You as a Public Service by your television provider. Host and joining us this week on cspans Communicators Program is Walter Mccormick who is president and ceo of an association called us telecom. Mr. Mccormick, who do you represent here in the washington . Guest well, we represent the nations Broadband Service providers, Companies Large and small, you are wan and urban and rural, publicly traded, privately held. These are companies that his to have create were telephone companies, but today they are Broadband Service providers, and they offer service on both a wire line and wireless basis. Host who are some of your members . Guest Companies Like verizon, a, the and, the, centurylink, windstream and Companies Much smaller that serve rural markets in sparselypopulated parse parts of the united states. Host what are some of the major issues right now being confronted by the companies that you represent . Guest i would say the single most, the Biggest Issue is the transition to the new ip environment. I mean, internet Protocol Communications is the future. Consumers are driving it. Ip technology is the technology that enables all devices to communicate with one another, and its that transition from an analog world to an ip world that is the biggest single issue. Host is there any room for a wire line world anymore . Guest well, i think that the wire line world is really the central circulatory system of our my. It is the veins and the arteries that really connect what is now the information economy in the united states. Were seeing data traffic on our wire Line Networks increase at the rate of 40 per year, and its wire Line Networks that connect all forms of communication whether they originate in a wire line environment or a wireless environment. So, yeah, i would say americas future is a wire line future. Host joining our discussion is Howard Buskirk of Communications Daily where he serves as executive senior editor. Youve already talked about the move to broadband, and one of the things the fcc is looking at is ip transmission. Do you feel to date the fcc is moving quickly enough in that area . I think there have been some concerns about that process taking a little bit long. Guest well, i applaud the commission for establishing the Transition Task force. I think its extremely important that we have a managed transition to ip. The commission and the department of commerce worked very well together in this transitioning us from an analog world to a Digital World when it came to broadcasting. You all will require it wasnt so long ago that folks were very worried about having to get rid of their Analog Television sets, and that was managed in a way that was done without a hiccup. But the broadband transition from the analog world to the ip world also takes planning and takes execution. I think that we have in the few chairman of the fcc somebody whos very attentive to that and whos going to really be focused on it. What would you like to see the fcc do next on this under mr. Wheelersome. Guest ing id like to see the fcc proceed forward on a number of problems. I think what the chairman has done is to say that he is going to have three load stars. One is competition, one is the nature of the compact between the networks and their users, and the third is content and capability. All three of these are implicated with the ip transition. I think its important to allow companies to begin to have some trials. At t has proposed doing trials in two of its wire centers. I would encourage the commission to authorize at t to go forward with those trials. Other companies are experimenting in a variety of ways how west to make this how best to make this transition, and i think its important that the fcc partner with the industry to make sure its done smoothly. But there hasnt been anything concrete that sets those trials definitely going forward, so theres a lot of questions. Guest there has not, but as you know, the new chairmans only been in the seat for less than a month. Host whats the hesitation about allowing those trials to go forward . Guest i think that the i dont think that there should be any hesitation. I mean, the fact of the matter is that every day we are, we are putting Ip Technology into our networks. Every day were seeing manufacturers building more and more ip equipment and less and less analog equipment. So i think its important to let those trials go forward, and i think its important to sort of measure the results of those trials, because theyre going to be informative for everyone. Host Walter Mccormick, are there lessons to be learned, in your view, about how to regulate ip when you look back attritional regulation over traditional telephones . Guest i think definitely. But i think to begin with the question of how to regulate is really the wrong question. The question is how to assure robust competition. If you, if you think about what the new chairman has said in terms of competition being his lode star, it is directly consistent with the very purpose of the 1996 act, the preamble to the 1996 teleCommunications Act, an act thats now 17 years old, said that the purpose of the act was to promote competition and reduce regulation. And so what were seeing in in this environment today with ip is were seeing the kind of intermodal competition that was never even really anticipated by the act. Its gone far beyond the act. So if you take voice Telephone Service, for example, today you can get voice Telephone Service from a wire line telephone provider, from a cable provider, from up to three wireless provider in over 90 of the markets, you can get it over the top through a voip provider. You have a number of options for voice Telephone Service. If you take video, it was video from broadcasters or cable, but today you can get video from a telephone company, you can get it from a satellite company, and you can get it over the top. In fact, netflix now has 30 million subscribers, 10 million subscribers more than the nations largest cable company. So we have real intermodal competition. And in this ip environment, the goal should be to incent further investment to accelerate the kind of investment that will lead to greater capacity. And it shouldnt begin with the question of how to regulate. I think that the question needs to be what should be our objectives going forward, and how do we best accomplish those objectives, and what Public Policy should we adopt to do so . Host what could the fcc do or congress do then, in your view, that would decrease competition . Guest well, one of the things it could do to decrease competition is to continue to overregulate one segment of the industry at the expense of investment. So if you take our industry, for example, at time of the 1996 act we were considered to be offering a monopoly service, voice Telephone Service. Today only 25 of American Homes have a wire line telephone. Today over 95 of americans have a wireless phone. 