The TV broadcast spectrum incentive auction proceeding raises some of the most difficult engineering challenges the FCC has ever faced.  One thing is clear:  a successful auction must start with an effective band plan.  A band plan must seek to mitigate interference challenges to the greatest extent possible while offering blocks of spectrum best suited for deployment by U.S. wireless carriers.  Otherwise, it will drive down the value of the spectrum and likely undermine the auction’s success.

With that in mind, broadcasters, wireless carriers and equipment manufacturers have spent an enormous amount of time, energy and expense reviewing and commenting on the optimal framework for the 600 MHz band.  Hundreds of pages of comments have been filed, two industry consensus letters have been submitted and the FCC just recently convened a day-long workshop to discuss this issue.  The result is growing consensus for adoption of a “down from 51” framework that seeks to maximize paired allocations and build guard bands only to meet engineering necessity.  This approach reflects the best collective engineering judgment of the companies most affected by the auction, including those that will spend billions of dollars to purchase 600 MHz licenses at auction and billions more to develop and deploy the spectrum in U.S. wireless networks.

Despite these significant advances, on Chairman Julius Genachowski’s last day, a Public Notice was released seeking comment on two alternative band plan frameworks, one reversing the uplink and downlink allocations and one featuring time division duplex (TDD).  The first has absolutely no support in the record and the second adopts a technological approach contrary to the one proposed by the majority of U.S. carriers.  A fair reading of the Public Notice suggests that the FCC feels the consensus approach constrains its ability to adjust the band plan to meet market-by-market variations.  We believe, however, that this notice will consume resources better spent on dealing with other critical and as-yet-unanswered questions in this proceeding, such as how co-channel interference concerns could undermine the variability of any band plan and how the FCC plans to conduct an effective re-packing.

Each of us of course will respond to the notice, but we don’t anticipate any fundamental shift in positions we’ve already taken in the record.  In the meantime, we are concerned about the apparent disconnect between the FCC and the various industries that will be critically affected by this auction.  Nothing about this auction will be easy, and, if we are to succeed, we must all work together to find solutions best designed to respond to broadcast industry concerns while meeting wireless industry requirements. 

This is why Verizon joined the Intelligent Transportation Society of America (ITSA).  ITSA represents state, federal and departments of transportation, transportation industry consultants, traditional intelligent transportation technology companies (i.e., such as Iteris, which makes traffic management systems), some automakers, academic institutions that do research on transportation, and some tech companies (IBM, Qualcomm).  (Full disclosure, I sit on the ITSA board.) 

Kicking off the annual ITSA conference a few weeks ago was a panel featuring David Strickland, the NHTSA Administrator and Tom Taylor from Hughes Telematics.  David said that technology moves quickly and that is why we must be mindful of quick innovation, noting that NHTSA tries to use good data to provide a ‘flexible regulatory framework’.  He also acknowledged that drivers have first responsibility for driving, but industry and government need to collaborate to make things safer. Tom stressed the industry’s commitment to safety, and pointed out that while connected cars – cars that communicate wirelessly with one another – are a long-term technology trend, we can already do much of what can be done with connected cars using cloud technologies, enabling cars to connect via the cloud to each other and to data. This is an important point – cloud services are already here.   ITSA is focused on connected cars, but the reality is that it may take ten to 20 years to see real connectivity among large numbers of cars, in part because there are so many cars on the road, and also because many of those cars are older and not adapted to new technology.  Hence, the cloud is going to be important in the near term.

I heard something at the last annual meeting a few weeks ago that was new – at least in the context of the transportation industry: someone used the word “ecosystem” to describe how the intelligent transportation sector is changing.  What they meant was clear from the context of their comments: they are seeing that new companies – such as mobile phones, wireless companies and apps makers – are becoming important players in the industry and beginning to make major contributions to its evolution.  We’ve all heard of Uber and Car2Go.  Another example is a company called Streetline.  It makes special small sensors that can be glued on the pavement in the middle of each parking space. When a car drives over the sensor, it registers that the space is taken with a private parking company or with city hall in the case of public parking. Users have accounts on their mobile phones, and they are automatically debited for the cost of the parking space.

I often say that the Internet has “crashed” into a great many industries and in almost every case, it has helped change them for the better.  The word “crash” may not be the best one to use for smart cars, but the impact of communications technology on industries often does cause shock waves that shake up competition, innovation and business models. We are just at the beginning of the changes the Internet will spur in transportation as apps and intelligent devices come into play. This is the “ecosystem” emerging, just as I saw it come into play in the landline and wireless broadband sectors. Policy makers in Washington are taking notice of this development, too, as the Senate Commerce Committee held a hearing on advanced vehicles earlier this week. This is one reason too that we joined with other tech companies and organizations to launch the Intelligent Car Coalition recently.  There is no telling where all of this will go but that is an important aspect of innovation – avoiding the temptation to try to prescribe how technology should evolve.

In his speech, Silliman outlined four principles that he believes policymakers should focus on: protecting consumers, encouraging innovation, incenting investment, and, with rapid changes in the industry, technology-agnostic rules that focus on the needs of consumers and ensure flexibility as new innovations and business models emerge.

“Technology changes too quickly to build legislative or regulatory frameworks on specific technologies,” said Silliman.  “The best approach is to protect consumers and to ensure that the rules aren’t obsolete as soon as the ink is dry.”

It has been almost 20 years since Congress overhauled telecom rules – the 1996 Telecommunications Act – when many of today’s technologies were closer to science fiction than fact.  

“The act could not have anticipated the policy challenges that we would face 20 years later, particularly given the extraordinary rate of innovation,” Silliman said.  “It has been only six years since the first smartphone was released, so 20 years is an eternity.  What guidance does the 1996 act provide in a world where everyone is carrying a broadband cloud-access device with them? Where video content can be accessed anytime, from anywhere?  Where these technologies are beginning to be applied to broader societal challenges like healthcare, energy management, education and more?  Not much. Nor should we expect it to.”

Silliman called for a proactive, flexible policy approach – one that would remain current and effective now and into the future. “The 1996 Telecom Act succeeded in what it was designed to achieve, but almost two decades later it is leaving the FCC to struggle to shoehorn Internet-era technologies into phone-era regulations,” Silliman said. “I am not suggesting that the answer is to abolish all regulation.  But I am suggesting that we need a 21^st century policy framework that is designed for 21^st century technologies and marketplaces, not 19^th century ones.”

He added that broadband platforms provide extraordinary opportunities to transform healthcare, energy management, education and more:  “By eliminating antiquated rules, focusing on meeting consumer needs, and encouraging investment and innovation, we will create the right environment for delivering the amazing promise of broadband and wireless technologies. And in place of optimistic uncertainty, such policies will create a spirit of innovation and a sense of limitless opportunities.”

Read the whole speech here.

Read the rest of this post at the Verizon Wireless News Center.

Link Hoewing: The evidence that dynamic competition is real shows in the recent announcement of Facebook Home, a new operating system “skin” for Android devices that integrates a user’s Facebook account deeply into the device’s software (e.g. using Facebook to manage contacts, photos, and as the default messaging app). Facebook Home demonstrates that innovation and experimentation with new business models in the Internet ecosystem are a major part of how competition works. Companies enter new markets in ways never anticipated. For example, in the case of Facebook Home, the new service puts into question what is and is not an “operating system”. It is morphing before our eyes. While Facebook was at pains to say its new “Home” service operates at a layer between apps and operating systems, in reality it works like – and to the consumer will seem like – the phone’s OS. So Facebook is entering the OS market without really making what we’ve in the past called an “operating system.” Google and Apple now face even more competition from Facebook than before.

David Young: Great points about Facebook Home. One of the key aspects of the dynamic competition model is that companies often do gain advantage in the market place, but because innovation and change drives competition in the Internet ecosystem, no company can really take anything for granted for long. I think this is also important with respect to who has leverage and how we look at the concept of the “open Internet.” Facebook Home (FBH) is only available on the Android operating system because the Android business model is “open” and allows FBH’s software to assume a new role in Android devices. Apple’s iOS is not the same from a business model standpoint. Some call it “managed” or “more controlled,” but regardless it doesn’t allow customization like Android does. Facebook’s ability to do something similar on Apple devices is constrained. Is this a problem?

No, because in the competitive market, consumers who care about FBH will buy Android devices. If Apple loses enough customers, perhaps they’ll open up to FBH. Now what if the next generation of Android didn’t allow FBH to work? Would that be a problem? Again, probably not, because it would open the door for Windows, Blackberry, or even some new OS to emerge that attempted to give the consumer what he or she obviously wants.

Link Hoewing: David, yes, right on. This kind of exclusivity that we’re seeing between Facebook Home and Android (or Facebook Home and handset maker HTC, which is selling devices with FBH preinstalled) is not necessarily a problem and in fact can spur innovation. The iPhone/AT&T deal was one that got roundly criticized by some but it did two things: it spurred demand for smartphones and mobile data services, and it gave us incentives to work with alternative suppliers – Android and Google in this case. What everyone forgets is that technology markets, being particularly competitive and innovation-driven, don’t need much help. If there are ways competition can emerge, it will. Quite often, that’s exactly the case. It may take time, and not every company in the market place will always win, but the dynamism of today’s technology market  spurs innovation and lots of new alternatives – the consumer is the winner in the end. Many believe “openness” (however defined) means exclusivity or proprietary services are bad. But that is generally not true, especially where consumers have choices, as they do in the Internet ecosystem.

These are issues that deserve more attention; understanding how innovation drives competition is a key issue for policy makers.

Verizon congratulates Commissioner Clyburn on her historic appointment as acting chair of the Federal Communications Commission. We look forward to continuing to work with her.

Verizon also congratulates Mr. Wheeler on his nomination; his experience and leadership will serve the commission well as it addresses policies involving the rapidly changing broadband and wireless industries.  Verizon looks forward to working with him and the commission to shape pro-consumer and pro-innovation policies in the communications marketplace.

• Jodie Griffin, an attourney with Public Knowledge, stated early on that universal access to quality services should be a keystone of any U.S. broadband policy.

• Robert C. Atkinson of CITI seemed to agree with Ms. Griffin on that point, but argued that a national policy that treats Manhattan N.Y., the same as Manhattan, NV (population: 124) would be disastrously inefficient and wasteful. He advocated for what he called “circumstantial regulation,” or local policy solutions that take into account the specific circumstances of the impacted area.

• Robert Atkinson of Information Technology & Innovation Foundation (yes, there were two “Robert Atkinsons.” For clarity, I’ll refer to the ITIF one as “Rob,” as his name placard stated) noted that U.S. adoption remains lower than the rates in other countries simply because computer adoption is lower in America. He also questioned whether the broadband stimulus grants, such as the one for the Chattanooga gigabit network, were the best uses of taxpayer money when there are still low-income families who not only lack access, but don’t even have a computer in their homes. He cited the ITIF’s recent report on broadband speeds, noting that the U. S. is doing well with regard to investment, prices, and availability.

• Jeff Eisenach, a visiting fellow with the American Enterprise Institute, compared the European model of unbundling with the U.S. model, highlighting recent remarks from European regulators acknowledging that their model is failing to spur investment. Robert Atkinson, who had formerly worked for an early U.S. competitive local exchange carrier (CLEC), concurred, adding that mandatory unbundling in the U.S. had destroyed the incentive for CLECs to build their own networks.  

• All panelists seemed to agree that there’s still a problem in America with low-income families lacking service. Various proposals were mentioned, including a school lunch-like program for low-income families with children, or making the Lifeline program technology-neutral and thus able to cover broadband or mobile service.

• Rob Atkinson compared proposals of a government-funded broadband network to the U.S. highway system, noting that the government spends 1/3 of what it ought to be spending annually on the construction and maintanence of American roadways. He said waiting for congress to pass an appropriations bill that included broadband funding would be a nightmare for U.S. connectivity.

• In addition to the low-income access problem, the panelists also acknowledged that rural access remains scant in some parts of the U.S. Jeff Eisenach proposed that satellite Internet access is a viable solution to many rural access problems. Though satellite technologies have not historically been comparable to basic landline broadband, today’s newer satellites much faster services that have lower latency, and which allow users to download as much content as they want at certain times of the day. Panelists also acknowledged the capability of LTE to offer rural users high quality broadband, like Verizon’s “Home Fusion” technology.

• Moderator Dave Burstein (author of DSL Prime, a top read for engineers and policy wonks) interjected at the end to say that, despite warnings from gigabit-enthusiast/industry critic Susan Crawford, all bandwidth-intensive consumer applications available today and in the near-to-medium future will work just fine over 50/75 Mbps connections.

Overall, it was an interesting, and at times very lively, discussion. Anybody interested in U.S. broadband policy should check out the videos, available here.

Health Care: Prevention & Individualized Treatment

In health care, rising costs are often attributed to three primary issues: the increased prevalence of chronic diseases; declining quality of care; and a lack of access to quality care. With respect to chronic disease, a brain map could help identify the origins of certain human behaviors that contribute to the onset of preventable diseases.  Therapies could then be developed that better anticipate expected behaviors, leading to more effective treatment regimens, or stop ineffective behaviors altogether. For example, using a brain map to anticipate patients’ cravings for nicotine or sugar could result in treatment strategies to mitigate those cravings, lowering the incidence of chronic diseases that result from long-term smoking or poor diet.

Individuals’ access to care as well as the quality of care provided could also be improved. Brain mapping could enable health care providers to better predict who will need access to care and what kinds of care based on certain brain activity patterns. Technologies could then be developed that address those personalized needs, reducing costs in the process. Brain mapping could also lead to advancements in treating brain disease. A recent study from the RAND Corporation found that the costs of caring for dementia patients are higher today than the cost of treating cancer or heart disease, a number that’s forecasted to double by 2040, after the Baby boom generation has retired. Effective prevention or treatments for Alzheimer’s disease (the most common dementia for people 65 and older) could deliver further cost savings.

Education: Leaving No Child Behind through Individually-Tailored Learning Plans

In education, a brain map could identify how students learn, process, store, and retrieve information.  A brain map could help demonstrate how children respond – or don’t respond – to certain teaching styles, curriculums, testing and assessment methods. Using this information, education curriculums could be designed at an increasingly personalized level to accommodate a variety of learning styles. Schools could better target teaching resources to meet the needs of individual students, and funding could be targeted toward more effective teaching and learning resources and focused on students demonstrating the most need, eliminating wasteful spending and getting more “bang” for our education “buck.”

Interestingly, a recent study by the National Science Foundation identifying the 14 great engineering challenges of the 21^st century noted the importance of moving to “advanced personalized learning” strategies using a combination of better software, new devices (e.g. tablets and other electronic devices), and better network connectivity to tailor learning approaches to fit the way each student learns best. Marrying these technological resources with information about learning patterns from the brain-mapping program could help improve learning outcomes significantly.

Infrastructure: Safer Highways, Bigger Pipes

The potential insights that can be drawn from this brain mapping exercise and their implications extend far beyond health care and education.  In fact, this information could advance technological developments in areas touching every aspect of our lives.  In telematics, for instance, dashboard devices and other vehicle technologies could be developed that complement (and perhaps eventually compensate for) the ways human cognition works. This could reduce tendencies towards distracted driving and help equip manufacturers and service providers with detailed and specific knowledge of how drivers will respond to various internal and external stimuli.  

In addition to improved highway traffic, the BRAIN Initiative could be one of the “killer apps” that paves the way for broadband networks that are faster and have more capacity. We’ve said previously that bandwidth demand drives investment in better networks. In recent months, other providers have made headlines with their announcements of new gigabit consumer networks, but currently there are few if any consumer applications that require consistent ultra-high speed connections. However, the BRAIN Initiative (and other comprehensive, big-data research projects) is likely to produce terabytes or even petabytes of research data, which will require significant storage and computational processing power. Presumably, much of this data processing will be done using cloud services. Anchor institutions like universities and hospitals will no doubt need considerable bandwidth to access brain map data. High-resolution images or real-time video streams of live scans will almost certainly require a fast fiber connection to the hospital, or to the doctor evaluating brain scans.

Bigger data will require bigger bandwidth, and it’s these kinds of projects that spur innovation that drive growth and investment in broadband technologies themselves. 

Image via Wired.com

But there is another dimension to competition that the report does not explain or analyze, which is: how competition throughout the Internet ecosystem is generating innovation, leading to new choices for consumers, and promoting even fiercer competition. Mobile broadband providers are part of a kaleidoscope of companies – from device manufacturers, to apps makers, to software providers, to content and online services providers – that both collaborate and compete with one another in the Internet ecosystem. Competition is healthy in the mobile wireless sector, but the story of how competition works in the broader ecosystem deserves attention as well.

Then and Now

Recent papers by Jeff Eisenach [PDF] and Jonathan Sallet (a former Reagan Administration economist and Clinton Administration official, respectively) explain that competition among mobile wireless carriers has evolved from where it was just a few short years ago. As recently as 2007, a customer walking into a wireless store would choose among devices, apps, services and network offerings that were under the province of the carriers. Few customers even knew or cared what operating system was on their mobile phones. The carriers packaged most of the services and products consumers could choose from. 

Contrast that with today, where consumers drive the process. There are many choices in terms of devices, operating systems, apps, networks and services. Companies like Apple offer “platforms” of services that include its apps store and iTunes for content, its operating system and hardware. Google has chosen a different strategy, but it too offers a platform consisting of its many services (search, Gmail, YouTube and the like), an operating system that is used in dozens of mobile devices, as well as its own devices like Chromebooks, Nexus devices, and Motorola handsets. Mobile carriers like Verizon partner with device makers, but also offer a variety of pricing options and packages including voice and texting services, as well as apps (like Navigator) and cloud storage.

In this dynamic market, companies collaborate, compete and partner in a wide variety of ways to reach the consumer. Consumers are at the center of this market, as wireless carriers, operating system makers, device makers, and apps developers vie for their attention. Competition is not just within sectors – such as wireless carriers – but also between and among sectors, or intermodal. Cross-sector competition is vibrant and affects every player in the Internet ecosystem. Companies cooperate and compete against one another to provide consumers competing packages of value. And innovation is a relentless force in this marketplace – it’s how companies differentiate their offerings.

