal responsibility, demanding accountability, and enacting market driven incentives based policies to be in pursuing a plan to meet these objectives, we must ensure reform occurs of both usis and

icc which are fundamentally interrelated while minimizing disruption along the way to do so we need a sensible but certain transition, when the kids participating companies sufficient runway to about with no overnight flash, but with clear milestones and a firm power forward. the proposed rule making will vote on tomorrow sets forth the two-stage proposal. the near term would begin several key reforms. these would include changes to the in our carrier compensation rules to stop waste and reduce disputes when companies exploit loopholes to gain the system and to address the treatment of traffic for the letter -- intercarrier. these would bring predictability to the uncertain area. we also propose to start a

multi-year transition pass and partnership with the state's to phasedown intercarrier payments and shift in the necessary recovery to the usf. doing so, as i mentioned would provide needed predictability for the industry and investors while reducing the inefficiencies and perverse incentives created by the current system. the universal fund was on the path to reform funding that's being used efficiently and without sufficient accountability and transitioning it to the connect america fund. so we will fund a broadband for the uncertain areas out of savings from existing programs while constraining the size of the fund. the commission will vote on tomorrow will include specific proposals to control costs and limit the funds' annual expenditures. it would include performance goals and reporting requirements to increase the accountability of service fund recipients and better measure the performance of the fund as a whole.

these immediate reforms would move us towards a fair distribution of usf, target the unserved areas where the support is needed most. .. >> as we do this, we'll make

sure all americans have access to voice service and can make calls from their homes. voice will be ultimately one application consumers can use over their fixed or mobile broadband connections. we target funding to the areas that threwly need it -- truly need it. we would ultimately eliminate the carrier charges that can slow the transmission to an all i.t. world. we will work with congress on this plan and any ideas on accelerating the transmission and build high speed internet in unserved areas. we also look forward to working closely with the states. usf are highly state systems and require the best ideas and healthy federal state corporation. in the coming weeks, there will

be ample opportunity for public input to improve and refine the proposed framework the commission will vote on tomorrow, will run a fact-based data driven open process including public workshops on key issues. i call on all holders to engage with us on this project. i look forward to all ideas consistent to the pillars of reform i outlined earlier. those who say the connect america fund should fund the highest speeds technically possible, bring us your specific proposals, but you must show us how much it would cost and who would pay for it consistent with our commitment to fiscal responsibility and accountability. to providers concerned the connect america fund won't help them and only support their providers in other areas, work with us to maximize the number and types of providers that can compete for support.

a technology-neutral approach is key to putting scarce resources to the best possible use. to those who receive intercarrier compensation, let us have transition paths that maximize predictability and minimize destruction. to those who pay intercarrier compensation, work with us to ensure that reforms ultimately benefit consumers which will be the true measure of the success of our effort. i understand that the change may not always bize sigh, but -- easy, but ignoring the problems is not an option. it's not a question of if we should reform the system, but how. last year with the release of the national broadband plan, all commissioners adopted a joint statement that said, and i quote, "the intercompany sages

system should be reformed to increase accountability and efficiency and encourage targeted investment and broadband infrastructure. since that time, we've continue the to work together at the commission and with the outstanding fcc staff focused on this issue and our commitment to the cause has only gotten stronger. now is the time to act, and i'm confident that we'll reform usf and intercarrier companies. thank you very much. [applause] >> the chairman has to ultimately run to make this happen, but he's generally agreed to take one or two questions. i would just add, by the way, itif has been a long advocate, and we appreciate your leadership on this and it's long overdue, and hopefully we can

move forward. i want to ask questions of the media, if you want to go first, if not, we'll -- if you can identify yourself. >> teal -- telecommunications. when rule making -- [inaudible] >> when the rule making was originally viewed, there were some within the industry who were somewhat upset the contribution issues were not included in part of the saying that really need to go hand and hand. you can't fix it without addressing contributions. i know you mentioned that's on the agenda longer term, but do you feel that -- what do you have to say to those who really wanted contributions dealt along with this at the same time? >> the first focus needs to be on fixing the program, and that's what we're going to begin

tomorrow. there's been work done on contributions and there will continue to be work done in the future. the first step is to make sure it's a program that meets its purpose, that's efficient, that's targeted, and that's what we're working on tomorrow as i said. >> a question over there, steve, over there, the lady there in the purple. >> hi, "politico". do you support personally eliminating the rate of the return consideration that was up for elimination. do you want to see it eliminated? >> we have the responsibility on asking tough questions. i don't want to jump the gun, but we're talk about it tomorrow, and clearly, there are difficult issues. one more. >> over there.

>> i was wondering if there was any thought to perhaps approach congress and ask for the moneys from the auction, the proceeds, instead of going into the general fund, target to some of the broadband programs and initiatives that you're outlining today. >> well, as i mentioned, we're looking to work with congress and everybody with ideas to accelerate the transition to a connect america fund that's focused on america and that gets the job done. thank you, everyone. [applause] [inaudible conversations] [inaudible conversations]

>> in a few moments, a forum own net neutrality, the fcc policy that tells internet providers to allow equal access to their networks.

>> next a forum on net knew thrallty, an fcc policy that allows equal access to the network. the free state hosts the panel. it includes at&t, comcast, and cisco systems. this is a little more than an hour and a half. >> let's get started. it's terrific all the panelists were here right on time, and i appreciate that. as i said earlier, this panel is entitled broadband, and what's next after the decision. in a minute, i'll introduce the distinguished panelists, but

since blair is on this panel, i think i'm going to begin by reading something from the nickelhouse advisory letter. am i pronouncing that right? i always have trouble. >> i haven't been there for so long, i've forgotten. [laughter] >> see i always just called it myself the blair's news letter when i thought about it, and it was easier to pronounce that, so that's what i did, but i understand blair is no longer there as i'll make clear shortly, but i want to read from actually maybe the most recent, recent advisory that i received because i think it will help set up this panel today. "looking ahead to the coming here in

telcom and tech policy and regulation, we see 2011 less volatile than 2010 especially at the federal communications commission. the drama surrounding the unvailing of the national broadband plan, the title to reclassification, and net neutrality battles, and the midterm election results will be tough to repeat, but the seeds of significant issues have been planted including on net neutrality and comcast, nbcu enforcement, and we should expect the unexpected with more new merger activity. the fcc will basically pick up where it left off before entering the abyss of reclassify -- reclassification and review." now, you know, i think when i

saw that in large part that it rang true in terms of what i thought we would be talking about today. now, the -- i'm sure we're going to have discussion of net neutrality for certain which i want, but i also think we'll be focusing in this post fcc decision on some of the issues that now come to the floor. now, i just want to read a short excerpt from a blog that i published earlier this week as i was thinking about the conference and where things stand in the aftermath of the net trualty and the comcast merger opinion, those opinion and orders. i said, "faced with a choice,

the agency continues to choose to regulate communications and information service providers under broad ill-defined standards rather than opting to rely on the discipline of the competitive marketplace to protect consumers, continually invoking language at the heart of the analog era regulatory paradigm, public interests, reasonable, fairness, and nondiscrimination, the agency clings to the exercise of regulatory power acting under the guys of reasonableness and the public interest and so forth, it exercises this regulatory power in the name of ensuring their competition for leveling the playing field all the while picking marketplace winners and losers and all the

while disclaiming it is doing any such thing." now, i went on to say later in that blog, that same blog, "and in my view, there are distinctly free market oriented solutions that should be brought to bear in resolving each of these policy issues, but i recognize there's other different views as well." today, i'm sure we're going to hear a range of those views which is what i want to hear, so let's go ahead and get it going. your brochure has everything you would want to know about the panelists, maybe a bit more. what i'll do is give you their current titles.

maybe perhaps i'll give another sentence or to, and i'll introduce them in the order they are asked to speak in. they have two minutes so there's time for q&a. have in mind your questions as they go along. i'm going to enforce that as they know, and the only exception was the executive director of the commission's national broadband plan, i'll have him speak last after he hears what the other -- so he can hear what the other panelists have to say. the first speaker is jonathan baker, chief economist at the fcc, also a professor of law at

the american university, washington college of law where he teaches courses primarily in the areas of antitrust and economic regulation. next will be jeffrey campbell. jeff is senior director of technology and trade policy -- let me make sure i get that right. senior manager in technology and government affairs at cisco, and he's responsible for developing and implementing the worldwide policy agenda on telecommunications and technology issues. following jeff will be james cicconi. jim is senior executive vice president, external and legislative affairs at at&t. jim is responsible for at&t's

public policy organization, and he served in this capacity since november 2005. i'm going to skip over blare for a moment, and next we'll hear from joe waz. joe as all of you know, is senior vice president of external affairs and public policy counsel at comcast. joe has primary responsibility for the public policy activities of comcast including working with the corporate's federal government affairs, law of state, and local government relations and public relations professionals. some of you might not know that earlier in his career, joe was a member of raiders when he worked for ralph nader.

