Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
June 30, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 2741 words
HEADLINE:
TESTIMONY June 30, 1999 KEN WASCH PRESIDENT HOUSE JUDICIARY
INTERNET BILLS
BODY:
Testimony of Mr. Ken Wasch
President Software & Information Industry Association before the House
Committee on the Judiciary Legislative Hearing on H.R. 1686, the Internet
Freedom Act and H.R. 1685, the Internet Growth and Development Act of 1999 June
30, 1999 Good morning, Mr. Chairman and Members of the Committee, and thank you
for the opportunity to testify before you today as you consider H.R. 1 685 and
H.R. 1686. My name is Ken Wasch, and I am President of the Software &
Information Industry Association (SIIA). SIIA was formed in January of this year
through a merger of the former Software Publishers Association and the
Information Industry Association. SHA represents 1,400 companies that produce
valuable information and software products crucial to the growth of electronic
commerce. Our members provide not only the products that ensure the continued
growth of the Internet but also the online content and services that assure the
Internet will be a marketplace where consumers can obtain the types of
high-quality, reliable code and content that they demand. In many ways, the
Internet is still in its infancy, and as the medium continues to mature, our
member companies will continue to pave the way for every other industry that
strives to take full advantage of electronic commerce. As such, SIIA and its
members have long had a strong interest in promoting the deployment of
competitive services to benefit their businesses and their customers, including
competition in the backbone of the Internet, those lines of communication so
essential to the efficient and rapid functioning of networks. Every few years,
the computer industry experiences the advent of new technologies that
dramatically change how we use computers and access information. The
introduction of graphical user interfaces fifteen years ago made computers much
easier for millions of individuals and businesses to use. The mouse was in; the
"C" prompt was out. Companies that adapted to this change prospered, those that
did not perished. The growth of local area networks ("LANs") in the late
eighties and early nineties made it much easier to share information easily
among users around the world and created even greater opportunities for both the
information and software industries to offer new and more useful products and
services. Once again, companies that failed to incorporate networking
capabilities into their operational infrastructure were unable to compete with
those that had recognized this shift. The commercialization of the Internet in
the mid- I 990s marked perhaps the most important paradigm shift in recent
memory and was strongly encouraged by our industry. Millions of Americans that
had never used a computer now found access to the Internet to be a compelling
reason to purchase a computer and get connected. The growth of the Internet has
been nothing short of phenomenal, and has had an indelible effect on individuals
and businesses alike. It has transformed how we communicate, access information,
shop and handle our finances. As this medium continues to evolve and
accessibility increases, more and more goods and services, especially
information and software products, will be available online to consumers around
the world. Growth of commerce on the Internet has been possible because the
government decided to step aside and encourage business to take the lead. Its
rapid deployment has been dependent, first and foremost, on the construction and
availability of a wide range of lines of communication and points of access.
Much has been accomplished in terms of creating and enhancing this crucial
infrastructure, but even more advances are on the horizon. The fact of the
matter is, Mr. Chairman, that the Internet is still accessed by most people
through narrow-band 28.8 baud modems. These connections are much too slow to
receive or send robust products, such as complex interactive services or the
further convergence of voice, data and video products that are in the
marketplace today but generally available only to large businesses. Yet these
products could easily be accessible to smaller enterprises and by consumers as
well and would ensure that the Internet becomes an even more valuable medium for
U.S. consumers and an even greater engine of economic growth. We are on the
verge of the next paradigm shift-the rollout of broadband Internet services.
