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My name is Peter
Pitsch and I am the Communications Policy Director for Intel
Corporation. I would like to thank you for this opportunity to
testify before your Committee. For three decades, Intel
Corporation has developed technology enabling the computer and
Internet revolution that has changed the world. In 2000, Intel
had sales of $33.7 billion, over 86,000 employees, and spent
$3.9 billion on research and development and another $6.7
billion on capital expenditures. Intelīs mission is to become
the preeminent building block supplier to the worldwide
Internet economy. Of particular relevance to the issue of broadband deployment, last
November Intel successfully launched the IntelŪ PentiumŪ 4
processor designed to deliver advanced performance for
Internet computing, including imaging, streaming video, speech
processing, 3D, multimedia and multitasking.
Intel believes
that the rapid deployment of affordable broadband technology
would drive dramatic growth of the Internet, e-commerce and
the IT sector. As Chairman Andy Grove, said in Intelīs most
recent annual report, "Connectivity is certainly whatīs
driving the growth in computing right now."
Broadband has
the potential to transform the Internet. Sixty-four percent of
CEOs "cited broadband connectivity as the most significant
immediate factor influencing the way customers will experience
entertainment and communications in the future."
According to a recent Business Week article, "In the long run,
realizing the promise of the Net will depend on the widespread
introduction of advanced technologies such as broadband to the
home..."
Some reasons why are:
·
Increased bandwidth could enhance
distance-learning, telemedicine, home-management, and public
services, in addition to features such as video on-demand and
audio streaming.
·
Video conferencing and Voice over the Internet
could connect family and friends.
·
Web surfing and e-commerce will occur at much
faster speeds and with more video content.
·
The "always on" capability of broadband means
that services such as electronic yellow pages, stock quotes,
and weather forecasts, will be utilized more often than when
users have to dial-in every time they want access to this type
of information.
·
Websites will become more interactive and
graphics-intensive. Online shopping will become more
attractive when more websites are able to offer better
customer service. For example, Landīs End converts more than
10% of its Web visitors to buyers- compared to the average
4.9%- in part because it offers live chat and other customer
service extras.
However,
we are just beginning to fathom the possible effects of
broadband access. Consider the difference between the first
computer applications and those offered today. Dramatic
increases in broadband access could spur another "virtuous
cycle" of innovative products and services similar to those
that have been introduced by hardware and software developers
in the PC sector. And while only about 5% of U.S. households
have broadband, one thing is certain: once users experience
broadband, they value it. In fact, 63% of respondents in a
recent survey stated that they would give up coffee before
they gave up their DSL service.
Broadband access
has implications for more than just service providers and
their customers. Specifically, the IT sector as a whole will
benefit. For example, one study considered broadband revenues
for various groups including manufacturers of communications
equipment, gateway devices, and semiconductors, as well as
service and content providers. They estimate that worldwide
broadband revenues will increase from $59.7 billion in 1999 to
$464.5 billion in 2004.
It should come
as no surprise then that Intel wants policymakers to get
broadband policy right. Like consumers, Intel wants public
policy that promotes the rapid deployment of affordable
broadband technology to all consumers. In pursuit
of this goal, Intel joined other members of the Information
Technology Industry Council (ITI),
in the adoption of the following broadband principles:
1)
Markets, not regulators, should drive the deployment of
broadband technology. To that end, ITI supports the
deregulation of the telecommunications industry and the
continued non-regulation of information services.
2)
Market-based competition among all channels of the
communications marketplace is the best way to promote rapid
deployment of broadband technology.
3)
Government intervention in the market is appropriate
only where a competitive bottleneck exists.
4)
ITI does not endorse any single broadband technology
and believes deployment of multiple technologies will benefit
consumers.
Consistent with these principles,
Intel believes that the Congress and Federal Communications
Commission (FCC) should encourage the rapid deployment of
broadband services to consumers through deregulation of the
incumbent telephone companiesī new, so-called "last mile"
broadband investment. I wish to point out that Intel is
neutral on whether the interLATA restrictions of the 1996 Act
should be modified. We believe that deregulation of last mile
broadband investment, however, could be done in a way that
would preserve the 1996 Telecommunications Act goal of
removing barriers to competition in the telecommunications
markets and stimulate investment, spur technological
innovation, reduce prices, and increase consumer choices.
Section 232 of H.R. 2420, last yearīs vintage of The Internet
Freedom and Broadband Deployment Act, would have moved in this
direction.