it's not often we're on a panel that there's someone who follows you. >> probably. [laughter] >> but that's the case today. fortunate again to have christopher yoo, a member of the free state foundations, board of academic advisers, but aside from that, perhaps more importantly than that in his view, he's professor of law and communications at the university of pennsylvania law school where he's also director of the center for technology, innovation, and competition, and then finally, we have blair lavin. he is presently a communications and society fellow at the pes pen -- aspen institute, and need i repeat, once more, blair was the

executive director at the commission leading that team of hundreds that developed the national broadband plan. you may have noticed blai is also going to be on the next panel. that means he's getting paid double for doing this today, but i hasten to add two times zero is still zero. [laughter] with that, we'll get started, and we'll hear first from jonathan baker. >> thank you, randy, and good morning. i am speaking for myself this morning, and not necessarily for the federal communications commission or any commissioner, and i'd like to talk about

mortgage -- merger review. that can be about broadband policy which is what our panel is about. i want to talk about the universal transaction to address some of the concerns i've heard raised about how the f chiropractic c approaches -- fcc approaches mergers. it has an interest in a number of cable networks including regional sports networks, nbc universal owns broadband networks, a number of cable networks, and a film studio. it was a joint venture, but can be thought of as comcast acquiring nbc universal. it was reviewed by the fcc and the justice department and allowed to proceed by both with commissions. at this agency, the major competition concernfuls the risk that comcast would exploit its

control of more programming to harm competing video distributers including online rivals and create market power for cable systems. i've heard some people question the advantages by which the fcc reviews competition aspects of communications, mergers concurrently with an antitrust agency as in the justice department with the nbc matter or the federal trade commission. i worked at all three agencies in the course of my career, and i can talk about the benefits of that from that experience. the economists at the fcc think about economics the same way as the economists at the antitrust agencies do, but the fcc looks at competition issues in a merger differently from antitrust enforcements for other reasons. one reason is their

complementary expertise. they major in communications policy, and as a result, the fcc can take a longer view in evaluating potential competition particularly. working together as the fcc and justice department did in reviewing the comcast transaction, makes agencies more effective. we had the most coordinated communications review ever between agencies without imposing greater cost on the parties or delaying the process. some critics of concurrent enforcement point to antitrust review as the gold standard for competition enforcement. well, if that's the test, it's hard to complain about the competition conditions in the fcc comcast order because there's little difference between them and the justice department. i've also heard concerns about the conditions that the fcc imposed to ensure that mergers

promote the public interest. let me explain why the competition conditions were necessary in the comcast case. this was a vertical transaction between a video distributer and a major programming splier. if it's the transaction is vertical, there's no problem. this idea is wrong on two accounts. the premise of the theory, the idea that vertical transactions are procompetitive is incorrect. the antitrust enforcements agencies have always recognized that vertical mergers can harm competition with exclusion or horizontal coordination. these possibilities are discussed in the guidelines issued by the justice department more than a quarter century ago during the reagan administration which are still enforced. in addition, even if a transaction is vertical, and those aspects are ignored, its

horizontal elements create competition problems. the comcast transition is a case in point because it wasn't a cable company applying for power. this aspect with lead to higher programming prices, and some of the conditions addressed that trouble. some people question why the open internet commissions are related to the transaction. those conditions address a specific competitive problem. comcast's ability to exclude video programming in an online world in order to benefit affiliated program. this is analyzed in vertical mergers and identified in the open internet order as a justification for those rules. not surprisingly, the justice department, the agency that's the competition policy specialist had the same concern and adopted the same remedy.

finally, i'd like to address the concern that the fcc's condition prevent merging firms from obtaining efficiencies. that concerns the months to be false with respect to the universal transaction. in conditions, the fcc worked with comcast not to weaken conditions, but to avoid comcast's ability to limit objectivings. there's no question on how well we did. after the order was issued, kohen stated publicly, i don't think the conditions are particularly restrictive. i take that to mean he thinks 23 the order dresses the concerns bout making it difficult for comcast to act consistent with the public interest. the fcc takes seriously its obligation to ensure that mergers promote the public interest. in the nbc order, the commission conclude the that it would

mitigate harms to competition, promote adoption in underserved communities, allow broadband to schools and libraries, and allow spanish programming. no responsible agency can simply assume that every communications merger imposed in the free market is beneficial, and some critics want the fcc to do that. instead, the fcc evaluates the effects on competition and policy goals, and imposes conditions as needed to ensure that communications in industry mergers serve the public. thank you. [applause] >> thank you, very much, jon. i noticed you used the word early in your talk, nacent. in the context of the comcast merger review, you know, at some point it struck me how often that word, you know, began to be

used in the context of the online video market; right? i forget that, but at some point, i thought it even overtook a system, it was a close race, but it might have overtook echo's system in the word in the tele com world this year. tom, you're next. >> it's nice that the commission won't be talking about that net neutrality issue for awhile and can focus on the initial broadband plan, and i hope an observation made by a wise man, two seats to my left here, when i came to talk to him on the national broadband plan, he observed very accurately that, you know, here you are coming in to see me, and, you know, you love # 0% --

90% of what's in the broadband plan, and you hate 10% of it, and you're here to beat me up of the 10% you don't like. it was true then, and unfortunately, since this the conference where we are concerned about overregulation by the government, i'm going to focus again on the 10% a little bit here today. [laughter] in particular, i wanted to focus on the commission's proposal to significantly change the structure of the market through creating a system that they are calling the ovid device. this is meant to be a replacement for the current cable card system which the commission has put into place some time ago in order to encourage the retail ability of the boxes and other such devices. in the 5 minutes left, i'll try to address quickly what i think are sort of the four fallacies that are underpinning this

policy that the commission is moving forward. the first fallacy is that there is not sufficient competition in the market. i think this fallacy is largely predicated on the fact that there isn't a lot of retail sales because consumers haven't chosen to go through the retail market, but the reality for actual competition among the box makers is that competition has flourished because of the implementation of the cable card system. we -- if you only need to go and look at the series of waivers that all the manufacturers ask the commission to do for ata devices that the commission did grant wisely, and you can see that there are a large number of companies that are engaged in producing top boxes in the country today including significant producers from japan, korea, and china, as well as some domestic manufactures as well. if you look at the average

prices of boxes, you will see that it is on a continuing glide path down downward, another indication of a fairly competitive box market, and, you know, we're seeing the major, you know, cable providers are getting boxes from multiple so pliers in a marketplace. the second fallacy that the commission is relying on and pushing the proposal is that consumers should purchase boxes, that this is an affirmative good and something we should have. i think there's a couple things missing in the analysis here. there are major benefits to leasing boxes in this kind of world. the first is, you know, it requires no outlay of money at the beginning. you don't have to buy a $500 tivo in the store. the second is that you're protected in your investment in the event that happened to me

last december that my noncisco box crapped out in the middle of the football season. [laughter] i called comcast joe, and i had a new box, and it cost me nothing, and that was great. [laughter] it was probably warranted by the other manufacturers, so it probably didn't cost joe either, but the point is that i didn't have to go out and buy, you know, clearly beyond a consumer warranty period, and i didn't have to go buy a new one. the other thing is when you change services, when you want to upgrade to a new or better service, you don't have to buy a $300 box, and then buy a $400 new box for the new service. instead, comcast swaps out for me. i may pay for on the lease for the better box, but i'm not stuck with the past purchase that goes with me. to look at this more clearly, if you look at the cell phone

market, the market that the commission kept pointing to saying the cell phone market is full of innovation and competition, even the cell phone market doesn't operate on a purchase model. you go and you buy your cell phone, but you're not paying the full price for the phone. you're half buying and half leasing it, and you get a contract with it, and it's a perfectly good way to go about doing this. consumers are not interested in the huge outlay of the high cost of the equipment right up front, and are interested in paying for it more over time. the third fallacy is the fact that there's not enough innovation in the market. i think looking at an entry where it wasn't that long ago there was 60 channels of an loll tv coming at us, and where we are today with digital, hd, dvr's, and more recently like tv anywhere and others that are really bringing the internet and

video together in a new and unique way making it available on multiple devices. in fact, just last month, cisco announced a new architecture in the space that allows all devices and all video sources to be operated through a service that's cloud based and transport based that would completely open up the market and eventually ofuate the need for having the network and soft clients and software, and so the innovation continues in the market, and i hope the commission is looking at these changes that have been occurring even recently in the area as they go forward on this proceeding. the last fallacy is i think the biggest one which is the commission chose a hardware solution for the problem. they created a device, a box,