Broadband services hold significant promise, but in order to see the promise
realized, it is essential that there be strong competition among those that
provide initial points of access to the high-speed lines of communication that
are being deployed across the nation. As noted above, the commercialization of
the Internet-and the resulting economic benefits-were supported by sound
government policies that encouraged competition in the telecommunications
market. Likewise, the expansion of high-speed connections to the home can occur
only if government acts carefully to assure that there is competition among
Internet transport providers as well. As the principal representative of code
and content companies, SIIA is concerned that consumers be able to choose how
they wish to access the Internet. Consumer choice, not controls by the
government or certain favored players, is the proven way to assure a
competitive, vibrant marketplace. SIIA believes strongly that greater
broadband deployment and the resulting increase in Internet
connection speeds to homes and businesses can only enhance the value of Internet
services and products. In fact, without the widespread deployment of high- speed
services, the future development of the Internet could easily be stalled. There
is a role for both incumbent and alternative local telephone companies to play
through more rapid deployment of advanced Digital Subscriber Line ("DSL")
services in all areas of the country, both urban and rural. DSL technology
offers faster access to the Internet utilizing the existing telephone
infrastructure than the common, much slower dial-up services available to most
consumers today. The broader availability of DSL services will greatly increase
competition in the provision of Internet data transport by those that own or
lease these lines, whether they be incumbent or alternative local telephone
exchange companies. Expansion of DSL capabilities represents a huge step forward
in consumer access to broadband services, just as emerging wireless and
satellite services hold the promise of even more capabilities for high-speed
Internet access. This Committee foresaw the wisdom of policies encouraging
competition among providers of land-line communications when it helped craft the
Telecommunications Act of 1996. Although the goals of that legislation have been
slower to reach than some had hoped, in the three short years since the Act
became law, its framework has encouraged new investment and innovation in a
broad range of communications service offerings. Companies-whether incumbent or
local exchange carriers, long distance providers, and even cable, wireless or
satellite service providers-see the reality of increased competition a short way
down the road and are beginning to position themselves to the make the most of
rapidly expanding market opportunities. Our Association agrees wholeheartedly
with the approaches taken by Congress in that Act and believes that a similar
approach must be taken generally in regard to laws that may affect further
development of the communications infrastructure underlying the Internet.
Government interference must be minimized so that competition can become even
more robust. The information technology industry-and by consequence Internet
infrastructure- has grown at tremendous rates precisely because these business
sectors have been free to develop without excessive government regulation. This
development has, in turn, helped fuel the growth of the information and software
industries, encouraging the provision of innovative products and services in
even greater numbers to benefit both businesses and the consumer. Competition
among all segments of Internet transport industries assures that consumers
retain the freedom to select both the means by which they access the Internet
and the service provider whose offerings of code and content best meets their
needs. Internet transport providers, such as telephone, cable, wireless and
satellite companies, should not be able to engage in anticompetitive behaviors
that frustrate or forestall consumer choice. Predominant carriers that are able
to control unfairly initial access to the Internet by bundling advanced
communications services can also limit customer purchases of Internet services,
including the valuable code and content that customers want. The ability of any
provider of broadband services to gain an unfair advantage through monopoly
control of its services and intentionally preclude consumer access to multiple
Internet service providers ("ISPs") is a worrisome development. Consumers may be
effectively denied choice in terms of the content would be otherwise readily and
easily available to them. Code and content companies that would otherwise be
encouraged to offer greater and more valuable services will be forestalled from
creating innovative products. Let me be clear, Mr. Chairman. We are not
concerned that certain Internet content will be blocked completely from access.
Rather, the industry believes it benefits no one if transport providers, through
unfair monopoly control, can bundle services selectively and hinder consumers in
viewing and purchasing online products and services. It cannot be in the
interest of our industry or our customers, if the competing, high-speed
transport carriers use their position in the market to make decisions on access
for the consumer, rather than making it easier consumers to exercise their own
choices. All ISPs have the opportunity to cache content so that their customers
can access it faster. In addition, ISPs frequently customize the first screen
customers see when first accessing the Internet. Customers can generally modify
the first screen, and many do so. However, we cannot minimize the impact of
having content selection made by the ISP, especially if a broadband service
provider is the only transport service realistically available to the customer
and that provider offers no choice in the ISP available to that customer. Any
broadband carrier that can exercise unfair market power that adversely affects
the consumer's choice of Internet service provider can also effectively
foreclose the distribution vehicle to code and content products of all types.
Consider, for example, a situation where the opening screen of the favored ISP
promoted Visa, rather than MasterCard or American Express, as the credit card of
choice; or Reuters, rather than Bloomberg, as the favored news source. The firm
not selected for preferential treatment would not necessarily be blocked from
customer access, but it is clear that a tilting of the playing field can have an
enormous impact on which product or service is even known to consumers, let
alone used by them. We would not be concerned if there exists effectively a wide
range of broadband providers and each makes its own independent selections.
