Delivering Broadband to All Americans--Quickly

Remarks by F. Duane Ackerman Chairman and Chief Executive Officer BellSouth Corporation As delivered to Technology Forum Washington, D. C.

For Immediate Release:

May 19, 1999

When the Telecom Act became law in 1996, companies like mine controlled the narrowband last mile, which remains a very durable, reliable medium for handling voice and slower-speed data.

We didn't control the broadband last mile, which was used primarily for CATV.

We still don't control the broadband last mile.

In what is good news for consumers, the AT&T-TCI-MediaOne-Microsoft combine has created a broadband last mile. It will provide video, Internet access and voice over IP.

In the new world of communications, broadband has become the desired state for moving information.

Put another way, the future of communications rides on broadband.

Some of you might not know what broadband or narrowband mean. They simply refer to how fast information flows. Narrowband is slower, broadband, faster.

More precisely, narrowband is associated with speeds of 28 or 56 kilobits per second; broadband, with speeds of 1.5 megabits per second.

Narrowband was fine when all you wanted to do was use the phone to talk with someone or to send or receive simple text. But it's not up to the demands created by the convergence of computers, cable TV and communications; the evolving world of the Internet requires transmission speeds for graphics, photos and video.

Here's an example that illustrates in practical terms the difference between narrowband and broadband-on-line education.

In the narrowband world, on-line education consists mostly of text. Some graphics are included, and, often, links to other web sites. If these other sites include video, or complex charts and graphs, your narrowband access probably isn't really up to the job-unless you don't mind sitting there waiting, and waiting, and waiting.

With broadband, on the other hand, a new world of on-line education opens up: You could see streaming video of a professor's lectures; you could see the give-and-take among students physically present in the class. In some cases, with a manageable number of people, the class could actually see you while you ask questions or respond to other's questions.

That's broadband versus narrowband.

Or consider a photograph of your child that you scan into your PC and send to your parents over the Internet.

With narrowband-traditional telephone lines-the transmission takes 10 minutes; with broadband, 12 seconds.

By the way, I want to go back to on-line education just a moment. It's a powerful illustration of why broadband is important in the first place.

On-line education has become a real boon to working adults. It's a means for people to move out of dead-end jobs, or if they're in a good job, to move up to a better one.

It's happening all over the country. And it's getting a lot of attention from students more generally.

Chairman Kennard's undergraduate alma mater, Stanford, is among 300 colleges and universities now offering some degrees on-line.

And just as broadband brings a richer form of on-line education, so too will it bring richer forms of e-commerce and more powerful tools in day-to-day work.

And now the AT&T-TCI-MediaOne-Microsoft combine is creating another broadband last mile. Not only is it good news for consumers, it's good news for policymakers: It creates the competition they've been looking for.

The upshot is this:

Most American homes are now connected to two communications networks, and, increasingly, these networks will offer the same services-cable TV, telephone, Internet access-fast access, broadband access.

So the pressing question is:

How do we deploy broadband to all Americans-quickly, as fast as possible.

We all agree it's a worthy aim for public policy.

Cable companies, software companies, computer hardware companies, Internet access companies, the phone companies-we all want to see broadband deployed as quickly as possible.

Chairman Kennard, as he made clear again today, is a strong advocate for putting broadband within the reach of all Americans. Anyone who reads his speeches knows it is a consistent theme for him.

If you run into the world wide wait, you likely agree that broadband pipes are needed.

In the current deployment of broadband, the cable TV industry is ahead of the LECs-far ahead. At the end of April about 700,000 customers were using cable modems, the cable version of broadband; about 100,000 were using XDSL, the local phone company version of broadband.

So we agree on the aim.

But how do we do it? What will make it happen sooner rather than later?

Some say the Telecom Act should have been comprehensive enough to address these questions.

It's a measure of how quickly technology and the marketplace are changing that it did not.

We have to remember that back when legislators first began writing the act, consumers weren't using the Internet. It was the province of universities, academics, scientists, engineers.

It was only as we moved toward completion of the act that the Internet was beginning to make a stir as something a consumer might use. Ultimately, the term "Internet" is only mentioned in two sections of the Act; neither of these focused directly on the rapid deployment of broadband to all Americans.

In short, the Act was based on the world of voice.

In the world of voice, the Act is up to the job. In voice it is moving the various pieces of the industry in the right direction.

The Telecom Act does not need to be thrown out.

But the advance of technology and demand in the marketplace have created a new world-the world of data.