that every multichannel has to provide. it has limited functionality and does certain things. the problem with the solution is that it's a hardware solution in a world that's about to become a software world. we're going to force these hardware boxes in perpetuity or at least for 10 years which is perpetuity in the commission's world, in order to create the market structure that we think is best at a time when we're really moving to soft clients, where you can run your video programming from your ipad or pc or mobile phone for soft clients and soft solutions that will be open and competitive, and so i think that if you look at the realities of the marketplace versus even where we were two years ago versus a year and a half ago, two years ago, when the commission started looking at this, there are drastic changes that occurred, and hopefully the commission is

keeping up with the technology changes and will adopt a more market-based solution that is going to allow for faster and greater innovation with more consumer choice. >> thank you very much, jeff. it will be interesting to see whether blair now that he's over at the aspen institute whether perhaps you persuaded him about the last 10%. let me say two quick things. i mentioned the audience that we want to have questions from them, which, of course, we're going to have, but i want to invite the panelists to react when we go through the initial prosecutions to -- presentations to their fellow panelists if they have reactions, so keep that in mind, and then the other thing i wanted to remind you of is we have a hash tag for twitter for the conferences on the back of your brochure, sfs conference if

you decide you want to treat about -- tweet about something going on. with that, jim? >> thank you, randy. really pleased to be invited here today. in fact, i can't tell you how pleased. for five years i wanted to be on a panel entilted what comes after net neutrality. [laughter] actually, i think we can all agree that the net neutrality debate which has consumed the last of two years has been both exhaustive and also exhausting. it's really sucked all the oxygen out of the room, and it's a shame in many ways because it's been focused on a hypothetical problem, and we have real problems out there. you know, i think with net

neutrality behind us now, we can deal with the real problems. blair pointed them out in the broadband plan. one is panel is dealing with that. i think it makes our eyes glaze over, but it's the challenge of reforming universal service and intercommunication systems that impend our communication systems in the country today. in fact, i think the national broadband plan itself challenges us to fundamentally think the way we -- change the way we think about service in this country. reforming usf and inferior comp will be extremely difficult. i think everybody understands that, but the plan itself made clear what many people have been saying for a long time is very true. if we're going to get serious about 100% broadband in this country, if we truly believe that broadband is the economic driver that takes us through the 21 cedarst century and beyond,

which i happen to believe, then we have to reform the policies in the way of achieving this goal of 100% broadband. in order to succeed in this journey, i think there needs to be agreement on where exactly we're going own and what the goal entails. i look out there and see a world where if we're successful everybody in america who who wants one will have a broadband connection. voice and video will be one of many applications, simply ride on a broadband pipe, and in fact, that's true of many americans today, and, you know, if we're serious about the goal, it will be true of everyone. we should be funding the most efficient technology to do this if we're going to have a universal service system devoted to broadband. we have to make certain we are careful and rational with taxpayer dollars there as commissioner baker and randy pointed out that that factor,

that contribution factor goes on everybody's bill today is up to 15.5%. we should only be funding areas where there's a market failure and broadband can't be deployed with private investment alone. specifically, we shamed not be use -- should not be using public dollars to compete with a company or technology that is deploying adequate broadband without public funds. we can't afford to support two networks. if we want to support broadband, we must be willing to let the public switch telephone network go away. that means removing the regulatory barriers that are today designed to prevent that very thing from occurring, and i'm talking about the last resort regulation, cost of service, and local voice regulation. broadband today is the interstate information service. we all know that. it's not regulated by 50 state commissions, and it has to remain that way, and we have to con front the questions entailed

in that statement. i don't think any of this is controversial to the participants who engaged in this debate for the past 10 years. i think each of the concepts is put forth and embraced in the national broadband plan released by the fcc last year, great work that blair spearheaded, but getting there entails a robust discussion and hard decisions. where we are going should be the easy part to define. if the fcc doesn't do that next week, i fear it's a lost opportunity. if we have disagreement on these points like whether the states have regulatory authority over broadband in the future, then i think we need to have that discussion sooner rather than later. let's be clear, this transition is already occurring. three weeks ago the fcc released its local competition record for 2009. that data is already a year old. it showed that between 2000 and 2009 incumbents switched access line slunk from 181 million to

107 million at 40% reduction. the real shocker is over the past two years, that reduction accelerated to over 9% for the industry on an annualized basis which means if the decline last year in 2010 remains constant with the prior two years, we are already blow the regular access lines in this country. on top of that, a recent poll showed that around 27% of americans have cut the cord entirely dropping wired phones and going to wireless only. that's a fact that the wireless bureau refuses to acknowledge or take into account when regulating wire lined companies. end user revenues associated with those lines is disappearing. the cost of maintaining those lines and the legacy building and provisioning systems around those lines doesn't go away when the customer goes away. antiquated regulations require us to comet to incur these costs

to maintain the lines whether people use them or not and in fact whether they're ever use them or not. when we get down to 50 or 60 million access lines, i suspect, in fact, i am positive, we won't be able to afford to support the access any longer or the switch network, and the emerging broadband infrastructure. we're going to have to make a choice, and the time to act on that is now. in order to get there though, we have to have the courage and foresight to clearly define our objectives in the end state that we envision. only if we do that, can we move to the next set of much harder choices that need to be made, and i feel the fcc can start that process next week. if you don't know where you are doing, it's awfully hard to get there. >> all right. thank you very much, jim. next we're going to hear from joe. you may recall that we've had one of those high wind warnings

a couple weeks ago. we've had several here in washington due to the -- some due to the storms, but the one a couple weeks ago, it was the day that the comcast nbc-u merger was approved by the commission, and it was later determined that that was just joe exhaling -- [laughter] up in philadelphia, and so that's why that one was shorter lived. joe, the floor is yours. >> thanks, randy. i think i'll let that be my comment on the whole transaction today. we're delighted to be done. we are delighted to have it closed and moving forward and crediting a company that we're extremely proud of that we really do think will accelerate the any time anywhere digital future that americans are looking for in a competitive and really innovative marketplace. otherwise, as to the transactions, i'll watch the shuttle cloud fly over my head.

if others want to share their views on it, that's fine, but for me, i'm just glad we're moving forward. what i do want to do today is take a step back and talk about the policy process and the fact that if there's anything we're learning along the way it's that we don't have the right statutes, laws, institutions, and processes for an internet age. we have statutes that were written for technologies that came into the market when our parents or in some cases our grandparents were children. we have agency jurisdictions that fail to account for the fundamental different interactions of players in a layered internet. we don't think consistently about what openness means with networks, applications, or systems. we don't think about privacy concerns cutting across the various players and the internet ecosystem. we have processes and procedures

that depend on prescriptive rules and don't defer to the consensus based problem solving organizational forms that work so well today. we have broken forms on achieving public policy goals in promoting like jim told us and i'm sure blair will elaborate on. i'll talk more about these critical issues and the give and take this morning, i wanted to take a couple minutes now on how to improve the legal and institutional context in which these issues get framed and addressed. i think it's time for more experimentation. we're finding new ways to break us out of these old paradigms. let me make a point with respect to two issues, broadband adoption, the centerpiece of the national broadband plan that blair led, and internet openness. on broadband doorption as jim just indicated, we are trying to find our way out of a failed

inefficient system to promote service and address not just rural issues, but also the urban poor. some would have us bloat and pass the existing system. we can't do that. we do need to approach this. our company is about to try an approach in regard to low income population, it's the broadband opportunity program or cbop which is a fairly catchy acronym. >> who told you that? [laughter] >> my son. [laughter] our transaction in it we said that the goal was to accelerate the any time anywhere future. as we spoke to the fcc about the transaction, we're reminded the future is not necessarily within everyone's reach, so we took on the responsibility of devising a plan to expand broadband adoption, and it's called cbop.

there's three parts. the focus community is households in which a child eligible for the free overage under the national student lunch program resides, and we're taking a three-pronged approach to promoting adoption in the households by offering a reduced price broadband connection for $9.95 a month by offering equipment for $150 or less, and we're working with technology partners to find a reliable piece of equipment that families want to use in that prois point, and to promote digital literacy because what we've learned is just talking about price is not enough when talking about broadband adoption. in fact, price of broadband is a barrier for perhaps 7% of the u.s. population. figure 35% of americans are not connected and cost is the main barrier, they get you down to

somewhere in the 7% range where cost alone is a barrier. there are multiple barriers to adoption, and blair's report refers to this and other research done shows it. among the factors are lack of digital literacy and lack of relevance and also the cost of equipment. we said, let's come up with a plan that hecks as many of these barriers as we can, and you see that reflected in cbop. this school year could be an important testing ground that will be effective in promoting broadband adoption than just arguing about the price. we hope that other companies will emulate and innovate around the model. we received calls from other isps who want to know more about it and want to build on it.

