Prepared Remarks of Verizon EVP Tom Tauke

New Democrat Network Keynote

Wednesday, March 24, 2010

Thank you, Simon.

In San Jose, in the heart of the high-tech world, sits

what’s known as the Winchester Mystery House. It
started out in the late 1880s as a small farmhouse and
by the 1920s was transformed into a 160-room, seven-
story Victorian mansion with doors and stairways that
lead no where, dead-end hallways, and mazes that can
leave you lost for hours. The house grew that way – with
no logic or plan – because the owner just kept adding,
adjusting and adding again as needs or desires
required; the result is an architectural white elephant.

In the world of communications policy, we have our

own version of the Mystery House. It started as the
Radio Act of 1929, was subsumed by the
Communications Act of 1934, and after numerous
amendments during the last three-quarters century, it’s
become an interesting maze that the Federal
Communications Commission and all of us attempt to

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navigate as we play various roles in the Internet
ecosystem.

It’s time we turned our attention to this Mystery

House and figured out how it can be remodeled to meet
the needs of a new era. This task is all the more
important because, thanks to the efforts of the Federal
Communications Commission, we now have a National
Broadband Plan, which lays out a vision for a vibrant
broadband and Internet marketplace. In my view, the
current statute is badly out of date. Now is the time to
focus on updating the law affecting the Internet. To fulfill
broadband’s potential it’s time for Congress to take a
fresh look at our nation’s communications policy
framework.

Verizon’s effort over the last year or two to find

common ground with Google and others on the issues
of net neutrality, behavioral advertising and privacy
protection, and other Internet policies, really brought
home to me the dilemma we face. Too often these
important discussions about policy for the Internet

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degenerated into disputes over the statutory authority of
the FCC.

Then, with the Comcast - Bit Torrent case it became

clear that the debate over jurisdiction wasn’t just an
intellectual exercise. The authority of the FCC to
regulate broadband providers under the so-called
“Information Services” title, or Title I, of the
Communications Act was at best murky.

One idea recently floated to solidify the FCC’s

jurisdiction was to place broadband under the old rules
that applied to telephone networks under Title II. To us,
that clearly was outside the scope of the statute. It also
highlighted the danger of attempting to apply statutory
provisions intended for the telephone industry of the
1900s to the communications and Internet world of the
21st Century.

In confronting this hard question about

jurisdictional authority, we also faced this policy
question: if Title I and Title II don’t apply to the Internet

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space, what are you saying about the authority of
government in this space?

As our efforts to find common ground on the key

issues became more difficult because of the disputes
over agency jurisdiction, it is clear to me that we need a
fresh look at what the role of government should be in
the Internet ecosystem, and specifically at the statute
governing the communications industry. We’ve spent
some time thinking about that, and today I’d like to
share our perspectives.

First, let’s talk about what’s working in the Internet

ecosystem, and then I’ll offer some suggestions for a
fresh start at developing a workable Internet policy.

What Is Working Well

Back in 1999 FCC Commissioner Bill Kennard said
America would get broadband “by letting a competitive
marketplace thrive. We need an intentional restraint
born of humility …that we can't predict where this
market is going. … In a market developing at these
speeds, the FCC must follow a piece of advice as old as

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Western Civilization itself: first, do no harm. Call it a
high-tech Hippocratic Oath. So with competition and
deregulation as our touchstones, the FCC has taken a
hands-off, deregulatory approach to the broadband
market.” There is no doubt that those policies put in
place by the Clinton Administration and the Bush
Administration to jumpstart innovation and the spread
of broadband worked.

Broadband providers have invested hundreds of

billions of dollars for deployment of broadband
networks. Verizon alone has deployed more fiber than
all the countries in Europe. The result: today about 96
percent of Americans have access to at least two
providers of wireline broadband and as many as three
wireless providers, and more than 55 million Americans
can connect to a broadband network capable of
delivering at least a 50mbps stream.