As you know, data is everything from e-mails, to music and photographs you might download, to video games, to x-rays, to architectural drawings-anything that can be digitized.

And today we can digitize most everything.

You all know firsthand what a new world this is.

Not that many years ago you used the telephone to talk with people-and that was all.

Now, you use your PC hooked to a communications network-either a telephone nework or a cable TV network-to do research, to e-mail friends and family around the world, to order books from Amazon.com, to get airline tickets and all the rest.

This new world calls for broadband.

And in turn we believe the growing demand for broadband calls for new policy to augment the Telecom Act.

We said that we here agree that deployment of broadband is a good thing.

We also stressed "fast" deployment.

When you add the qualifier "fast" deployment or "fast as possible", there are, as a practical matter, only two ways to get broadband to all homes in America-in the near-term.

Yes, various wireless technologies offer promise. Teligent is showing us what can be done with wireless to provide broadband to businesses.

Fixed wireless has promise for residential customers.

Satellite has promise.

And BellSouth isn't forgetting all those entrepreneurs out there who are delivering broadband.

We at BellSouth are selling ADSL wholesale to some 16 ISPs, the latest being Mindspring. These 16 companies resell our ADSL. And we want to continue working with these customers, and acquire new ones.

But if you want fast deployment there are really only two paths.

These two much quicker paths to fast deployment already reach most American homes.

The two paths are:

An upgraded, rebuilt cable TV system.

And:

An upgraded, rebuilt phone system.

On the cable side, the course for deployment is clear.

A company can invest its money, invent the technology develop new products and services and serve its customers.

That is an investment-friendly policy that furthers our shared aim of deploying broadband.

We at BellSouth certainly expect that AT&T-TCI-MediaOne-Microsoft combine will-as it should-move aggressively to deploy it.

That's on the cable side, a clear course, an investment friendly course.

On the phone side, the course is unclear.

Will data be regulated? How much?

If we invest in data will we be required to unbundle elements and sell them at a discount so our competitors can resell them without having to make the investment?

Will we be required to have a separate subsidiary for data?

If so, just how separate is separate; how much of a handicap will that be to recovering our investment?

How much unnecessary cost will that drive into our business case?

As you can see, this environment is not as investment friendly as that the cable TV companies are operating in-including that formidable combine of AT&T-TCI-MediaOne-Microsoft.

There is a tremendous imbalance-in regulation, in risk.

More regulation for us; less for AT&T and our other competitors.

More risk for us; less for our competitors.

Thus far, AT&T, whose purchase of TCI has been approved, has no requirement to open its network or to unbundle elements for its competitors.

We think this will encourage AT&T to deploy broadband more rapidly, and we believe this is a good thing for consumers.

But the other platform-the upgraded, rebuilt telephone network-is not being encouraged in the same fashion. That's not a good thing for consumers.

AT&T's CEO, Michael Armstrong, stated the investment problems we face when he laid out the reasons why AT&T should not have to unbundle network elements, and I quote:

"Now some narrowband Internet service providers want the government to give them a free ride on those broadband pipes. That's just not fair. It's not right. Worse it would inhibit industry growth and competition. No company will invest billions of dollars to become a facilities-based broadband services provider if competitors who have not invested a penny of capital nor taken an ounce of risk can come along and get a free ride on the investments and the risk of others." We agree with Mr. Armstrong's assessment. Such policies do inhibit investment; they inhibit deployment. If the goal of public policy is to spur the rapid deployment of broadband, such policies work against that aim.

We believe these two platforms should be pitted against one another head-to-head.

Less regulation will give America the best outcome. And in "less regulation", I include our preference for the forbearance of regulation of AT&T.

I am not as concerned about what they can do as I am about what BellSouth can't do.

Consumers will benefit when these two industries are racing to get their firstest with the mostest.

Line them up, drop the flag, let them race to see who gets to the home fastest.

And I believe this race will have the additional benefit of spurring the development of fixed wireless and satellite broadband pipes.

Again, we all agree that the fast deployment of broadband to all Americans is a worthy goal.

Members of the House and Senate will be introducing legislation that would set this race in motion.

We need the race because of this additional fact:

Business is already getting broadband. In the next year, great numbers of affluent neighborhoods will see broadband-with offerings from two competitors. Densely populated areas will get broadband.

Not so in rural areas; nor is it likely to happen in many poor neighborhoods.

However, the rural and non affluent neighborhoods will share in the benefits from letting the competitive race begin.

To me that is the most compelling argument for letting the race begin.

Thank you.

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