Where the FCC Almost Nails It

Interestingly, the FCC report reflects data that supports the notion that dynamic competition in the Internet ecosystem is a major driver of this market. Yet, the report fails to connect the dots and explain how this competitive dynamic drives value to the consumer. Here is an example from the report including a diagram explaining the market as the FCC sees it:

“This Report analyzes competition across the entire mobile wireless ecosystem, including the ‘upstream’ and ‘downstream’ market segments, such as spectrum, infrastructure, devices, and applications.  As discussed in detail below, this Report’s detailed assessment of competitive market conditions required by statute considers developments across the entire mobile wireless ecosystem.”

The report goes on to note that some of these segments (particularly those in the “upstream” segment, including spectrum or backhaul) can affect entry, competition, output, or prices in the provision of mobile wireless services. But it does not spend much time considering the very important impact “downstream” segments like devices, operating systems or apps have on other parts of the ecosystem, such as wireless carriers. They even affect the way services are offered by carriers and the market for the services.

I am not saying the report entirely ignores the evolution of competition in the Internet economy. Indeed, these passages from the report do suggest the FCC clearly understands that intermodal competition does have impacts:

“The report does note Consumers are increasingly substituting among voice, messaging, and some data services, and, in particular, are willing to move from voice to messaging or data services for an increasing portion of their communication needs.  Because consumers view these other services as interchangeable with or substitutes for certain CMRS services, service providers compete for these customers using CMRS services as well as non-CMRS services . . . The existence of Internet-based messaging services may also be encouraging consumers to substitute Internet applications for mobile voice calls and traditional text messaging . . . These [text messaging services] include device-specific services like BlackBerry Messenger (“BBM”) for Blackberry smartphone users, and a number of downloadable third-party applications such as GroupMe, TextPlus, WhatsApp, Kik and Pinger.   Analysts predict that these new services will cut into  service providers’ text messaging revenues and profits by encouraging subscribers to bypass their providers’ text messaging offerings. In combination with the recent declines in the price per megabyte of mobile data services, these texting services may be encouraging subscribers to substitute data services for mobile voice service.” [Emphasis mine].

What I’m suggesting is the report spends very little time examining these factors or analyzing how they impact competition. It also does not analyze the major shift in the role of the consumer that is suggested by this dynamic competition model. Instead, it continues to presume a linear model, where the consumer has less of a role in driving competition and is not at the center of the market.  This is important because under the dynamic competition model, virtually every player in the Internet ecosystem is trying to reach the consumer, creating an ever more innovative and competitive industry.

Source: Jonathan Sallet “Broadband Value Circle”, 2011

The FCC’s report pulls together lots of data demonstrating how competitive the wireless industry is in its own right. But a very important aspect of how competition has evolved is the emergence of the dynamic competition model. When seen from this view, mobile competition is even healthier than it seems when focusing on the wireless sector itself. 

To be fair, Harold does see the ongoing IP transition as an important process (terming it “the single most important development in telecom since passage of the Telecommunications Act of 1996”). But the transition is much more than a “simple” change in network protocols or operating procedures. IP is just one part of a complex series of changes that have occurred in the broadband/Internet network world, which have fundamentally altered the markets and technologies involved in the Internet’s operations. Taken together, these changes make a major difference regarding how we think about traditional regulation of broadband networks. 

So what are these “complex changes” I am referring to? 

1. Open architecture. Unlike the proprietary phone and cable architecture of the old days, the protocols for the IP world are an open architecture. These protocols were crafted by engineers and multi-stakeholder bodies, which designed these standards to meet the best technical specifications. Competing network providers can participate on equal terms with other network providers through multi-stakeholder organizations like the Internet Engineering Task Force to shape the protocols that run the Internet and govern things like interconnection and traffic routing. No one party or central player can now mandate how networks work, and technical standards governing IP networks don’t favor incumbents over competitors.

2. More Core Network Providers. The open nature of IP architecture has enabled a number of players, other than incumbent carriers, to deploy their own core networks (what we used to call the “backbone”). In fact, a large share of the core networks have been built by companies that no one would have even imagined would be in the business of running networks. Companies like Google (the third largest operator of core networks in 2009), Akamai and Level 3 are now managing core networks, and in some cases local extensions called Content Delivery Networks or CDNs. These CDNs are typically huge, and the video content they store and deliver is in high demand by customers connected to ISPs’ local networks.

3. Decentralized Interconnection and Routing. The move from circuit switched routing to packet switched routing, along with the proliferation of core network operators, means that rather than traversing a dedicated, end-to-end circuit path, the information bits can now be divided into a number of tiny packets, sent over multiple routes, and repacked at the receiver for delivery. IP traffic can route to customers quite easily over interconnection points that are not directly connected with the customers’ access provider. Indirect routing has proven to work well. Improved bandwidth, better software and coding techniques and improved network equipment have helped improve delivery of even real-time applications no matter how or where interconnection occurs. The leverage of all networks in the Internet ecosystem has changed due to IP and packet networks, helping to level the playing field dramatically. It is no longer the case that a few large networks – in previous years owned largely by ISPs – represent the major part of the market. Now, many large networks exist and offer competition.

As a result of these innovations, Everyone Offers Everything: The IP world has overhauled the competitive dynamics of the Internet marketplace. In the old days, voice service was delivered over the telephone network, video was delivered over cable, and text messaging and the Internet did not exist.  The network and the service were one and the same in the old world of TDM and traditional cable TV.

Now, you can do everything over everything – make calls over cable, deliver video over wireless networks, deliver Internet through Satellite service and send text messages over the Internet.   As FCC Commissioner Ajit Pai mentioned in recent comments at the Hudson Institute, “Increased competition, new technologies, once-separate industries battling on the same turf—these are the hallmarks of convergence today”.

All kinds of players in the IP world –telephone, cable, satellite, wireless providers, makers of apps, providers of operating systems, device makers, and providers of applications like VOIP and IP delivered video – are competing against each other to attract the consumer. This highly competitive and rapidly changing world has an impact on everything, including IP interconnection. There are several strong incentives for companies to work out interconnection arrangements, not the least of which is the fact that a large array of players – companies, collaborators and consumers –benefit from these arrangements.  

What Does This Mean for Internet Policy? The communications world has changed, and IP has played a significant role in bringing about this change. In the words of Commissioner Pai:

“Underlying these changes is a technological revolution. Analog signals have gone digital. Circuit switching is giving way to packet switching. And first-generation cellular has been replaced with ultra-fast LTE. The common thread knitting all of these changes together is IP, a near-universal way to organize and transmit data.”    But it is just one of many changes that include IP that have helped make the market far more competitive and innovative than it has ever been.”  

Technology changes alone don’t dictate how policy should change.  But they often do spur major changes in the market, in consumer demand, in the leverage of various players in the market, and in the competitive dynamics that define how a market place works.   For example, disruptive technology has had a huge impact on the video market place. Movie ticket sales have been declining from their 2002 peak for the last decade, and part of the decline is due to the new technologies that enabled home-viewing to rival the theater experience – like large HDTVs and DVDs – and the surge in online streaming. Any policies dealing with video content that fail to take into account the changing structure of the movie business could potentially harm the increased choices consumers have today for video.

To ignore broad shifts in technology when crafting policy is to make changes that either could hamper further technological advances, or cause unintended negative consequences for future competition. While the underlying principles of universal access, interconnection and affordable access to primary services remain important, the policies required to achieve these objectives are very likely to be different in scope from those that applied in the old TDM world of the past.

This report from Silicon Flatirons that summarizes a discussion I was part of helps a lot in coming to a better understanding of just what multi-stakeholder organizations are. First, these groups really don’t “govern” in the sense that government agencies do by ordering or mandating something to happen. But they do govern nonetheless by building a broad consensus on a course of action, which must eventually become accepted in the wider Internet community. The upshot is that without the credibility of broad consensus, the multi-stakeholder organization model simply doesn’t work.

Multi-stakeholder organizations do indeed reflect the Internet’s origins around openness, transparency, and collaboration. The collaborative nature of the multi-stakeholder decision-making process is why these organizations are so flexible and capable of helping the Internet adapt to changing business models and marketplace realities. To say that a multi-stakeholder approach has successfully governed the growth of the Internet is not just a convenient way of saying there is less need for government regulation. But multi-stakeholder organizations – like the Internet Society, or the Internet Engineering Task Force – have helped to effectively manage the Internet’s evolution to date, and have solved many of its most vexing problems with an eye to providing balanced solutions and preventing problems from festering into politicized disputes. Compare this model to regulatory agencies, which often underperform or cause stagnation through overregulation, and rarely suffer any direct consequences from doing so.

The mission of BITAG includes:

• Educating policymakers on such technical issues;

• Addressing specific technical matters in an effort to minimize related policy disputes;     

• Serving as a sounding board for new ideas and network management practices.

 Specific BITAG functions can include:

• Identifying "best practices" by broadband providers and other entities;

• Providing technical guidance to industry and to the public; and /or

• Issuing advisory opinions on the technical issues that may underlie disputes concerning broadband network management practices. 

On the whole, BITAG demonstrates again that the Internet community can look honestly at key Internet network management and operational issues and come up with improvements in a reasoned way. It is another example of the kind of voluntary group that has helped make the Internet a robust communications system.

BuzzFeed, the popular Internet news/entertainment site, has made a name for itself by regularly posting content that appeals to Millennials' sense of nostalgia. On any given week, the site publishes a new "listicle" of toys, consumer products, and pop culture artifacts from the 80s and 90s. Last week, the site posted a list of "28 Things Kids Today Will Never Get to Experience," which included several references to outdated technologies that children born in this decade will likely never see. Examples included cassette tapes and other obsolete media formats, landline phones that tethered us to the wall with their tangled cords, and exhaustively slow dial-up internet services. Since we talk a lot about technological innovation and transition here, we thought of a few more things that today's kids just wouldn't understand, such as:

Killing time with the latest, most awesome (and only) game on your phone:

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"Social Gaming" actually used to require you to leave your house.

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Selling enough candy bars for a school fundraiser to score one of these bad boys from the prize catalog:

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You automatically knew which of your classmates were cool, because their parents got them a separate phone line.

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Speaking of cool, remember storing your friends' phone numbers in one of these?

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Or those quirky, star-studded TV commercials for collect calling services?

Occasionally, you could find a hidden treasure inside one of these:

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And let's be honest: you felt like the ultimate teenage rebel whenever you did this.

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From Verizon’s perspective, we would love to see the emergence of such applications. Today, most customers are thrilled to have our 50 or 75 Mbps FiOS Quantum speeds. And of course, it was only a few years ago that those customers were happy with 5 to 10 Mbps. So whether the killer app for Gigabit networks turns out to be ultra-HD, 4K cat videos or life-improving education or tele-health applications, Verizon stands ready to deliver Gigabit speeds as soon as the demand develops.

The reason that we are able to make that claim is because our fiber deployment – the nation’s largest by far currently available to almost 15 million homes - allows us to increase speeds to deliver whatever our customers demand. When we first launched in 2004, we offered speeds up to 30 Mbps. Today, we offer speeds up to 300 Mbps and we’ve already demonstrated 1 gigabit per second over our existing fiber network. We’ve also tested a next generation platform capable of delivering up to 10 Gbps over the same existing fiber we’ve already deployed.

While only fiber-to-the-premises is able to offer this virtually unlimited capacity, other network architectures are meeting customers’ needs today and can be upgraded to do so for many years to come. Cable networks can be upgraded with new technologies and more fiber and less coax (copper). And mobile broadband should not be dismissed. American leadership in 4G LTE deployment and adoption has made us a hotbed of mobile ecosystem innovation. Mobile broadband is delivering speeds that would have been unimaginable only a few years ago. The next generation of LTE technology will enable another order-of-magnitude increase in speeds, but only if enough spectrum is made available.

Fundamental to all of this is investment in network infrastructure. Delivering ever-increasing broadband speeds (or gigabit networks) requires significant investment. Some believe that governments should spend the billions of dollars to build and operate broadband networks themselves, and while there are some success stories there are also numerous failures. A better approach – one that doesn’t cost the city anything at all - is to encourage private investment by removing regulatory impediments and bureaucracy that today discourages investment in many ways.

Inmate calling services (ICS) are provided by private telecommunications companies that contract with Departments of Correction (DOC). The way it usually works is that inmates make collect calls from detention facilities, and the inmates’ families pay the bill. The ICS providers set things up on the prison end of the call and make other arrangements. Once selected by the DOC, the ICS provider is the sole payphone provider available to inmates and their families for such services.

Unfortunately, some ICS providers charge extremely high rates for these calls – rates of a dollar a minute are not unheard of, so the cost of one conversation can equal that of a family’s regular monthly phone bill. The FCC opened a proceeding to examine the ICS providers’ billing practices after hearing the concerns of the families paying these extraordinary bills. The record in this proceeding makes clear that an inmate’s regular telephone and other communication with family aids in the inmate’s transition back into the community post-incarceration and thus lowers recidivism. As a result, there is a compelling public interest in ensuring that call rates are reasonable in this unique market.

Our prior experience in this market (we provided inmate calling services until 2007) gives Verizon a historical perspective on how this one-of-a-kind market functions and where there may be opportunities for meaningful Commission action. So today we filed comments with the FCC [.PDF] that urge the agency to examine the issues and take action. This isn’t the kind of thing we usually weigh in on with formal comments, but it’s such an important issue that affects everyone. The FCC has an opportunity to help lower rates for ICS and facilitate more inmate-to-family communications, which benefits all of us. 

From what we’ve seen in the FCC’s record on this issue, these high calling rates usually result from the fact that some public departments of correction require ICS providers to pay the DOCs a high commission in order to win the service contract. The winning ICS providers pass the costs of the high commissions on to the inmates’ families in the form of high calling rates. While the DOCs may have good intentions and do use a competitive bidding process to award calling contracts, the bidding tends to revolve around the amount of a commission the ICS provider is willing to pay the prisons, rather than the calling rates the ICS provider will charge  consumers. In other words, the bidder with the lowest calling rates is simply not more likely to win the contract. And since the contracts are exclusive contracts, the inmates’ call recipients – usually the inmates’ families, who often are economically disadvantaged – have no choice but to fund the large commissions.

To be clear, Verizon is not suggesting that there is anything wrong with commissions or that all commissions, regardless of size, should be eliminated. We understand that DOCs may use commissions to fund beneficial inmate services that may not otherwise receive funding. However, we don’t think inmates’ families should bear the brunt of all this by paying unreasonably high calling rates.

The Commission should move quickly in its consideration of the record and, consistent with its jurisdiction, to take decisive action to reduce the high calling rates.

• Better, faster networks. Sprint, Leap Wireless, US Cellular, and C-Spire have deployed LTE networks; Clearwire and T-Mobile are getting ready to launch LTE soon, too.

• Avoiding a spectrum crunch. The 600 MHz spectrum auctions are finally starting to take shape.

• Secondary markets put spectrum to use. Just about every wireless player in the marketplace rationalized its spectrum holdings over the past 12 months and purchased or swapped spectrum that would allow them to meet the needs of their customers.  This highlights the important role the secondary market plays in getting unused spectrum into the hands of wireless service providers that will use it effectively for their consumers who are increasingly using more spectrum-intensive services.

• New, novel competitors arrive. New mobile virtual network operators with novel pricing strategies, such as Republic Wireless, FreedomPop and Ting, are emerging.

• Diverse offerings. A diverse mix of mobile data pricing strategies is emerging in the marketplace, giving customers a choice between prepaid, post-paid, shared plans, free/ad-supported, usage-based, and reduced-speed. Most smartphone plans today now include unlimited calling and texting, too. Some operators are even experimenting with handset subsidies, financing, and buy-back programs.

Moreover, the FCC has released a broadband fact sheet that highlights the US wireless industry’s leadership in areas like mobile infrastructure investment, LTE deployment, and job creation. From the release:

• The U.S. is the first country deploying 4G LTE networks at scale, and in late 2012 the U.S. had as many LTE subscribers as the rest of the world combined, making us the global test bed for LTE apps and services.

• Annual investment in U.S. wireless networks grew more than 40% between 2009 and 2012, from $21 billion to $30 billion. By contrast, investment in European wireless networks has been flat since 2009, and wireless investment in Asia, including China, is up only 4% during that time.

• In 2013, analysts project $35 billion in wireless investment in the U.S., over 50% more than all of Europe.

• More than 90% of smartphones sold globally in 2012 run operating systems developed by U.S. companies, up from 25% three years ago.

• The new mobile apps economy is a “made in the U.S.A.” phenomenon that has created more than 500,000 U.S. jobs.

• Investments in wireless broadband infrastructure created more than 1.6 million U.S. jobs since 2007.”

The wireless sector is a dynamic, fast-changing part of the economy. For more highlights on some of the innovations in apps, devices, and networks that we saw in the last year check out Mobile Future’s Year in 2012 review.

“Chairman Genachowski’s leadership at the FCC has been marked by his commitment to encourage expansion and adoption of broadband – both wireless and wireline – as a transformative technology that is critical to our nation’s global competitiveness, our economy and our standing as global leader in wireless innovation.  We commend him for modernizing outdated policies, including reforms to the antiquated intercarrier compensation system and the Universal Service Fund.  He was also successful in keeping the Agency focused on the needs of consumers in today’s marketplace, including addressing the surging demand for wireless spectrum.  We wish him well as he embarks on the next stage of his career.”

We’ve just released our 2012 Annual Report, and I invite you to take a look. This marks the second year that we’ve combined our annual report on corporate responsibility performance with our traditional annual report on financial performance. Our corporate responsibility strategy is integral to our business strategy, so, we find that we can’t talk about one aspect of our performance without discussing the other.

As this report demonstrates, the core of our growth strategy is a commitment to use our resources to address some of the world’s biggest challenges — such as healthcare, energy and education. 

We see these challenges as opportunities to grow and expand our business. So our long-term success is directly and fundamentally tied to our success in advancing the delivery and security of healthcare, enhancing education, and making it easier for all of us to save energy.

We call this strategy “Shared Success.”

We also began developing quantitative measures of the shared value our healthcare products can deliver. We plan to use the measurement data to refine and improve the social effectiveness of our products while, at the same time, constantly seek to improve financial results. Again, we see that one measure of success is deeply intertwined with the other.

