A Conversation with Julius Genachowski

Tuesday, November 20, 2012

Julius Genachowski discusses the challenges and opportunities of the Federal Communications Commission's role in international telecommunications policy and its ongoing mission to promote Internet freedom, competition, innovation, and investment in broadband services around the globe.

DANIEL PRIETO III: Good afternoon. Thanks for joining the conversation with FCC Chairman Julius Genachowski.

Just some quick introductory remarks, sort of normal rules of the game that I'm sure you're all familiar with. Welcome to our meeting today at the Council on Foreign Relations. Please completely turn off, not just put on vibrate, your cellphones, BlackBerrys and all wireless devices to avoid interference with the sound system. And as a reminder, this meeting is on the record.

I'm very excited to be here today, just perhaps the most anticipated CFR event, as much as the new James Bond movie, since we rescheduled a number of times, but I'm glad that the chairman could join us today.

Just in a quick introduction, prior to his FCC appointment, Chairman Genachowski was chief of business operations and before that general counsel at IAC/InterActiveCorp, special adviser at the private equity firm General Atlantic Partners and co-founder of the technology incubator LaunchBox Digital. His full bio is in your packages.

And with that, I'll turn it over to the chairman for some quick opening remarks. We'll then go into a conversation where I follow up with some questions. And then after that we'll open up to audience conversation. Thanks so much. Chairman, the floor is yours.


Well, happy Thanksgiving. Happy Thanksgiving, everyone. I for one am thankful that the election is over so we can finally focus on the real issues facing America, like catching Abu Nazir. It's -- "Homeland" is a TV show -- (laughter) -- on "Showtime."

Let's move to nonfiction. It is a privilege for me to be here at the Council on Foreign Relations. And thank you to the council for hosting and Dan for moderating. I see a number of people in the audience who have done such important work in the space -- some of my colleagues from other government agencies. I see Charlie Firestone, from the Aspen Institute, very involved in the issues that I'll be talking about today.

Let me start with one provocative sentence from Jeffrey Sachs of Columbia University. He said recently the information and communications technology revolution is surely the most powerful single force for economic development in the world today.

So I want to talk about that today, about the enormous opportunities the broadband revolution is creating. I'll also talk about the dangerous fact that the global Internet is at a crossroads. Threats to the future of the Internet have never been more serious, and if we don't tackle these threats, the U.S. and other nations will pay the price in the form of lost economic growth and development, stifled innovation and social progress and diminished opportunity. So I'll describe those threats and talk about what needs to happen for us to keep the global Internet on the right path, to harness the opportunities of new communications technologies to benefit all people.

Now, there's a lot that's new about the relationship between communications technologies and world events. But in some important ways, the relationship between communications technology and world history has always been a profound one. The printing press was a new communications technology that changed the world.

I won't take us back that far, but for a few minutes I will take us back 50 years to a powerfully important speech given by an FCC chairman in 1961. That may -- President John F. Kennedy's pick as FCC chairman, a 35-year-old named Newt Minow, spoke to the National Association of Broadcasters. His speech is generally remembered for the declaration that TV had become a vast wasteland.

But the speech -- and I recommend reading it -- was actually about much more than it's remembered for, and its core insights provide enduring lessons, very relevant for today. Newt Minow spoke in May 1961 about the new communications technologies of his day: broadcast TV, what we now call cable TV and satellite communications. They were all discussed in his speech. And his overriding message was that these technologies offer new opportunities to do good and to do the opposite.

And he spoke about how our obligation as a society was to seize the positive opportunities of new communications technologies, to harness the power of technology for the benefit of all people, to advance the causes of prosperity and freedom, to educate and inform, to help our children fulfill their potential, to help our great nation to a bright future, and to do these things at home and around the world.

Now, Newt Minow spoke in that speech in 1961 of -- and this is a quote -- "the technological knowledge that makes it possible, as the president has said, not only to destroy our world but to destroy poverty around the world." His speech explicitly imagines a future where new communications technologies will tie together -- and these are quotes -- "tie together Indiana and India, Chicago and the Congo." That speech -- Newt Minow's insights were inspirational to me when I first read them 20 years ago.

And the fact is they help inform today how the FCC thinks about new communications technologies because the core messages from that speech are as relevant today as they were 50 years ago. The main difference, of course, is that the primary new communications technology today is different. It's not broadcast TV or cable TV or satellites. It's broadband Internet.

