Information Technology, Competition, and the American Dream

Published February 1, 2004

At the FCC, we embrace the vision of tomorrow that gives individuals the freedom to be in control. As our economy briskly recovers, we are poised for a golden age of information technology. And, we have a coming generation of early adopters that will be ready to drink it up.

Businesses will face great opportunities, but serious challenges as well. Digital means providers can invade other markets that their infrastructure long kept them from. Cable companies can use their fiber network to deliver telephone service to their customers, as well as data services and video services. Phone companies can offer higher value content services over their DSL lines–including video. It will be challenging for them to branch out from their core, but the opportunity is there for a bold CEO to snatch.

To realize these opportunities, companies will have to surmount major obstacles. First, the digital migration means that companies that grew up in the analog world have to reinvest in and rebuild their infrastructure in order to compete with new digital-age companies in providing the new services that consumers and businesses want. The dilemma for an incumbent is that they have to invest capital today to generate uncertain revenue tomorrow that may cannibalize today’s business. They have little choice, however, for if they don’t someone else will and they will be dead. This is a classic innovator’s dilemma.

Second, competition in communications is going to be brutally intense. This comes not just from a policy that now favors competition over the state-supported monopoly model, but more dramatically it will come from the rapid technological erosion of the walls that separated different industry segments from each other.

Not long ago, you would have said SBC is a telephone company. Comcast is a cable company. T-Mobile is a cell phone company and NBC is a television company. They enjoyed near-monopoly positions within their lanes and had no significant cause for concern from companies in other lanes. But with digitalization transforming all communication services into data applications that can run over any platform, these barriers will fall, revealing new and formidable competitors. Any player with a digital platform can now provide almost any form of human communication.

But you ain’t seen anything yet. The Internet threat is even greater. Over the Internet, applications are separated from the infrastructure. Now, services can all be software applications that ride over the platform as bits. A consumer can download a piece of software over a broadband connection and set up their own communication channel. Your kids have done that with programs like AOL Instant Messenger and Skype. Voice, video, and data all can ride over Internet networks easily, and will.

The fact that applications are divorced from infrastructure means companies like Microsoft, Intel, and Apple are suddenly competitors to traditional communications companies. Apple, for example, sells a high-quality web camera that combined with free software enables very easy computer-to-computer video conferencing to anyone with a broadband Internet connection. All for $149. What did any of you pay recently for video conferencing services? The once vaunted picture-phone the phone company promised has finally been delivered … by the Internet industry.

Third, innovation will be the most important driver of success. Most telephone companies and cable companies are accustomed to mature, high-quality networks. Innovation from the phone company over the years has been (shall we say) leisurely. While *69 and call waiting are fine, we can expect much more in the Internet environment. Because the software world and the computer world follow Moore’s Law, innovations will come more rapidly and from many more sectors.

Companies will have to operate faster, more nimble organizations. They will have to get comfortable with greater risk-taking and with failure. They will have to invest in research and development. Small companies unburdened by a legacy network will spring up constantly and attack. Products will have to be reinvented regularly. This is a sea change for traditional communications providers.

At the FCC we are moving in a direction that embraces revolutionary change. We know we have to help get broadband built and deployed to every American. We are 10th in the world right now, an unacceptable position for the world’s leading economy. We are trying to change that. We have adopted policies that provide incentives for building fiber to homes, by limiting unnecessary regulations so that entrepreneurs can focus on their work and not on filling out regulatory forms and hiring lobbyists. We have particularly explored opportunities to lower regulatory barriers in rural and underserved areas to further promote wireless Internet deployment where it may be the most efficient path. …

The twentieth century was the American Century. It was not just the triumph of democracy over communism, but the triumph of free-market capitalism over central-planned economies. Now we turn to the future and ask how we will fare in the twenty-first century. Will we forget the lesson we learned, that the free market is the kiln where invention and creativity are fired–a place where risk, well-executed, is rewarded?

A revolution is rarely government-led. We must place our faith in entrepreneurs and not extinguish the burning energy of innovation with the wet blanket of over-regulation, as some seem to prefer.

The Information Age should be a period of great glory for the United States. We have always tilled the richest soil for innovation and entrepreneurship, the clear touchstones of the next generation. The premium we place on individual freedom and empowerment are culturally suited to the characteristics of this technology age.

We need a national commitment to embrace the potential of the next century and drive it forward. Our children have sampled the promise and we must make for them a world in which they can work, learn, play, and communicate in the manner that they are used to and that they expect. They deserve nothing less as the heirs to the American Dream.

Excerpted from remarks by Michael K. Powell delivered at the Chicago Economic Club, December 18, 2003. The full speech is available on the FCC’s Web site at