Last year we refocused the Verizon Foundation on these same areas, in order to deliver the advantages of our technology to communities that would benefit most. So in healthcare, our foundation will focus on health issues for women, children, and seniors in underserved communities. In education, we’re training teachers on how to best use mobile networked technologies in the classroom, with an eye on fostering interest in science and math in the critical middle school years. Our teacher technology training program, our partnership with the Children’s Health Fund and the launch of the annual Verizon Innovative App Challenge are the first fruits of this new direction. We will continue to build on these promising beginnings.

Our goal is to take our corporate responsibility to a higher level of social impact, because we believe that creating a healthy, sustainability society is the best way to create a healthy, sustainable business. We invite you to join the conversation and share your thoughts with us.

 “Commissioner McDowell has been a consistent advocate and a strong voice in supporting and promoting market-based policies and keeping the global Internet free from over-regulation.  His tenure has been defined by his insistence that the FCC base its decisions on sound policies that are well-grounded in the law. McDowell’s vision and judgment have been invaluable during a remarkable period of transformation, innovation and investment. Verizon wishes Commissioner McDowell well as he moves onto a new phase in his career.”

911 is a lifeline for people in distress. Those three simple numbers have brought help to countless Americans for nearly half a century.

It takes an ecosystem of first responders, call takers and communications companies to ensure that – when a person dials 911 – the call is delivered to the right 911 call center and first responders are dispatched.

Verizon is one of the nation’s largest 911 network service providers, handling around 480,000 calls each day for more than 1,200 emergency 911 call centers, or “PSAPs.”

Designed to be resilient, Verizon’s 911 network is built with a great deal of redundancy so that if a disruption occurs in one part of the network service still will be delivered.

In late June 2012, the Mid-Atlantic region was hit by a derecho – an intense storm that caused widespread power outages and damage. 911 service in parts of Northern Virginia was negatively affected after this storm, and that’s unacceptable.

We immediately began a comprehensive investigation of the derecho’s effects on our network and 911 services, and we have acted aggressively and decisively to address issues we found as part of that investigation.

For example:

• We voluntarily conducted back-up power system audits of all critical Verizon 911 facilities in Virginia, Maryland and Washington, D.C., to identify and resolve any issues, and we’re now doing the same for our critical 911 facilities across the country.

• We’ve improved our procedures to identify power issues and get back-up generators on line more quickly in crises.

• We’re diversifying our network monitoring system so that the loss of any single location has less of a critical impact on our overall monitoring capability.

• We’ve improved communications with 911 center directors and other government officials during emergencies.

• We’re applying lessons learned from our derecho investigation throughout our service area.

Hurricane Sandy and the early March winter storm coined “Saturn” by The Weather Channel were strong tests of our significant progress to date, and our systems performed well: Back-up power worked smoothly when commercial power was lost, and we communicated with public safety officials early and often.

Our ongoing effort to strengthen our 911 network is part of a multi-year network modernization program to increase the resiliency of our infrastructure across the country.

I – and thousands of my Verizon colleagues across the country – will continue to work daily to improve our network's resiliency. We will continue to apply lessons learned and collaborate with the public safety community, as well as local, state and federal government officials.

Our goal is to ensure that citizens receive the very best 911 service possible.

Also worth checking out is ITIF's recent report, Where America’s Broadband Networks Really Stand, which discusses these topics in further detail.

I’m a technologist, and much of the time, I take technology for granted. iPhones, Facebook and 3G/4G networks have been around long enough to feel like everyday parts of life. Occasionally, though, I realize how much technology in general - and mobile Internet access in particular - has changed my life. I’d like to take the opportunity to illustrate how much the technological advances of the last five to ten years have become indispensable to my life as a student and young professional.

I recently moved to Washington, and having a fast, always-on mobile connection helped me to settle into my new temporary home in numerous ways. For example, I was able search through rental listservs and use Google Maps and Yelp to find rentals in neighborhoods that provided a balance between affordability and desirable location. I’ve gotten some great home furnishings from nearby yard sales I saw on Craigslist. I am able to share pictures of my new place and my adventures in my new city with friends via Instagram. I keep in touch with old friends overseas using Viber, a free voice and messaging app with over 160 million users.

When I’ve been asked to guest-lecture for a university class on the other side of the globe in Lahore, Pakistan, I can use Skype on my 4G smartphone. While at work, I can walk to the nearby park and buy lunch from a food truck with my debit card, thanks to mobile payment operators like Square. I don’t have to spend my lunch hour waiting in line at the bank, because my bank lets me deposit checks using the camera on my phone.

These are just a few of many everyday examples of the conveniences provided by a robust mobile broadband network. There are also several specialized use cases that highlight how technology is impacting the lives of my family, friends, co-workers, neighbors and students.  For example, iPhone’s avatar Siri is impacting the lives of people with disabilities such as the blind; updated weather information is helping farmers; and FDA-approved portable smartphone based ultrasound devices are helping to save lives in remote areas.

The possibilities that have arisen thanks to mobile broadband and more powerful consumer devices are nothing short of astounding. The potential of the Internet as a powerful economic engine starts to dawn on you when you realize that many of the economic opportunities we take for granted today (mobile merchant credit card processing, free international calling, the entire mobile apps ecosystem) didn’t even exist ten years ago. As every sector of the economy, from small entrepreneurs to health care and manufacturing, is incorporating new communications tools into their businesses, it’s clear that a revolution in communication is well underway.

Earlier this week, the Center for Copyright Information (CCI), whose members include five Internet service providers – Verizon, Cablevision, Comcast, AT&T, and Time Warner Cable – as well as artists and content creators like the members of the Recording Industry Association of America (RIAA) and Motion Picture Association of America (MPAA), announced the launch of the Copyright Alert System. 

Verizon earlier today posted an announcement on its website giving our FiOS Internet and DSL-based High Speed Internet service customers information about how our Copyright Alert Program will work.  Here are a few important points to note.  First and foremost, Verizon is committed to protecting our customers’ privacy and we will not be sharing anyone’s identity with the content owners as part of our Program.  Second, Verizon’s role in the Program is to forward to our customers information gathered by the content owners about possible peer-to-peer copyright infringement taking place on the customer’s Internet connection so they can take steps to address the possible infringing activity on their account.  Finally, the goal of our Copyright Alert Program is to build education and awareness around the important issue of copyright infringement, and to help our customers find lawful ways to find and enjoy digital content. 

You can read our customer notice below.  For more information about CCI and the Copyright Alert Program, you can visit the CCI website at www.copyrightinformation.org.

EFFECTIVE FEBRUARY 27, 2013 – IMPORTANT INFORMATION REGARDING CHANGES TO VERIZON’S COPYRIGHT ALERT PROGRAM, VERIZON’S ACCEPTABLE USE POLICY AND YOUR VERIZON ONLINE TERMS OF SERVICE

This notice provides information about changes to our Copyright Alert Program.  This new approach is focused on education and awareness about copyright issues and builds on our existing program for passing on notices of possible copyright infringement involving customer accounts. 

In addition, we also wanted to inform you that we are making several changes to our Terms of Service and Acceptable Use Policy, some of which are related to our Copyright Alert Program.  These changes are effective as of February 27, 2013.  We recommend that you review the complete Terms of Service and Acceptable Use Policy to determine how these changes apply to you or your use of the Service.   The Terms of Service and Acceptable Use Policy can be accessed by clicking on the "Terms and Conditions" link at the bottom of any page of our Website. The Terms of Service, as revised, will govern your rights and obligations, and ours, with respect to your use of the Services we offer. As set forth in the Terms of Service, your continued use of the Service after the effective date of these changes will constitute your agreement to the changes.

This information shows that Verizon is one of the largest taxpayers and investors in America.

Over the past three years, Verizon has paid more than $11.1 billion in taxes – including nearly $3.4 billion in 2012 alone. Verizon's 2010-2012 payments include more than $1.5 billion in income taxes, $4.0 billion in employment taxes, and $5.6 billion in property and other taxes.

In 2012, the net income attributable to Verizon totaled $875 million, and the company paid $351 million in income taxes while investing $16.2 billion in technology infrastructure.

While Verizon complies with all tax laws and pays its fair share of taxes, sometimes numbers are cherry-picked from the 10K to support claims that corporations avoid paying taxes. In Verizon's case, such claims are false and misleading.

For example, often Verizon's deferred tax liability is wrongly characterized as a loophole, even though deferred taxes do not reduce Verizon's tax liability. U.S. economic development policy spreads out, or defers, some federal tax payments over a longer period of time for companies that invest in America’s technology infrastructure. That’s because investment in infrastructure creates jobs.

In 2010-2012, while Verizon made more than $11.1 billion in tax payments, it also invested nearly $50 billion in technology infrastructure. This has created and sustained great U.S. jobs – both in and outside of Verizon – as the company has deployed innovative broadband technologies nationwide.

Some key points from the event:

• Technology convergence has brought huge industries – communications and auto manufacturers – together in a way that was largely unimaginable 10 to 15 years ago. Sure, the first “mobile” phones were the car phones of the 1980s, but today, communications services are being put back into the car in the form of cellular connectivity and integrated services.

• Consumers are demanding integrated web services like Pandora in their cars, and manufacturers are eager to deliver – the music-streaming service is now available in 85 different car models. This is also good for auto safety: when services or touch-screen, tablet-like interfaces are built into the car itself – and not accessed through a mobile phone – drivers are less distracted and the roads are safer.

• While most of the current data demand (excluding streaming video) of connected cars can be handled with LTE networks, the real challenge will lie in working with policy makers to establish standards and build infrastructure that can better leverage LTE networks to communicate with cars directly.

• Communications capability will drive (no pun intended) the revolution in autonomous vehicles, too. Beyond just email and entertainment, connected cars will be able to communicate with each other in ways that will alert other vehicles of road conditions or blockages. Even more impressively, autonomous connected cars could alleviate most of the rush-hour congestion we see today on highways (usually the result of driver miscalculation and error), making massive road construction projects to increase capacity unnecessary.

The convergence of communications technology and auto manufacturing creates an opportunity for breathing new life into the struggling automotive industry.  It’s an exciting time for Verizon and Verizon Wireless in this space, in part because our networks are open platforms for innovators that allow them to experiment apps and services  for connected vehicles, so we’re seeing some amazing innovations  As a few audience members noted on Twitter, Michigan is the latest state to consider legislation permitting self-driving cars. Roads have long been considered an apt analogy to the Internet - remember the “Information Super Highway?” How fitting, then, that Silicon Valley is bringing its game to the Motor City.

The Information Technology and Innovation Foundation (ITIF) recently published a report, “The Whole Picture: Where America’s Broadband Networks Really Stand,” in which it assesses the deployment, performance, and price of broadband in America in comparison to other nations. The report makes a solid case that the U.S. is doing well when it comes to building advanced networks across the country. ITIF also examines broadband adoption and highlights some challenges to increasing adoption rates in the United States, which have recently stagnated. This continues to be a thorn in our side, especially given the benefits we know broadband can bring to every American.

Broadband adoption is a complex issue. Consumer adoption of any good or service is driven by a variety of factors, and it is not always easy to determine the main factors influencing consumer demand. On the one hand, adoption of many technologies in the home, from televisions to dishwashers has been fairly widespread over time. By comparison, the uptake of broadband in the home has been very rapid. We’re seeing even faster adoption of mobile broadband via smartphones and tablets, and some people are already relying on mobile connectivity as their primary source of broadband.

ITIF’s report presents several reasons for consumers’ choice to forgo broadband, including price, availability, and lack of computer access. Lack of relevance, however, is one of the reasons most commonly cited by consumers. Translation: they have not seen a compelling reason to get connected to the Internet. So how do we identify and readily address consumer ambivalence toward broadband to help increase adoption rates?

Today, most Internet use relates to e-commerce, entertainment, social networking and information gathering. However, for some non-adopters, broadband could become more relevant and meaningful when it is used to fundamentally address needs and solve problems in ways not possible before, such as improving educational outcomes, making health care more accessible and improving outcomes for patients, managing energy usage in our homes, or reducing congestion on commuter routes. Broadband platforms can help in all of these areas, and in the process, provide more compelling reasons for people to want to connect to broadband networks and the Internet.

In education, for example, broadband technologies have helped improve access to needed educational resources for all students, support long-distance and remote learning, develop curriculum and teaching strategies that better meet the ways individual students learn, and help assess and analyze student and teacher success and progress. With modern high speed networks, cloud based processing and intelligence, highly customizable software, and more capable technologies, it is now possible to create learning regimens that fit the personal learning styles of each student.

Similarly, in health care, broadband technologies have helped increase access to quality care, decrease costs, and improve health outcomes through remote patient monitoring, real-time video consultations, remote diagnostics, and medical applications that enable and promote self-management among consumers. None of this is commonplace today, but in a few years it will be as our CEO recently pointed out. 

Making broadband relevant means using it as a platform to transform key systems that are important to the daily lives of each one of us. Broadband is the Powerful Answer that supports and enables innovative platforms and technologies that can - and are - transforming the lives of people everywhere. As the market continues to generate demand for advancements in broadband technologies, we can expect new online services and applications in health care, education, and other areas. It is those types of services that may make today’s broadband non-adopters tomorrow’s broadband consumers. There are also policy challenges in some of those areas, and in a future blog post, I’ll talk about those. Removing them can help increase the use of broadband as well.

Three weeks ago, Akamai released their State of the Internet report with findings from Q3 of 2012. The quarterly report typically includes a list of average speed measurements for different countries around the world. Some commentators have suggested that these figures indicate serious competitive problems with the U. S. broadband marketplace, but things are not necessarily as dire as critics would think. It’s important to understand what the Akamai report – and others that compare speeds among nations – actually measures. While many of these tests provide interesting and useful data – and can clue us in to how broadband markets are performing over time - they do not provide the kind of consistent and calibrated measurements that make direct comparisons among countries possible.   

How to Measure Broadband Speed Accurately

When considering how to compare broadband speeds, the focus should be on the connections the consumer has from their ISP.   The best means of measuring and comparing such residential access speeds is to use measurement systems that are configured to isolate the ISP’s access service from other extraneous variables. Working with a number of ISPs and stakeholders, the FCC a few years ago put together such a system. The resulting reports (Measuring Broadband America) provide the best available metrics regarding local broadband connections in the U. S. (unfortunately, the UK is the only other country so far to publically release data from Sam Knows’ measurements, so it is hard to draw solid comparisons between other nations).   My colleague, David Young, explained last week why the Sam Knows test yields the most accurate measurements for ISP performance. Another good resource is this thoughtful paper from MIT on “Understanding Broadband Speed Measurements.” The authors identify even more limitations that are beyond the ISPs’ control.  They include local bottlenecks; performance of the speed test measuring server; TCP configuration settings; and how is traffic routed beyond the access ISP to the server.

What Akamai Measures

In contrast to the FCC’s system, Akamai’s quarterly report describes the average and peak delivery speed on its own networks for traffic in different countries around the world. The report does not offer a true picture of residential access speeds that is of so much interest to so many.    

Furthermore, Akamai’s measurements may favor certain nations more than others due to other limitations:

• Akamai measures all Internet traffic that accesses their servers and does not differentiate between residential and business traffic. Average speed data are skewed in favor of states or countries with a higher ratio of businesses/universities to the number of households (commercial subscribers generally buy higher speed tiers).  

• Akamai measures “speeds” through individual HTTP (browser) sessions to their servers, not adding up multiple simultaneous HTTP sessions from the same IP address. More sessions use up more bandwidth which equals lower speeds.  This could be another reason Akamai’s speed results are considerably lower than the FCC’s and Ookla’s.

• The file sizes that Akamai samples to produce speed estimates may vary based upon the distribution of content Akamai regularly serves in a particular location.  This is likely to be different in different geographic areas.  For example, Western Europeans have a strong preference for using PCs as a video platform, while U. S. users prefer a wider variety of devices.  As a result, more video is likely stored - and thus sampled - in Europe than the U.S. (Internet protocols (TCP) are geared towards adjusting throughput based on available network capacity, and the longer the amount of time it takes to send a “package” of content, the better optimized the throughput can be. Video content provides a longer period of time - compared to webpages or email - for TCP to increase its sending rate to fully utilize the available capacity provided by the ISP.  Thus, populations that stream more internet video could see a higher average speed than those that stream less).

Moreover, Richard Bennett noted another bias in Akamai’s data in a recent email:

“These are Akamai data of the average speeds from Akamai servers, much of the data is rate-limited video streaming by design. This is similar to the Netflix data that says Google's gigbabit network in Kansas City only runs at 2.55 Mbps. Average peak connection speeds in the best nations and best U. S. states, per Akamai, tells a different story (speeds in Mbps):

1 Hong Kong 54.1
2 South Korea 48.8
3 Washington, DC 42.3
4 Japan 42.2
5 Delaware 39.3
6 Vermont 38.8
7 Latvia 37.5
8 Romania 37.4
9 New Hampshire 37.1
10 Massachusetts 36.0
The speed differences are largely a matter of population density.  Here's what we're up against:

"Hong Kong is one of the most densely populated places in the world. The land population density as at mid-2010 stood at 6,540 persons per square kilometre, and Kwun Tong, with 54,530 persons per square kilometre, was the most densely populated district among the District Council districts."[1]

"The Population density (people per sq. km) in the United States was last reported at 33.82 in 2010, according to a World Bank report published in 2012."[2]

Do the math on the cost of FTTP (Fiber to the Premises) bearing these figures in mind.”

Conclusion: Better tests, better data are needed

Although speed tests can be a useful tool for assessing some aspects of network performance, measurement methodologies vary significantly. This is why the average speeds measured for the U. S. by Akamai (7.2 Mbps), Ookla’s Speedtest.net (15.91 Mbps), Youtube (8.09 Mbps) and the FCC rankings (15.6 Mbps) show large discrepancies.  Akamai itself offers a disclaimer in an FCC filing that makes it clear the report does not purport to measure local access speeds, nor do its measurements “conform to the reporting categories of the FCC’s Form 477 (e.g. speed tiers).”  Drawing conclusions about how nations compare with regard to broadband access services from tests that do not actually measure access speeds is not advisable.  Very few broadband speed tests provide a technically sound basis for making such comparisons. 

