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Press Release

    Broadband Triple Threat

    07/18/2007

    This piece was originally published at the National Review Online.

    In 2004, President Bush declared that “all Americans should have affordable access to broadband technology by 2007,” and that his administration “is working to create an environment to foster broadband deployment.”  Unfortunately, the policy prescriptions of certain agencies and the policy inaction of Congress put this goal at risk.

    According to the most recent Federal Communications Commission and Pew Research statistics, the broadband penetration growth rate in the U.S. increased from 20 percent annually to 52 percent between 2004 and 2006, with an estimated 65 million high-speed lines for Internet in use by mid-2006. So far, so good. Additionally, nearly 60 percent of these new lines were for mobile broadband wireless technology, a statistic that clearly indicates the amazing growth of this category. According to FCC commissioner Robert McDowell, “we will more than leapfrog over other countries with new wireless technologies that are already in the pipeline.”

    The Bush administration’s pro-broadband policies — such as a ban on taxes for Internet access, support of R&D, the promotion of free-market competition, and a reduction of telecommunications regulation — have been critical to the acceleration of these broadband Internet connections. In particular, FCC chairman Kevin Martin’s “light touch” agenda of regulatory parity, regulatory certainty, and outright deregulation have lifted the cloud of investment uncertainty that once hung over the telecommunications sector. For instance, the FCC, under Martin’s leadership, made a crucial decision to treat cable, digital subscriber lines, wireless broadband, and broadband over power lines as “information services,” thereby clearing the way for the tremendous innovation and growth in broadband.

    Today, however, the telecommunications industry — especially its wireless sector — faces three public-policy threats that could undermine both the deployment of high-speed wireless Internet technology and its use.

    To begin, the FCC is set to auction public spectrum in the upper 700 MHz band. Moving this valuable spectrum from public to private hands will spur more competition and growth in the broadband market, not to mention generate substantial revenue for the Federal Treasury. But according to media reports, the FCC is considering placing special conditions on one-third of the spectrum — conditions that would require auction winners to provide open access to their networks and/or so-called “network neutrality” mandates that could prevent broadband providers from offering enhanced and tiered levels of service.

    These conditions are likely to reduce the number of bidders for the spectrum, and therefore the value of the spectrum. In fact, potentially only one bidder would qualify: Internet giant Google. With a market capitalization of $175 billion, Google hardly deserves a hand-out from the government. Moreover, this pro-regulatory approach to spectrum management could potentially chill broadband investment by bringing back the legal and policy uncertainties that plagued the communications sector just a few short years ago.

    Then there’s the International Trade Commission (ITC), which recently ordered a complete ban on the importation of tens of millions of the newest broadband cell phones and handsets that use Qualcomm chips. This was done as a remedy to a patent infringement dispute between Qualcomm and Broadcom (a quarrel which currently and more appropriately is being adjudicated in our civil court system). But according to the FCC, the proposed import ban “would have a considerable impact on American consumers, dramatically curtailing their choice of mobile broadband handsets and services,” and would lead to “higher prices, lower quality, and less innovation.” CTIA, the national association for the wireless telecommunications industry, warns that the economic harm from the ban will be “very substantial and will undermine the President’s goal of extending broadband services to all Americans.”

    Fortunately, the Smoot-Hawley era law that gave the ITC the power to ban the importation of products that infringe upon U.S. patents also provides the president the power to veto it for policy reasons. Since 1978, presidents have vetoed ITC remedies five times: Jimmy Carter once; Ronald Reagan four times. For the sake of international competitiveness, economic growth, and expanded consumer choice and access to broadband connections, President Bush ought to do the same.

    Finally, Congress has yet to permanently extend the current ban on state and local taxes on Internet access and commerce, which is set to expire on November 1, 2007.  Without permanence, booming Internet access and commerce vehicles would be easy targets for additional state and local taxes. This is especially alarming given the high level of taxes already imposed on other communication services, particularly wireless. Congress must act now to ensure that Internet access is not subject to discriminatory taxes.

    Ultimately, these policy decisions will determine whether or not the president’s goal of universal, affordable access to broadband technology by 2007 will be fully realized. From the FCC, to the president, to Congress, there’s critical work to be done in the name of the American broadband consumer.

    — Cesar Conda, formerly domestic policy advisor to Vice President Dick Cheney, is a senior fellow at FreedomWorks and a public policy consultant to several telecommunications industry clients.