So let's start with the opportunities around broadband Internet. The benefits already being delivered by wired and wireless broadband are nothing short of extraordinary. We see it here at home in the U.S. It's no exaggeration to say that high-speed Internet is reshaping the U.S. economy. We can hardly imagine a world without Google, Facebook, Twitter, Amazon, Wikipedia, without email, texting or the app stores people are using to download a hundred million apps a day. Broadband is also transforming education, enabling distance learning and interactive digital textbooks. It's revolutionizing health care with remote monitoring, remote diagnostics and digital health records, education, health care, energy, public safety, government performance, elections -- broadband wired and wireless transforming everything. That's already a game changer, and we're still in the early innings of this new communications technology.

Now, these opportunities, where we are in the curve of the technology and the opportunities, this is known around the world. When I meet with my international counterparts in every region of the world, they are focused on the opportunities of broadband. Each of our global competitors wants to become a 21st-century hub for broadband-related innovation. And in today's flat global economy where capital can flow anywhere and innovators can work anywhere, we have to acknowledge that U.S. leadership going forward is not a given. It's something that we have to learn anew every day.

And U.S. broadband leadership is particularly vital as developing countries grow and the middle class expands around the world. These are good developments. But we should embrace them as a spur to our global competitiveness to ensure that we have in the U.S. world-leading broadband infrastructure, to ensure that tech-related capital and talent continue to flow here and to ensure that we are the world's leading innovation economy for the 21st century.

Now, there's good news on this front. Over the past four years, the U.S. has regained global leadership in key areas of the broadband economy. Take mobile, where we've moved from laggard to leader. Four years ago, people were talking about mobile innovation, but they were talking about mobile innovation in Asia. And they were talking about mobile infrastructure and they were talking about it in Europe and describing the U.S. as a backwater.

Today, the U.S. is the clear world leader on mobile innovation. U.S. companies invented the apps economy, and in four years, the percentage of mobile devices globally with U.S.-made operating systems has grown from 20 percent to 80 percent in four years. Around the world, American apps are leading the way. And on mobile infrastructure, the U.S. is now leading the world in deploying at scale the next generation of wireless broadband networks 4G, 4G LTE. This new mobile broadband platform will allow us to enjoy broadband speeds on the go comparable to what we're used to from our Wi-Fi connections at home. The U.S. has today more 4G subscribers than the rest of the world combined. And we're on a path to maintain that leadership into the future. This is incredibly important because 4G LTE is the leading platform for next-generation mobile, and mobile will be a leading if not the leading platform for innovation for years to come.

There's a similar story of improved innovation and infrastructure on wired broadband, not to go into at this point, but it is important to note that the progress in wired and wireless broadband in the U.S. together are having a positive effect on the U.S. economy. Private investment and job creation in the sector are strong and growing.

Now, for all the benefits broadband is creating here at home, its power to spur economic growth and opportunity may be even greater in emerging economies. The World Bank estimates that a 10 percent increase in broadband penetration corresponds to a 1.4 point increase in GDP in developing countries, higher than the corresponding rate for developed countries. It's not hard to understand why, but the point to notice is the magnitude of the benefit to developing countries' GDP from driving broadband deployment.

And the fact is that the global broadband story is just beginning globally. So today we have about 1 billion mobile broadband subscribers worldwide, 1 billion. The bulk of that is in developed countries. Here's what experts estimate will happen over the next few years, by 2016. The number of mobile broadband subscribers globally is expected to grow from 1 billion to 5 billion, 5 billion mobile broadband subscribers by 2016. That's 2017 -- the point is the same. And whether it's creating new opportunities for small businesses worldwide, banking the unbanked, getting weather and market information to farmers, spreading access to prenatal care and information to expecting mothers and young mothers, whether it's empowering people with information, the opportunities are amazing and hard to understate in a world that will have 5 billion Internet-connected people.

This is one of the reasons why at USAID, under the leadership of Raj Shah, they're now using broadband technologies to promote development worldwide and they're focused on this broadband opportunity.

Now by focusing on the amazing opportunities of broadband -- economic, noneconomic -- I don't mean to suggest that there are no risks or downsides that come with broadband. Of course there are, very serious ones: cyberthreats, texting and driving, theft of intellectual property.

Throughout history, every technological breakthrough has created new dangers along with new opportunities. This was one of Newt Minow's points in that speech. It's part of what led him to the "vast wasteland." The challenge, he said and we recognize today, is this: How do we realize the incredible potential of today's new communications technology, broadband Internet, maximize its benefits for global prosperity and opportunity, while addressing the dangers?

The first step, I would argue, is focusing on how to unlock the benefits of broadband, what pillars, what priorities, and then address the dangers with meaningful, tailored and smart strategies, ones that don't undermine the recipe for economic growth and broad opportunity.

I see three key pillars of a vibrant broadband ecosystem: infrastructure, innovation and inclusion.