Broadband speeds have seemingly become the sole focus in the debate over U.S. broadband and Internet policy. As such, it’s important to understand what the various studies are measuring in this regard and how they should be interpreted.  Bad or even misconstrued data leads to bad policy, and considering the huge role broadband will play in manufacturing, health care, energy management, education, and nearly every other sector of the economy, policy makers cannot afford to get this one wrong. Using a multi-stakeholder approach to test modeling and data gathering, as the FCC/Sam Knows test does, provides the best data from which to craft fair and effective broadband policy.

Unlike many of the other studies that claim to represent ISP performance, the FCC’s study, conducted by Sam Knows – with input from service providers, public interest groups, equipment makers and the research community – is unique in a couple of key respects. First, the FCC has detailed information about the speed tier the volunteer/consumer has purchased, allowing them to make a direct comparison between the tested and advertised speeds. Second and more importantly, the test is conducted using a dedicated device that attaches directly to a volunteer’s broadband connection. Most other oft-cited broadband tests rely on geographically scattered content servers or HTML sessions, but the Sam Knows set-up isolates a user’s broadband connection from other activity that takes up bandwidth. For example, one household member may be streaming video to a tablet while another plays an online game, two activities that will impact the speeds seen by a user running browser-based test on his or her computer. Results from these other tests are also impacted by bottlenecks that exist elsewhere in the network. By directly measuring throughput at the point of a user’s connection, the Sam Knows test shows the actual speeds consumers can expect to experience, independent of other limiting factors beyond the control of the ISPs.

Transparency is an important part of helping create the most vibrant and competitive markets for consumers. Having good information on the speeds of ISP offerings helps consumers make informed choices in this competitive market place. As a recent ITIF report notes, the U.S. has one of the most competitive broadband markets in the world. This program is another example of the sort of multi-stakeholder approach to addressing issues on the Internet that we believe helps improve services while providing more choices for consumers.

A decade ago, Verizon laid the groundwork for gigabit networks when we first started architecting FiOS, our top-rated fiber-to-the-home service.  We committed over $23 billion to deploy a fiber network that would one day deliver Gigabit speeds.  At the time, 10 Mbps was considered ridiculously fast, and when we introduced FiOS with a top speed of 30 Mbps (much faster than anything available at the time), our technicians actually had to tweak customer PCs to make sure they could handle that speed. 

From 30 Mbps then to 300 Mbps now, we've been ahead of the game in offering cutting edge speeds to large numbers of customers (17.6 million homes are now passed by FiOS as of January, 2013).  We've already demonstrated we can deliver 1Gbps and even 10 Gbps speeds over the same fiber to a home.  As consumer demands and needs grow, we can increase our speeds.  But offering a high speed connection to the home does not tell the full story when it comes to delivering the best possible and most capable broadband service.  A high number of bits-per-second-connection alone isn't sufficient, because other factors aside from speed affect the quality and capability of a connection.  Internet traffic usually has to “hop” through many points in the “network of networks” to reach its final destination.  As a result, latency (or the lag in how long it takes for packets to reach a destination) and jitter (how “smoothly” packets arrive at their destination) matter a lot when it comes to quality and performance. So do a number of network architecture issues, like the development and adoption of video delivery protocols. Bandwidth doesn’t cure all problems, and sometimes even with lots of bandwidth, other factors can significantly affect how well services work. We are boosters of high speed services, as our investments demonstrate, but the utility of broadband networks and their ability to help support new applications and services is affected by many factors, not capacity alone. (Christopher Yoo of the University of Pennsylvania has written an excellent book that details some of these challenges).  

Additionally, the level of demand for more bandwidth applications and services is an integral part of making deployment successful and adding real value for consumers. When we started our FiOS deployment, most people did little more than email, web browsing and the like. If we offered 300 Mbps in 2005, we'd have had few takers - no devices could handle that speed, nor were there Internet services or servers that could use it. While we’ve made a lot of progress in creating new applications and services that can take advantage of ultra-high speeds, it remains true that our fastest FiOS services have far more capability than has been tapped. We know homes now often have multiple devices connected to the Internet via our broadband service and capacity demanding devices and services – like big-screen Internet-connected TVs and streaming HD video – are a growing part of the mix. The FiOS project raised some eyebrows a decade ago, but few would question the need for what our network can offer now. 

The point is that it is not as simple as expanding bandwidth. That said, we are leaders in providing the highest quality, fastest networks and we believe in the value they provide. More work is needed on a number of fronts to make all of the promise these networks can deliver as widely available and useful as possible.

Watch one Verizon team demonstrate a 10 Gbps connection:

To its credit, the FCC recognizes the importance of moving to broadband and IP. Recently, Chairman Genachowski challenged the industry to bring at least one gigabit-speed internet community to each state by 2015. The FCC has also taken important steps to help facilitate the transition by reforming the universal service and inter-carrier compensation systems.

The Commission now has the opportunity to consider additional steps that can further the transition, as recommended in the National Broadband Plan. The FCC has already paved the way for this with the creation of the Technology Transitions Task Force, and there are some straightforward steps the Commission can take to help accelerate the transition, as we’ve detailed in our comments.

But let’s not kid ourselves – transitions like this can be unsettling. People generally resist change, and it’s easy to focus on and worry about the differences resulting from a transition to IP-based networks, rather than seeing the benefits and new opportunities that will be created. I’m sure that a century ago, there were people concerned about the transition underway from the old, familiar horse that had served them well for centuries, to those new-fangled “automobiles." Someone might have said, “If my horse gets tired, I can let it rest, eat some grass by the side of the road and keep going, but if my car runs out of gas, I’m stuck!” All transitions involve trade-offs, but no one would seriously entertain moving backwards.

The fact is – in many cases out of necessity – transformation of our nation’s communications infrastructure is already underway. The Commission only has to look to Lower Manhattan to see what the future of communications holds. In the wake of Superstorm Sandy, Verizon engineers have been working around the clock for the last three months, replacing damaged copper cables with modern fiber infrastructure. The faster the FCC acts on reforming outdated regulations, the quicker next-generation technology can be rolled out to the rest of the country.

As the FCC contemplates this transition, it should resist the calls to shoe-horn old laws and regulations onto 21st-century services. The FCC should embrace rather than shy away from change. It should identify what public policy objectives continue to be important and how best to achieve them in the competitive, highly dynamic, fixed and mobile, app-driven broadband IP world we are rapidly moving into.

For an inside look at the copper-to-fiber transition happening in Lower Manhattan, check out this video:

• More than half of Americans now own smartphones
• Mobile data usage doubled in 2012 and more than 50% of all mobile data is video.
• North Americans make up 69% of total LTE subscribers worldwide.

This began to change in the latter part of that decade. The emergence of IP (or Internet Protocol)- based communications, digitization, packet switching and higher-capacity lines meant that each of the formerly separate network technologies could deliver communications services of many kinds – voice, video and data. The word “convergence” emerged to describe this term, and was popularized by Nicholas Negroponte in his famous book, “Being Digital.”

Today, we give no thought to the fact that thousands of different networks are interconnected using a variety of technologies, while at the same united around IP protocols. Competition among industries that were formerly separated by walls of analog network technologies has blossomed. The rapid evolution of IP networks, technologies, and services has helped transform many other sectors. One such sector is manufacturing.

Modern, large-scale manufacturing is global in scope. For decades, manufacturing was highly labor intensive and required that large stocks of materials be kept on hand. The manufacturing process also required other inputs, such as communications services. But these did not comprise a substantial portion of the value of the finished products, and so were not strategic inputs fundamental to successfully producing globally competitive goods.

That has all changed. Today, communications and information services are an integral part of any successful manufacturing operation. The U.S. has one of the top ten[PDF] communications and IT systems in the world. A recent report by the McKinsey Global Institute found that the integration of these services into manufacturing jumpstarted “manufacturing convergence” – merging traditionally separate functions and systems to create unique new capabilities within the business. With people, processes and technology in unison, manufacturers can achieve higher levels of business performance, innovate more effectively, change product lines more quickly, turn resources into assets, and discover unique opportunities for competitiveness.

Within the last decade or so, advanced communications and information services have become an integral and strategically vital part of the manufacturing process. These services have become so important that they make up to 20 to 25 percent of the value of a finished product in some industries. Successful manufacturers use communications, information technology, cloud services and the like to coordinate manufacturing systems, design and distribute vital drawings and schematics that guide the building of products, and keep real-time track of inventory and draw-downs of vital materials. This new form of convergence has made manufacturers in the U.S. more competitive, and allows manufacturers of all sizes to grow their business globally and with the confidence it can be sustained.

But this synergy cuts the other way, too. In order to build and improve their networks, U.S. communications providers rely heavily on network equipment manufacturers that make advanced servers, routers, and fiber optic cables. As the McKinsey report notes, “just as manufacturing creates demand for service inputs, services also create demand for manufactured goods.” U.S. network providers have invested over $1.2 trillion over the last decade, and are continuing to invest today in advanced networks such as 4G LTE mobile networks.

In effect, a virtuous cycle has developed between network providers and manufacturers. More and more, manufacturers need advanced communications services and IT to remain competitive. They need the continuing improvements in these networks to become even more innovative and efficient. At the same time, network providers need the high-tech products manufacturers build to create, install, operate and improve their networks. This is a new convergence, but one that helps the U.S. remain globally competitive.

The result, according to the report, is reflected both in the percentage of a manufactured good’s value that reflects communications and IT services, and the percentage of service-related employment in manufacturing, as shown in these charts from the McKinsey report.

The convergence of manufacturing with communications and information services highlights the need for manufacturers and communications companies to be able to maintain flexibility within their business models and operations to quickly and efficiently manage their risks and long-term investments. The goal is to “make each strategic choice less critical, less permanent, and less costly to reverse or redirect.” It is important then to support an environment that allows companies to swiftly respond to shifts in this burgeoning market of interconnectivity and to become more resilient and prepared for continued evolution in the marketplace. The advantage of this new convergence is the ability of all firms to change and relentlessly innovate. If they are unable to do so because rigid U.S. policies or regulations that interfere with needed changes, the U.S. ability to compete globally will suffer.

Beginning this week, Verizon Wireless plans to reach out to some of its customers asking them to opt-in to participate in a new initiative called Verizon Selects, which is part of the company’s Precision Marketing portfolio. Verizon Wireless will offer customers who opt-in to Verizon Selects a coupon or some other form of reward, most likely from a popular retailer, in exchange for their participation. If a customer chooses not to opt-in, absolutely nothing about their relationship with us changes. Customers are not part of Verizon Selects unless and until they opt-in. Simply put, Verizon Selects will use location, web browsing and mobile application usage data, as well as other information including customer demographic and interest data, to create specific insights. Verizon Selects analyzes this information about customers to see whether they fit into certain audiences Verizon or third party marketers are trying to reach. Depending on the results, participating customers will receive marketing messages or offers that may be of more interest to them than what they see or receive today. These messages could be delivered in various ways such as email, text, postal mail or online or mobile advertising.

As they say, read the whole thing. It’s important to re-iterate that Verizon Selects is an opt-in program, and that Verizon does not share personally-identifiable customer information with anybody outside of Verizon. Customers can change their privacy settings at any time by visiting their Verizon Wireless account page.

Just as we appreciate effort in innovative ideas, Verizon also prizes its well-established track record of respecting its customers’ privacy and protecting their personal information.

Verizon crews have been working around the clock to restore service to the hardest-hit customers in New York, New Jersey, and the surrounding regions. Naturally, in the wake of Sandy, and with a chill in the air portending winter weather, policymakers are asking how utility infrastructure, transit systems, and communications networks can be made more resilient and better able to meet the needs of consumers and public safety officials during an emergency. As an industry leader in both wireless and wireline communications, Verizon looks forward to being a part of that discussion on issues regarding public safety and how we can best serve our customers and communities. You can find updated information on our wireline and wireless restoration efforts here and here.

Also worth checking out is a recent piece at The Verge on our Manhattan restoration operations that includes photos and video from inside the flooded cable vaults, where workers have been replacing the damaged copper cabling with new fiber optic equipment.

You can see additional videos on Verizon’s recovery efforts here and here.

Innovation happens throughout the Internet ecosystem, from the physical networks and broadband connections, to computers and devices, to software. While innovation in some aspects of the Internet is readily visible – such as new web applications or content sites (think Facebook or Netflix) – innovation in how the physical networks are structured and how they function is equally important, if less visible. In fact, many new services – such as massive distribution of video – would not be possible today without innovation in how the physical networks interconnect and exchange traffic.

First, let’s put things in perspective: The volume, variety and complexity of traffic on the Internet have been evolving and growing for many years. Just fifteen years ago, Internet video was virtually non-existent. Today, the fastest-growing type of Internet traffic by “volume” (i.e., how much capacity is consumed in sending the traffic) is real-time streaming video. According to Sandvine, nearly 60% of all traffic during peak periods on wireline residential networks is video. Though other kinds of traffic – from peer to peer file sharing to web browsing – are also growing at high rates, video consumes far and away the most capacity on the Internet today.

This wave of increasing traffic volume is not a new phenomenon. We’ve seen similar waves of growth in the past. In the late 1990s, simple web traffic (a new phenomenon on the Internet at the time) was growing massively, and many "experts" feared that a congestive failure of the Internet was imminent. In fact, Robert Metcalfe, the originator of Ethernet protocols, famously predicted that the Internet would collapse in 1995, promising that if it did not, he would eat his words. (Later on, he did quite literally do so).

In each case where a new service or application caused traffic to surge, the Internet has adapted to the new levels of bandwidth demand. Part of this adaptability is due to the billions of dollars of investment by network companies – I’m talking fiber optics, VDSL, and cable DOCSIS modems and networks – that have expanded bandwidth by several orders of magnitude in the last decade.

But an equally important part of this story of network adaptation has to do with innovations in how networks interconnect and exchange traffic. Remember, the term “Internet” refers to a network of multiple networks, each differently owned and operated, often using different underlying technologies, that interconnect and exchange traffic via agreements that benefit all parties. The chart below shows the way that video traffic might have moved under the old “hierarchical” model of the Internet back in 2003.

This hierarchical, tree-like organization worked fine for traffic that did not have latency constraints or did not require virtually instantaneous display. But it didn’t work well for high-capacity, latency-sensitive traffic like video. Traffic had to travel all the way from the consumer up through the backbone, down to the website, and then all the way back again (see the red line), carrying a continuous stream of video traffic. It simply did not run smoothly, and video delivery was increasingly degraded as more and more video was consumed.

But two major examples of network innovation changed this:

First, a more efficient way to manage web video traffic has taken hold with the gradual restructuring toward a more distributed network system, and with the emergence of Content Delivery Networks (CDNs). With the rise of CDNs – and there are many competitive providers of these services – traffic operates differently. It does not travel hundreds or thousands of miles up and down the “stack.” Instead, content is stored on several local servers, closer to end-users, making the transmission much more rapid and greatly improving quality.

As a result, here is what the Internet looks like today:

A second example of innovation and network adaptability is the emergence of Internet Exchange Points (IXPs). In many parts of the world, traffic on the old, hierarchical Internet model had to travel from a country in, say, Africa, all the way to the U.S. and back in order to serve a simple web page. Just a little more than a decade ago, 75% of all European and Asian traffic passed through the U.S., where a lion’s share of the web’s servers were located at the time.

However, in recent years, interconnection arrangements called IXPs began to evolve. IXPs are hubbing agreements that allow several ISPs to locate routers together and interconnect with one another. These hubs are located near a country or region served by the ISPs. As a result, when a request for information, content, or an email is sent that can be served by an ISP in a nearby IXP hub, it can be routed quickly to that ISP and not have to travel thousands of miles to the US or Europe and back. Today, according to FCC Commissioner Robert McDowell, only 5% of Africa’s internet traffic now touches the U.S. The number of IXPs operating globally today has grown from just a handful to over 350 today, a solid indication that IXPs are at the heart of a new and more efficient way to interconnect networks.

The important point to keep in mind is that all of this restructuring did not just happen by accident or regulatory decree. A whole new set of interconnection relationships had to develop in order to make CDNs and IXPs possible. Did anyone order this to happen? Did regulators mandate it? No. Rather, growing market demand for bandwidth forced companies to collaborate in order to find a better way to serve that demand. It wasn’t always easy to do and there were inevitable hiccups, but it worked out and network operators continue to work together to meet the evolving bandwidth needs of the 21st century.

Given how fast the Internet is growing, and how effectively it has adapted to growing bandwidth demand with new forms of interconnection, the question I’ve been addressing in these three posts about IP interconnection is this: what could regulation or government intervention do to improve the current state of network organization, without undermining the innovation and rapid adaptation we’ve experienced over the last 15 years?

I'd wager not much. The Internet is growing faster than anyone ever imagined. More people around the world own a mobile phone than own a toothbrush. Although not all of these phones are connected to the Internet, given the speed of adoption, they undoubtedly will be in the near future. Despite this growth – in fact, because of it – the Internet continues to adapt to meet that swelling demand without governments having to play any significant regulatory role. On balance, the three posts I’ve offered make a strong case that allowing the Internet to evolve as it has – with minimal government involvement – is the best means of ensuring its continued success.

This is a very important topic because much of the current debate around what to do to spur more growth centers on understanding how the economy responds to policy changes and to the actions of various actors, such as businesses and consumers. Some believe that the U. S. economy’s basic working fundamentals have not changed much in recent years. This is the view of Ben Bernanke and many others.

But others believe that the past 250 years may prove to have been a “unique” period of expansion that may not continue in the years ahead. As a result, they believe that achieving annual growth rates of three to four percent going forward will be much more difficult than in the past. Among those making this argument is Robert Gordon. You can read Gordon’s paper at the link, but in a nutshell he believes the waves of innovation over the last 250 years (including the Internet) have largely played out, and that while new technologies and innovations will spur economic growth, a host of other factors – an ongoing global debt crisis, demographic challenges, lack of access to educational resources – will tamp down economic growth for decades to levels as low as .5 percent a year.

Is Gordon right? As a tech trends and policy thinker for over two decades, my first response when it comes to the potential of technology is to be cautious about predicting anything. But I do believe that technological advances often move in directions and with speeds we never could have anticipated. I, for one, am not nearly ready to declare that we’ve reached a “new normal” or plateau in growth, in large part because the innovation that ensues is not limited to technology, but also to business models and transformation of the entire production system.

