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Diplomacy in Action

Creating an Environment for Future Success


Remarks
Ambassador Terry Kramer, Head of Delegation, U.S. Delegation to the World Conference on International Telecommunications
Information Technology Industry Council
Washington, DC
August 1, 2012

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As prepared for delivery

First, let me say “thank you” to ITI for your leadership and engagement in a critical and high impact area. I am honored to have been appointed to this role as Head of Delegation for the United States at the World Conference on International Telecommunication – or, as we often call it, the “WCIT.”

I am drawn to the WCIT because it presents an important opportunity for the United States and the world:

  • We have all seen, over the past 25 years, incredible successes and growth in telecommunications and the Internet universe;
  • Now, we face a pivotal question: How do we create an environment for the future global success of telecommunications and the internet?

In my career in telecommunications, domestically and abroad, I have had the good fortune, as many of you have, to witness the rise and societal impact of two phenomena: the birth of mobile communications and the advent of the Internet.

When I look back at my time in the mobile communications industry, it was a "beeper" business, which then transformed into a "cell phone" business. That cell phone business then went from a high-end market, initially targeting wealthy individuals, to a mass-market, "must have" service. And finally, it went from a developed-country business into a truly global one.

Meanwhile, the Internet ecosystem has evolved, thrived and changed the very nature of human interactions and connectedness. The Internet is now flourishing with unimagined capabilities and uses, from advanced search to location services incorporating user preferences and social media—all of these focused on providing highly personalized and relevant services and user experiences. We can literally look to the stars – and have our smartphones tell us what constellations and planets we are seeing.

The development of the Internet is truly inspiring – but that’s not why I am here. What I want to talk about today is the opportunity we have, through the WCIT, to build the environment for success for the future global telecommunications and Internet universe that everyone wants and needs.

Mobile

The foundation of that environment for success can be found, I believe, in the consumer-driven, competitive growth of the mobile service industry. That industry has pioneered an entrepreneurial spirit, engineered the rapid and cooperative development of industry standards, promoted market liberalization and driven an intense focus on satisfying customer needs.

In just 25 years, we have come from no cell phones at all to more than 5.3 billion mobile subscriptions worldwide.

  • Today, the world’s developed markets have achieved, on average, 116% mobile penetration, and even developing markets average about 70% mobile penetration – a figure estimated to reach 100% in the next 3-4 years.
  • Or consider this: roughly 90% of the world’s population – and even 80% of its rural residents – now live in areas that have mobile network coverage.

Around the world, 3G and 4G services are increasingly available, and millions of users now will likely obtain Internet access – for the first time – using their cellphones. How did the mobile revolution become so successful, so fast?

  • A wave of liberalization and competition driven by national regulators who opened their markets to multiple service providers;
  • Regulators who moved proactively to make spectrum available for commercial use;
  • Industry-driven standards-setting which brought technological innovation to market at accelerated speeds;
  • A new, consumer-oriented outlook – adopted by industry and government alike – that drove innovative services and business models, such as pre-paid services, text messaging and handset subsidies; and
  • Mobile operators, device makers, internet players and infrastructure providers who all worked together to form a healthy, vibrant ecosystem to deliver customer relevant mobile internet services

Innovation was unchained to meet and promote demand, and the result has been growth at hyper-speed – well beyond what any ministry or monopoly could have planned or directed.

Internet and Broadband

Meanwhile, as the mobility revolution was gathering steam, the Internet also was becoming a global phenomenon, on both mobile and fixed platforms. The adoption of the World Wide Web – as we called it then – gave the Internet a user-friendly interface, while the open and decentralized architecture invited content and easy, cost-effective access. And look at the results: There are now about 2.4 billion Internet users worldwide -- a number predicted to rise to 3.5 billion by 2016. At least 1.2 billion of those Internet users today are in developing countries.

Moreover, demand for Internet access and other IP-based applications have fueled the growth of broadband networks. Fixed broadband technologies, including DSL and cable modem services, make it possible to download rich video and internet content, as well as voice calling through VoIP services.

This content can be created, cached and transmitted anywhere in the world – and increasingly, that includes developing countries that are linked regionally through new undersea cables and Internet Exchange Points (IXPs). As a result:

  • Broadband service is now available in 208 economies – virtually every country in the world.
  • Fixed broadband subscriptions have more than doubled in five years, from 284 million in 2006 to an estimated 591 million at the end of last year.