Start with infrastructure. If you build it, absent services will come. But you've got to build it, and that has its own set of challenges in every country. What makes the challenge even greater is that when it comes to wired and wireless broadband networks, you've got to keep doing it. To compete in the global digital economy, countries, ours and others, will need to deploy ever-faster and higher-capacity networks.

And that's not the only challenge. In this space, we need to address the infrastructure we can see, like fiber and towers, and also our invisible infrastructure, the airwaves spectrum that mobile devices, the mobile Internet needs to operate. This is under tremendous stress from very rapidly growing demand for spectrum, and this requires new policy breakthroughs. It's why at the FCC we've been focusing developing big new ideas like incentive auctions, spectrum sharing, next-generation licensed spectrum use. These are all solutions to very significant infrastructure challenges. They're not the only ones.

The second pillar: innovation. The interconnection between infrastructure -- wired infrastructure, towers, spectrum -- and innovation, the interconnection between infrastructure and innovation's one of the key insights of the U.S. National Broadband Plan, which the FCC wrote and released in early 2010.

At that point other countries had developed broadband plans, but those plans focused just on the infrastructure piece. In fact they focused really just on the wired infrastructure piece. When we prepared our plan, we said that smart policy requires promoting a healthy broadband ecosystem, networks as well as applications. We said policies should promote a virtuous cycle where broadband networks spur innovative applications, where those applications drive growing user demand for bandwidth, which generates returns and incentives for network operators to invest in improving and expanding broadband networks, and on we go -- virtuous cycle.

The FCC's resolution of the Net neutrality or open Internet issue 2 1/2 years ago was driven by a desire to promote this virtuous cycle, and indeed in the U.S., private investment and innovation throughout the broadband ecosystem, in both networks and in applications and services, is up significantly in this period and growing.

So along with infrastructure and innovation there's one more essential pillar, inclusion. Inclusion in our broadband economy, access, is important for two reasons. One is equity. Having large swaths of people who can't connect to the Internet in the 21st century is today's equivalent of people without access to electricity in the 20th century. The other reason inclusion matters is what economists call network effects. The more people on broadband networks, the more valuable the networks become to everyone on it and to the economy in which they operate.

So now, how best to build these pillars of infrastructure, innovation and inclusion? At the FCC, we've focused our policies on four key priorities.

First, private investment. Unless government is going to build, own and operate communications networks themselves -- not a wise approach, and rejected by history -- we need massive private sector investment to unleash the opportunities of broadband and a thriving private market for broadband and other advanced communication services. We need massive private investment in infrastructure and networks and massive private investment in applications and services that ride on those networks. And so we need to foster a strong and healthy climate for private investment, which involves recognizing the legitimacy and the need for returns on investment, because without those returns, there's no incentive or private capital to invest in networks or services and the upgrades that we need for faster speeds and more capacity.

Second, competition. Competition is the lifeblood of our free-market economy and a uniquely powerful tool to drive private investment, innovation, and to increase consumer value. The more competition, the more investment, the more innovation, the better off consumers are, and the less need fore regulation. But history teaches that government action is indeed required to promote and preserve competition, particularly in the ICT sector. In the U.S., for example, the mobile marketplace two years ago was on the doorstep of duopoly. But our rejection, along with the Justice Department, of the proposed AT&T-T-Mobile deal and other pro-competition actions we've taken have led to an improving competition picture in the United States.

The third priority: preserving Internet freedom and openness. The ability to speak, innovate and engage in commerce online without having to ask anyone's permission has driven the Internet's unparalleled success. At the U.N. last year, President Obama spoke strongly about this, saying that the U.S., quote, "will support a free and open Internet so individuals have the information to make up their own minds." No one has been a more forceful advocate of the economic and social opportunities of the open Internet than Secretary of State Hillary Clinton, who delivered a landmark speech on Internet freedom in 2010 when she said that one of the fundamental freedoms of the Internet age was the freedom to connect, "the idea that governments should not prevent people from connecting to the Internet, to websites or to each other." That's a quote.

Now, Internet freedom is sometimes cited as an obstacle to addressing the issues of cybersecurity and intellectual property theft. I disagree with that. I disagree not because I question the importance of the issues or the magnitude of the threats. They're very serious problems that we have to address. But I believe, based on my experience, that we can address those issues without undermining core values like Internet freedom and privacy. We've put our money where our mouths are at the FCC, and we've taken important steps along these lines, for example, driving a multistakeholder process over the last year and a half that developed a botnet code of conduct for ISPs and other concrete steps to improve network security, steps consistent with Internet freedom and supported by the Internet community as well as by network operators.

