Copyright 1999 Federal News Service, Inc.
Federal News Service
JUNE 24, 1999, THURSDAY
SECTION: IN THE NEWS
LENGTH:
1986 words
HEADLINE: PREPARED STATEMENT OF
MR.
GEORGE VRADENBURG
SENIOR VICE PRESIDENT, GLOBAL AND STRATEGIC POLICY
AOL
BEFORE THE HOUSE COMMERCE COMMITTEE
TELECOMMUNICATIONS,
TRADE
AND CONSUMER PROTECTION SUBCOMMITTEE
BODY:
Introduction
Chairman Tauzin, Ranking Member Markey,
members of the Subcommittee, thank you for the opportunity to discuss the
important issue of the Internet in a broadband world. I believe that this
hearing marks an important step in Congress' examination of issues that are
critical to the future of the American economy and society as we move further
into the Information Age.
The Internet Today
Unlike any other
communications technology that has preceded it, the Internet is a truly
remarkable phenomenon. In only a few short years, the medium has literally
transformed the way Americans communicate, engage in commerce, educate
themselves and even participate in our democracy. It is a place where an untold
number of new entrepreneurs have discovered that if they build something -- a
Website, a business or a new access service -- thousands, even millions, will
come. Always open for business, always open to new ideas, the Internet is
perhaps the most dynamic force in our society and economy today.
More than
half of American households -- a total of 53 million -- now own PCs. And about
one-third of American households now have access to the Internet. Every month,
nearly 1.5 millions Americans join the online world for the first time, bringing
the percentage of the US population online from nearly zero in 1990 to over 30
percent today. Indeed, the number of online households in the United States grew
by a factor of eight between 1994 and 1998. In five years, nearly 60 percent of
Americans are expected to be online. This same rapid growth path can be seen
throughout the world, where the number of online users is expected to reach 250
million by the year 2002. As one would expect from all of these users online,
traffic on the Internet is doubling every 100 days and analysts are predicting
that by 2002 consumers will spend nearly $43 billion a year online, compared to
$8 billion last year.
The most significant aspect of this online phenomenon
in many ways is the degree to which consumer choice and competition at all
levels of the Internet marketplace has fueled its growth; consumer adoption
rates are far out-pacing the predictions of even the most aggressive analysts
only a few short years ago -- and far outpace the track record of any other
medium in history. Today over 6000 ISP's offer a wide variety of price, feature
and service packages; over 90% of Americans have available to them competing
Internet services with local dial-up connections. Competition has brought prices
down, raised the quality of service and expanded the range of Internet features
at all points in the Internet value chain. From the migration to flat rate
pricing in the access market to rapid innovation in business models, no Internet
business man or woman has been able to lose sight of competition for even a
moment lest the rug be pulled out from under them.
Consumers are the drivers
-- and the ultimate beneficiaries -- of this fierce competitive and open
environment. With virtually no barriers to entry into the Internet marketplace
and no gatekeepers collecting tolls from new businesses, consumers have seen
their product choices expand, been granted access to a wealth of information
historically available only to those with means and have been empowered to
participate in civic life in ways that were previously imaginable.
The
Broadband Future
In the next few years, the interactive medium will be
available not only over today's "narrowband" technologies but also through
"broadband" connections 100 times faster than today's access speeds.
As
broadband becomes widely available, affordable and easy-to-use, it will meet the
needs of consumers, small businesses and our community in new ways we have only
begun to imagine. Online shopping -- and online-selling -- will explode as more
sophisticated technologies expand the range of products and services available
online and make it possible to view, tour, test and even "try on" a range of
products.
And beyond online shopping will come the home office.
Telecommuting -- involving everyone from typists to traders -- will come into
the mainstream through broadband's capabilities, benefiting cities across the
country through reduced traffic and pollution. One-person Internet-based
operations will compete with multinational corporations, creating whole new
local industries.
As broadband expands the capabilities of the Internet, its
role will expand as society's "great leveler" -- putting world-class resources,
the widest range of products and services, and even access to the outside world
at the fingertips of anyone capable of flipping a switch or dialing a telephone.
The Future will be Multidimensional
Remarkably, today's Internet is
built on a single access platform borrowed from the world of voice telephony.
Tomorrow, broadband Internet may well be built on multiple access platforms --
telephone, cable, satellite and wireless. Indeed, our vision for residential
Internet access is one of a true "broadband tapestry."
In a
multiple-platform environment, it is our view that consumer choice and
competition can and should be enhanced not limited -- consumers should be able
to choose among infrastructures, as well as services.