Of course, the growth of broadband capability is not confined just to fixed services. The marriage of the Internet and mobility – embodied in 3G and now 4G networks – is a growing reality. The number of mobile broadband subscriptions is believed to have surpassed 1 billion worldwide in 2011, and 3G service is available in more than 143 countries around the globe.

Not surprisingly, we are seeing an explosion in the amount of data – much of it in the form of VoIP and video – circling the globe. Roughly 369 exabytes (an Exabyte is 1 million terabytes) of IP data were exchanged around the world last year – a number that Cisco predicts will rise by 2016 to 1.3 zettabytes annually – a figure equal to 1.3 billion terabytes. Overall, IP traffic is forecasted to grow at a compound annual growth rate (CAGR) of 29 percent from 2011 to 2016.

Operators, meanwhile, have abandoned the old ‘walled gardens” that restricted non-proprietary content – and they have done so with the customer in mind. Like the mobile industry – and perhaps even more so – the Internet is created, maintained and driven, in an organic, bottom-up way, by the people who need it and use it.

Again, we have to ask ourselves: Who created this phenomenon? And the answer is both “nobody” and “everybody.” The Internet is truly a decentralized ecosystem, pulling in network operators, applications designers and content creators from all over the world.

Societal Benefits

The beneficiaries of the mobile and internet industry growth are individuals and societies all around the world. The Internet creates:

  • Economic benefits – Jobs--beginning with mobile network expansion and jobs created through online commerce and content delivery
  • Commercial benefits – illustrated by farmers can use cellphones to link with buyers, check weather conditions and determine commodity prices in real time;
  • Social benefits Health care providers can use mobile technology to do remote diagnostics and treatments as well as training of health professionals. Governments can now make services available online, and people can inform themselves about political events and proposals;
  • Human benefits – Groups can organize themselves online, friends can re-establish contact after years of separation, and everyone explores new meanings of connectivity and connectedness.

In a global marketplace battling for growth, telecommunications and Internet industries have acted as multipliers of productivity, translating into greater employment and social benefits. In the OECD countries, the Internet now accounts for an average of 4.1% of GDP – and up to 7-8% in the most “wired” countries, such as South Korea or the UK. Moreover, a University of Munich study, reported by the ITU, found that a 10% increase in broadband penetration yields an increase in GDP of .9% to 1.5%.

With the Internet, we have benefits that are as concrete as a labor statistic and as ephemeral as a smile on a laptop screen.

The Internet Is Global

One thing also is clear: this phenomenon belongs to the entire world. Internet business ventures, social media companies, and enterprise applications are sprouting up all over the globe.

Meanwhile, national broadband plans and policies which lower market-entry barriers, allow competition, encourage infrastructure-sharing, reallocate and re-farm spectrum, and provide tax incentives for investment are being implemented in both developed and developing countries alike.

In Kenya, the government:

  • Articulated a clear national policy for its communications market, called Vision 2030;
  • Leveraged its geographic location to develop access to international fiber-optic cables, reducing wholesale bandwidth costs by 80%;
  • Used public-private partnerships to attract investment; and
  • Pioneered online banking services, such as the M-Pesa service, which is used by more than 80% of subscribers (13.5 million people) of Safaricom, Kenya’s largest mobile operator.

One of the so-called “BRIC” countries, Brazil, has also initiated a national broadband plan that:

  • Seeks to maximize competition in the mobile and broadband markets;
  • Fosters investment in the incumbent provider Telebras as a competitor in the wholesale broadband service market;
  • Employs technology neutrality in regulating networks, while encouraging network buildouts, and
  • Provides tax and financial incentives.

Hong Kong, meanwhile, has leveraged a private-sector, market-oriented strategy to achieve:

  • A successful auction of LTE and WiMAX spectrum in 2009 – even in the midst of the global financial crisis; and
  • Sustained private investment in broadband infrastructure, resulting in a broadband penetration rate of 83% at the beginning of last year.

Developing countries are acting now to facilitate the development of the Internet. The key is to adopt nationally specific policies that leverage the broad-based nature of the Internet and mobile environments and create a “virtuous circle” of higher demand, economies of scale and greater supply.