In particular,
Intel believes unbundling requirements for new broadband
equipment and fiber loops deployed between an incumbent
telephone companyīs central offices and residences should be
eliminated. This action would remove a deployment disincentive
that Incumbent Local Exchange Carriers (ILEC) face-being
required to allow competitors unbundled access to this new
high-speed equipment. In the past, Intel has supported the
imposition of unbundling obligations on the ILECsī essential
facilities but we do not believe these obligations should be
extended to new broadband services for residential customers
because that investment is both risky and discretionary.
Unlike the existing local loop, ILECs do not have a legacy
advantage in newly installed broadband investment and
broadband equipment is readily available to competitors and
ILECs alike. Removing the unbundling disincentive will lead
ILECs to deploy more quickly high-speed services such as DSL,
bringing the benefits of broadband technology to more
consumers. Intel believes those who take the broadband
deployment risk should get the reward.
Intel is
satisfied that safeguards can be designed to ensure that the
removal of those barriers has the desired effect and does not
adversely impact competition. Importantly, deregulation should
be conditioned on ILEC compliance with FCC and state
collocation and loop provisioning rules. Intel has long
maintained that it is important that the competitive local
exchange carriers (CLECs) have access to ILEC loops and
central offices. Indeed, in December 1998, we reached an
accord with several ILECs that conditioned deregulation of
their broadband services on their making these essential
facilities available to the CLECs. Finally, in the case of new
fiber loops, ILECs should be required, upon request, to
maintain the existing copper local loop, so competitors do not
lose access to the home and remain capable of providing
advanced and other telecommunications services.
Intel also
believes that to get relief an ILEC should be required to meet
important build-out benchmarks. For example, it could be
required to make advanced services available to 80% of its
customers within 3 years and 100% of its customers within 5
years. In sum, Intel believes there is a sensible step-by-step
approach to eliminating regulatory barriers that will
encourage rapid deployment of advance services to consumers
through deregulation and competition.
I would like to
close by noting that Intelīs support of DSL deregulation is
just one part of a consistent set of policies that we believe
will increase the deployment of a variety of competing
broadband technologies. For example, in the area of high-speed
cable access, through ITI we supported the FCCīs decision to
forego regulatory action to mandate cable access.
ITI has also advocated regulatory relief for ILECs before the
FCC. ITI argued, and the FCC agreed, that certain high-speed
DSL equipment installed by incumbent local phone companies
should not be required to be unbundled. ITI submitted comments
to the FCC on this particular matter because we believe that
it will enhance the competitive growth of the broadband market
by providing an incentive for ILECs to deploy DSL quickly. At
the same time, however, the FCC also agreed with the position
taken by ITI that the local loop must remain open to all
competitors.
As you can see,
Intel has been actively involved in broadband policy issues.
We have not sided with one camp or another, but instead we
have supported and opposed the positions of all of the major
players at one time or another. Throughout this policy
process, Intel has supported the same basic goal; namely,
rapid deployment of widespread, affordable broadband for
consumers.
We would encourage the Committee to be as
forward-looking as possible when it examines broadband issues.
As we all know, the telecommunications debates of the latter
part of the 20th century often involved pitting entrenched
business interests against each other, or they focused on the
competitive deficiencies of one communications medium or
another. Today, we have a far different landscape, one that
has emerged only in the last several years. With the Internet
achieving status as a mass medium, consumer demand for
broadband data service has grown dramatically. All major
communications infrastructure providers should be encouraged
to meet that demand even if, in practice, that means the
government will be loosening some of the regulatory
restrictions that may have made sense in a prior era.
As this debate continues, I would urge you to turn to
Intel and the high-tech community as an disinterested voice on
these important issues.
On behalf of
Intel, I would like to thank the Committee for its time, and I
would be glad to respond to any questions.
ITI wrote to FCC in support of
the Commissionīs amicus brief in AT&T v. City of
Portland. ITI argued that because cable Internet access is
an emerging service and the providers currently lack market
power in the Internet access market, they should not be
subject at this time to open network requirements.
Furthermore, ITI agreed with the position taken by the FCC
that the question of whether cable companies should be
required to open their cable modem services should be
addressed at the federal level. Apart from legal arguments over
federal and local jurisdiction, ITI argued that there are
compelling economic and business reasons for developing a
national policy on this important issue.
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