The following are remarks of Jim Cicconi, AT&T Senior Executive Vice President of External and Legislative Affairs, as prepared for delivery at the Emerging Issues Policy Forum: 2016 Digital Pathway Summit, Amelia Island, Florida, Thursday, January 14, 2016:
Thank you, it’s a pleasure to be among so many friends. I’d like to give you an industry perspective. Specifically, I’d like to share a few thoughts on how investment and innovation in broadband infrastructure has brought about technological advancements and adoption faster than any technology ever.
First, a bit of historical perspective. After Edison invented the incandescent filament light bulb, it was 46 years before electricity had been adopted by one-quarter of the US population. It took 35 years for the telephone, 31 for radio. It was 26 years before a quarter of the country adopted television. It took 16 years for PCs, 13 years for mobile phones, 7 years for dial-up Internet and even less for broadband. It’s staggering to think that the first iPhone was introduced on 2G technology only 8½ years ago. The velocity of technological change is incredible.
And what does that adoption look like?
Today, a full 84% of Americans adults use the Internet, compared to just 52% in 2000. That figure is even higher when looking just at younger people: 96% of those between the ages of 18 and 29 use the Internet.
Today, 90% of U.S. households have three or more Internet-connected devices, and the average number of connected devices per household is 5.2.
In a remarkably short amount of time we have gone from the cellphone being a gimmicky toy of the rich and famous to having nine in ten Americans owning a cell phone. Even more impressive, more than two-thirds of American adults now own a smartphone, up from 35% just 5 years ago.
In the U.S., nearly 340 billion MB of data is downloaded using wireless devices every month— 20 times more than just five years ago.
Driving the growth in consumers accessing all of this online content is that broadband speeds– both wireline and wireless– are getting faster and faster.
NTIA estimates that more than 85% of the U.S. population has access to wireline speeds greater than 25Mbps. AT&T leads the nation in offering gigabit speeds to consumers. We are already in 17 markets with AT&T’s Gigapower service, with plans to expand to many more markets. For those keeping score, a gigabit connection is fast enough to download a TV show in 3 seconds, or an HD movie in 36 seconds.
The U.S. boasts similar progress on the mobile front. Today, over 98% of Americans have access to LTE wireless networks, the fastest mobile broadband. Downloading a game on a wireless device over LTE takes mere seconds, and downloading an entire movie takes just a few minutes.
Today, our customers are taking full advantage of AT&T’s broadband network. They’re streaming video to all their devices at unprecedented levels. In 2014 alone, total video traffic on our wireless network doubled. Now more than 50 percent of our total network traffic is video.
This progress has been so steady that we take it for granted. But to put this amazing growth in perspective consider that it could take up to 5 days to download a movie to a desktop computer via the dial-up modem consumers used to access the Internet just 20 years ago.
But it’s not just speed of technological change and adoption that makes broadband amazing. The creation and proliferation of broadband is arguably the top technological success story of our time.
A 2014 report by the World Economic Forum examined the economic benefits of implementing a concerted strategy to spur the deployment of broadband networks and other advanced digital infrastructure.
The report predicted that Internet-based economic activity would reach $4.2 trillion in G-20 countries by 2016, which represents more than 5 percent of worldwide GDP. And the digital economy is growing at 10 percent a year, significantly faster than the economy as a whole.
Let me bring it closer to home with a few questions: without broadband would Facebook be the Facebook we know today? Would Amazon be the Amazon we know today? Would Google be Alphabet? Would Uber even work? Of course not.
Our broadband networks are the catalyst that makes possible so many of the products and services we enjoy today. They’re the bedrock upon which virtually all innovation exists. Because of investments in broadband we are in a position to change the way we educate our children, deliver health care to our elderly, entertain ourselves, and manage the infrastructure of our cities.
We should all be proud of the role our country and our industry have played in advancing the global digital economy, and ensuring consumers have access to high quality, innovative communications services. But we should also consider how we got here.
First and foremost, it’s important to understand that building what we have built in this country today required an enormous amount of private investment.
The broadband industry (both wireline and wireless) as a whole has invested $1.4 trillion since 1996. Let me put that in perspective for you: The USF High Cost Fund is just over $4B annually. It would take literally over 250 years of USF funding at current levels to equal that investment.
Last year alone, U.S. broadband providers invested $78 billion in their networks. Or roughly almost 20 years of high cost dollars.
I make these comparisons between private investment and the dollars that are available for universal service in this country to point out an obvious but important fact: these mobile and fixed broadband networks simply would not exist today without private investment.
Where does that level of investment rank amongst all investment in the United States? Right at the top. The Progressive Policy Institute has named AT&T its #1 “investment hero” for four years running, meaning we have invested more money in the United States than any other public company. Verizon, Comcast, and Time Warner cable also ranked in the Top 20. The telecommunications sector leads the way in the US when it comes to domestic capital investment.
But it’s not just about cap ex and investment alone. The communications industry, through those investment dollars, has created jobs throughout the country. And the jobs created by AT&T’s investment to build a U.S. broadband infrastructure were performed by Union labor and an army of minority contractor firms. Now that’s what we call a real virtuous cycle.
And of course, that investment in broadband infrastructure has enabled the US high tech industry to invest in innovation and create even more jobs. These investment dollars reverberate throughout the economy and are a critical component of both job creation and growth.