we hope the technology community will do their part and step up to make this work. we hope we will have the seeds of a new and cost effective approach to broadband adoption, one that was developed in a policy conversation rather than a government mandate which i think is an important point. let me turn briefly now to the open internet policies. after many years of rangeling, there's fcc rules on the books. how long they remain is up to the courts. as for my company, the rules reflect how we run the business. we are prepared to abide by them and committed to do that in the fcc transaction review, but how the rules get interpreted and implemented will matter. that brings us to a process point. if internet issues are used for filing of complaints with the fcc and other process, i'm concerned the politically ugly process behind the adoption of the rules will be extended for

years to come with further diversion of attention from resources of key national goals from the national broadband plan. we need better approaches, institutions that are innovative, and i'm pleased to be involved with such an institution, called the broadband international group. it's another acronym for the table. let me try to summarize what this thing is. during our bit torrent dispute three years ago now, we learned about something that our engineers knew well, but the policy team did not. the internet community today has incredibly successful consensus based mechanisms for dress aing issues. the internet access issues is one of the mechanisms bringing together thousands of engineers from all over the globe several times a year and lets anyone tee

up questions for discussion. the give and take is invaluable. we played 5 major -- a major role there over the years. we tested propositions behind the fair share management network system and got terrific input. what's great about it is the engineers really succeed by and large in leaving their business and biases at the door. coming out of round tables a couple years ago, a cross section of players from all elements of the internet industry and the user community developed a program to domesticate the itf if you will creating an organization here at home. we identified a right and respected leader, dail hatfield, who should be known as everyone in the room, serving as our leader. it gives stake holders a place to go to sort through issues and the fact-based engineer driven oriented process that the itf has, but with focused discussions and expedited

timelines. these working groups meet for the first time later this month with a terrific cross section of people representing industries, application providers, user groups including public knowledge and center of democracy and technology are all participants, and i hope we have proof this kind of approach can work to expedite problem solving and bring clarity to issues. i was at a meeting -- >> joe, one minute if you're good. >> i'll wrap it up. a meter here in town last year when an administration official, not one who used to run flat irons by the way, referred to itef as a near miraculous institution. we hope to renew that and hope and expect that policymakers will watch us carefully. to sum it up as we rethink the frameworks, i think we have to be open to more experimentation and innovation as these two

examples suggest. those are the characteristics, expir i wantation that made the -- experimentation that made the internet a success too. >> thank you, joe. next turning to professor yoo, also from the city of brotherly love. chris? >> i don't mind going at the end because it is the reality of alphabetical order, one i'm used to living with that allowed me to make a small point that is despite whatever you try, there is no such thing as a neutral premises. there is biases in everything you pick. you naturally pick alphabetical order if you choose to avoid offending anyone. there is an inherit bias in that. [laughter] it's a risk, but things like first-in , first-out, all the

routing schools that reperceive as knew rail have biases against applications in the speeds of which they start, how long they run, and what are the parts of the researches i'm doing now studies that and it's something engineers understand well and percolated little in the policy debates as they exist today. going on the topic of today which as jim liked the idea we're talking about network neutrality and what comes after neutrality, and december piet the forward--- despite the forward looking aspects, my remarks is what comes after. we have two major issues brewing. the first is a fight over jurisdiction and the other is a fight over enforcement. i'll talk briefly on each one of the jurisdiction is the big fight that will happen in the courts. the dc circuit ruled it's not necessarily going to happen there because the comcast decision came down issued by the

dc circuit, and there's a mechanism to decide which venue will resolve that issue. it's question is on the substance of the venue, and what's interesting is different people have different opinions when they read the order. my own take on it is the fcc definition of jurisdiction does not sound confident, that, in fact, they recite a large number of provisions they potentially support. they -- someone told me when i used to work at a company and i had someone coming in with four great ideas. my boss said, you don't have a single good idea, and you hope i buy something by you throwing up a few ideas. there's the u.s. code, and ifs been stated by commissioner baker and commissioner mcdowel

that it was a deregulatory up vestment oriented provision, and they believe that's hard to turn into a mandate for instituting regulation. that's up to the courts. i think the final venue will be congress. as i said last year in the conference, i think we can take a great lesson from the history of the cable industry which is the last time we got a new major technology, tried to shoe horn it to the existing categories given us to by the communications act of 1934. all of you know the history. we tried to use jurisdiction, had a series of supreme court decisions saying fcc can do this or not do this, and finally we needed a regime instead of being decided by a series of categories for different technologies, this accidently falls on a particular technology, we need to think about how we should regulate this, and congress eventually stepped in in 84, three decades

into cable industry and gave us a framework. i think that's a useful model leading to better results. what's interesting is how complicated that has become. i actually think we have missed a tremendous opportunity about a year ago for a congressional solution. since that time -- at that point, house democrats weighed in against the network neutrality proposal, and about 70-some wrote a letter to the commission, and others opposed and seemed to be room for non partisan discussion, mayors came in. right now, there's a different election. we have a tea party con ting gent of the republican party that made opposeing neutrality a major part of their agenda, and in the limbs of this, there's a president who now stated pairing back regulation is a goal across the board. given his precommitments in the administration and current

commitments of the chairman, i don't expect that commitment to extend to net neutrality, but it does indicate the political context we're debating this. i'm not optimistic on a short term solution based on the waxman proposal that was received well by the industry, but it's considered a useful starting point because of the politics and partly because of the time of the elections, and also how the underlying politics change. the second is not just jurisdiction. actually, the order attempts to provide guidance, but it actually is very ambiguous. for example, the context industry probably is very in the proposal said part of republican management would be proving piracy of content. the order actually took that language out of the specific definition of reasonable network management, but qualified it by saying but nothing in this order

changes the copy right laws that will stand in the way of someone who wants to regulate or curve illegal piracy. everybody was left scratching their heads. ..piracy. everybody is left scratching their heads. reasonable network management is you can't block access to legal content. we're left trying to figure out, they didn't remove it from the definition for no reason, but we're left with ambiguous clues about what you can do. there's wonderful ambiguities about whether they say there's a real harm. they use the term proph ylactic. they talk about who bears the burden of proof. i favor a case by case approach. the burden of prove lays on the

complaintant. they make -- they start off saying the burden of proof sits on the complainant, but if they make a prima facie showing, the burden shifts to the broadband access provider to show their actions are reasonable, which is a very different thing than saying the plaintiff bears the burden of proof throughout the proceeding. why is that a problem? ambiguous practices about which we have no data which means new practices are often going to run directly afoul, because once the prima facie showing has been made and the burden shifts, the broadband provider is going to try to prove something in which no data exists. the idea of protecting innovation are very influential. i'll give you two examples that are happening right now. as most people probably know, there is a dispute going on between comcast and level three. comcast and level three cdn, content distribution network had a peering network. level thee is the primary

distribution network for netflix. the economics changed. comcast attempted to shift from a peering arrangement to a transit arrangement. there was claimed foul as the network neutrality violation. i do not know any of the private details. many people say how do i know? what do i know? estimates suggest that netflix is 20% of all network traffic. it's a large provider. some estimates suggest that the change of adoption of netflix will increase the flows going through level three cdns by five times. i don't know the details of the agreement. any peering agreement that i know of, one side of the flow increases by five times the underlying, it's no longer a piering agreement and it's likely to change. it doesn't top the ambiguity and the enforcement mechanisms for people raising concerns. a number of voices raised concerns. it causes a tremendous drag in

what's going to change in the relationships. the second thing that's in the news right now is metro pcs. one of the struggling -- not one of the big four largest wireless providers, they're attempting to scale up. they missed 3g and move from 1g to lte. they have a system where they used on their 1g system, they were able to put youtube because of consumer demand by changing flash into a different protocol called rtsp. they're willing to do that tony provider that provides their content in flash, right now, you cannot get all video content on their network because of the way the limitations of the 1g network. they carry that to the 4g platform because they have all these problems with dual function phones because basically they're not completely built out in 4g, sometimes you're in a 1g cell or 4g cell.