Let me turn to the fourth priority, universal access. History and economics teach us that the private market on its own won't deliver universal access to communication services. As population density thins and as topography becomes more challenging, and so expensive to build out, the economics of network deployment and operations just don't add up. That's a reality. And even where networks exist, it's also a reality that too many people don't subscribe. There are a number of different reasons, but cost is one.

The digital divide is a real issue, particularly as the costs of digital exclusion continue to rise. What do I mean by the costs of digital exclusion rising? Just imagine if you were looking for a job. Five years ago, if you were looking for a job, you would have gotten a newspaper, you would have looked at the classifieds, you would have called or you would have faxed an application. That's not how it works anymore. Almost 80 percent of Fortune 500 companies do 100 percent of their job postings online and require online applications. And so if you don't have access to the Internet, you're out of luck.

I could tell you the same story about where education is going and the teachers I've talked to around the country who are incredibly frustrated that even as they try to teach their kids what they need to know to thrive in a digital economy, half their kids in general, public schools, don't have broadband at home and so can't do the assignments. We got a letter at the FCC from a high school student in Florida who said here's what she does to complete her assignments that require Internet access: she drives to her local library at night after it's closed and sits in the parking lot where she can get Wi-Fi access. Well, that's not a good answer.

So the digital divide is a real issue, and smart government action can help drive universal access. This is what drove the FCC last year to adopt a once-in-a-generation, comprehensive overhaul of the $4 1/2 billion-a-year Universal Service Fund. We transformed it from a telephone-focused program, and a wasteful one at that, to an efficient program focused on universal broadband.

So these pillars and priorities not only guide our policy work in the United States; they guide our international engagement in the ICT sector. And they have in the past historically in ways that have had profound effects. To explain how, let me take a detour to the Arab Spring. In Egypt last year, when the government shut down the Internet and shut down mobile service, many asked, how were they able to do that? What does it mean that they could do that? These are very important questions. But let me focus on another important question that fewer people asked: How did Egypt come to have an Internet and a mobile service worth shutting down?

The short answer lies in the most important policy accomplishment of the Clinton administration that most people, present company excluded, have never heard of: the World Trade Organization Agreement on Basic Telecommunications. So back in the 1990s, monopolies operated communications networks in most countries around the world, generally government-owned or controlled monopolies. That was the world most of us grew up in. It was before the Internet and mobile communications took off, and it's not a coincidence that the end of that world coincided with the takeoff of mobile and the Internet.

In any event, back then in the '90s, leaders at the White House, at the State Department, the U.S. trade rep, the Commerce Department and yes, the FCC developed what many thought at the time was a crazy and certainly hopeless idea. What if -- they asked, what if we pushed to privatize communications companies and markets around the world? What if we moved the world toward open market access, robust competition, rule of law? And it wasn't easy. It took years. I watched as my then-boss, FCC Chairman Reed Hundt, worked tirelessly with Vice President Gore and U.S. Trade Rep Charlene Barshefsky at the time, and the result: 69 nations representing over 90 percent of the world's telecommunications revenues signed a WTO agreement in early 1997 committing to open private markets and competition and rule of law. The agreement and the private market competition it launched helped spur, in the years that followed, trillions of dollars in new investment in infrastructure in telecommunications around the world and helped spur a huge, historically unprecedented wave of worldwide communications technology innovation, mobile and Internet.

Global access to communications service rose in the years following that agreement, especially for mobile services in developing countries that took the opportunity to leapfrog past wired networks. Between 2001 and 2011, mobile phone adoption increased globally from 15 percent to 86 percent -- one decade -- from roughly 900 million people around the world having basic mobile service to 6 billion, in a decade.

Now, the U.S. benefited from this global growth. U.S. exports in information and communications technology services quadrupled over that decade. And as the global market continues to grow as we hit those new metrics that I've described, mobile broadband access going from 1 (billion) to 5 billion, the U.S. economy will continue to benefit.

So given this history -- and the fortunate feat of the junior staffer that I had to see this play out -- when I became FCC chairman in 2009 I made it a priority for the FCC to re-engage in international issues, and these efforts have led to agreements signed or dialogues opened with a broad range of countries including Mexico and Brazil, China and India and the new EU telecom agency BEREC on issues ranging from broadband in the innovation economy to disaster relief in public safety.

Mindel De La Torre is here, who runs our International Bureau at the FCC. I see other staffers from the FCC -- Michael Steffen, who works on these issues in my office. We have just a fantastic team at the FCC that's focused on these opportunities and issues.

Our work internationally at the FCC stemmed from our early recognition of the opportunities of broadband, opportunities that could benefit all countries and all people, and also the looming threats to a vibrant broadband future. And what we've learned internationally over the last four years as we've rolled up our sleeves has led me to the view that we are now at a crossroads when it comes to the future of the Internet.

