Telecommunications Summit - Opening Remarks by Thomas J. Donohue

On: Telecommunications
To: Summit attendees
From: Thomas J. Donohue
Date: October 6, 2004

Washington, D.C.
October 6, 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.

We're here to examine the challenges and opportunities facing the telecommunications industry.

To help frame the issues we will discuss today and in the future, the Chamber last spring commissioned an independent study designed to examine why the telecomm sector is struggling even as the rest of the economy is improving.

We made sure the authors sought the views of everyone in the industry as part of their process.

We commissioned the study because we wanted to be presented with 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.

We asked the authors to consider how the telecommunications market has changed — due to revolutionary advances in technology and dramatically different consumer tastes, demands and patterns of consumption.

And, since communications technology permeates virtually every activity in our economy and daily lives, we also have to consider the impact of this vital sector on our nation's ability to compete effectively around the world.

Based on the findings of their study, the researchers have laid out a variety of policy options along with an analysis of the impact such options would have on investment, innovation, and economic growth.

This report provides the Chamber with a useful catalyst to engage in discussions with our members – including both telecom users and providers – as well policymakers, regulators and opinion leaders.

We are studying the proposals presented in the report and how they relate to our policy and efforts to revive this vital industry.

From this process, we hope a policy consensus emerges that will move the industry and our nation forward in telecommunications services, technologies and applications.

We initiated this project for a simple reason. Telecommunications is the central nervous system of the American economy. It has revolutionized the way we conduct business, communicate with each other, educate our children, and deliver health care.

Through modern telecommunications, we are able to transmit vast amounts of data in just seconds through wire and wireless devices, cable, and satellite.

Through the miracle of high-speed communications, companies have been able to reduce inventories, lower working capital, improve product quality, dramatically increase productivity, and offer consumers products and services at ever-lower prices.

Think for a second of how dramatically telecommunications has changed your own life – and if you have children from the grade school level all the way to young adulthood, think how different their lives are from your own - - thanks to these technologies.

Even more impressive than the technological innovations we've witnessed over the past decade is the promise of emerging technologies.

We're just beginning to understand the extraordinary benefits of WiFi, broadband, Voice Over Internet Protocol, digital TV, and smart radio.

Even the first floor of this historic building is set up for wireless Internet access, but that's not an invitation for you to start surfing the Web right now!

These technologies have the potential to open new highways of knowledge, add hundreds of billions of dollars to our economy, improve our schools and educational systems, and keep America competitive in the global economy.

However, we're wasting our potential and squandering our global leadership in technology. The U.S. telecommunications industry has fallen on hard times, plain and simple.

U.S. investment in telecommunications is rapidly declining, killing off jobs, delaying the development of new products and services, and threatening our competitive standing in the global economy.

In the past four years, the value of stocks in the telecommunications service industry declined by two-thirds! Over the same period, investment in the communications technology sector – the companies that manufacture equipment – fell by three-fourths!

The job losses suffered by this industry are equally dismal. Over a three-year period, nearly 3 out of 10 job losses in the U.S. were in the telecommunications industry.

And while overall U.S. employment increased by 1.4 million between August 2003 and this past May, telecomm lost another 23,000 jobs.

So why is this happening? It's the result of several factors.

Technological change is occurring at tremendous speeds, and as a result, lifestyles and options for receiving and delivering information are changing as well, especially among young people.

For instance, many young people choose not to have a landline at their home. Instead, they use only cell phone service.

These changes are creating tremendous upheaval of the competitive landscape.

Satellite, wireless, and cable are all capable of delivering the same services and are going after the same customers.

The Chamber believes in competition. We also believe that the regulatory system that governs competition must be fair, predictable, and up to date with market realities.

The regulatory system currently in place is none of these. It's obsolete; regulators are attempting to rule a world that no longer exists.

Also, the system of financial incentives and rewards for investment is out of whack. We have to find ways to protect incumbent companies' investments without hindering others from entering the marketplace.
Finally, the FCC has managed to create great regulatory uncertainty in seeking to implement the 1996 Telecom Act.

Congress is equally to blame for the uncertainty that arose after passage of that bill.

As the FCC handed down one rule after another attempting to implement the Act, Congress got tied up in political conflicts, and as a result, its oversight was inconsistent.

And the federal courts have gotten into the mix 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.

This kind of regulatory uncertainty and chaos is crippling the industry and cannot be allowed to continue.

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 conditions in which market forces and technological innovation work together to create the world's most advanced and efficient telecommunications system.

At the Chamber, we look forward to leading a policymaking process that considers all the important questions facing telecommunications in a sincere, objective and factually-based manner.

We want to work with all the stakeholders to retain the best parts of the current system while developing new approaches.

Our goal is to help fashion an approach that revitalizes a great industry and thereby solidifies our nation's global leadership in technology, productivity and economic opportunity.

I'd now like to hand the program over Rick Crandall, who will moderate our first panel. You will notice that Rick has dual duty today as moderator of two different panels. He is filling in for Marty Regalia, our Chief Economist, who could not participate today for medical reasons.

Rick is chairman of the Enterprise Software Roundtable, which consists of the CEOs of the 35 largest enterprise software companies.

The leaders of these companies meet twice yearly to share ideas, discuss changes in the industry, and consider future market opportunities for software products.

Rick is also the software industry advisor to the Chamber, assisting us in understanding and advocating software industry public policy issues.

Please join me in welcoming Rick Crandall...