Chamber Telecommunications Study - Announcement by Thomas J. Donohue

Opening Statement by Thomas J. Donohue
President & CEO, U.S. Chamber of Commerce

Washington, D.C.
March 31, 2004

Good morning, ladies and gentlemen. Welcome to the United States Chamber of Commerce. I'm Tom Donohue, the Chamber's president and CEO, and I'd like to thank you for coming.

I'm here today to announce the launch of a Chamber study that will attempt to identify the regulatory environment's impact on investment, new product development, and job growth in the telecommunications sector.

This is a sector that is vital to the American economy. It has revolutionized the way we conduct business, communicate with each other, educate our children, and even care for ourselves through the miracle of telemedicine.

Innovation in telecommunications and high-tech fueled the historic levels of economic growth in the second half of the 1990s, and it will continue to be an indispensable driver of economic growth and prosperity now and in the future.

We're just beginning to see the extraordinary benefits of technology such as broadband, WiFi, Voice Over Internet Protocol, or VoIP, digital TV, and smart radio.

We must encourage the development of these technologies. Last week, President Bush boldly called for universal, affordable access to broadband technology by 2007.

Broadband in every home and small business would open new highways of knowledge, add hundreds of billions of dollars to our economy, and keep America competitive in the global economy.

The Chamber applauds the president's broadband strategy, but we understand that change has to occur in the telecommunications sector to achieve such a goal and to encourage the development of all telecommunications technology.

Though the economy as a whole is bouncing back now, telecomm is not.

According to industry estimates, more than 600,000 jobs in the telecommunications services and equipment sector have been lost since January of 2001—more than a quarter of all nonfarm jobs lost since that time.

Since January 2001, the total market value of all publicly traded U.S. companies has declined by $1.6 trillion, and industry sources estimate that nearly half of those losses occurred in the telecom services and equipment sector.

According to the same sources, between 2000 and 2003, telecommunications capital expenditures fell more than 60%—and are expected to diminish even further this year.

The objective of the study is to get to the bottom of why the telecomm sector is struggling while the rest of the economy is improving.

We will closely examine the regulatory uncertainty created by the FCC in seeking to implement the 1996 Telecom Act.

The federal courts have added to this uncertainty by reversing FCC directives. Right now, none of the telecomm providers know for sure what regulations apply or which regulation the court might invalidate next.

We have commissioned three of the leading experts in the field to conduct our study.

Mr. Coleman Bazelon [BAZ-A-LAWN] of the Washington, D.C., consulting firm Analysis Group Inc., will lead the study, assisted by Mr. Tom Hazlett, a Manhattan Institute Fellow who will serve as the primary telecommunications policy expert, and Dr. John Rutledge of Rutledge Capital Research, who will work on the economic impact portion of the study.

Each of these gentlemen is seated with me at the table and will make brief remarks in just a moment.

Their study will seek to accomplish three objectives:

First, provide a clear overview of the existing regulatory environment and identify the major choke points that are limiting investment and inhibiting the rollout of new products and services.

Second, offer recommendations for regulatory change, which we will share with key decision-makers at a Chamber-hosted policy summit.

And third, assess the impact of potential regulatory changes on investment, innovation, and economic growth.

This study will look at the broadband market, the wireless sector, the local telephone market, and any new technologies that affect these markets.

It will be one of the most extensive reviews ever of the telecommunications field.

We are not entering into this project with any preconceived notions. Our action items will depend on the conclusions and recommendations that are developed in the study.

But I will say this: American businesses need to be free to operate in a marketplace where there is regulatory certainty and where the regulatory structure can withstand judicial scrutiny.

The Chamber will be involved at every level of high-tech and telecomm policy development—whether in Congress, the FCC, or anywhere else—to ensure that this happens.

With that, I'll turn things over to Coleman Bazelon [BAZ-A-LAWN] of the Analysis Group, who will provide you with more details. I'll be happy to take your questions at the end.