It’s not an accident that over the past decade, the

Internet Ecosystem has become a critical global
economic engine, or that so much of the innovation
from the core to the edge is based here in the United

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States. It isn’t only companies like Amazon and e-Bay
and Google. We have companies like Salesforce.com
innovating around cloud computing, and Medtronics
pioneering medical implants that transmit vital signs
over the Web to physicians.

Across the Internet Ecosystem you have many

players crossing their traditional lines of business to
offer consumers products and services they want. The
marketplace is increasingly characterized by
collaboration and partnerships among various
companies. So Google, Motorola and Verizon Wireless
created the Droid to compete against the Apple-AT&T
iPhone. The collaborating partners are ever-changing,
creating a new dynamic of what some have called
Modular Competition.

The approach Bill Kennard talked about years ago

of using a light regulatory hand to create a highly
competitive marketplace has worked. Now, we need to
put in place a framework that will continue to encourage
ongoing investment and innovation for this vibrant

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ecosystem we see. This should be the cornerstone for a
refreshed policy framework.

Policy Discussion
So what’s the problem? The problem is that the
statute is irrelevant to the ecosystem that has
developed. The Internet today hosts a quarter of the
world’s population – close to two billion users. The
Verizon network alone connects 100 million of these
users with over 1.7 billion text messages and 50 million
video/pictures exchanged, 400 million e-mails received,
8.7 petabytes of video streamed. There are new
pressures and challenges and problems cropping up
that policymakers didn’t consider a decade ago – such
as the 5 billion potential cyber-threats monitored and
acted upon each day.

The issues that arise from all of these new players

and cross-platform competitors don’t fit nicely within
the boundaries of traditional communications
regulation. The instinct is to impose regulation, but it’s a
balancing act. We want order, but we also don’t want to
hinder investment and innovation in this dynamic

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broadband and Internet marketplace. How do we
accomplish this?

I certainly don’t have all the answers for exactly

what a 21st century policy framework would look like, but
if I may, I would like to suggest four general principles
that constitute the foundation on which such a
framework should be built.

First, consumers must be fully empowered. Any

new policy should put the users in charge. Consumers
should have the ability to choose the devices and
software they want, access whatever lawful content and
applications they need, and obtain the products and
services they desire on the move or at home.
Empowered consumers are also well-informed
consumers, who are able to make choices and decisions
based on easily understood language and transparent
business practices. Providing consumers with more
easily understood and relevant information about how
their broadband connections will perform, for example,
or how their applications may affect their broadband
experience, or what consumers’ privacy expectations

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should be when they download content, helps promote
competition and innovation.

Second, the consumer must feel safe. If we want

consumers to use broadband in all of the ways we
envision – social networking, online shopping and
banking, online medical records and remote medical
monitoring, online education, cloud storage of such
personal content as family photos – consumers must be
confident that their online security and privacy are
protected. These policies should be consumer friendly
and uniform across the ecosystem. For example, a
behavioral advertising policy that requires an easy to
use process for affirmative consent from a user before
that user can be tracked on-line should apply to all
players engaged in behavioral advertising, regardless of
where they sit in the space and what technology is used.

Third, consumer access and adoption should be

priorities. In order to ensure that broadband
technologies are fully deployed everywhere, we must
tackle one of the most vexing issues from the old
communications world: the subsidy issue. Over the

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years there has been a great deal of talk on Capitol Hill
and the FCC about addressing subsidies like Universal
Service … and for good reason. The National
Broadband Plan’s recommendations for addressing
facility-based deployment in high cost areas is headed
in the right direction. But we need a new approach to
addressing the challenge of giving low-income
Americans access to the Internet.

When you look at other consumer-assistance

programs for food or fuel, you don’t see energy
companies or food companies collecting fees from their
customers and then figuring out how to split those fees
among themselves. The consumer receives direct
support from the government and then uses it to
purchase fuel or groceries. We should look at the model
for fuel assistance and food stamps. Competitive
subsidies that are technologically neutral and targeted
solely for the benefit of consumers, not corporate
intermediaries, would be one alternative to ensuring full
national broadband deployment.