they have a huge problem. they don't want you clipping out of service based on what city you're in and you have to keep track of all that. this is something that's a natural technical fix for a wireless carrier that has very limit eed bandwidth. they stand ready to do this with other people providing in terms of flash. the question is do they have to support other video encoding systems, side flash, it's hanging over them and caused a tremendous problem. it's one of the reasons they are challenging this. >> christopher take about another minute. i have to have you wrap up. >> these are the questions. i mean, we have these questions about how these things are going to be enforced. in fact the one thing that bothers me most about the order is the notion about -- there's a threat in there about hostility towards practices that will let broadband access providers generate more revenue. the reality is, i think jim is correct that one of the down sides of the network neutrality debate has distracted us from

the broadband plan. the filings from the state reps make it clear there's a deep linkage between the two. i'll throw a couple facts at you. the lowest, most conservative estimate for building out 100 million megabytes is $350 billion. that was government funding. i know of no proposals on that scale, the smaller ones, on that scale, there's going to have to be some form of revenue enhancement. i'm worried about the language of the order standing in the way of that. to me the wonderful example of this is the difference between fios. one used a heavily managed solution, one used a big pipe solution. price tag difference, $24 billion versus $7 billion. that's a technical choice, economic choice which they're finding out in the marketplace. wall street has been on both sides of that fight. what i would suggest is in fact, yes, buildout is the most

important thing, but there is an effect of how we implement the open internet rules that will have a direct effect on which practices we can use to make that buildout which will have a direct impact on the cost, whice cost, which will have a direct impact on the extent of whether it is successful. >> thank you very much, christopher. i made a note here on my piece of paper that next year you're going to go first. it is going to be a nonneutral decision that i've made. okay. next we're going to turn to blair. i'm going to hold him to the same time limit. i just want to say, with respect to blair, jeff said, i think that you agreed with about 90% of the content of the broadband plan, just disagreed with about 10% of that. and that made me think of my relationship with blair when honestly i don't think i, you know, approach agreeing with him 90% of the time, but i do agree

with him -- i do agree with him on many things. we have known each other for a very long time. and i've always appreciated having him come to free state foundation events and i think we're good examples, blair, of, you know, what they talk about a lot in washington these days where you don't agree on everything. but nevertheless can talk about these things in a way that hopefully is useful to people. so with that, proceed. >> does anyone in this room think it is a good idea to ever have the government use its power to assess consumers to subsidize a private company and assure that company's permanent profitability? anybody want to raise their hand? okay. that's what we do today. we spend billions and billions and billions of dollars doing that. it is called rate of return

regulation. and the result of that means that in some parts of rural america we collectively pay the price of creating a maserati for which that private company offers a mercedes, which because of the subsidy they can do it -- offer it at a price of a chevy. that's what we do for about half of rural america. the other half of rural america we say, walk. okay? it is really dumb. it is really stupid. we have been doing it for years. it is wasteful. most of you have been conservatives and will find this to be offensive. i also find it as a liberal democrat i find it offensive there are millions of people who can't afford broadband who are paying so that bill gates in his second home can get that subsidy. i find that offensive. so i spent a lot of the last fall going to various meetings of rural phone companies. i owe it to them and the team that i work with to explain what we did and why we said that's a

bad idea, we ought to change it. there is obviously a lot of transitional issues. we ought to change it. i'm sitting there and i'm listening to them come back at me with basically arguments like we need the money, we need more money, we should tax google. if anybody anywhere has 100 megabits per second, we deserve the same thing and you should subsidize it for us. as i'm sitting there, i'm thinking where the heck is rob mcdowell. rob mcdowell writes wonderful pieces on net neutrality and other places in "the wall street journal," free markets, we have to get rid of these rules, we have to understand economics and all this. and i'm sure he will come here today standing behind -- from the banner talking about free markets and, sure, like every other fcc commissioner will talk about the bloated and wasteful universal service fund but he's never to my knowledge said we need to get rid of rate of return regulation. now, i don't know what you would call rate of return regulation. you cannot call it capitalism. i'm not saying it is socialism.

though i would say that certainly carl marx would agree with rob mcdowell's acquiescence in the passage of billions and billions of dollars on rate of return regulation. and probably, well, i'm certain it is true that under stalin and russia telephone system was built under rate of return regulation, and also interesting to note that rate of return regulation really gained prominence during the woodrow wilson administration. you guys obviously don't listen to glenn beck enough. but my point is we need a principled conservative to point out. it should not be my job. that's not really my job. i'm willing, by the way, i go to liberal think tanks, i'm doing one on monday and they'll say things like we should send $300 billion and i'll point out to them that's not really progressive at all since it will come on the backs of people and cause rates to go up by 30 bucks a month. the other day, a reporter, lovely guy, very, very concerned about this, wrote me and said

i've done a lot of studies and discovered poor people pay a higher percentage of their income for broadband. that's outrageous. i said, well, they also pay a higher percentage of their income for, i don't know, energy, food, water, everything. i will take on the burden of talking to my progressive friends to try to have a rational debate. but i really would like it if i could get a little backup here. if rob mcdowell would finally become a principled conservative and say, unequivocally, i think rate of return regulation, again, we can argue about the transition out, we need to end it and we need to end it in a foreseeable future, along a clear path. yes, i am stating it. i would like to ask you, randy, to ask rob two questions. number one, does he think it is appropriate to ever have the government use its power to assess to guarantee the permanent profitability of a private company? and secondly, if you would please be so kind as to ask him, is there a limit to how much we

should spend per year to subsidize a line. we don't have that limit today, it is certainly something that i believe we should have. now, let me just close, i'm going to be quicker than everyone else, close by saying that we identified lots of gaps for our country in the broadband plan. three are very effective by universal service, the unserved, the adoption gap and institutional gap, which i think becomes more and more important over time, public institutions lacking in sufficient speeds which are very different than what you would want for residential. in looking at all of that, i think it is important to remember the wisdom. by the way, a bonus question if you wouldn't mind asking rob, what did the kansas-nebraska petition which the commission passed giving more regulatory authority to the states, what broadband gap was that designed to help us solve?

>> i thought initially you were going to ask about the kansas-nebraska law of 1854 and i was really -- >> if you give me a couple of extra minutes, i'll work it in. i am mystified by that, like, why they were doing that. i'm just saying it was an odd kind of movement. but you can ask him that. here's the thing. peter drugger, the great business visionary said the danger in times is not the turbulence, it is to act with yesterday's logic. and the problem we have is that we are constantly acting with yesterday's logic as to all kinds of things. and joe talked about it. but let me just close by saying i really agree with jim cicconi. i think we did a pretty good job of identifying the end point that we have to -- have to achieve, which is fundamentally about 100% broadband everywhere in the country, having everyone on it, and then working backwards from there to what do we need to do to change that?

in some ways i wish we had been stronger in articulating that vision. but i couldn't agree more that that's really the job of this commission, articulate that vision, be very clear about it, work backwards, have a plan. you will, of course, course correct. let me just say quickly that my favorite line -- >> quickly. >> -- in the plan is the opening line of chapter 17 on implementation, this plan is in beta and always will be. you have to adjust facts as they change. but the important thing is set that vision, be clear about it, and start in a far, faster and more passionate way to get to that broadband future. thank you. >> blair, thank you very much. if blair thinks that he's going to get paid more by now giving me questions to ask commissioner mcdowell, he's probably -- he's probably wrong about that. but, you know, i do appreciate him plugging the lunch. i'm not sure whether you linked commissioner mcdowell to stalin, but i think you did.

i think you did. so i may have to -- i may have to ask him about that or get you to do it. but actually this gives me an opportunity to say quickly, a lot of you have come in since i did the initial welcome this morning. we were concerned about getting everyone into the first amendment room with all of the registrants that we had and for some of you out there who are my good friends, possibly may have even discouraged you from eating as opposed to just standing up, but we have alleviated all of that. we're now going to be in the ballroom and that works better as well for c-span. so there is no -- absolutely no problem. i want all of you to come for lunch and, you know, i don't know whether i'm actually going to -- myself, link commissioner mcdowell to stalin personally,

but i guarantee you we're going to have really a good conversation. it is going to be interesting and enjoyable. blair was actually the first -- when we did the first annual conference, he was the first person that i interviewed. i think he can vouch that we had -- we had a good conversation then and fun and it is going to be -- >> talked a lot about stalin. >> i don't remember, but anyway it was good. we're going to have a good one today. so now with that, what i want to do is open it up for questions and we have got -- questions from the audience and then we can have questions among the panelists as well. and so you can line up at the mikes. i think what i'll do, just because i promised the panel, if anyone on the panel, after hearing the remarks of the

others, john or anyone else, if you want to ask a question of your panelist or if you want to react to something, i'll let you do that first and then we'll intersperse those matters with questions from the floor. anyone want to say anything? okay. let's go right to questions from the floor. if you'll please identify yourself by name and the organization that you're with, and, remember, we want to have questions more than statements here. >> no problem. i have a question for you. hi, eliza with politico. for those of us not as expert on these issues, could you just briefly lay out in layman's terms what rate of regulation is. >> it means if a company spends money on various capital expenditures, gives the bill to the government, says please give me my money back plus a rate of return, which i believe if i recall correctly is 11 1/4.

i read a recent report that said jim's company -- it costs the capital about 8%. so we're paying a lot of -- let's put it this way, if anybody would offer me a guaranteed 11 1/2 -- i would put all my money there right away. >> just to juxtapose numbers and, by the way, almost everything blair said, that's within that totally within the 60% or whatever that i agree with him on. but keep in mind that the universal service tax that results from all of those things that he was talking about, understand legally it is not a tax, but the effect of it is, is i think now 15% or close there to. i think john had a comment. >> a quick academic qualification about rate of return regulation.