Rob Atkinson and a number of other economic historians argue that throughout its history the U.S. economy has gone through such periods of transformation about every fifty years: from agriculture to craft manufacturing during the 1840s-1890s; the development of factory-based industries during the period from the 1890s to the 1940s; the explosion of large, corporate mass production from the 1940s to the 1990s. Today we are still experiencing the disruption of the post-WWII, mass-production social and economic order that began a decade ago, as the forces of the IT-driven knowledge economy began to “flatten the world,” as Tom Friedman might say.

As even Gordon notes, the impacts of the changes influenced by the first two waves of technology change he discusses took literally decades – possibly close to 100 years – to completely work their way through society and the economy. While he notes that computers have been around since the 1960’s, the truth is that those early machines were nothing like today’s. They ran initially on punch cards (I programmed on them when I was in grad school) and they did little to empower individuals. They were centralized devices owned and managed by corporations and government agencies by and large.

Further, the real power of computing did not start until the 1990s, when computers finally were not only “personal” (and no longer behemoths owned by big companies alone), but more importantly networked. Alan Greenspan made an important observation about this in a speech in 2000 when he said “The full value of computing power could be realized only after ways had been devised to link computers into large-scale networks.”

The power of mobile technologies adds another dimension to this picture that suggests high levels of innovation, change and investment. This piece in the New York Times illustrates how rapidly these markets are evolving. The innovation that is emerging is going to have continuing impacts on our economy, promoting new services that will mean more growth and consumer adoption of a wide array of services that are only beginning to emerge. This piece, highlighting the development of networks of sensors and mobile-information devices, suggests even more growth as mobile networks of a wide array of devices will help us manage aspects of our daily lives and businesses better manage their operations. These so called “machine to machine” technologies are only beginning to have an impact, with approximately 100 million devices connected today. Studies suggest more than 2 billion devices may be connected within the next decade, with major impacts on business operations and efficiency.

Further, technology often has even greater impacts as business processes change to take maximum advantage of the new capabilities. Clayton Christensen as explains, only after consumers (and businesses) widely adopt a new technology and have used it for some period of time can its impact be widely appreciated. This sort of change may not become “transformational” with major impacts on the economy for quite a period of time.

I believe this is true of mobile technologies and the Internet. Yes, we’ve had the World Wide Web (running as service on the Internet) since 1995 but only in recent years has web access become a “mass market” phenomenon. While most Americans today have mobile phones, the majority still do not have smartphones and are not able to use the full set of services and capabilities available on the web. Globally, billions still do not have either web connectivity or smartphones. Whole segments of our economy have yet to see the full benefits of mobile connectivity and access to high speed web based services.

While a majority of doctors today have iPads and are using information technologies, the reality is that health care remains isolated from the major improvements in efficiency and treatment outcomes that effective utilization of information and communications technologies could bring.

At least a third of health care expenditures in this country are wasted or harmful according to the study, including numerous examples of patients failing to follow their treatment regimens and landing back in the hospital. Medical errors, such as improperly administering medicines or treating patients in the hospital, often result from faulty written records or mistakes in reading information on paper charts. All of this results in huge costs for re-admitting patients to hospitals, failing to prevent serious illnesses, failing to administer treatments correctly and failing to take maximum advantage of better alternatives in administering care.

Huge inefficiencies result. Communications and information technologies can make a major difference in this situation. While there has been a push for wider adoption of electronic medical records, progress has not been as great as in other industries, such as retail, which have taken advantage of efficiencies and meeting consumer needs via information and communications technologies.

Our CEO Lowell McAdam put it best in a recent speech:

And we’ve seen a revolution in the behavior of consumers, who have come to expect anytime-anywhere access to everything in their digital lives. Yet for all of this innovation, technology has yet to truly transform health care as it has other sectors of the economy. Doctors report that their productivity actually goes down, not up, when technology is introduced because of incompatible systems and frustrating interfaces. The amount of digitized medical information is rising exponentially, but systems still can’t talk to each other easily, in part because of the licensing and security issues unique to this industry. Access to quality care is still uneven. While 20 percent of Americans live in rural areas, only 10 percent of doctors serve them, meaning that two-thirds of people in rural areas have to travel more than an hour for medical care. And maybe the most surprising thing in an anywhere-anytime age is that patients don’t have the seamless connection to their health care systems that technology affords them in every other facet of their lives. The results: consumers and providers are still frustrated …access to quality care is still unequal...and America’s $2.3 trillion bill for health care is still rising at an unsustainable rate.

This is not the only segment of society where the Internet and mobile technology has not been integrated effectively, where the transformational possibilities – and the spinoff improvements that would continue to occur – have not yet been achieved. Energy management, transportation, education and many other parts of our society have only seen the beginnings of the improvements that could occur if we more effectively integrated these communications technologies – and adapted our systems to utilize them more effectively. There are huge benefits in productivity and efficiency that remain to be mined. And this does not even take into account what can be done globally where many hundreds of millions do not yet even have access to the Internet.

When it comes to earlier waves of technology that led to the adoption of cars, indoor plumbing, the telephone and electricity among other things, Gordon seems to understand that a complex process of technology development, change in business practices, adaptation by society and full integration into all aspects of society are required to take full advantage of the efficiencies and improvements that technologies offer.

I would argue that with the Internet and mobile technologies, we have not seen anything yet, and that this coming wave of innovation will actually help address and alleviate some of the “headwinds” Gordon believes will hold back economic growth – access to education, for example.

This is why my second blog post about IP interconnection is about the economic and market incentives related to interconnection. My point here, as in my first post, is that commercial interconnection arrangements for IP traffic have worked well. There is no need for government involvement in these processes. In fact, government’s involvement would very likely harm innovation and the evolution of the Internet.

To set the stage, let’s look at the market that underlies IP interconnection arrangements. It is highly competitive with thousands of physical networks interconnected to provide access for consumers, governments and businesses to each other and to the wealth of information that resides in various sites on the Internet. These networks include everything from local access networks run by Internet Service Providers (ISPs), to backbones spanning the oceans to global facilities, to Content Distribution Networks (CDNs), to content and search engine sites and their facilities. In this world it is not uncommon for a player to be both a provider of access in one instance and a consumer in another.

A report from Analysys Mason illustrates the point that the players involved in the Internet ecosystem often have customers who want to connect to sites for content, or want to send information to others, or want to find information from the millions of sites that are a part of the Internet. While there can be bad actors, responsible companies know they have to cooperate to make this happen.

Take Verizon as an example. Our broadband connections allow our customers to connect to sites that are linked to other networks. Traffic from our customers often goes on backbones owned by other companies or it must connect to CDNs owned by other players for access to video content. If we tried to interfere with traffic to NBC, for example, Comcast could retaliate in a number of ways by, for example, stopping email traffic to our customers that travels over their networks. But why would they? The benefits of interconnection so greatly outweigh any possible advantage gained from interference that no rational company would even consider such a strategy.

The fact is that there are so many users (2.2 billion), networks (tens of thousands, but no one really knows), devices (35 billion), operating systems (dozens), apps and applications (hundreds of thousands) and web sites (255 million) that are interconnected today on the Internet that the incentives to cooperate and ensure that traffic flows to where consumers want it go are very strong.

While all of this can seem complex, it works amazingly well with no government involvement. For example, according to this study by Anna Maria Kovacs, there are literally tens of thousands of agreements between networks of various kinds to interconnect. The vast majority don’t even involve a formal written agreement. Clearly interconnection arrangements between networks are common place and arrived at in the vast majority of cases with very little fuss.

That does not mean, however, that all requests for interconnection between networks end in an agreement. A failure to reach one agreement does not imply that traffic is being “interfered” with, or that a network is isolated and unable to send traffic from its customers to other networks. It just means the two parties couldn’t agree on price or other commercial terms – something that happens every day in every business.

Beyond the myriad relationships that exist among networks and that exist at all levels of the Internet that drive communications and connectedness, competition also represents a strong form of discipline in the market. Competition is clearly in evidence with IP interconnection, and it shows in the prices for network services.

For example, according to Analysys Mason, the increase in competition among owners of capacity on global backbone facilities has resulted in substantial drops in the prices for international connectivity in the past few years in many countries. In one example, since 2008 prices declined by more than two-thirds for an international link between South Africa and the UK. These drops in prices helped push down the cost of broadband in many countries.

Within countries too, prices for transit have fallen dramatically. In spite of continued and massive increases in demand and the increased bandwidth of content, transit prices have fallen on average more than eighty percent in major markets around the U. S., again a major indicator of the competitiveness of the IP market place.

The Internet is constantly evolving, too, adding more networks, different business models and more competition. New networks are emerging or have emerged, such as Content Distribution Networks and hubs where large numbers of ISPs connect, called IXPs. Traffic is no longer hierarchical and no longer simply goes from local networks, up to backbones and back down. There are many more pathways and much greater efficiency than in the past. These new models increase options for players when it comes to interconnecting their networks, and serve as further evidence that the market is competitive and adapts to the benefit of consumers and the industry.

A final factor that encourages network players to work out interconnection disputes and reach agreements is crowdsourcing or pressure from consumers. Most consumers are basically users of the Internet and not engineers or network experts. But among the hundreds of millions of users of the Internet are many engineers and experts. The Internet’s protocols are not proprietary, and the openness of the Internet makes it very difficult to “hide” problems related to an interconnection dispute or a breakdown between networks. If these kinds of interconnection disputes cause network problems or slowdowns, it is quite possible that the dispute will get public attention. If the dispute is significant enough and has a negative effect on consumers, it is also quite possible with today’s social networks, Twitter and blogging sites, that some will react and a “crowd” will grow online, making it clear what their views are. Companies do care about their reputations, and public displays of frustration or concern are not likely to be ignored.

It is important to remember, though, that while the incentives to interconnect are strong, it is the ability of the negotiating parties to decide which agreements make sense that leads to market-based rates, innovation and the efficiencies they produce. As Analysys Mason noted, the rate of growth of the IP infrastructure in recent years, and the accompanying decline in prices, has been truly remarkable. That success story is due in large part to market-based prices for interconnection arrangements that give all participants the right incentives to invest and innovate.

And that’s something no one could ever say about the regulated interconnection regime that governed the circuit switched world.

This article by Steve Pearlstein in the Washington Post on Sunday (September 16, 2011) does an excellent job of explaining how the rapidly changing business models in the Internet ecosystem and the forces of technological change and consumer demand have led to innovation and more value for consumers. Here is what Pearlstein says about the nature of change in the Internet ecosystem (It is a long excerpt but worth reading):

“Rapid change in technology is obviously a common thread running through all of these stories. While it’s difficult to figure out how new technology will develop, it’s impossible to say how it will be adapted. It is only in hindsight that Nokia looks so dumb not to have fully understood the promise of surfing the net while listening to music or for BlackBerry not to have realized that people would prefer to type their messages on a flat screen than pushing buttons with their thumbs.”

“The key to success in such a fast-changing environment isn’t developing clairvoyance. It’s keeping a mind open to numerous possibilities, having the discipline to experiment with several conflicting strategies and moving quickly to embrace one of them when the direction of the market becomes clear.”

“A second lesson is that as long as the technology remains unsettled, so will be the business models around that technology.”

“Today it is gospel that success in the smartphone market requires integration and control of both hardware and software, just as Apple has done with all of its products. But that hasn’t assured the success of BlackBerry, which has stubbornly embraced the same model. And it doesn’t explain why Nokia, which once had not one but two operating systems, has scrapped them both and gone in with Microsoft’s new mobile operating system. Unless, of course, you believe that it’s only a matter of time before Microsoft buys hardware maker Nokia, following the path set by software maker Google last year when it bought hardware maker Motorola.”

“It may appear today as if competition from the likes of Amazon dooms brick-and-mortar retailers like Best Buy, particularly for low-margin appliances and electronic equipment. But perhaps there is a good business to be had by unbundling the sale of hardware from the services required to demonstrate and explain it, install it and service it, which can be charged separately for customers who chose to buy their equipment elsewhere. Under such a model, it would be Best Buy that has the brighter future, and Amazon that gets stuck competing in a low-margin commodity competition.”

“The point here is that over the next decade we’re likely to see many more Nokias, RIMs and Best Buys before the technology sector settles into a more stable, predictable competitive dynamic. Until then, you should be highly skeptical of anyone who claims to know how it’s going to shake out.”

A new book by Alan Wurtzel, a former chief executive and chairman of Circuit City during its heyday, is also referenced by Sloane in his article. It makes much the same point – no company can sit on its laurels in the dynamically competitive and changing Internet ecosystem. The book is coming out next month. Wurtzel and his company were profiled in Jim Collins’s best-selling management book, “Good to Great,” in 2001 as Pearlstein notes. Wurtzel’s book - “Good to Great to Gone,” looks at lessons Wurtzel takes away from Circuit City’s subsequent demise. He basically says they knew change was coming but in the end they could not make the transition fast enough.

This phenomenon – best captured in the classic series by Clayton Christensen “The Innovators’ Dilemma” – is a key feature of the Internet ecosystem. We’ve often said that this dynamically competitive and innovative ecosystem does not fit the anticipatory regulatory models of our existing policy structure. But the truth is that not only regulators and policy makers but business leaders as well can’t predict the direction innovation and competition will take with regard to the Internet ecosystem. And it is a good thing they can’t because this openness to change and the willingness to adopt a whole new direction is what helps make the Internet so valuable to everyone.

Back when the World Wide Web first became popular and PC use was growing rapidly, one of the comments often made was that we would soon see the “end of paper.” A 1975 article in Business Week was one of the first to argue that the paperless office was not far off. A study by consulting firm A.D. Little predicted in 1979 that all paper records would disappear by 1990. And IBM was among the most famous of companies predicting the end of paper in the office.

Rather than making paper obsolete, however, paper use exploded for a while. Why? In part because in those days you really had limited amounts of things you could really do on the Web other than surf and print what you found. There were no photo-sharing sites, no Facebook, no cloud storage or data sharing sites.

Further, PCs were frankly pretty lousy in terms of their screens and displays. It was hard to read documents on them. There were no digital cameras and most of what was sent via the Web/Internet was text-based information (i.e., emails with attachments, mostly documents/charts), things that are easy to print. Lap tops were just emerging in the late 1990s and they would eventually add new capabilities so people could see documents wherever they were. Over time, as these technologies developed, people had less need to print when they traveled.

Finally, so much today is cloud connected/focused and the devices so good at displaying everything (e.g., iPads) that printing is increasingly unnecessary. And with smartphones, people often share photos immediately and on Facebook with friends. They don’t need to print them. The new generation of users is frankly just not that reliant on printers as their usage patterns are so immediate and so different. iReaders make reading documents much easier and have high levels of functionality (e.g.., search capabilities, dictionaries that are integrated with the devices, the ability to add notes and store quotes and so on).

So has the amount of paper used in the U. S. actually declined at all in recent years? The answer is yes, paper usage in the U.S. has gone down. And Lexmark’s announcement demonstrates that printing at home is a declining business, as well.

But all of the factors I cited above demonstrate once again that predicting technology and the direction of the Internet ecosystem is impossible. Regulators can’t do it and even the industry can’t. It took years for the decline in paper use that was predicted but the futurists weren’t wrong. They just could not predict when or how all of the changes would occur that would make all of this happen. And they certainly could never have predicted that new devices like the iPad.

The old telephone network (also fondly referred to as POTS, Plain Old Telephone System or PSTN) was an amazing thing for its era. Imagine what it must have felt like to be able to dial a few digits and within seconds to be able to speak to someone halfway around the world, in an era where a physical letter took many days to get delivered, and email and WWW were typos, not services. The PSTN was “centrally” managed – by the telephone companies. "Dumb" peripherals - your basic black phone - connected to a "smart" network, one in which the network functionality was simple in one sense (i.e., routing calls) but complex in the sense that the calls had to be measured and billed. The network offered one service: voice. The network was aware of who initiated the transaction (in the sense that it “knew” physically where the line terminated and who to bill for it), who “terminated” the transaction, how long the transaction lasted, and what carriers were involved in supporting the transaction. This provided a way to allocate the costs of the operation of the network to those who used the network. In general, there was one call initiator and one call recipient. Life was simple.

In this model, physical interconnection was much more immediate and closer to the source of the switching function. Since a physical circuit had to be "built" end to end from the source to the destination in order to connect and compete, a competing carrier (CLEC) needed to have access to the lines managed by the incumbent carrier (ILEC) in a central office, because these lines were connected physically to a person or business and associated with a specific phone number.

The architecture of the Internet turned all of this on its head. It is not centralized. There no longer are only a few networks managed by dominant players who have a central and controlling role (the former monopoly telephone companies) from protocol specifications to network build outs. Now, there are thousands of networks, many not operated by the traditional “carriers” but instead by web site providers, content providers, private companies and the like. The protocols are open and managed more collegially. What used to be an easily measurable transaction - call duration and distance - is now no longer easy to measure. A transaction is now an attribute of the application that is run on the end systems, and the network is generally not aware of these transactions. All the network sees is packets, and each packet provides limited visibility to the network about what it is carrying.

This is even more true in the case of encrypted traffic, where data is simply invisible and impenetrable to everyone but the source and destination. Now that the “transaction” is not visible to the network operator, this implies that any effort for a network to use a transactional service tariff model becomes an exercise in frustration. There are no such network-visible interactions that could be used to create a transactional service model.

Interconnection in a “switching center” is not necessary or vital any longer because physical access to individual lines is not needed as was true with telecommunications and telephony in the past. Now, packets can be routed to a physical location virtually, and the physical interconnection can happen in many ways, in many different forms. Just because an interconnection agreement is not reached with one player does not mean that it is not possible to get your traffic where you want it. There are, in other words, many ways to skin the cat. That was not true in the past. John Gilmore's quote - "The Net interprets censorship as damage and routes around it." - applies whether one is referring to censorship by a state or lack of an interconnection agreement between two players. There are many pathways to ensure traffic gets to where it is going. This is a part of how the system was designed and it has proven itself to be highly adaptable and capable of evolving.