Down one path is a free and open Internet that drives new innovations and that will grow economies, create opportunity and raise the standard of living for billions around the world, and the other path is a Balkanized Internet that stunts opportunity for countless people around the world -- slower economies, less access to life-changing innovations in health care and education, less freedom around the world.

Let me describe three major threats that could put us on the wrong path for the future of global communications networks. The first big concern is proposals to create a new layer of international Internet regulation -- unprecedented proposals to have international bodies impose heavy-handed rules that would radically change the proven model of Internet governance. Next month, the World Conference on International Telecommunications, known as WCIT, will convene in Dubai to review what are called the International Telecommunications Regulations, a framework that has never applied to the Internet.

There's a lot at stake. U.S. government has been preparing for the WCIT for a long time, and there is no confusion about our bipartisan and unwavering position: To ensure continued investment in Internet-driven economic growth and opportunity, the WCIT must reject proposals for new international Internet regulations and instead embrace the success of the last two decades in a market-driven, multi-stakeholder approach that preserves the free flow of data and information over the Internet.

Among the proposals that are deeply troubling are proposals that would have an international authority dictate how companies exchange and compensate each other for Internet traffic. Other proposals would bring cybersecurity under the auspices of these ITRs, the International Telecommunications Regulations, and could be used by countries then to support monitoring and restrictions on online communications.

These proposals not only ignore the successes of the past two decades, they'd fundamentally change the Internet as we know it. They would increase uncertainty and raise costs for online innovators everywhere, in every country in the world, including developing countries. They would limit access to Internet content and applications for consumers all over the world, including in developing countries, which will in turn suppress demand for broadband, will suppress investment in networks, will accomplish exactly the opposite of what these proposals purport to do. Rather than promoting a virtuous cycle of investment and innovation in networks and applications, these proposals would unwind it, to the detriment of people all over the world.

The second threat. The second threat to the future of the Internet is protectionist policies that would slow the continued growth of global markets powered by unimpeded cross-border flows of data. Some countries, for example, have already implemented rigid requirements on where data and data centers reside, requirements that undercut the efficiency and cost savings offered by cloud computing. Some countries are pressing forward on policies that require local manufacturing of technology.

These policies are bad not only for the U.S. economy, bad not only because U.S. companies lead the world in cloud computing -- companies like IBM, Amazon, Google, Microsoft. These policies and directions are bad because they'll ultimately be counterproductive for the economies in which they are imposed. Countries that suppresses cloud computing are suppressing the abilities of their local companies to expand their markets and lower their costs. They're suppressing their own innovation economy.

Let me turn to the third threat. The third threat is blatant government control of online activity that restricts the freedom of information online and invades privacy. Censorship. Last month Freedom House released its third iteration of the Freedom of the Net report. The study found that 20 of the 47 nations they examined were on a negative trajectory when it comes to Internet freedom. These policies are harmful both to the Internet as an economic engine and as an engine for broad opportunity, and they're inconsistent with fundamental freedoms, including the freedom of speech and the rights of people worldwide. President Obama, Secretary Clinton and others in the administration have consistently and forcefully called on other nations to end these practices. And this will continue.

Each of these threats, unfortunately, will continue. They'll remain part of the international landscape for some time to come. The upcoming WCIT conference won't be the last international setting in which these issues arise. And all of us in the U.S. government, my colleagues at the State and Commerce departments and the USTR, will need to continue to work on a coordinated and ongoing strategy. We'll need to continue to think creatively about all our levers, from trade to aid, updating our strategies to meet this digital moment.

We have a powerful story to tell globally, a story about the ways that a growing Internet globally can increase economic growth and opportunity worldwide, and about the link between that growth and principles of openness, freedom, competition and private markets. One of the amazing things about this story is that it's not theoretical after two decades of mobile and Internet growth driven by adherence to these principles. And so in this context, when we think about foreign aid, I see real value in including, as part of that, sharing expertise and policy solutions with our counterparts in other countries.

We've seen historically the success of this approach. It's how we got so many countries to agree to the World Trade Organization agreement and fundamentally revive their market structures, to make a bet that implementing principles of competition, openness, rule of law would increase GDP investment, et cetera, in their countries. They made their bet, and the proof is very clear.