of course wasteful subsidies are something we all want to oppose, that's essentially what blair is saying and i'm not trying to quarrel with that. as a matter of history, the point of rate of return regulation isn't to subsidize, you know, high cost activities. the reason that it was introduced historically is we had phone companies, electricity companies, water companies that we thought were natural monopolies and would only have one firm because of the high fixed costs and very low incremental costs of production. and if another firm tried to enter, the first firm would try to undercut it and force it out and we would be left with one firm that could charge very high prices to consumers but with freedom from competition. one can imagine a variety of solutions to that, government ownership or the like with u.s.

historically chose is to allow private firms to own natural monopolies but protect consumers and assure enough return for investment by just capping the rates. and so national monopoly regulation was the solution, i'm sorry, rate of return regulation was a solution to the natural monopoly problem. over time we have learned to try and -- to tweak this. we have introduced price caps as a way of improving on the way natural monopoly regulations historically run. but the basic idea of it was to protect consumers in settings where there would be one firm that would charge a high price, not to subsidize inefficient companies which is -- which is blair's concern here. >> my real concern, look, i, of course, was kidding about stalin, just to be clear as well as woodrow wilson and i hold nothing personally against rob. well, not exactly, he went to duke, i really hold that against him. >> we'll get into that later. >> but the point is, that is an

historical answer. we cannot act with yesterday's logic. we have a completely different situation there. none of the companies, i want to be clear, they're good people, they're trying to do a job for their communities, i don't object to that. but we have a system, which, like i said, makes us pay for a maserati, we get the mercedes, they subsidize it for the cost of a chevy, we're subsidizing it and the rest of rural america has to walk. that's stupid. we got to change it. >> okay. >> blair, his point is that the world is different, the natural monopoly world and the core cutting world doesn't exist anymore. the problem is the old justifications that have been put together with rate averaging and other institutions that are going to be the drag, and that if we make a change, there will be winners and losers. the problem is getting all of that sorted out and it has become a political coalition among the losers because someone's rates are going to go up who are getting subsidized by a cross subsidy aside from the direct subsidy.

>> a question from the floor. go ahead, please. >> john with tech net and i worked with the national broadband plan with blair. i have a question that i think ties together two sentiments expressed in the morning, one by joe waz and one by commissioner baker. and they seem to be talking effectively about institutional failure and not market failure and joe talking about a need for the reform, regulatory processes and commissioner baker even seemingly in favor of planning. i'm wondering if anybody on the panel has ideas on what changes to the institutional apparatus are needed to have more effective policy. >> i will make one quick comment at the risk of disagreeing with joe. there is a tendency to romanticize other institutions. those of us in the room mostly know the fcc. there is a big spate of writing among some fcc scholars that look at the patent office and think that would be great, let's become more like the patent

offices and they're saying, what, are you nuts. and the patent office is saying that fcc is a great institution, why don't we make the patent office more like the fcc. if you talk to engineers, which it is has been very consensus driven, but as the community has changed, people think it is very dysfunctional. it is as phied, consensus doesn't work when there is so much hetergeneity. there is no magic design or we would have found it a long time ago. we have this unruly workable sort of muddling through approach about trying to play off different institutional strengths against each other. >> all right, jim had a comment. >> yeah. in practical terms, i think it is asking a lot to ask any bureaucratic entity to reform itself or to reconsider, you know, the core fundamentals of its existence. i mean, institutions just don't do that.

that's why the congress actually, you know, has responsibility here. it created the agency. it wrote the law s under which t operates. if there is going to be a fundamental re-examination of the mission and the role of the fcc going forward, it has to come from the congress. and i can give you two quick examples. one of them with respect to jonathan goes to merger review. i certainly understand his defense of the way the commission goes about this today. i think the fundamental question is why the telecommunications industry almost uniquely has to go through two merger reviews to consummate a transaction. you know, in virtually every other industry in america, if you pass the antitrust review, which is in essence a competition review, then you can go ahead and close that transaction. so why we have this extra bar of an fcc approval, which fundamentally stifles economic

activity is a question the congress ought to be asking. i think another played itself out recently in the city of phoenix. qwest applied rightly for relief of regulatory obligations there on the basis that the markets essentially is competitive now. they have lost about a quarter of lines to wireless only, as almost all of us have and they have lost about half of what remains to the cable company in terms of voice service. and the wire line bureau in examining their forbearance petition essentially declined to consider wireless substitution, which honestly is truly unfathomable and ignores all logic. it is acting as if the only competition possible is a wire line to wire line and then in its decision, it essentially

said qwest is going to remain highly regulated in the phoenix market and the cable companies that compete against them are not going to be regulated at all and we're going to ignore the fact that customers of both are free to drop wire line entirely and use wireless. this makes no sense. we can't expect the wire line bureau itself to reach a conclusion that in essence raises questions about its own relevance going forward. this is something that the congress has to do, i think, or at least the five commissioners that govern the agency. >> thank you, jim. now we just have time for one more question and then we're going to have to end the session. but, you know, it is fair to say i do have now several more questions for commissioner mcdowell that probably were better than the ones that i had originally thought of myself. this has been useful. steve, it is just a question, we're going to do it very quickly because i promised our moderator that we're going to

get the next panel up and running on time as well. >> steve, efras communications. i want to wrap up a few things with a simple question. do you think the commission can be adult enough, even in a small way to look at a piece of its rules and say, you know, that doesn't make any sense anymore. congress, you ought to change this? jonathan gave a great demonstration of that, i think, when he said, well, we looked at it and they looked at it, we came to the same conclusions they did, we came to the same rules that they did, except we had 500 pages instead of 200 pages and two sets of lawyers instead of one set of lawyers. so when is it that the commission becomes adult enough as jeff pointed out with regard to the allvid proceeding where you have rules from 15 years ago, we all know the world has changed, blair says you've got to adjust to change, instead of going on with more rules, does anybody think the commission could be adult enough to just go back to congress and say, that

one little provision on regulating or creating electronics we should get rid of? >> what we're going to do is i can let everyone respond, but only if you do it really quickly and then we have the panel on spectrum. so very quickly, if you would like to respond, you can. >> look, i think they can be responsible enough to do those things. i think a lot of the statutes that we're talking about here give the commission flexibility in many areas. and so, you know, in the past, the commission has certainly acted flexibly with statutory requirements based upon the markets they're in. it is a dual responsibility here. and in the case of the set top boxing, they're living under a statute from 1996 when we had analog cable. and so there is a responsibility in the congress to recognize some of these old statutes shouldn't just be left on the shelf, they should get rid of them or update them properly. >> i think in the instance of

this particular statute there is actually -- i'm not sure if you mentioned this -- there is built into the statute a sunset provision, i think, which would actually -- that's pretty unusual, of course, in these types of statutes. i assume it was put there so the commission could make a decision itself that times have changed. okay. jim. >> of course i can be adult enough. i think it is just a matter of will. i think the president of the united states is actually giving them the perfect charge to go ahead and do that. with his executive order. you know, they recently received a letter from the u.s. chamber of commerce calling on them to voluntarily do the same thing that president obama has ordered every other government agency to do. and they ought to do that. >> okay. john, want to make a remark? >> a brief comment. the commission has, in the past, exercised its authority to forebear from regulation when it is not appropriate.

so the commission has a good record of doing just what you say, of deciding where regulation is appropriate and exercising it and thinking hard about where not to regulate. i see no reason why the commission won't continue to do that going forward. >> okay. just time for one more. joe, did you want to say something? this will wrap it up. >> sure. the fcc is under a biannual review obligation which they kicked off for communication -- for telecommunications. i think they're under a quadrennial review for media and broadcast rules. they have to get the notion it is a perennial review, something that should be ongoing and the agency should be open to it. probably no better time than now to show that they're committed to it. as bill canard was when he undertook the top to bottom review. >> okay, well, i'm sure the audience agrees with me that this was an absolutely terrific panel. i hope they'll join me in thanking you for that.

now, i'm going to ask the next panel to immediately come up and assemble and we're going to get started and then at 12:30, we're going to move to the lunch session. more now on the broadband spectrum. the panel focuses on ways to reallocate the spectrum needed for wireless devices like ipad and android. this is a little more than an hour. [inaudible conversations] okay. we are going to get started. thank you for coming today. we are going to be talking about spectrum reform on this panel, which if you listen to the sec and the congress is one of thewf top issues they are going to bec ocus on non-so we have a great

panel today we are going to be focusing on water some of the year new things that are going to. be happening but that the fcc and congresssing on what are some of the new things that are going to be happening, both at the fcc and congress, and really what are some of the policies that the u.s. should adopt as we're looking at this very valuable yet somewhat scarce resource. on the panel today, i am going to introduce -- you have bios in your book so i'm not going to belabor this, in alphabet cal order, but not the order they're seated, larry atlas, senior adviser for the national telecommunications and information administration. we have kathy brown who is the senior vice president of public policy development and corporate responsibility at verizon. we have david honig who is the president and executive director of the minority media and telecommunications council. we have blair leavin who needs o introduction. you have paul de sa, the chief of the office of strategic planning and policy analysis for the fcc.