There is no one "Internet" to govern, and the coalition of networks is not governed by any one entity. If anything, it is governed by everyone. While the peering and IP interconnection (i.e., transit agreements and the like) process may not be a multistakeholder led activity, it is a form of governance because it is about making the Internet work. Agreements are reached among networks all of the time that keep Internet operations moving. All governance is not done via multistakeholder organizations, but it happens in a number of ways and generally without direct government involvement. IP interconnection is an example of this in action. If this were not the case, the Internet as we know it would look very different.

Thanks to my colleague, Sanjay Udani, for some useful edits and guidance.

On June 21, 2012, Verizon and AT&T each filed a complaint with France's highest administrative court, the Conseil d'Etat, to ask for annulment of a new regulation that requires operators to provide the French regulatory authority ARCEP with detailed semi-annual reports on their wholesale Internet traffic practices.^[1]

This filing is based on the global policy premise that regulatory restraint is appropriate for any competitive market, and this includes Internet services.  Under a philosophy of regulatory restraint, the Internet has grown rapidly and enabled unprecedented economic and social productivity, When any regulator considers imposing regulation to the Internet, no matter how light the touch and no matter what the intention, it is appropriate to challenge whether the regulation is necessary, appropriate and lawful. Because even light regulation can lead to unintended consequences that distort market behavior, we challenge this globally unprecedented regulation by ARCEP. 

Verizon and AT&T can demonstrate that the new reporting obligations violate the deregulatory principles of the European regulatory framework, and are unjustified in light of the competitive nature of the Internet wholesale market. Up until now, no European regulatory authority has identified any market failure, or applied regulation to Internet wholesale arrangements. The high degree of competition within the market was recently confirmed by the European group of regulators (BEREC): "[Peering and transit interconnection] agreements have been largely outside the scope of activity of National Regulatory Authorities (NRAs). This appeared justified in particular due to the competitiveness of the transit market on IP backbones."^[2]

As a matter of regulatory principle, Verizon and AT&T object to ARCEP imposing a broad reporting obligation, without any demonstrated link to competitive or consumer harm. As underlined by the BEREC, "most [NRAs] do not consider [data gathering exercises] appropriate unless concrete problems or requests occur".^[3] ARCEP has justified its new regulation by a general desire to learn more about the market.  However, a regulator can utilize less burdensome methods of market analysis than to issue an ongoing regulatory requirement for data reporting obligations.  Because there is no existing evidence of market failure in the highly competitive Internet services market, because ARCEP could utilize less burdensome measures to gain general market knowledge, and because regulatory restraint continues to foster a highly successful Internet model in France and across Europe, we challenge the legality of ARCEP’s decision. We have also challenged ARCEP's statutory authority to issue the regulation because, under French law, periodic reporting obligations are to be defined by the French government, not by ARCEP.

[1] ARCEP n°2012-0366 decision related to the implementation of a process for gathering information on the technical and pricing terms governing data conveyance and interconnection

[2] BEREC's Response to the Commission Questionnaire on Net Neutrality (BEREC(10)42); BEREC's Draft Report for public consultation, An assessment of IP-interconnection in the context of Net Neutrality (BoR(12)33)

[3] BEREC's Draft Report for public consultation, An assessment of IP-interconnection in the context of Net Neutrality (BoR(12)33)

I hesitated to give the quick response that came to mind given my own experiences with innovation in technology.  Back in 1976, I got my first computer when Timex came out with a small machine that hooked to your TV and saved data to a cassette tape.   Then in 1981, I bought an “IBM “clone” (a computer made from knock-off parts based on the then-very popular IBM personal computer) that my brother-in-law made and sold.  As I recall, it came with a 20-meg hard drive, and I distinctly remember his comment: “You’ll never need all of this memory.”   Yeah, right.

But let me delve into this matter a little more seriously. Why a 300 meg offering now?  Why do – or will –  consumers need or want it?

First, the sheer number of broadband-enabled devices in a home.  It was not too long ago (in the late 1970’s) when homes had only a few media or communications devices.  They were all analog, did not “talk” to each other, and could perform one task well, playing a record, for example (I know, “What’s a record?”) but that was it. 

Now, many homes have six or seven communications devices connected to the home network at the same time, sharing the home WiFi cloud coming off the router and using the same broadband connection.  In fact, it is becoming more common for even just one person to have multiple connected devices – a PC, a tablet, a smartphone, for example.  In short, the bandwidth demand from so many devices is increasing.

Further, the Pew Center has pointed out that even when digital devices are not connected to a home network, data can be swapped or transferred from device to device.  This too can drive broadband demand as people seamlessly pop out a memory card from a camera, download the pictures and movies just taken at the birthday party, and whisk them off to others over a social network site or upload them to a picture-sharing site. 

Second, the usage patterns of consumers are changing.  It used to be that memory in the PC was critical.  After all, once you created a PowerPoint presentation or edited your own home movie, you had to be sure you had storage space.  Increasingly, people are storing much of what they produce in the cloud.   Transporting such data requires bandwidth and the more people in a home or small business use the cloud, the more upstream demand there will be.   People frequently ignore or forget about the upstream piece of broadband, but it is increasingly important and FiOS does “up” really well.

Third, the devices themselves are increasingly demanding.  The new iPad, with its extremely high resolution, averages four-times the bandwidth demand of the previous version.  Until the iPad, some might have scoffed at the notion that more resolution is important and a major selling point to consumers, but it clearly is.  Any device that requires that more pixels be sent to it for display purposes puts more demand on the network. 

Tablets are only the start.  The newest flat-screen TVs have 4K displays, approximately two-and-a-half to three-times the pixel displays of the current 1080 TVs.  While these new TVs are expensive, they won’t stay that way, and given the reception the iPad high-resolution display has received, it is a safe bet that 4K TVs will find a home in many households.  These TVs require 70 meg download streams to display video and the next generation of TVs – the 8Ks – will take up to 250 megs.  Sounds like ever-growing demand for more bandwidth.

Fourth, we have only begun to really tap into the potential of broadband to enhance the delivery of important services like health care.  Our CEO just gave a speech on health-care technology and made this point well:

“Wireless and broadband networks are evolving rapidly, putting high-speed video capabilities within reach of an increasing number of users. And we’ve seen a revolution in the behavior of consumers, who have come to expect anytime-anywhere access to everything in their digital lives. Yet for all of this innovation, technology has yet to truly transform health care as it has other sectors of the economy.”

We have a long way to go to take the power of high-speed networks and meld it with medical technologies to create better health-care solutions, make health care more accessible, and improve outcomes.  But much is changing in the medical field with regard to communications and broadband technologies.  Already about half of doctors have tablets and a large majority have smart phones.  The number of hospitals that now use electronic medical records has grown dramatically in recent years.  And mobile apps of many kinds now exist to help people monitor chronic conditions or remember to take their medications.

But as Lowell said, this is only a start.  Chronic conditions that need continuous monitoring are a major challenge for our health-care system.  Broadband technologies can connect patients from their homes, and provide doctors with continuous updates on their conditions.  New technologies like 64 Slice CT scans can illustrate in amazing detail problems patients may have with their internal organs, but such scans require up to 3 gigabytes of capacity to transmit. Sending such a scan over a FiOS connection might take less than a minute.  Sending it over traditional broadband connections could take 12 minutes or more.  So, high-speed connections can be life-savers, especially in situations, where instant analysis is required from a doctor who is home or on the road. The demands of these new technologies – and the improvements that can come from better monitoring and better patient-doctor interactions including via video calls – are going to make broadband capacity ever more important.

So, is offering 300 megs simply a case of “build it and they will come”?   I think it is a case of skating to where puck is very likely to be.  That’s thinking ahead to create both platforms that can support the ideas and concepts of innovators, as well as to ensure the customer has what they need when those innovations become available.

By Andrew Glass

I recently escaped the bustling atmosphere of downtown Washington, D.C. and took a pleasant thirty minute drive to Ashburn, Virginia, home to Verizon’s Ashburn Campus. The facility maintains and processes services for customers nationwide – making sure that all of the little Bits that leave your computer or stream to your television are moving as quickly and as securely as possible. The facility also tests FiOS devices and maintains an extensive data center utilized by online companies.

Stepping out of the car, the first thing I noticed was the mere size of the facility. The campus consists of twelve buildings spanning over a third of a mile. Over 4,200 Verizon employees work in the facility. It is also home to geese that flank a pond in front of the facility, welcoming employees and visitors as they make their way from the parking lot to the main entrance. The main center is connected by a three story atrium called “Main Street.” It is very appropriately named as it could probably fit full size automobile traffic.

The Ashburn complex has a long history in the telecommunications industry. It was originally constructed as the UUNET headquarters, which was one of the largest Internet service providers of its time, and later acquired by MFS Communications Company, bought in 1996 by WorldCom (later to become MCI). Verizon moved into the facility in 2005 when it acquired MCI.

I made my way down Main Street and passed a sprawling cafeteria, complete with a Starbucks and omelet station. The facility is like a small town, offering employees resources that make it convenient to work in Ashburn. Our next stop was the Executive Briefing Center which is used to give presentations to government officials, stakeholders, and internal groups. It is where highly complex information on network testing, maintenance, and innovation is made simple for outside groups and the non-technologically inclined like myself. Here, Sanjay Udani, Verizon’s engineer-turned-technology policy expert, explained the incredible volume of traffic that the facility supports.

It is fitting that the briefing center overlooks the Network Operations Center. The “NOC,” as it is referred to at Ashburn, monitors three networks – Verizon’s global IP network, the FiOS network, and the Digital Media Services Group. This room is filled with cubicles featuring three monitors each. They all face large screens affixed to a far wall that monitor real-time network operations. If something goes awry, the problem will show on the screen and network engineers can get to the bottom of the issue right away. One of the screens is set to the Weather Channel in order to track potential weather challenges in different parts of the country. The scene is reminiscent of a military control room from an action movie – It is set up and monitored around the clock to ensure that the network stays up and any problems that arise are dealt with and remedied immediately.

From the NOC, we moved on to the FiOS testing lab. Engineers in this lab test FiOS devices to ensure that they are operating up to speed and customer expectations. They challenge the devices, pushing their limits to assess their capabilities. Engineers download music, play movies, and load video games – looking for any media that might slow the device down. They flood the devices with much more information than you or I could produce, just to make sure that the product will perform for the customer.

From the FiOS lab, we moved on to the Public IP Lab. This, I thought, was the most impressive part of the facility. Imagine entering a room with an overwhelming buzzing noise and air conditioning blasting on shelves upon shelves of equipment. Wires traverse the room, connecting machines in a visually impressive effort of organized chaos. The room represents an almost $80 million dollar investment by Verizon in order to flood its network servers with Internet traffic and test a myriad of protocols and configurations exactly as they would be deployed globally to make sure they all work together as expected. The challenge is to be the most reliable in the business, and to achieve this goal, Verizon is always testing its own networks by sending massive amounts of Internet traffic through the systems. This room features equipment from McAfee, Cisco Systems, and Juniper Networks, among others, in an effort to mimic authentic Internet traffic.

Needless to say, I was more than impressed with the facility. It surely is a technological feat worthy of recognition. However, what stuck with me transcended the technology to what the facility says about Verizon as a company. The Ashburn Campus is a testament to Verizon’s commitment to delivering cutting edge services and products that feature the most reliable track records in the business. The NOC ensures that networks nationwide can be counted on to perform at all times. The testing labs ensure that the products will perform under all circumstances. Verizon is committed to doing the job well the first time. This doesn’t mean that Verizon is complacent with its top performing products – No, a hefty investment in testing new products helps plan for the future. The engineers think two steps ahead, constantly searching for the next innovative product, relentlessly testing it, and delivering it accompanied with support to ensure that it is reliable.

My trip to the Ashburn Campus expanded my conception of Verizon’s business. Witnessing the technology in development and in practice is powerful. The facility says a lot about the company’s priorities – reliability of product and innovation for tomorrow.

But near the end, the discussion turned to the Verizon Wireless purchase of spectrum from the cable consortium and that is when I had to intervene and set the record straight. Many of the comments made by Gigi and panelist Andrew Schwartzman distorted the purchase and asserted “facts” that are simply untrue.

Gigi asserted that antitrust has a role in helping ensure markets remain competitive and she criticized her right of center counterparts for not seeming to care about antitrust. Andy expressed concern about the spectrum acquisition as well as the marketing agreements between the cable companies and Verizon Wireless. Both claimed that the spectrum purchase will harm competition in the mobile market place and that the spectrum would be better utilized in the hands of other companies.

Andy went on to say that no new spectrum is being created and no new auctions are imminent. He suggested that is a reason to view skeptically the Verizon Wireless purchase.

Most in the audience did not have any detailed knowledge of the transaction and I simply had to set the record straight at that point. I raised my hand and made several points.

First, I agreed that antitrust policy has a role in helping ensure markets are competitive but I noted that the marketing agreements Andy alleged have problems are in fact being reviewed by the Justice Department. Like the numerous joint ventures that exist, if there are in fact competitive issues, the DoJ is in a position to respond.

Further, I noted that Verizon is not proposing to purchase another company, buy customers from another company, or merge with another company. There will be no reduction in the choices available to customers. We are simply buying spectrum in the secondary market, a mechanism that FCC policy recognizes moves spectrum to its highest and best use. Secondary market transactions are common and important to helping companies adjust as necessary to the constant changes in consumer demand, technologies, and market conditions. Turning the secondary market system into a mechanism to make political or policy points is harmful to the entire process and undermines a key element of the government’s spectrum policy.

But getting this spectrum that the cable companies have not been using into the hands of a company like Verizon that is leading the world in 4G deployment (and in fact helping make the U. S. a leader in 4G deployment) advances both government and consumer interests of putting fallow spectrum to use. Verizon will put the spectrum to work to provide customers with the capacity they need to get the most out of their 4G LTE devices, applications, and services. This was the goal advanced by both the FCC’s Broadband Plan and the Administration’s memorandum on spectrum last year. So Andy’s comment is a distinction without a difference. This is "new" spectrum because it is not now being used to build networks to serve consumers.

While it is certainly true that no new electromagnetic spectrum is actually being created (even D.C. can’t change the laws of physics!) – my public interest friends ignore that there is plenty of good spectrum being made available for commercial broadband use. For example, the FCC recently proposed to allow the full 40 MHz of 2 GHz spectrum held by DISH to be used for terrestrial purposes without requiring any satellite-based service. And Congress also recently passed legislation directing the FCC to auction various federal spectrum for commercial mobile broadband use, including a first tranche of 55 MHz of spectrum by 2015. In addition, the NTIA recently “announced its finding that 95 megahertz (MHz) of prime spectrum could be repurposed for wireless broadband use” in the 1755-1850 MHz band.

On the spectrum competition issue, I noted that the FCC has long and successfully used a “spectrum screen” – a measure of how much spectrum in a given market any one company can own before it might raise competitive concerns – and it uses this tool to help make assessments about whether a particular transaction might need closer scrutiny. In all, 98 percent of the markets across the U.S. where Verizon Wireless is proposing to add spectrum from the cable consortium do not exceed the limits of the spectrum screen. And that does not even account for the 700 MHz spectrum Verizon Wireless recently announced plans to sell that will reduce the company’s spectrum holdings. That clearly suggests the proposal does not raise competitive concerns as Gigi alleged. And as much as I appreciate that some would like to control spectrum allocation to fit their subjective view of what markets should look like, we should not forget that the FCC is barred by law from considering other companies as alternatives to the purchaser proposed in a secondary market transaction.

To me, our purchase will make the markets more competitive. Why? Because as we see consistently in the Internet ecosystem, companies compete aggressively and change strategies rapidly to meet consumer demand. I don’t know what the other companies competing in the wireless market will do in response to our spectrum purchase but I am willing to bet they are not just going to sit still and wait to see what happens. They will respond to remain as competitive as possible. Competition will continue to evolve as it always has in our dynamic industry.

I like debates like the one Seton and Gigi convened. But in addition to policy positions and rebuttals, I think debates need to get the facts right. I was more than disappointed at how the Verizon Wireless spectrum purchase was mischaracterized. That’s why I spoke out at the debate and why I am sharing my thoughts now.

His article explained that key consumer needs are connected to broader societal issues in most cases. For example, there are a wide array of consumer needs in the health care space and broadband technology provides a platform for addressing many health care problems more efficiently and effectively and expanding access. Addressing consumer problems in the market for health care also helps produce major societal benefits, reducing family stress, improving community vibrancy, and reducing pressures on local governments and institutions. 

Companies that use their core competencies to address societal challenges tend to build stronger companies and produce better results for their shareholders and their stakeholders. Porter called this “shared value.” 

Matt Duffy who works for a consulting company that Michael Porter helped found called FSG just posted an excellent piece describing the shared valued concept as it is being implemented in Verizon. We adapted the concept and call it “Shared Success.” Matt’s post does a good job of outlining how far we have come in implementing the approach. 

The success of the Internet ecosystem is truly amazing. Wireline and wireless networks, new devices, software, applications, the Cloud – together they are connecting the world, empowering people, facilitating innovation, giving consumers many new choices in the way they communicate, work, and play. I suspect that most, even in this distinguished audience, did not anticipate what has come to be known as the Internet ecosystem would be delivering the services and the value that it is delivering today. And my sense is that this is just the beginning.

Think about the potential for this ecosystem to change our education system by creating for each student the learning environment that permits that student to learn best. At the World Health Care Congress held this week across the Potomac at Harbor Place, discussion centered on the revolution in health care driven by ongoing mobile monitoring of each individual, the effective use of data, and the massive improvements in efficiency and quality enabled by this ecosystem. Every aspect of our economy – from energy management to agriculture – is undergoing fundamental change driven the Internet ecosystem.

One little noticed factor in the development of this Internet ecosystem is the dispersed cooperative governance structure – the multi-stakeholder process – used to “govern,” or perhaps I should say, “keep order” in the Internet space. If someone had put this process on paper some thirty years ago and asked us if it would work, I suspect we all would have said, “No way!” Yet it has worked remarkably well.

The speed of innovation in the Internet ecosystem is due in part to the environment created by the governance model – an environment in which both competition and collaboration play key roles in driving new business models and new ways of meeting consumer demand. Players can be competing against each other and at the same time partnering. What this mix-and-match competition and collaboration produces is wonderful. But this process is also difficult and messy. There is always strong resistance to change, and change produces winners and losers. There are casualties. Those who don’t adapt, don’t innovate or fail to meet consumer needs, can quickly become casualties, losers in this marketplace.