Sustaining an Environment for Success

Another way to describe these market developments is what I call innovation supply and demand – the ability of innovators and entrepreneurs worldwide – big and small – to create new products and services on the foundation of a healthy telecom and Internet industry. This creates a supply of thousands of new products and services for a "demanding" set of customers who are anxious and willing to consume these new services in a world of greater mobility and connectedness.

Governments work best when they implement an environment conducive to innovation supply and demand – then step back and avoid counter-productive interventions.

We should be clear about the specific ingredients for a successful Internet ecosystem:

  • The presence of a consuming public that is keen to learn, to be mobile, to achieve and to be connected;
  • Markets that foster innovation and competition, forcing providers to improve and become more efficient to attract and keep customers;
  • Notable economies of scale in all aspects of new products and services – whether it be infrastructure, consumer devices or services – driving down costs and permitting widespread adoption;
  • Intuitive service offerings that make simplicity and ease-of-use the top priority in driving market uptake;
  • Standards that permit interoperability between a burgeoning set of devices and services within an increasingly global marketplace;
  • Availability of spectrum for an increasingly mobile world;
  • And perhaps most importantly: freedom. This includes the freedom of ideas, the freedom of information and the freedom to take entrepreneurial risks in an increasingly vibrant and decentralized environment.

We should recognize that the innovation we have seen in the mobile and Internet environments was not implemented in a top-down fashion by policy-makers. It was driven by multiple players and stakeholders around the world. There are thousands of social media companies, Web designers, retailers that market their own e-commerce offerings, analytics companies that break down complex data patterns to drive customer relevant offerings, mobile phone distributors, Internet cafes and community centers – all of them with a role in shaping products and demand.

The Internet has grown precisely because it has NOT been micro-managed, regulated or “owned” by any government or intergovernmental organization. Let’s be clear about this: the Internet continues to demonstrate the effectiveness and success of the current multi-stakeholder structure – and its own independence. No government or single organization can or should attempt to “control” the Internet.

Sustaining this environment, I believe, offers the best chance to continue achieving our mutual goal of making an innovation-driven Information Society a reality all over the world.

WCIT

This brings us to the WCIT, which is the International Telecommunication Union’s first conference to review the International Telecommunication Regulations (ITRs) since 1988. As we look back on what the delegates accomplished that year, we should appreciate the environment for success that they created. The genius of that work can be found not just in what the delegates chose to do back in 1988 – but what they refrained from doing.

The true “magnetic north” of their compass was to create a framework for interoperability and connectivity. But they did so without over-burdening the ITRs with rigid “fixes” for specific issues or perceived inequities. Within the scope of the ITRs, the 1988 delegates created an architecture for innovation, flexibility and broad-based consultation.

The world has changed and, as with any successful organization, it is wise to consider how that change should be reflected in the ITRs. But it is critical to acknowledge the flexibility and guidance that the ITRs have provided, in light of our new environment.

It is also vital to see the differences between the Internet and the structure of international telecommunications backbones, circuits and gateways that have been addressed in the ITRs. The Internet is a new and different phenomenon, entirely. It is not the legacy of common carriage and “bent-pipe” transmission; it is an ecosystem of content providers, application developers, social media companies, and data and video transmission providers – and ultimately, ideas and knowledge. There is no Internet “central office” or headquarters. Its openness and de-centralization are its ultimate strengths.

Now that the Internet is here and established, we need to nurture it as an environment that is:

  • Highly data driven;
  • Characterized by a free flow of information and commerce, happening at light speed,
  • Where innovation is organic and distributed worldwide, and
  • Where consumer interests continue to be met even where they differ from country to country and within countries.

Opposing Content Restrictions or Censorship

Several proposals have been made for the upcoming WCIT that, although seemingly well-intentioned, fail to acknowledge this "new world" we live in and what is required for future success.

In particular, proposals to control content transmitted over networks run counter to the foundation of a free and vibrant telecommunications and Internet society.

The ITRs serve to set an international framework for linking international telecom facilities. They should not be inappropriately stretched to cover any aspect of content routed over those facilities.

Throughout the WCIT process, the United States has, and will continue to, express opposition to proposals that would place governments in a position of greater power to censor the Internet, track content or target end users – even under the guise of combating spam, controlling traffic routing or identifying calling number information as a way to defeat alleged fraud and “misuse” of networks.