So, you get that investment is really important. Let’s talk for a minute about the speed of the technological change taking place – the velocity point again – and what that means for investment. The velocity at which technology is changing today is breathtaking – and shorter life spans for technology necessitate even greater investment to keep pace. Since that first iPhone was released back in 2007, the wireless industry has gone from 2G technology to 3G to 4G, and now to 4G LTE technology. And 5G is coming soon. Technology life cycles that used to be measured in decades are now being measured in months.
But now is not the time for anyone to rest on their laurels. The broadband job is not finished anywhere. Ultimately, to get to Gigabit speeds and beyond, we are going to need more fiber – much more fiber — in our broadband networks.
In the DIRECTV merger we committed to build 12.5 million fiber connections in our wireline footprint, which is a good start. In fact, the $1.4 trillion spent by the industry on broadband since 1996, in the end, is also just a good start. Everyone has to realize that much more investment – private investment — is required to get this job done.
Back in 2009, when the FCC was working on their massive National Broadband Plan, they estimated it would cost over $350B to get every single household in the US to 100MB. That’s not even fiber to the home. They did the math back then and realized that with a fund sized at about $4B/year, it would take them almost 100 years of government funding to get there. Consequently, the Plan focused on maximizing private investment to get more fiber infrastructure. In that sense, the National Broadband Plan did a very sensible thing. They followed the same bipartisan blueprint that had been established over the past 20 years during the Clinton, and then Bush, Administrations: a light touch regulatory framework designed to maximize private investment in broadband infrastructure. Those policymakers, from both sides of the aisle, understood the true virtuous cycle: investment in broadband begets job creation, begets innovation, begets opportunity, and ultimately begets strong economic growth.
Today, quite frankly, we seem to have strayed from that course. When I read speeches from policymakers that say things like:
“…we’re not going to let imaginary concerns about investment incentives and utility regulation cause us to let up on policies to encourage fast, fair, and open broadband,”
it’s almost as if the last 20 years of investment and light touch regulatory policy did not exist, and the investment figures I cited earlier had never happened. It’s as if some policymakers do not actually believe that the level of regulation and “Mother May I” oversight entailed by Title II do not have a direct impact on investment incentives and levels of investment.
The timing of this move is remarkable, and ironic as well. In a recent column, Larry Irving offered his perspective on potential harm by looking at Europe, where we clearly see how the choice of regulatory approach has affected investment. Larry noted a report that concluded investment in Europe’s telecom infrastructure had declined by 2 percent per year for five years because of outdated and intrusive regulation– regulation that distorted competition and discouraged investment.
As a result of learning this lesson, the European Union is re-examining its regulatory models to better align with network investment objectives, with a goal to encourage the level of investment that we, in this country, seem to have taken for granted. To support this, the European Commission recently launched a Digital Single Market strategy to lay the groundwork for Europe’s digital future. One of the pillars of that initiative is to improve the conditions for digital network investment and innovation to flourish. Key to creating that environment is a modernization of existing telecom rules that recognizes major changes in the competitive landscape over the past decade, and the substantial strengthening of incentives for investment in high-speed broadband.
So, why the United States has chosen this time to abandon a regulatory framework proven so successful and which resulted in so much infrastructure investment is a puzzle to me. Especially at a time when everyone agrees we need even more broadband infrastructure investment.
In the coming year, the DC Circuit Court of Appeals will decide on the legality of the FCC’s Open Internet Order. We consider it fundamentally flawed. But my concerns are not solely about that Order. I’m concerned about the implications of a fundamental shift back to a hopelessly outdated utility regulatory model.
Consider other issues the FCC has teed up:
- the re-regulation of special access and Ethernet services– in effect rate regulation;
- the imposition of Title 2 regulations on new services and technologies when older technologies are retired;
- the examination of usage allowances and other aspects of broadband services;
- the “Mother May I” approach to services that provide consumers with free data (look no further than the letter many of us just received to come in and explain our decisions to the FCC);
- the promotion of government-owned and operated networks to “compete” with private broadband investment, and thereby discourage it; or
- the special privacy rules that will apply solely to ISPs, not Google and Apple.
It seems pretty clear to me that we’re fast approaching a crossroads. And the question is whether the Open Internet Order was designed solely to keep a free and open Internet, like the prior rule we supported, or whether it signifies a much harder shift—a shift away from the pro-investment policies of the past 20 years.
To be very specific, I reject the notion that this is a binary choice– that we cannot have an Open Internet — as we have had since the inception of the Internet– without adopting an archaic regulatory model designed for railroads in the 1880s. That is quite simply a false choice. And it’s a choice driven not by what’s best for consumers, or even what most drives broadband investment. It’s being driven by an ideology of increased government control.
The United States has led the world in Internet innovation over the last 20 years, helping to spur investment with its deliberately light-touch regulatory model. Now is not the time to reverse course. With more and more users and endless possibilities for innovation thanks to high-speed IP networks, investment is needed now, more than ever. Broadband remains THE key driver of economic growth, stability, and job creation. It will also improve our lives in so many ways.
So, consider this a call for policymakers to re-examine how we got to where we are today. To consider where we need to get in terms of broadband infrastructure investment in the United States. And to consider what best serves our country—ideological purity or pragmatic policies that spur investment to serve consumer needs. Building networks is not easy work. It will take billions — make that trillions — of dollars to build the broadband infrastructure we will need in the 21st century. Government policies can either make it easy, or make it hard. For 20 years they’ve made it easy. And all of us should worry that 10 or 20 years from now, we may look back and realize our leaders, well intentioned though they are, made an error with serious consequences for our country. Thank you for your time this morning.