While change in the marketplace is hard and disruptive, change in the policy or political world can be even more difficult. Unlike the pace of change in the Internet ecosystem, the body politic moves slowly. There is a strong desire for institutions, whether local or state or federal or international, to hold onto the rules that benefit their constituencies even if those rules or policies no longer make sense. For example, today, as we gather here, there are efforts internationally to apply the old telecom rules to the international exchange of IP traffic. Right now, only 8% of international traffic is traditional analog voice communications. Some carriers are losing revenue as the world moves to IP; regulators see their role going away. So both have an incentive to not just hold onto the old rule, but expand it to the new world of the Internet.

When companies try to apply old rules to new technology and quickly evolving marketplaces, when they ignore the needs of consumers and the market itself, I’m reminded of former FCC Chairman Bill Kennard’s admonition: Be careful what you wish for. In a world where adaptation and change is required in order to survive and succeed, hanging onto the past is not a winning strategy.

That consideration is one reason why today the Internet ecosystem is in large part not subject to traditional regulation and anticipatory rule setting. The IP marketplace was allowed to evolve with this “dispersed cooperative governance model.” Mostly voluntary, privately led global organizations have helped manage most of the Internet’s operational issues and technical issues. This governance model has helped to reinforce and support the open protocols and the largely collaborative system of networks that make the Internet thrive. The recent OECD principles, combined with this dispersed cooperative governance model, provide a good framework for Internet governance going forward. They reflect many of the key principles and best practices that have emerged through the many years of work done by numerous organizations that have helped the Internet evolve and adapt.

We’re in an important period for the Internet ecosystem domestically and globally. Serious and far-reaching policy issues connected to the Internet are now being debated in national and international forums: privacy, cyber-security, network management, spectrum policy.

As I mentioned, it’s not surprising that policymakers and politicians are jockeying for their countries or their international or regional organizations to have greater influence or control over the policies that affect the networks that make up the Internet’s physical infrastructure. This is why I believe there is an opportunity now for the U.S. to make real contributions and build on the efforts of the OECD and others to shape those policies that affect the Internet and impact consumers.

One way for the U.S. to contribute is to be a model for the rest of the world in establishing the right framework to help guide policymakers toward policies that meet the needs of consumers, as well as all players in the Internet ecosystem.

Recently, the Federal Trade Commission reached an agreement with Facebook regarding the social network's policy on changing privacy controls and informing users of those changes. That agreement affected 875 million Facebook users, most of them not in the U.S., but in other countries. That settlement may have done more to protect the privacy of consumers around the world than any action by their own national governments. With the scope and breadth of Internet services provided by U.S. companies, our country has the ability – and the responsibility – to lead the way in shaping global Internet policy.

When thinking about our domestic policy, the common theme many of us have articulated has been: Hands off the Internet! Congress has more or less had that as a policy. Theoretically it’s the official policy of the U.S. But, of course, as the responsible agencies try to apply our obsolete statutes to this new world, there has been some creeping regulation of the Internet ecosystem.

Here’s the bottom line: the “hands off the Internet” policy is not sufficient anymore. It doesn’t stop regulators from trying to do what they believe they are required to do: apply the obsolete statutes to this new world. It seems inadequate to consumers here and around the world whose lives and livelihoods are increasingly tied to the Internet ecosystem. So we all should insist that Congress do what it is supposed to do – establish a sound national policy for the Internet ecosystem.

Our new national policy should be focused on the consumer. If we focus on their expectations for safety, security, privacy, and fair treatment in the internet ecosystem, we’ll develop the right policy. Let me suggest four key elements of this new policy:

First, the new statute should embrace the dispersed governance model. It is working well. It is consistent with the proper role for government in the Internet space, that is, enforcement of consumer-focused policies, not anticipatory regulation or rulemaking. It is also consistent with the OECD principles, which have been embraced by much of the world and serve as the framework for our international discussions on Internet governance.

Under this model the statute would set broad guidelines for the Internet space; an enforcement agency would use the multi-stakeholder process to develop guidelines for behavior and enforce them. We have a similar kind of model in the advertising industry, where the statute sets broad guidelines to protect consumers. The Federal Trade Commission doesn’t spell out all the do’s and don’ts of advertising. Instead, they rely on the advertising industry to establish the standards, and then the FTC uses those standards to determine whether actions are appropriate or not. It does conduct investigations when players have allegedly failed to live up to the standards and it can punish violators.

The BITAG, the Broadband Internet Technical Advisory Group, and the Internet Engineering Task Force(IETF) are working to set standards in the Internet space or provide technical assessments and “best practices” advice regarding the sometime contentious issues that can arise as the Internet evolves. Additionally, the Internet Governance Forum (IGF) and organization’s such as the Internet Society (ISOC) provide platforms for discussion or expertise on key Internet policy issues. Often the work of these groups can avoid policy disputes or provide solutions that minimize the concerns of policy makers and make it possible for the Internet to evolve and adapt.

Some people get nervous about this model, because it doesn’t sufficiently limit an enforcement entity. These advocates want the “certainty” of specificity. But, again, be careful what you wish for. You can’t have extensive statutory limits and certainty without also getting a guarantee of obsolescence. Such limits in response to technological or market change can restrict innovation. If the choice is “certainty and obsolescence” or “flexibility and innovation,” let’s come down firmly on the side of flexibility and innovation.

Second, there should be a test for government intervention. That test or standard should be this: that government intervenes only when there is harm – demonstrable harm – to the consumer or to competition.

Without some demonstration of harm, there is no need for government intervention, and the multi-stakeholder system should be able to function with the collaborative process that governs it today. The “demonstrable harm” standard for government intervention protects consumers from bad actors, but at the same time does not undermine the innovation and collaboration that underpins the Internet’s evolution.

Third, the policies should apply across the ecosystem and should be technologically neutral. If the consumer is harmed, he or she doesn’t care about the technology used or what was at fault, whether the provider of the device, the network, the operating system or the app. Consumers want to understand what the rules are and have one place to go when they need those rules enforced. In other words, consistent policies across the entire ecosystem.

Finally, in the U.S. context it is also important, from a consumer perspective that this be a federal policy. If ever there was interstate commerce, it is the Internet and the Internet ecosystem. We should not have state-by-state regulation.

Just as the Internet ecosystem and its many players respond to changes in technology and the marketplace, so too does our public policy. We have to get beyond the point of simply decrying the obsolescence of current law or the absence of appropriate consumer protection. We have to start focusing on how to build the new public policy that properly governs this space. In doing so, if we embrace the multi-stakeholder process that has worked so well here in the U.S. and around the globe, eliminate the obsolete rules, and establish a sound public policy process, we will create the right environment for delivering the amazing promise of the Internet ecosystem in the decades ahead.

Verizon has a longstanding commitment to privacy because it is an important consumer trust issue. We know that consumers will only fully use our products and services if they trust that we won’t misuse their information.

The FTC report acknowledges the importance of preserving the innovation that has been spurred by the Internet and the industries that have helped build the networks and services that make up the Internet ecosystem. It also notes that gathering and using information about consumer activities online has contributed to innovation and the delivery of better products and services. At the same time, the FTC emphasizes that these activities should not be conducted at the “expense of consumer privacy.”

We do not agree with all of the FTC report’s findings. For example, the FTC suggests that consumers have little choice once they select a broadband provider. Yet, in a recent post, I offered clear evidence that consumers have choices and the evidence is in the number of consumers who are switching providers.

At Verizon, we work in this interconnected market every day. We are a global solutions provider, serving customers with a secure, global, IP-based network that spans six continents and 159 countries, 4G LTE mobile service, and a 100% fiber-optic FiOS network. And as everything becomes digitally connected – homes, cars, buildings, streets and cities – we are creating innovative products that employ our networks to conserve energy, deliver health care, and improve the environment.

In order for our customers and our society to reap the benefits of these technologies, we must protect consumers in an ecosystem that is evolving more quickly – and is more sensitive to consumer demand – than any other in history. So the White House and FTC have set out a flexible yet multi-layered approach that rewards good actors. Both support the enactment of baseline privacy legislation – essentially a set of principles dealing with everything from transparency to consumer choice – that companies would implement through their own publicly available privacy policies and procedures. The FTC would be the enforcement agency for all players in the ecosystem, intervening only when an investigation shows companies have failed to live up to their commitments.

It will take some time for Congress to consider privacy legislation. In the meantime, the White House and FTC encourage companies to implement best practices that will give consumers greater control over their information. These practices form a framework that is intended to assist Congress as it considers privacy legislation.

The FTC does two more things in the Report that advance consumer protection in a practical manner. First, it recognizes the importance of not favoring one type of technology over another, saying that a “technology neutral” approach is the best path forward. In the Internet space, the same technology can be used for different purposes – good and bad – so making rules about technological tools themselves rarely works. Instead, successful policies make the consumer the focus, looking at the harm that has been done, and finding ways to protect consumers from the harm– no matter which tool was used. This way the consumer is always protected.

Second, the FTC says it will work through the Department of Commerce multi-stakeholder process to come up with sector-specific best practices – a method that allows the government, consumer groups, and industry to create consensus around how to deal with fast-changing technologies that impact consumer privacy.

At a hearing in the House of Representatives on March 29^th, FTC Chairman Leibowitz said he thinks the right privacy policy would set a standard that protects consumers in a way that does not hinder innovation. We agree.

Now I am not saying that cell splitting and adding more antennas and backhaul aren’t important tools for increasing network capacity. They are. But they do not eliminate the need for more spectrum to continue to meet customer’s exploding mobile data needs.

Mr. Crowe creates a strawman asking, “So why don’t wireless companies pursue this seemingly obvious approach?” Well, in fact, they do pursue this approach. But Mr. Crowe doesn’t let the facts get in the way of a good story and tries to link this assertion with Verizon and AT&T’s wireline services which are often used for wireless backhaul. Ahhh, now we see where this is going…

His beef seems to be that wireless companies who buy backhaul from AT&T and Verizon have taken advantage of lower per-unit pricing that is available if they are willing to buy larger quantities, commit to longer terms or both. Yet these incentives are perfectly normal business practices and familiar to most consumers (i.e., the healthclub that charges less per person for a family membership than for an individual membership, or a magazine subscription that costs much less per issue than the single-issue, newsstand price with even lower pricing for two or three year subscriptions).

So, wireless carriers in many instances have contracts in place for existing backhaul facilities that they are using to handle the traffic that their customers are generating. But not for future backhaul that will be needed to handle the exponential growth of mobile data traffic. This exponential wireless data traffic growth is what is driving significant investment in wireless network infrastructure including new cell sites. And the new 4G technologies like LTE require new backhaul facilities – fiber to the cell site. Companies compete fiercely to win these contracts to build new, fiber to the cell site facilities. The wireline phone companies are competing to build them. The cable companies are competing to build them and, in fact,wireless backhaul is one of the most rapidly growing revenue sources for cable companies. And of course, many other companies including Level 3 are competing to build those facilities. All of which has created what Amanda Tierney, VP, Wholesale Markets for Level 3, calls a “very competitive space” that has seen competition “dramatically increase”.

Sadly, rather than competing in the market, Mr. Crowe would prefer to try to game the regulatory process to hobble one set of his competitors. He is not the first to take this route, nor will he be the last, but in the long run, this is never a very sound business strategy.

I feel that way when I hear some advocates talk about competition in the broadband market. Here is an example from a hearing that occurred just the other day that partially focused on competition in the mobile market place:

“Consumers are being locked in to the few large incumbents offering service and competitors are being locked out of the marketplace.”

Or take this statement from the same hearing by another advocate:

“The dominant firms in a communications industry, whatever they may say, have little interest in competition. Left alone, history suggests the industry will drift toward monopoly or duopoly.”

The implication of these comments is that consumers have little or no choice, that carriers don’t have to work hard to satisfy and attract consumers, and that the market is dominated by big companies. Of course the essence of a competitive market is consumer choice. Consumers drive markets that are working well.

What is interesting about these comments – and about the testimony of these advocates – is that while consumer choice is at the heart of what makes a market competitive, neither advocate cited any evidence that consumers are not making or are not able to make choices. They cited a lot of other data but nothing on this fundamental point.

Why? I think it is for the same reason that some castigate politicians for all being the same - it is simply easier to ignore evidence to the contrary.

And there is plenty of evidence to the contrary. Customers are making choices. They are changing carriers and they clearly are making decisions to go in a new direction if they aren’t satisfied with what they have. The fact that they are doing so in large and growing numbers demonstrates that the broadband market is competitive. Contrary to assertions I often hear that these markets are “sticky” and consumers have a hard time switching, that is simply not the case.

Where is the evidence? On the landline side, the FCC issued a report in December of 2010 that examined how many consumers have switched broadband providers and why. The evidence is overwhelming that consumers are able to make choices and switch when they want to and that it is not difficult in the minds of many to make a switch. Here are some key findings:

• When asked whether they had switched service in the prior three years, 36% of Internet users had done so, while 62% had not. 23% of online users switched once in this time frame. 13% switched more than once.
• 63% of broadband adopters with a choice of multiple providers said it would be easy to switch providers, with 33% saying it would be very easy and 30% saying it would be somewhat easy.

It certainly does not seem that consumers have a difficult time switching if they wish to and consumers do have choices in many cases. By comparison, in the auto insurance industry, only 10 percent of customers switch annually.

Some may still say that a one-third plus rate of “churn” is not indicative enough of a competitive market. A second FCC study may have hit upon a major reason consumers are not in many cases inclined to switch. It found very high levels of satisfaction with the broadband service consumers are receiving:

• 59% are very satisfied with the reliability of their service and 33% are somewhat satisfied.
• 51% of broadband users are very satisfied with service overall and 42% are somewhat satisfied.
• 50% of broadband users are very satisfied with the speed of their service and 41% are somewhatsatisfied.
• 49% are very satisfied with their broadband provider’s customer service and 33% are somewhatsatisfied.

So consumers are making choices and switching when they are dissatisfied but many are pleased with their service in general and for this reason they may be less inclined to accept offers to switch.

What about on the wireless side of the ledger? Here too, the evidence is that consumers do make choices and the evidence is in the rates of switching. While not specifically focused on broadband alone, a new PricewaterhouseCoopers study is indicative of how competitive the mobile market place is. It finds that consumers are “jumping between carriers more quickly than ever before.” Specifically, the study found that the “The average length of relationships between carriers and their under-contract customers fell to an all-time low of 48 months last year. The comprehensive annual study includes data from all of the region's major carriers. The trend has building for a few years. What's shocking is how quickly it accelerated. In 2010, the average customer-carrier relationship was 59 months -- nearly a full year longer.”

As Pierre-Alain Sur, one of the authors of the report said "Competition is fierce, and pricing is a key element. That accelerates the jump from one carrier to another at the end of a contract period."

It would seem one of the best ways to judge how competitive a market is the behavior of consumers. The data suggests that in both the landline and mobile markets consumers are switching providers when they wish to do so and don’t find it too difficult to go in a different direction if they feel the need. All politicians are not the same and neither are all providers. Consumers seem to know that and they can vote with their feet if they want to.

“But Fidler, in what amounts to an extraordinary act of taking the high road, said he holds no hard feelings. Really. He points out that he did not initiate the legal war underway. He is not jealous of Apple’s success. He understands that in technology, ideas come and go, they get into the wind, and people iterate on them and bring them to life and make them better. It turns out, in fact, that someone long before Fidler thought of tablets.”

The article goes on to point out that Mr. Fidler was not the first to conceive of this idea (he never built an actual working device, just a mock up). In the movie “2001: A Space Odyssey”, astronauts are seen using tablets. How well I know this. I am a science fiction “nut” and my parents actually took me to see the movie when it came out in 1968 as a birthday present.

Mr. Fidler points to the fact that the evolution of technology is iterative and often involves a number of fits and starts. But a key is to first envision the technology. I noted that I love science fiction and this is one major reason why. It lends itself so well to imagining all sorts of futures that include technologies that may not even be feasible but seem interesting or useful. Once imagined, it can often be true that if the technology allows it, the device, idea or concept can become a real service or product.

The Post article points to something else – the need to try different things, different approaches, different ideas. Flexibility and the ability both to fail and succeed is critical to innovation. This why business models are so important to the process of innovation. While it may prove to be possible to develop a device or concept and launch it as a high tech service or product, that does not guarantee success. It often takes a lot of advanced planning and efforts to remove “red lights” that might be in the way of the success of the innovation.

This is the idea behind Ron Adner’s new book The Wide Lens. Adner argues that technology does not exist in a vacuum. There is an ecosystem around innovations. If companies fail to consider it and don’t think about and plan where it may be possible to remove “red lights” in the ecosystem that could kill the innovation, it often can fail. Here is an example from the book:

“Here’s an example, a big innovation failure that nobody foresaw. In the 1990s Michelin developed a revolutionary new kind of tire with sensors and an internal hard wheel that could run almost perfectly for 125 miles after a puncture. A light on the dashboard would notify the driver of the puncture, and the driver could then attend to the problem at his leisure. This would make customers’ lives much easier and much safer, and make lots of money for the company. The company built a powerful alliance with Goodyear to reach almost 40% of the world’s tire market with the product. It signed up Mercedes to put the tire on new cars, and other manufacturers followed, including Audi and Honda. Yet by 2007 the product was such a failure that Michelin had to abandon it. Why? The company hadn’t confronted the entire ecosystem the tire would rely on. It had overlooked the garages that repair punctured tires and hadn’t gotten them on board. Those garages needed expensive new equipment they had neither money nor space for, and they had to have that equipment long before it would get heavy use. They saw no reason to acquire it. And Michelin didn’t see that one coming.”

Doing what Adner suggests can clearly be expensive and take commitment. Just developing the technology alone is likely to be costly and risky. As the late Larry Darby used to note innovation and investment are linked. Without investment, you can’t have innovation. And often without more investment, you can make the changes need to move the innovation out into the mainstream. Companies need the flexibility to investment, develop strategies and create new business models to overcome the barriers to innovation. They need the right incentives too including the right tax system. Innovation does not happen overnight but it can be stopped or at least dramatically slowed by inappropriate regulation or bad government policy. More on that in another post.