In this vision,
multiple service providers will offer services of varying speed and
functionality to their consumers through multiple platforms. Ideally, any
Internet service provider could offer consumers different applications using
different access technologies -- and the consumer would never have to know
whether their Internet service provider was using DSL telephone
lines, cable modems, or hybrid satellite delivery. Indeed, the consumer, in a
fully competitive broadband world should not be aware of which access technology
its Internet service provider is using -- the consumer cares about service and
applications, not technology. The transparency or invisibility of the technology
employed by a service provider is critical to the success of the Internet as a
mass medium.
It is important to recognize that despite this vision, for the
next several years, two-way broadband access to the Internet for the consumer
marketplace will be offered primarily through two sources, both wireline --
DSL through traditional phone lines and cable modems over cable
systems. In the case of DSL, telephone companies offer non-
exclusive and non-discriminatory interconnection arrangements. We, and our
Internet competitors, have entered into such arrangements with the prospect of
higher speed Internet services and more robust applications becoming widely
available in neighborhoods accessible by DSL by the end of the
year.
Other broadband access technologies will also become available at some
point in the future.
In fact, just this week AOL announced an alliance
with Hughes Electronics to help bring a hybrid form of high-speed Internet
access through satellite to consumers by early next year. As a result, consumers
will be able to benefit from affordable, convenient and faster Internet service
even if they live in traditionally hard-to- serve communities like rural areas.
In today's Internet environment, rural consumers and those in other high cost
areas have choice and flexibility in Internet access. Tomorrow's rural Internet
customer should have the same choice and flexibility. What makes satellite
broadband connectivity distinctive is its availability nationwide, particularly
where other services are not rolling out. In the next few years, satellite
systems can provide their download speeds up to 14 times faster than the
standard 28.8 kbps modem, with uploads over phone lines at speeds up to 56 kbps.
In the longer term, two-way, higher-speed connectivity will be available by
next-generation satellite systems, such as Hughes' Spaceway,™ expected
to be available for residential applications by 2003.
It is in the cable
environment where we see the potential for consumer choice and competition in
broadband services to be at risk. Unlike in other broadband facilities,
providers, cable companies do not plan to offer access to Internet services --
insisting that a customer purchase the cable-owned or affiliated service before
buying or accessing a competitive service. This practice has at least three
adverse consequences. First, it eliminates competition in the access market,
thereby challenging the Internet model that has kept prices falling and service
quality rising over the last several years. Second, it forces consumers to pay
twice to get the Internet service of their choice, thus depriving moderate and
low income families of cable-based Internet service. Third, it discriminates in
service quality between the cable-owned Internet service providers -- whose
content is directly accessible -- and independent Internet service providers --
whose content is only indirectly available through the Internet. To make matters
worse, the cable companies have even stated their intention to preclude access
to content otherwise available to the consumer on the Internet, material with
which the cable system does not wish to compete, including video material longer
than ten minutes. The Policy Environment
AOL believes that competition,
openness and consumer choice are the essential ingredients of the success of the
Internet, whether consumers access the Internet by broadband or narrowband
means. As technologies converge and all services -- voice, data, video and
others - are offered over traditionally distinct voice or video platforms, old
regulatory classifications will not be sustainable. As a result, regulatory
parity should become a clear priority, lest Congress favor one technology
platform over another.
In moving toward regulatory parity, Congress must
choose between the open model of the Internet or the closed model of the old
AT&T and of cable.
We believe the choice is clear. As the Internet
marketplace has demonstrated, competition in an open environment will deliver to
all American consumers' lower prices, better services and more innovative
products.
Further, the goal of Congress in this area should be to rely
increasingly on the marketplace, and less on regulation. We can do that by
assuring a market-oriented framework where entry costs are low and where
business success is achieved by a better product and lower price, not by
ownership of bottleneck facilities or more favorable government regulation.
We decided nearly 20 years ago that open interconnection and
nondiscriminatory treatment of national service providers by owners of last-mile
bottleneck facilities should be the cornerstone of our national and
international communications policy. The remarkable developments in the Internet
over just the last 5 years have proven the wisdom of that choice. The rules of
the game have changed; we gave monopoly a chance and it failed; we decided to
take a different, more competitive, path; and we as a nation are better off as a
result. Indeed, the attached chart shows the benefits of competition across
multiple communications media, only, in cable, where there is little competition
have prices risen.
While Congress's role in this area should be as "hands
off" as possible, you and your colleagues, have in my view, a responsibility to
consumers to ensure that the benefits being delivered by the Internet
marketplace are preserved and fostered in the future. It should be our ultimate
goal to continue an environment of consumer choice and competition -- where
prices have been shooting down instead of up and services have gotten better and
better. This Internet DNA of choice and competition -- not the gatekeeper DNA of
vertical integration -- should be our guiding star. If gatekeepers want to play
in the new Internet game, we should require them to play by Internet rules. We
owe consumers no less.
Thank you for the opportunity to appear before you
today.
END
LOAD-DATE: June 29, 1999