So continuing this effort to engage with other countries in a data-driven way that focuses on the link between these principles and GDP growth, innovation, opportunity, job creation is very important. It's one of the reasons why at the FCC, working with the U.S. Telecommunications Training Institute -- terrific organization -- we've helped policy officials from 143 countries around the world learn about what we see here in the U.S. And in 2012 alone we hosted 49 delegations to the FCC's international visitors program. And I can tell you from personal experience, these officials come, and they're incredibly engaged, and we shouldn't underestimate the number of highly talented officials around the world who wake up in their countries trying to do the best thing for their economies and to provide opportunity in their countries.

I think that this effort to engage directly with other countries for our mutual benefit is far from hopeless. Just the opposite: We have seen year after year at the FCC that it can make a difference in policies adopted in those countries.

Last week, consistent with this philosophy, I participated in a forum hosted by CENTCOM, where I spoke, alongside our CENTCOM military leaders, with communications ministers from about a dozen Middle Eastern countries -- Egypt, Iraq, Saudi Arabia -- about the strategies we're pursuing to promote economic growth and opportunity and combat cybersecurity (sic). And the response was very positive. I measure positive response by serious substantive engagement and an openness to looking at the data, looking at the facts and thinking about what is in the self-interest of their countries and what is in the mutual interest of all our countries and global economic growth.

Let me close with a brief story. Last month I was in Brazil. And as I try to do on all my international trips, in addition to meeting with senior government officials, I met with a group of Brazilian innovators, entrepreneurs and executives. And I spoke with them about basically the same things that I've spoken about today: the importance of private markets, competition and a free and open Internet. When we went to Q-and-A, nearly every question or comment was about how our countries could work together to ensure international adherence to these principles. I've had similar experiences around the world.

And my point is this: Whether you're in Baltimore or Brazil, Kansas City or Cairo, there are young men and women with the desire and the potential to build a bright future, to work on business and social innovations that can unleash new waves of opportunity and economic growth. For this generation, the Internet is a primary platform for innovation, where their future is being invented.

My experience has convinced me that we are at a crossroads. The threats are real. But nothing I've seen has shaken my optimism. Working hard and working together, I'm convinced that we can turn back the threats and ensure that all people benefit from the amazing opportunities of the Internet and that we can, as Newt Minow taught us, harness new communications technologies to help deliver a future of prosperity and peace.

Thank you. (Applause.)

PRIETO: Terrific. Thank you very much, Chairman Genachowski. And I also wanted to thank you on behalf of my company, IBM. You've sustained a really constructive dialogue with my chairman and CEO, both the new and the old one, over your years in the administration. So thank you very much for that.

A couple quick questions from my end before we turn it over to the audience. The first one -- you talked about Arab Spring. And so let's look, in the context of that, to the challenges that all this innovation potentially face the United States with. And I'll throw out a couple. Number one is speed. Things move really fast. And in a world where things move that fast, maybe traditional U.S. foreign policy organs are not up to the task of responding as quickly as they should, number one.

Number two, while the opportunity is there -- I was just in Jordan last week. I saw the impact of telecom deregulation and a vibrant IT sector that's now 14 percent of GDP. But counterposed against that opportunity, I read a story last week about how the Syrian government, instead of shutting down the Internet, left it open in the midst of a lot of what's been going on over there and, as a result of that, were able to surveil much more effectively the folks that were speaking out against the government and use that retroactively as a tool to sort of understand networks and make arrests. So there's the surveillance aspect of it, which is really the flip side -- and the privacy aspect of potentially 5 billion mobile -- broadband subscribers.

And a third example I'll bring up is Afghanistan. You've gone from a half-million cellphones 10 years ago to 17 million basically in nine years -- unprecedented growth. At the same time, you still have a country where literacy rates are in the 20s.

So go a little deeper. Look at the context -- Afghanistan, the Arab Spring, Syria versus the liberalizing countries. What are the biggest challenges to U.S. foreign policy from all this innovation and new technology?

GENACHOWSKI: Well, you've mentioned, I think, a number of the biggest challenges.

One of the ways that I think we'd benefit from thinking about this is to distinguish between long-term goals and near-term management challenges. So let's start with the -- with the easier one, right? Long-term goals -- we have to bet on openness, freedom, universal access, private markets. For the reasons I talked about in my remarks and many others, the recipe for global peace and prosperity is in that long-term vision.

There's no question there are short-term challenges that are very real. Greater connectivity, broadband deployment over time will lead to greater economic opportunity and job creation. In the near term, there's potentially a mismatch between connectivity giving dangerous people a larger platform and forum without moving economic opportunity as quickly.

Well, when we think about that, we have many difficult management challenges, but one of the things that we have to try to do in that world is speed up the economic opportunity side. And so if you're convinced, as I am, that the more there is economic opportunity, the less threats we'll see, well, now we have to focus on speeding up economic opportunity.

You mentioned speed, and I think in general speed creates a whole host of challenges for policy.