There is an overriding issue of freedom of information that the United States recognizes as a core tenet of human rights. This is embedded not only in US constitutional law and tradition, but also within the founding documents of the United Nations. Both the Universal Declaration of Human Rights, and the International Covenant on Civil and Political Rights contain provisions (Article 19 and Article 19.2, respectively) that recognize freedom of expression, as well as the right to receive and impart ideas, in any medium and across borders

Proposals to control content and routing, or to expand the definitions of international telecommunications to cover the Internet, ultimately will not work. Such proposals will only:

  • Stifle innovation, promote customer cynicism, and breed "work-around" solutions to undermine flawed policies;
  • Undercut the free flow of information and ideas, defeating the entire purpose of the ITRs themselves.

Similarly, proposals that seek to artificially mandate pricing terms – such as "transfer payments" between content providers and network operators – will only result in failure. With regard to transfer-payments on data traffic, the U.S. would raise the following questions:

  • How would transfer payments be implemented in the current environment?
  • Who would determine the transfer prices and how to apply them?
  • Is the originator of an Internet search a sending or receiving party?
  • Finally, what happens if network operators refuse to transmit downloaded content because the “termination rate” to a certain country or ISP is excessive or uneconomic?
  • And probably most importantly, would such pricing lead to increased freedom or flow of information – or less?

To be clear, the United States will oppose changes to the ITRs that (1) restrict the free flow of content, (2) broaden the scope of the ITRs, however subtly, to impinge on the Internet’s natural growth and evolution, or (3) impose uneconomic pricing or transfer-payment obligations on Internet content providers or backbone operators.

In its initial tranche of contributions, the United States will make the following proposals, which are consistent with this approach. We will:

1) Consider only minimal changes to the preamble of the ITRs;

2) Seek alignment of the definitions in the ITRs with those in the ITU Constitution and Convention, including no changes to the definitions of telecommunications and international telecommunications service;

3) Approve ITR’s which maintain the voluntary nature of compliance with ITU-T Recommendations;

4) Continue to apply the ITRs only to recognized operating agencies or RoAs; i.e., the ITRs’ scope should not be expanded to address other operating agencies that are not involved in the provision of international telecommunications services to the public; and

5) Promote revisions of Article 6 to reflect the variety of flexible and innovative interconnection and termination arrangements found in competitive markets.

There will be subsequent opportunities for the U.S. to make additional proposals, and meanwhile, I am engaging in bilateral discussions with other governments to hear their views and how they believe their own proposals will drive continued success of the telecommunications and internet industries

For the United States, our approach is based on recognition that the existing environment today works amazingly well, and it is empowering telecommunications – and human – development by quantum leaps. In cases where imbalances occur, they can be addressed through market forces and consumer-focused national policies that empower local content development and stimulate local and regional traffic and demand.

So what should be the focus of our unique opportunity to drive a new set of ITRs at the WCIT?

  • To reaffirm our belief in what will drive future market success;
  • To recommit ourselves to the goal of maintaining and promoting global telecommunications connectivity in the 21st century;
  • To create an unfettered, free flow of ideas, information and commerce;
  • To establish high-level principles that foster an open and secure Internet and network operating environment; and
  • To be pragmatic in understanding that telecom and Internet economies are too large, too distributed and too diverse for any one organization to control.

In more practical terms, this means preserving the principles of the ITRs’ preamble – including the value of connectivity – maintaining the stability of the ITRs, as well as the voluntary nature of compliance with the ITU’s standards recommendations, and preserving the definitions in the current treaty that have served the world well. It means avoiding changes to those definitions – and to the overall ITRs – that would broaden their scope, dilute their meaning and amount to “mission creep” for an international treaty that has been so effective in establishing a platform for growth and innovation.

So, in summary, we should congratulate ourselves on the 25-plus years of success in building a vibrant telecom and Internet economy, driving economic growth, and empowering individuals with information, connectedness and commercial opportunities.

Our challenge now – more than any other – is to maintain an environment for continued success, and to continue creating that environment around the globe, in all countries. We need to acknowledge how innovation is best created, through consumer demand, and realize that the Internet is beyond the scope of any one nation or regulatory authority to control or manage.

By following these principles we will enable the telecommunications and Internet phenomenon to become our lasting legacy and platform of success for future generations. Thank you.



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