Today, Verizon filed comments on the Further Notice associated with the order, which raised a number of important questions. In the order, the FCC dealt with the rates charged for terminating calls (Terminating Access Charges), which will transition to a uniform rate for all terminations (local and LD) eventually going to bill-and-keep (i.e., no money changing hands for the exchange of that traffic at designated points of Interconnection). While the last step – moving to bill-and-keep – could create new problems (a point we make in our comments filed today), we think the overall effort of moving to a low, uniform rate for all traffic is good policy.

Therefore, we think the FCC should move expeditiously to put the rates for Originating Access charges on the same, rapidly declining path. And as it did with respect to terminating rates, the FCC should focus in particular on areas that present significant arbitrage issues, such as access charges associated with intercarrier toll-free 8YY traffic, which is more like terminating access traffic than originating.

Our comments also address a part of the Further Notice that asks about IP Interconnection for voice traffic. As new IP-based voice services come to market and new IP networks replace older circuit-switched networks, it makes sense for those IP-based delivery networks to exchange traffic with one another in IP format. This is happening today with some long distance and wireless traffic, as well ascable-to-cable calls and many retail VoIP services. As more and more services and end users move to IP, companies will expand their IP-based interconnections. We are engaging in voluntary discussions for direct IP interconnection arrangements because doing so provides significant advantages to both Verizon and the parties with whom we would be interconnecting. These voluntary contractual arrangements, reached through good-faith negotiations to work through the complicated technical and business details associated with a particular agreement in a mutually beneficial manner, provide the right model for moving forward. They are also the bedrock upon which the global network of networks – the Internet – is built.

As pointed out in a Wall Street Journal op-ed by Commissioner McDowell and in comments by Ambassador Phil Verveer, we know that there are many around the world (and even some here in the US) who would like to see regulators take a more active role in the standards and technical management of the Internet. Simply having opened a proceeding about application-level interoperability over Internet protocol networks may be seen by other regulators as an invitation to do the same. In any event, the FCC should not impose rules on IP interconnection – no matter how benign they appear to be in a narrow context - which would in turn open up the Internet and ISP interconnection for regulation worldwide.

But why does Verizon need more spectrum? The answer – highlighted in a recent article on CNN Money– has become one of the big policy debates in Washington and across the country: the coming spectrum crunch. As more and more consumers use more and more wireless devices, additional spectrum capacity is needed for video-streaming, video-chatting, music, video and other content downloads, and any number of applications that require fast and reliable wireless broadband connections.

Consider that smartphone traffic in 2015 will be 47-times greater than it is today. And those tablets that are becoming increasingly indispensable at home and at work? They use approximately 120-times the capacity of traditional phones. By 2015 it is projected that mobile-connected tablets will generate as much traffic as the entire global mobile network in 2010.

But more spectrum is only part of the story. It isn’t just about how much spectrum a carrier uses, it’s how well—or efficiently—it uses the spectrum to meet customer needs. And Verizon Wireless is one of the most efficient wireless providers in the world.

Today, we serve approximately 109 million wireless connections, more than any other wireless provider in the U.S. Those connections are serviced with a nationwide spectrum license base that averages 88 megahertz of spectrum. That means, on average, Verizon uses one megahertz of spectrum to serve 1.2 million customer connections. Should the AWS spectrum transfer be approved, these wireless connections would be served using an average of 109 MHz nationwide, with one megahertz of spectrum serving almost one million customer connections.

In its FCC filing opposing our license purchase, T-Mobile claims that “the principal impact of the acquisition would be to foreclose the possibility that this spectrum could be acquired by smaller competitors – such as T-Mobile – who would use it more quickly, more intensively, and more efficiently than Verizon Wireless.”

Rhetorical flourishes aside, let’s be clear on the facts: it’s hard to imagine anyone launching LTE more quickly and more broadly than Verizon did. The broadcasters moved from the 700 MHz spectrum in June 2009 and we launched LTE in November 2010, covering 100 million people. Just over a year later, we've already reached 200 million people, and our nationwide deployment will be completed – on schedule – at the end of 2013.

As for intensive use, Verizon is 2-times more efficient with our spectrum than T-Mobile. While Verizon Wireless services 109 million connections with an average of 88 megahertz, T-Mobile has 50 MHz to serve 33 million customers. Both Verizon and T-Mobile have spectrum licensed nationwide, which means, as I mention above, Verizon serves 1.2 million customers on average per megahertz, while T-Mobile serves only half that with 660,000 per megahertz.

Finally, T-Mobile fails to mention that it will be gaining 10-20 megahertz of AWS spectrum covering 40 percent of the population of the U.S. as a result of its break-up deal with AT&T, giving it spectrum in some areas on a par with Verizon and other competitors.

Rather than waste time arguing about spectrum efficiency, let’s focus on the issue on which we all agree: America’s wireless consumers face a spectrum crunch that won’t be relieved by Verizon’s spectrum purchase. It’s up to the industry, as well as policymakers, to help ensure that more spectrum reaches the marketplace soon, so America’s wireless industry remains the global leader in innovation that it is today. I’m sure T-Mobile would agree with that.

Is that really true? Is change really that rapid?

I got to thinking about that and discovered that yes, in fact, change is rapid and not only in our sector but in the world as a whole. Just take a look at this list of events and developments over the past decade. Some of them affected our industry and others did not. But all were part of the rapid change that characterizes modern society.

So, at the turn of the last century (the year 2000):

Y2K had just happened. Due to a combination of factors – including candidly good leadership in industry and government – it was not the catastrophe that had been feared.

The US was the world’s sole superpower.

The US economy was expanding and the budget was in surplus.

The European Union had 15 members. The Euro was 1 year old, although no notes or coins were in circulation.

The most recent wars were in Europe – Bosnia, Croatia and Kosovo. 9/11 hadn’t happened, so the wars in Afghanistan and Iraq were not even contemplated.

The term “BRICs” had just been coined. In fact, most still viewed the world as largely divided between the developing countries and the developed countries.

The Internet was booming – the dot.com bubble had not yet burst. On March 10, 2000 the NASDAQ hits its record high and it marks the turning point of the dot-com boom. AOL-Time Warner were just merging.

Social Media did not exist. Google had only been around for a couple of years and had not really begun its rapid growth.

In Verizon, we had three times more landlines than we had wireless customers and nationally only about a third of the population who have mobile phones today (around 300 million) had them then. And thephones were operating on a network designed for voice and texting (with pictures in some cases).

Change in our industry happens in a broader context that is influenced by, sometimes helps shape, and sometimes simply coexists with broader societal changes. When you look back at where we have been, it certainly seems that change is rapid and continuous. Policy making in such a rapidly changing world is more difficult and must be able to account for the continuing changes that can be expected in technology and society. It can sometimes seem that all of the many things we use today or are aware of have been around for a long time. Not true.

I won’t pretend to have all the answers or even understand all of the many contributing factors that make decision making harder.  But I think it is harder. 

I do have some ideas on what might help make it easier to get policy questions decided.  One of the simplest – but in my view least practiced these days – is to really spend some time trying to understand the “other guy’s” perspective.   It is easy to vilify someone else or their position by making assumptions as what to motivates them and what they really want.   Sometimes the toughest of issues can become far simpler once you really understand the perspectives of the other person.  Solutions may suggest themselves because when we make assumptions, we often assume the worst.

This is not an easy thing to do and I recognize that.  But this story on National Public Radio recently about the battle between the  lobbyist for the egg farmers and the lobbyist for the Humane Society is really instructive on what can happen when you reach out to your opponents.   Admittedly, this presumes that both sides really want a solution because in these situations it clearly means some form of compromise may be the way forward.   Brad Feld at Silicon Flatirons yesterday focused on this very issue of how we focus on solutions in his blog post.  I’m not always sure that in many situations today those involved really do want solutions except and only on their terms.  And I recognize that compromise has become a dirty word these days but as shown in this case both sides really can win if they are creative and don’t take the view that any change in their position signals defeat or caving in.

I also think that what made this situation work was the fact that both parties took lots of time to privately get to know each other and to really explore perspectives.   This kind of quiet interaction is rare in Washington these days and far too often  - with the 24 hour news cycle, Twitter and all of the other media we have to keep up to date and opine – interactions like this would get “exposed” and criticized before they led anywhere.

Another thing I think is evident is that the issues have become more complex and there are so many pressing problems that our legislative and regulatory policy processes are simply struggling to cope.  And change in our industry and its technical complexity also makes it hard to come up with policy approaches that can work and attract widespread support.

This suggests that not all solutions should be sought through the policy making process. It may simply not be up to the challenge or in many cases not really fit the needs of the issue at play.  It may be the case that in many situations today it is better to take charge of our own problems. At Silicon Flatirons which had a conference on communications and Internet policy that I attended last weekend, there was a lot of discussion about what some have labeled “multi-stakeholder organizations”. These are groups of organizations and individuals who have an interest in and usually expertise regarding a policy problem or set of problems and who gather together in an organized way to address that problem. As panelists at Silicon Flatirons noted, there are many such organizations that contribute to the ongoing operations and evolution of the Internet including the IETF, IAB and ISOC.  And new ones are being created all of the time like the Broadband Internet Technology Advisory Group that was established over a year ago to look at and provide advice and best practices suggestions for addressing technical and operational issues that affect the Internet and too often turn into unnecessary policy disputes.  

But most of these organizations are not really designed for decision making per se but rather gradual consensus. That has worked in the context of technology issues and operating issues relating to the Internet for a variety of reasons.  But many of the issues that are now getting attention are more policy focused, often with a technology dimension.  As my boss Kathy Brown noted, a key issue is how to take the energy and “crowds” (not a pejorative term as used here but rather signifying online consumers who get together to promote a goal) that are behind online efforts to promote change and turn that into the means to implement new approaches  through governance models that do not involve government mandates or dictates.  This summary of the discussions at Silicon Flatirons helps provide some idea of how the discussions went.

In the context of online advocacy and “crowds”, the whole matter of online piracy and the SOPA and PIPA legislation was also debated at Silicon Flatirons.  The discussion was pretty heated at times and watching from the audience, it seemed clear that the key advocates involved in the dispute are far apart.   At the same time, I also got the impression that there is still too much “talking past each other” going on and neither side seems to feel it could reach out to the other in a meaningful way.  These are important issues and emotions do get stirred up.  But at the same time I wondered what would happen if someone took a chance and reached out the way the lobbyist for the egg farmers did.  These things often take time and experience to happen so while it may seem impossible today for a policy agreement to be reached, I don’t think it is impossible.  It may in fact happen in a way we least expect and may not in the end involve legislation at all.

Can you imagine a science fair with a project built around a mobile app even just a few short years ago? It never would have happened because while applications of various kinds did exist then – when the President was just being inaugurated – they were not as widely used as today and they did not work like they do now. The entire apps market – which a recent study estimated has created 450,000 or so jobs – did not really exist until just a few years ago. Today, as the study notes, “Nothing illustrates the job-creating power of innovation better than the App Economy. The incredibly rapid rise of smartphones, tablets, and social media, and the applications—‘apps’—that run on them, is perhaps the biggest economic and technological phenomenon today.”

With the rapid advance in information technology, it can often seem that new developments or innovations come out of nowhere. But of course that is not true. Usually, years of development and preparation have gone into major innovations.  By the time consumers are able to take advantage of a new advance like apps, a lot of work has been done to create the conditions for growth and innovation.

What helped lay the groundwork for the dramatic explosion of the apps economy? I think five things were significant contributors to the evolution and growth of the apps market: (1) the widespread deployment of high speed mobile data networks; (2) the widespread adoption of mobile data services which created viable markets for Internet based services; (3) the “always on” connections which mobile high speed networks enable – an app is “touch and run” and that was not possible with the slower networks of the past; (4) the rapid adoption of the “mobile computers” we today call smartphones; and (5) advanced device interfaces particularly touch screens that have transformed phones into real time interactive devices.  I want to concentrate on the first point because I think it is too often ignored.

Data services for mobile networks were launched in the mid- 1990’s in the U. S.  They could only operate at speeds in the range of a few hundred kilobits down and even less upstream.   Text messaging was used on these networks over time but the web itself did not become popular until the latter half of the 1990’s so 2G networks did not have a lot of data capability.  The devices used on these networks were phones, not computers, and they were largely built around voice.

Carriers began deploying 3G networks in 2002, eventually allowing and speeds of up to 2 megabits down and hundreds of kilobits up.  The web became more popular on mobile phones but video was not really a big driver and even web services were not well adapted to mobile use.

Amazingly, Verizon began deploying its 4G networks only a few years later in 2010.   In less than 20 years, we’ve gone through three generations of mobile networks to today’s 4G which conservatively can handle 12 megabits downstream and up to 5 megabits up although higher speeds are commonly being delivered.  Today’s modern apps market was pioneered in part by Apple which did not launch its apps store until the summer of 2008 when the iPhone 3G was just coming on the market. 

While the rise of the apps market seems to have happened in the blink of an eye, the work needed to conceive, plan for and build the networks that provided the right platform for apps was extensive and substantial resources were required to build these networks.  For example, an important part of the work required to build networks is to develop the standards for operating them.  In the case of LTE, it took four years to finalize the standards and Verizon was involved with a wide number of companies in helping make LTE a global standard.

Sufficient spectrum is also key to deploying new mobile networks.  By the mid 2000s, it was clear that mobile carriers would need new spectrum in order to offer new data (4G) services , while continuing to offer  2G and 3G services that millions of consumers continue to want.   Verizon announced its plans to build a 4G-LTE network in 2007 and spent billions of dollars purchasing spectrum to make this 4G deployment possible.  Today, Verizon is a world leader in 4G deployment and will make the technology available to most of the population of the United States by the end of 2013.

As I noted, a number of technology advances have come together to make the apps market possible.  Companies in all facets of the Internet ecosystem – from hardware makers to software makers to network companies – have laid the groundwork that made the popularity of apps possible.  But the networks that underlie all of this have advanced rapidly and continuously with strong leadership and vision.  Some would say a “perfect storm” created the apps market.    It’s more accurate to say the commitment, investment and hard work that led to the deployment of 4G networks was a key part of making it possible.

The question she asks in her piece is a fair one - but it is also fair to note, as even many who helped found the Internet would admit, that Internet’s design did not incorporate features to enhance security for example or help protect intellectual property or make it easier to protect against threats to personal security.  In addressing problems like these that clearly are a threat today, it is vital to keep the Internet’s core characteristics – as a platform for innovation, free expression, and global connectedness – intact.

How do we do that in today’s policy environment where, as MacKinnon correctly points out, Washington does not understand the Internet?  Many in the Internet “community” fear that too many policy approaches to deal with admitted problems have ended up undermining the Internet’s core strengths.

It starts with recognizing that traditional legislative approaches – based largely on mandates and rigid “Do and Don’t” rules - simply won’t work either to address key problems effectively or preserve the vitality and innovation of the Internet.   This type of approach is embodied in large measure in theTelecommunications Act of 1996 which focused largely on existing industry segments and on the physical networks that underlie the Internet’s operations.  

It is increasingly clear that the Internet ecosystem consists of all of the many players involved including broadband providers, software developers, apps makers, device manufacturers and online service providers.  Innovation, collaboration and competition, rapidly changing business models, and entry by new players as in the case of apps characterizes the Internet ecosystem. 

The Internet has evolved through the leadership and the work of many organizations made of up volunteers from a wide array of interests without government domination.  These models of what some call “multi-stakeholder” approaches can provide the basis for the right policy framework for the Internet in everything from privacy protection to security to protecting intellectual property.  What is necessary is to ensure that the government’s role is acknowledged but focused on ensuring accountability when voluntary compliance activities fail to ensure bad actors are disciplined for harming consumers or competition.

What are the elements of this policy framework?

First, a national policy overseen by one federal agency is a vital feature of the framework.  The Internet is global in both its reach and its technical and operational structure and having a single accountable agency domestically is important to maintaining its vibrancy and minimizing harmful government interference.

Second, basic policy principles set out in law and implemented not by regulation but by industry codes of conduct or corporate policies will ensure that effective policies guide companies and organizations in their actions while avoiding traditional inflexible government regulation.  Government should participate in the development of these policies but it should not be allowed to dictate or mandate any outcomes.  The process should be collaborative as is the case today with Internet organizations. 

Third, government should only intervene on a case by case basis after an investigation that has proven a particular company or organization has failed to live up to its commitments and has harmed consumers or competition.  Regulation and mandates which are the traditional tools of government should not be allowed under this framework. 

Finally, the policies should be technology neutral, applying equally to all players in the Internet ecosystem.  This is as much to help consumers – who should not be confused as to which agency is accountable when markets do not work properly – as it is to ensure fair competition.

This basic framework can apply equally well to most key policy areas ranging from privacy to cyber security.  By using the governance models that have made the Internet a success and effectively involving the government in ways that ensure accountability but do not stifle innovation or the ability to use the Internet freely to connect with others, we can build a model of Internet governance that is right for the modern era.  And we can finally ensure that Washington does get it when it comes to the Internet – and does not get in the way of the Internet’s continuing journey to build new ways to interact, communicate and innovate.

While it’s bitter cold outside, Verizon is already looking to summer, specifically summer jobs.

Today I participated in the “Summer Jobs +” event at the White House to represent Verizon’s internship program for the summer of 2012. This event was hosted by Secretary of Labor Hilda Solis and Director of the National Economic Council Gene Sperling.

Verizon has established many partnerships to spread the word about our summer internship positions in the hopes of attracting a diverse, dynamic group of young people. We appreciate the White House and their efforts to connect the dots between jobs, youth, and the not-for-profit community that provide the steady drumbeat of support critical to the success of this initiative.

We have been and will continue to provide summer internships rich with practical, on-the-job experience so that interns emerge from their time at Verizon with a competitive edge in their professional journey. This summer we will offer more than 300 internships throughout the company. These opportunities will be posted from January through May.

For more information about the White House initiative, visit: http://www.dol.gov/dol/summerjobs

For more information about Verizon’s internship program, requirements and specific opportunities, visit: http://www22.verizon.com/jobs/campus_internships.html