After all, each restaurant can select whether it serves Coke or Pepsi. Chains
normally make those selections for all franchises, and consumers can choose to
eat in a particular restaurant or go to another for comparable service. However,
it would be intolerable if a single restaurant chain provided the only realistic
opportunity for consumers' patronage and used its position in the marketplace to
preclude their ability to choose one soft drink over another. The same holds
true for access to information. As the technology paradigm shifts, we must watch
closely to ensure that no one firm controls broadband access to American
consumers and in doing so precludes choice in ISPs and the code and content
services those ISPs offer. Under current FCC regulations, incumbent local
exchange carriers are already prohibited from engaging in such bundling.
Congress was purposeful in this approach when it passed the Telecommunications
Act of 1996, for it recognized that the monopoly controls enjoyed by incumbent
local carriers-ones long sanctioned by law and financed by essentially all
Americans who constituted the rate-payers-had to end, if further, innovative
infrastructure development was to become a reality. The bills under
consideration by the Committee today would apply the same unbundling rules to
other providers of Internet transport, including cable, wireless, and satellite
services, as a means of further enhancing competition. In recent weeks, SIIA's
policy group has engaged in a spirited and valuable debate on the issues that
are the subject of today's hearing. Our members are united in the conviction
that the creation of a regulatory system that influences the deployment of
broadband services in the wrong way will only slow such deployment. We cannot
support a policy that discourages and encumbers those who are making the huge
investment necessary to provide such services. Further delays in deployment will
only prevent more ubiquitous access to the many valuable information and
software products that consumers are demanding in greater and greater numbers.
At the same time, however, we cannot risk development of predominant carriers
who can and will use their market power unfairly to preclude competition on the
Internet. SIIA is not prepared at this time to comment on specific provisions in
either bill under consideration today. However, we believe there are several
crucial questions that this Committee and your colleagues in Congress must keep
in mind in making your decision, and they are similar to the ones faced by you
in crafting the Telecommunications Act of 1996. First there is the question of
technological capabilities, namely whether cable, wireless and satellite
providers have the same capacity as do local exchange carriers to accommodate a
multitude of access providers offering similar, competing products and services
adapted to high-speed transfer of code and content. The second question relates
to the nature and extent of the control over the communications lines that these
carriers offer. Is the type of monopoly that local governments have granted to
the cable industry, for example, and the manner in which it has been financed,
comparable to the situation that Congress corrected in relation to incumbent
local exchange carriers under the Telecommunications Act of 1996? Third,
Congress must make the determination whether the existence of alternative
transport providers-including the whole gamut of telephone, cable, wireless, and
satellite services emerging in the marketplace- offers sufficient competition
and adequate reach to assure that consumers and smaller businesses have choices
in how they achieve high-speed access to the Internet and the software and
information services they desire. Finally, Mr. Chairman, SIIA believes Congress
should determine whether there has been, or is likely to be, a failure of the
Nation's antitrust laws and mechanisms to the point that possible monopolistic
behavior in the Internet transport sector cannot be remedied. In conclusion, let
me be very clear that SIIA strongly believes consumers and businesses are best
served by having a wide variety of choices for Internet access. We remain
committed to the principle of minimal regulation of the Internet and healthy
competition as the best means of assuring such choice. Policymakers should
encourage the rapid deployment of broadband technology, a goal most easily
achieved by eliminating wherever possible regulations that might otherwise
reduce market incentives. The broadband marketplace must be competitive,
allowing code and content providers maximum choices in how they deliver-and
consumers access-products and services on the Internet. SIIA and its member
companies stand ready to assist the Committee in any way possible as you sort
through these important issues. Clearly, this debate is one that will have
effects reaching further than simply the interests of rival transport carriers,
and the code and content industries must be part of the debate. Thank you again
for the opportunity to appear before you today, and I will be glad to answer any
questions.
LOAD-DATE: July 2, 1999