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 Fourth, government’s role should be to protect
consumers and ensure a properly functioning free
market. Put another way, the test for government
intervention in the marketplace is to prevent either harm
to users or anti-competitive activity. Today, there are a
host of consumer-protection concerns – online fraud,
child protection, privacy – that need to be addressed.
That’s one bucket of issues that I won’t focus on today.
The other set of issues focus on ensuring the properly
functioning free market. Let me offer some thoughts on
this issue.

Government also has a legitimate interest in

ensuring a functioning marketplace – one that incents
investment and innovation and provides choice. It’s the
free market being free for competition. And, I believe,
the threat to a functioning marketplace does not
arise from only one set of players; it can arise from any
place in the ecosystem where market power can be
abused. From the perspective of the consumer, it
matters not whether competition is constrained by a
network company or an applications providers or

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anyone else in the system of linkages that add up to the
Internet.

In fact, today, by the very nature of the Internet

Ecosystem, many are working together or competing in
other company’s turf. Computer companies sell
phones, and quite successfully. Search engines sell
open operating systems. Network providers create their
own apps stores. That means that the value proposition
to the consumer is really a package created by many
companies acting together with little, if any, regard to
their previous corporate histories. So no set of
companies should be immune from scrutiny.

Think about the evolution of cloud computing. It is

the cloud that will allow consumers to have access to
their content wherever they are, regardless of device.
But who controls the cloud? If it’s anyone, it’s not likely
to be a network provider – it’s much more likely to be
some entity that came to control access to the data or
the software. For example, consider the messages sent
by users on a social network. They are the functional
equivalent of an email message. But the functionality,

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and therefore the potential control, is in the cloud. If we
worry about the movement of email and other content
along networks, then we need to worry just as much
about their movement and treatment in the middle, not
at the edge of the Internet.

The bottom line is this. Harm to consumers and

competition should not be permitted, from any source.
So the level-playing field needs to be big enough to
include all of the players. If you’re on the field, then the
referee can blow the whistle. That’s a simple principle –
and a good one. Good public policy is always good for
companies that want to play by the rules.

Now let’s spend a moment on process.

Traditional regulatory models based on rules

written to shape and control more static, “one purpose”
industries – such as TV or telephone service – are not
only out of step with today’s dynamic, converged
Internet ecosystem, they are harmful to the innovation
process that characterizes broadband and the Internet.
Traditional agency “fact finding” – often through notices

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or public requests for comment – are usually geared
towards specific rules or regulatory outcomes.

Instead, we could structure a process that uses the

innovative, flexible and technology-driven nature of the
Internet to address issues as they arise. Instead of the
traditional rule-making process, federal enforcement
agencies could structure themselves around an on-
going engagement with Internet engineers and
technologists to analyze technology trends, define
norms to guide such questions as network
management, and understand in advance the
implications of new, emerging technologies.

Technology leaders and experts from all players

involved in the Internet should set up voluntary
organizations and forums to provide advice,
recommendations, and advisory opinions to
government agencies. This will help inform the
agencies’ role as backstops that deter damaging
activities that undermine the vibrant competition and
openness that defines the Internet.

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 In pursuing bad actors, the government should use
understandable principles that can provide guidance but
are informed by experience. Some will suggest that
more detailed rules are needed, but by adopting the
approach I have outlined, we can both protect
consumers and competition and assure the flexible,
adaptive oversight that fits the innovative nature of the
Internet that we want to preserve.

This will require clear statutory authority for the

implementing agency. In other words: this is a job for
Congress.

Earlier, I referenced the quote from Bill Kennard, in

which he spoke of the role humility played in setting
policy. I offer these observations today in that same
spirit. In putting forward this policy framework Verizon
hardly views it as the capstone to a discussion, but
rather the beginning. We don’t have all the answers.
We want to work with all of you to ensure a vibrant
Internet Ecosystem, and fulfill the vision for the
technology and the networks laid out in the National
Broadband Plan.

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Thank you.

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