I'll give you another example that's in this general area. First of all, I'd say, you know, the speed of technological change, as you know from IBM and their -- you know, you -- what are the options? We can have an option of slowing down technology and the speed of private markets. I don't think that'll be a successful option. So the other thing we have to do is, in addition, as before, I said speeding up economic opportunity -- we have to speed up the levers of government.

I'll give you one example where there's just an obvious need to speed things up. The way we do spectrum allocations globally today is the way we've done it for decades. We do have to cooperate internationally on spectrum because what one country does with spectrum can interfere with the spectrum use in a neighboring country, and we have to cooperate with other countries on satellite, and so we need sit down together and agree on allocations.

The way this works is, once every four years -- Midelle (ph), is it four years or three years?

MS. : (It depends ?).


MS. : Yeah.

GENACHOWSKI: Three or four years -- there's a big effort to do this. Well, you know, given the rapid changes in mobile, what we're seeing -- and, you know, with increase in demand, the pressures on spectrum infrastructure, it's hard to see how it will continue to make sense that the only time these international allocations issues are addressed are once every three or four years.

There are lots of examples like this, and I think that one of the things that we would benefit from in international fora is instead of seeing the kinds of proposals that I mentioned that we're seeing in WCIT, I think global economic growth and opportunity and economic growth and opportunity in all the countries who are participate in these forums would be better served if we worked together practically on how do we speed up the leverage of government to speed broadband deployment, adoption, economic opportunity in all of these countries.

And as I said in my remarks, I'm very concerned that a number of the ideas being floated would be counterproductive, as against the goals that are articulated for them. And I'm concerned about this because unfortunately we do have, you know, a world that's capable of doing things that are counterproductive. We're seeing it already in the space where, as I mentioned in my remarks. countries are putting in place restrictions on cloud computing that are undermining the ability of those countries to benefit from cloud computing.

PRIETO: Let's switch gears quickly and talk about concentration. FCC recently talked about relaxing ownership and cross ownership rules between the -- across media holding companies. At the same time, Tim Wu up at Columbia University, who I think coined the term "Net neutrality," has also warned about concentration. If you look back at film, radio, television, you typically end up in cycles of concentration, breaking up the concentration and then reconsolidation.

Is the Internet different? Are we not going to end up in a period of sort of large, sort of corporate concentrated control?

GENACHOWSKI: Well, you know, to me the -- I don't want to say the most, but a very important, difficult challenge in this space is the mobile market. You know, as you know, as we've talked about, the -- in so many ways, mobile broadband is our future of, you know, innovation, economic growth, GDP, and we have a real challenge in the U.S. when it comes to mobile market structure. And, you know, as I mentioned, I think, two years ago the U.S. was on the doorstep of duopoly. I believe that would have been very dangerous for our innovation economy in the U.S.

And there was a transaction that tested our rules, our policies and our commitment to healthy competition, and we made the decision that we did, took other steps between then and now, and our mobile market structure is moving in a much better direction now than it was then. And so I think, you know, anyone who's committed to a free-market economy has to be committed to preserving competition. At the same time, of course, rules adopted in different technological settings have the potential of becoming out of date as things change.

The specific proposals we made recently were to eliminate restrictions on cross ownership of newspaper and radio -- TV and radio. It's very hard to argue that in this new world, those restrictions continue to make sense.

Last point. I think over time, the Internet will significantly change the analytical framework in the more traditional ownership areas. And the FCC has said this in our decision. When we get to a hundred percent universal adoption of broadband in the U.S., that will require a different analytical framework than the one we have now, where we still have about a third of the country, a hundred million people, who don't have broadband at home. And we have to continue to take that into account.

By the way, I think taking it into account creates positive incentives that will benefit our economy because it gets everyone rowing in the same direction, which is driving universal broadband in the United States. And I think one of the things I'm proud of in the last four years at the FCC is there's no confusion about what U.S. communications policy is organized around. It's about driving universal broadband deployment adoption, world-leading speeds and capacity, and the ingredients of wired and wireless infrastructure that make us a magnet for innovation for years to come.

PRIETO: My last question before we go to audience has to do with spectrum allocation -- reallocation, excuse me. There's been a lot of focus on freeing up unused spectrum and reallocating it out to the commercial sector, and I think, you know, particularly around unused DOD spectrum. Talk a little bit about that. I know there's a move to release some of this spectrum. I think it's complicated.

At the same time, I would ask the question, has the defense and intelligence community accurately forecasted their 10-year, 15-year year need for spectrum? And are we making decisions about reallocating that to the private sector in the context of the potential real need that these communities might have for it as, you know, they become more connected, they pick up mobile, you know, drone connectivity, network-centric warfare? Have they predicted their needs before we make decisions about reallocating that?