and we have thomas sugrue from t-mobile. all members will give a short presentation and we'll answer this up for questions from the audience very quickly. so if you want to start. do you want to actually stay seated. it will be faster. >> okay. there we go. i want to just bring you up to date what the administration's doing on the spectrum front. there has been a lot of activity over the last six months. and the demand for american spectrum resources is increasing at rapid rates and the amount of information flowing over some wireless networks is growing at over 250% a year and there has not been a corresponding increase in supply. to expand america's available spectrum resources, the administration has to use existing spectrum more efficiently, we need to free up more spectrum for new uses and

thus provide the private sector with insentives to transfer spectrum from higher uses to more current ones. in june, president obama committed to make available 500 megahertz over the next ten year for wireled broadband, the initiative would double the amount of commercial spectrum available over the next decade will spur investment, economic growth and job creation while supporting the growing demand both by consumers and businesses for wireless broadband services. to make this happen, the president directed the secretary of congress working through ntia to produce a ten-year plan and timetable for making the 500 megahertz of spectrum available and at the same time protecting vital government missions that rely on spectrum use. three months after the president's order we had ntia issued a ten-year plan and timetable. that report developed with input from other federal agencies and the fcc identified over 2200

megahertz of spectrum for evaluation set out a process for evaluating the candidate bands and the steps necessary to make the selected spectrum available for broadband use. at the same time, we issued a second report which was a fast track review that we undertook to identify some spectrum reallocation opportunities that could be done much sooner. in that report we identified 115 megahertz of spectrum we recommended to the fcc be made available for wireless broadband use now. this was a substantial and immediate down payment on the president's ten-year goal. we're currently working with other federal agencies to prioritize candidate spectrum bands for more detailed review on a rolling basis. this week we identified another 95 megahertz of spectrum, spectrum from 1755 to 1850 megahertz to be analyzed to determine if the band can be repurposed and made available for broadband use. we intend to complete the review of that band on the timetable

called out in the plan which is by september. together with the 150 megahertz of fast track bands that we previously identified, and another 40 megahertz that was identified on the fast track report, we have now put about 250 megahertz of spectrum in the pipeline since the president announced the 500 megahertz goal. spectrum is a vital ingredient for innovation and growth in the communication sector and the economic vitality of the country as a whole. the work we're doing to identify additional spectrum is part of building the foundation for continued economic growth and we look forward to working with the private sector and the fcc to put more spectrum out there for commercial use. >> great, kathy. >> thanks, amy. good morning, everyone. i was rereading the long now, remember that book, and also new stats book, thinking in time, for another purpose. but as i was thinking about the spectrum issue this morning, i

was thinking how much we have to really think in the long-term here. if you all had heard me about two years ago, i kept saying, you know, telecom 2000 was the plan that janis and tom put together way back first bush administration which set a framework for where we had to go for spectrum planning and for the kind of future that was foreseen then. and think about it, we actually do have hdtv. now it was tough. it was a tough road. and we actually did get the 700 megahertz and right now we're actually rolling out lte on that spectrum. and others of my colleagues here in the room have been able to get spectrum and put them to entirely new uses. well, in the last two years in my view the obama administration has, in fact, laid out the framework and, thank you, blair, and the work that was done in the broadband plan and, thank

you, larry, for what i think ntia is doing. we now have a notion of what we need to do for the future. and it is probably a good time to stop and think about the long now and think about this future because just as i think back in whatever that was, 80, whatever, that you wrote that report, i don't think as smart as he that he actually thought about that iphone. i actually don't think he did. i don't know that we had invented those things at the time. i don't know that we actually understood what 3d television would look like at the time. maybe we did in science fiction, but we had to set government policy in order to anticipate things that we actually didn't know were going to happen. we just knew that if we had the right resources and the right input out there, in the marketplace, that in this american economy with the free enterprise system that we have that this was going to happen. so where are we now?

it seems to me we're at the beginning of the next beginning. and that it is enormously important that we get it right here. i think the administration has wisely thought about creating market mechanisms for the going forward plan. that we really need to think about how to when the demand happens, the supply becomes available. and i think we have moved away from, i hope we're moving away from the notion that spectrum is this rare thing that once you get it, you keep it and it never, ever has another use. turns out that's not true. and so the challenge at this point is to come up with mechanisms that allow this sort of dynamic change in the marketplace happen under economic principles that makes sense and that allow for the invention of the future, even in the present.

that's tough business. this is hard. so now we're trying to figure out what these incentive auctions ought to look like. i think this is hard work. i think that i personally don't think we're there yet. there are lots of pieces of this that have to work properly in order for these auctions to achieve the purpose for which they are -- they were -- the idea was invented. this and is that there are willing sellers and willing buyers and there is some sort of clearing way in order to make this get back -- this spectrum back into the market. we have a lot of work to do i've been interested in a long time for secondary markets more generally, which i think for the long term we really do need to think more deeply about. bill canard was the first chairman, i think i'm right on this, blair, that said we could do secondary markets and we could have a change of ownership leasing rights, whatever the heck it was.

we know -- john mayo at georgetown did a good report on what happened over these last years and, in fact, there is a market for this stuff. what we have to figure out is how you get -- you can aggregate enough so that -- so that players in the market can get nationwide swaps on numerous perhaps transactions or maybe all at once in some sort of active marketplace so this can happen. finally i'll say to my friend david that whenever i go on like this, he says what about the little guys and he's right? there is lots of room in this market for new entrepreneurs, for big companies like my own, for folks -- for companies that have not yet been born. but we have to figure out the way that it happens in a marketplace so that we don't end up, and some of you in the room know, years and years and years in litigation that don't work thereby holding up that spectrum

for good use over time. i think we have a big job ahead of us but i think we're well on our way. >> david. >> thank you. i'd like to talk about the impact of spectrum policy on minority wireless consumers and entrepreneurs. wireless broadband has a unique ability to provide a bridge to cross the well known digital divide as shown by the wireless adoption rates of minority consumers. ntia reported that in 2010 african-americans and hispanics trailed 20 percentage points behind whites in broadband adoption at home. minorities over index more in smart phone penetration. nielsen just reported that as of december 2010 31% of all mobile consumers in the united states owned smartphones but smartphone penetration was higher among minority groups, asian pacific islanders at 45%, hispanics, 45%, african-americans, 33%,

only 27% of white mobile users reported owning a smartphone. minority wireless consumers are a huge and fast growing economic market. according to the target market news report the buying profile, the buying power of black america released two weeks ago, african-americans spent $9.4 billion on cellular phones and service in 2009 which was an increase of 30% from 2008. with respect to current spectrum policy, mtc has three specific recommendations that will help close the digital divide facing minorities as producers and consumers. first, we would like low power television stagtss to be aloud to participate in dtv intentive auctions. the bill is flowing around congress and ambiguous whether they would be. a handful of full power ssks tagss are minority owned anymore. 15% of low powers are minority owned. these are experienced entrepreneurs who produce compelling content that will be very useful in driving minority

broadband adoption. second, we have asked the commission to authorize am radio stations to migrate to analog television channels 5 and 6 and be transformed into fm stations. fm sound you hear if you tune that way. two-thirds of minority owned radio stations are ams and most minority owned am stations are burdened with inferior technical facilities, historic legacy. the exodus would triple am stations' value. third, the commission should encourage consumers to conserve spectrum like they do any other finite resource. conservation impacts low income users likely to prefer a broadband service that may not have every bell and whistle, but it is affordable. that's why the metro pcs net neutrality dispute disturbs me and i've never met anyone who works for metro pcs, don't know much about the company, but i've read a lot and i'm pretty disturbed by what is happening to them. they're very small compared to at&t and verizon, they have

offered discount pricing plans to attract those who want cellular service, but don't want spectrum intense applications like those offered by skype or netflix. they have also offered higher price data plans for those who wish to have those services, the same way car dealers offer to sell suvs as well as compacts. they're not blocking service. instead this is just engaging in classic price differentiation and connecting the underserved and low income consumers which they seem to be doing in a dignified way. unfortunately the company has been accused of violating the net neutrality fifth principle relating to network management this is just a textbook example of why from a civil rights standpoint not everything that you call net neutrality leads to network equality for minorities and the poor. and yesterday verizon announced a commendable network management approach, kathy does not know i'm going to say this, under which it will conserve spectrum by reducing threw put speeds for

heavy data users there by preserving reliable and inexpensive service for the other 95% of us. congratulations. these examples underscore why transparency, well informed consumers and the shaming culture of the internet, those factors combined, fortunately render most internet regulation unnecessary or superfluous by avoiding regular lair overreach we concluded the commission could help free up the investment capital to be necessary to deploy the wireless spectrum needed so urgently by all consumers and especially minority consumers and the poor. >> blair? >> i'm just going to very quickly say that for those of you who heard commissioner baker, i pretty much agree with everything she said. i'm going to be very, very brief. i want to add that i want to publicly thank her and charles, her staff. it shouldn't surprise you since she and her staff helped write

the chapter on spectrum in the national broadband plan. they don't necessarily have to say they agree with everything in that, but they had a tremendous influence on it and made it a lot smarter piece so i'm very grateful for that. let me add one other thing i think is relevant to the moment. there will be a big debate in congress about where -- how to allocate the d block, that's a good debate, i hope they have it. we had it internally. we came out in one place, the white house and members of congress have come out in a different place. that's perfectly fine. here is what should not be debatable. the worst use of spectrum is no use. it is a drag on the national economy that the d block has been sitting there unused, no one is investing in it, no one is building jobs on it, no one is creating service on it. that is a drag on the national economy. kathy and i think may be among the few chiefs of staff who have labored under a congressional deadline. i actually did it twice. in the '96 act and the broadband plan. i don't speak for her in this

regard, but i will say that number one i did not like doing it and number two it was the best thing congress did. if we did not have a deadline for the broadband plan, i would still be there and it would be really bad. believe me, in dealing with the commissioners, the best thing i could possibly have. i think it is time for the fcc to give congress a deadline. and it should simply announce you have as much time as you need to make a very, you know, it is a hard decision on some level, but it is also very simple. you allocated to commercial, to public safety, it should not take more than a year or 18 months. that's how long it takes to actually do an auction so the fcc might as well start tomorrow. tomorrow is saturday. can't do that. monday and just say, we're going to start planning for commercial auction. that's the current law. if congress wishes to reallocate it differently, that's fine. but let's not get to a point where a year from now congress decides not to do it and then we have to wait aol yenother year

half before an auction can be held. i would urge the fcc and congress, and, by the way, if you're a supporter of public safety, it is in your interest that that happen because that's the only way to get to that kind of state of urgency which would cause congress to actually act. >> always hard to follow blair. first, let me start by thanking amy and the free state foundation for the invitation to be here. i want to make three very quick points. the first is before getting into the details of the policy, it is worth maybe reflecting that one of the great achievements of the broadband plan is that we're talking about spectrum, that spectrum has been introduced in a major way into the national discourse. there is a presidential memo, the fact that in the state of the union this was mungs ention. whether we agree or disagree on specific policies, the fact we're having this debate, this discourse is good for the country if you believe, as i think everyone on this panel does and hopefully most of you

do that spectrum is a critical part of national competitiveness. it is important for the country we get this right. second, i just observed that although i think a lot of attention last year of the fcc was on the open internet and comcast transaction there is a lost thing lot of things going on with spectrum over the last year, many of them as the result of the broadband plan and many thanks to those who have been working away hard to get things done and get things moving. i won't talk about these in detail, but we can in the questions but things like the spectrum dashboard, secondary markets, wcs, mss, white spaces, wireless back hold, the competition report, i could go on. there are many things, some of them have been through order, some on their way there, but many, many things the commission that have been moving over the last year on this front. i think the last point i'll make is going forward if we look forward, we would like to spend the next year taking many of these things to order and getting them done.

we have three themes, i think, for 2011. the chairman said spectrum is a key agenda item for us. the themes for us going forward with spectrum, first repurposing, so incentive auctions are the means, whatever it takes to get spectrum to its best possible use. the second is the extension of mobile broadband, particularly to rural areas, tribal areas, areas underserved to the discussion this morning about universal service, making sure this is -- this key tool is universally available as possible around the country. and finally trying to examine how the fcc can respond to -- as kathy said, what is a paradigm shift in how spectrum is managed with respect to secondary markets, interference policies, trying to see how we can change the recalls, change the practices.

we're making sure our rules track that and exploit that opportunity. >> couple of things. i agree with paul, it is great we're having this debate, but some of us have been having this debate for 20 years. and i think this is going to be a good year for spectrum. i think hopefully in the president's budget we'll foreshadow it in the state of the union. we'll see a comprehensive approach to spectrum reform, that will address things. not only the d block and that got a lot of attention and i want to quickly address blair's proposal, but also incentive auctions, reallocation, perhaps some specific bands, 1755 plus band is one that we're really

interested in. and ntia has just announced a major priority to put that to stop that band. reallocation improvement, there are certain things that can be done to improve the act of 2004. we worked very extensively with federal agencies to do that and we have some ideas on that. there was a bill moving a bit, got traction last congress and hopefully that will be in there as well. mss spectrum, it is another one hanging out there, possibly the first application incentive auctions, charlie irgan owns all of it to get it done in the broadcast band. there are some things we can do. and frankly i find the budget factors, a lot of people wring their hands about that spectrum policy being made, you know, for budget reasons. my view of the history of spectrum reform is there are

more good decisions made on spectrum policy grounds in the budget process than in the spectrum policy process. i don't view that as a -- as a -- well, they make market-based decisions. the government starts acting a little bit like how can we maximize the value to the country of this resource, which also maximizes, if you believe in market economies, the income to the government. on d block, and t-mobile has been very active in trying to preserve the d block as a commercial allocation. of course, we were disappointed in the administration's announcement, but, again, as blair said, that's fair game. we do think, and feel very strongly, actually, with what blair said, the worst possible situation is we come back here a year from now and we say, well that d block, i guess we'll have to argue about that for another year and, by the way, there are some real issues to be addressed by the fcc before that auction. i mean, you couldn't just auction it off right now. there are concepts and ideas and how this will work, how that

will work, that will affect valuations that will affect the parties who are interested. we need to get on with that work. and those notices to initiate that proceeding as i understand it were written and ready to go early last summer, may/yjune tie frame and put on the shelf. in short order they could be updated. it is not an attempt to preempt the administration or congress. i would call on the administration to support the fcc in this. you would have a full year or maybe into next year, but a reasonable time for congress to act and if it doesn't, then at least the fcc is in a position to adopt some rules. you're still six months or more sometimes from the actual conduct of an auction. congress required the fcc to auction the d block in january of 2008. and three years passed, congressional deadlines, they might say, well, we tried to auction it and no one wanted to buy it under the rurals srules time and that was true.

i don't think you get a definite pass. there is an implied obligation when congress says do this by this date, three years later you should start the process and get it under way. and then as i said, if congress reallocates it, that's fine. so we'll try to make lemonade out of those lemmeons. but we need to get the thing on. from a policy point of view and a company point of view, it is frustrating to see it hanging out there and not sure anything is going to happen with it. >> great. i think why don't we start with the d block since thofolks are talking about that. do you guys agree -- blair, you didn't agree it should be given away. but also if, in fact, they decide to do this, is blair right, should the fcc say we'll auction this off if nothing more than to just provoke congress to do something? >> well, what i've sort of

propose to the fcc is they can do an auction with two scenarios. they have to write rules even if it is reallocated, public safety. what are the relationships between the public safety licensees and the other 700 commercial licensees and the fcc's broadband plan had some ideas in that regard. the other commercial licensees in the band didn't think much of the ideas so there will be controversy there. there will be rules that have it apply as to how to use the d block. the legislation talked about some sort of joint arrangements with commercial providers that are, you know, sort of described in very vague terms. so you have one path that says if it is not reallocated, we have to enact these sorts of rule and what should they be. and then one path, if it is reallocated, what should it be. will that be a little extra work because one of those paths isn't going to come true? yeah, it will be a little extra work but it is well worth the investment to get it under way. >> can i make the case for the

urgency for this public safety network to actually happen. so i think there is an urgency in putting the spectrum to use. i think the administration, and much of the congress, i i thinks that we have got to make sure that public safety has what they need. now, let's remember what this is about. so ten years after 9/11 we still don't have interoperable network where it is not -- as much as i love my local police, it is not just about the local police talking to the local firemen, it is about local, state and federal officials being able to communicate with each other in the event of an attack. we seem to remember so quickly that we were attacked in three places on 9/11. and the ability to speak across jurisdictions was greatly hampered. this is a personal, like, thing with me that we're still here, we still don't have this done, and i think that the congress

ought to get this done. it needs to -- it is going to reallocate it, let's get it reallocated. and i don't -- i don't doubt that there is work to do, even in a reallocation, by the way, and in fact the fcc's plan around how to then use this spectrum to make sure this -- these network get built, because it will be -- i assume it will be a network of networks that is inoperable, that plan is a good plan. i think we need to move forward on that very quickly. i would like to see some urgency behind getting a public safety network done. >> so if anybody is going to do that work, paul, you're the guy. so what do you think? >> well, i think it would be -- it would be a mistake to assume that because we're not saying publicly no work is going on inside the building, both during the plan and subsequently people are working and thinking about different alternatives and what our responsibility would be under those. but i think, you knowhe