GENACHOWSKI: Well, so just some facts. In the U.S. the government -- military and otherwise -- has primary access to about 60 percent of the spectrum, and commercial industries have access to about 40 percent. When you think about the numbers and compare the number of devices used by government versus commercial, it's not even close.


GENACHOWSKI: And so it's hard not to look at it and think this is out of whack even taking the most aggressive projections on what government users will need. And in fact there really isn't a lot of disagreement that -- on the government side; this is true on the commercial side, too, and we have policies to address this -- there's inefficient spectrum use. You know, when spectrum was allocated for satellite earth stations 20, 30 years ago, they weren't done with the kind of efficiency optimization that we do today. Now clearing it is a -- is a challenge.

A couple of points -- I think these are important, so give me a minute to make them. One, I'm increasingly convinced that our leadership in the military services recognizes the benefits of working with us and the commercial sector to change the paradigms, because, yes, they're looking at increasing demands, but they're looking at something else too that's a very serious issue for people who are responsible for strategic planning for our military services. They're looking at a rapidly growing gap between military communications devices and commercial communications devices, a gap in functionality and price.

This gap has always been there, and you know, we've all known for a long time that military communications equipment, you know, cost more and did less than commercial equipment. But the gap, compared to what it's becoming, is relatively narrow. And so, you know, these devices can do 10-X more, 20-X more, 50-X more than the typical military communications device.

And the conversations that we've had have been around this and around the strategic imperative for our military services to adopt new strategies, because the old strategies won't work, to improve the functionality and the functionality price ratio in military equipment.

And one of the ways to do that is to do something that we've suggested as a major policy innovation, which is increase sharing of spectrum between government users and commercial users. And so if you take my point before that there's a lot of inefficient spectrum use on the government side, in some areas we can and should clear and reallocate that spectrum, shrink down the amount of spectrum, for example, devoted to earth stations and clear spectrum for commercial. Where we can do that, we have to continue to do that.

But we will see examples -- we know of examples where it's not cost-effective or practical in the near term to do that. New technologies allow greater sharing of commercial -- government in commercial spectrum, and we are moving rapidly, together with our military services, to make that idea operational, to test it on the ground in a couple of different spectrum bands. This is a big deal.

Last point on this: In the last 30 years in spectrum policy there have been two major policy breakthroughs, two major spectrum innovations, each of which has had tremendous benefits for our economy. One was auctions, allocating licenses through auction, and the other was unlicensed spectrum. Without telling you the whole story -- you know it -- but this is the spectrum on which WiFi was built.

Here's my simple point: Those two policy innovations can't be the last two policy innovations in our history. And given the changes in this world, we need to develop and put in place a new generation of policy innovations. So spectrum sharing, as we talked about, is one. Incentive auctions, a way to reallocate inefficiently used commercial spectrum and free it up for new contiguous block -- blocks of spectrum is another. And the third is a new generation of unlicensed use.

And so those are the three major policy innovations we're working on. If we get those right, we will lead the world in those three policy innovations, as we did in auctions and on license. These are big strategic imperatives for the United States.

PRIETO: Good. I'd like to open it up. Looking at the clock, we have just time for -- one question? You want to bundle two? (Laughter.) Let's bundle -- can we bundle two?

MR. : If they're quick.

PRIETO: OK, if they're very quick. All the way in the back -- yeah.

QUESTIONER: Mr. Chairman, when you talk about open Internet and preserving that today on this international stage, there's a lot of echoes to the policy decisions you made when you first came in, in 2009, on a domestic level with your Net neutrality regulations, though at that point you were arguing for rules. In this case, you're arguing against and talking about your fear of sort of protectionist, restrictive policies and other countries not implementing certain types of technologies. Can you explain the difference in the point of view on the international versus the domestic side? Because it seems sort of contradictory.

GENACHOWSKI: Absolutely. The idea that the U.S. is opposing internationally is the idea of having a new layer of international Internet regulation that would be unprecedented and completely inconsistent with the models of Internet governance that have worked for many years. The framework that we adopted in the U.S. 2 1/2 years ago is something that was strongly supported by the Internet community as this new level of Internet regulation is opposed. So that is our focus in the United States, it's bipartisan and it's extremely important.

PRIETO: So with that, unfortunately I'm getting the hook signal from our masters. So thank you very much, Chairman Genachowski, very rich remarks on the (upfront ?). I apologize that we didn't have as much time for audience for audience questions on the back end. But thank you for your remarks. Very compelling discussion today. And thanks, everyone in the audience. (Applause.)

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