25 of im sorry, 45 of American Homes are today wireless only. So were seeing vigorous competition in phone service. But we are still saddled with regulations that come from the monopoly era, and they are regulations that really are kind of without purpose. Ill give you an example. We have to keep uniform system of accounts separate and apart from gap accounting. Were the only provider of voice Telephone Service that has to keep a uniform system of accounts thats a second backup, a separate form of books from gap accounting. Now, the fcc five years ago told our companies we dont want to see those records anymore, we have no use for them because these companies, price gap companies, are no longer rate of return regulated. So we said wed like to no longer keep the accounts. They said, well, were not ready to allow you to do that yet. So as a result, today when we look at our investment, you know, we would like to be putting all of our investment in the new stuff. But were required to continue to put a lot of our investment in the old stuff. So one of the things the fcc can do is to follow the act. Two prongs to the act; promote competition and reduce regulation. The fccs very good at promoting competition. The fcc could be better at reducing regulation. Let me ask, be as specific as possible, but order the few things that will wheeler could do right away that you would welcome that would be helpful from your perspective in promoting competition and reducing regulation. I mean, what are a couple things that he could do right away that guest i think that when you look across the board at those who provide voice Telephone Service to eliminate those regulations that obtain to us and not to our competitors. So, for example, the uniform system of accounts. Equal Access Requirements that have really had no meaning in todays environment. The idea that if we have only 25 of households that are subscribing to a land line telephone, how do we deal with the requirement that we still have to make a Network Available to the remaining 75 that arent using our service . These are issues that really go to the competitive balance, and they go to where investment lies. Finally, the requirement that no matter what even when we deploy fiber that we have to make a voicecapable Service Available is one that is not imposed on others who are deploying fiber. And in many cases has led our companies to having to maintain two networks, a Fiber Network and a Copper Network. The Copper Network is quickly becoming one that the people dont use. In fact, today only 1 of the Nations Communications consists of the original old voice traffic, 99 i was going to ask, fcc chairmen all say theyre tocompetition. I dont know nowadays who doesnt say democrat or republican, everybodys procompetition. Why is it that these rules are still on the books . What do you need to get them off the books, and, i i mean, thats i think id like to be as concrete as possible on that. Guest yeah. So what we need, what we need to get them off the books is to either have them repealed or to have the fcc announce that it will forebear from regulation. The 96 act provided that mechanism. We have filed forbearance petitions, and i think that what we need to do is to have the fcc acknowledge that where consumers have choices for a service like voice Telephone Service, that those choices can be intermodal in nature, and and so the commission needs to expand its thinking to not think in terms of simply wire line Voice Service, but to think in terms of Voice Service and the competition for Voice Service and where consumers have multiple choices for Voice Service, then the commission should no longer engage in economic regulation of that service. So would you like to see some kind of maybe special committee at the fcc or some kind of task force review all of these regulations . Is that the kind of specific thing youre looking for . Guest i think, and i think that this is something that the Technology Transitions it is tak force can take a look at. I think the appointment of jonathan sallow to held that task force is really whos also going to be the new general counsel at the fcc, the fellow that you just mentioned. Guest well, and i will tell you i just have Great Respect for phil revere who has led three bureaus at the fcc. He was the architect in the 1970s of some of the original sort of computer i and computer ii requirements that were aimed at introducing competition into the industry. I think that tom wheeler himself is one who has led industries that have been seeking to expand and to deploy and to invest. He has a very keen appreciation for those things that limit investment. And theres nothing that limits investment more than lack of certainty and predictability. So where theres a regulatory overhang that creates uncertainty and unpredictability, that limits investment. So im very, im very optimistic that were going to see a commission thats going to focus on objectives and goals, investment, deployment and not focus so much on the traditional regulatory means thats been kind of the hallmark of the fcc. Host youre watching the communicators on cspan. Our guest this week is watter mccormick Walter Mccormick, president and ceo of u. S. Telecom. Our reporter is Howard Buskirk of Communications Daily. Mr. Mccormick, looking at the new fcc with five members, do you see Net Neutrality, net management coming back as a front burner issue . Guest i cannot imagine that it would be a front burner issue. I think that its one of those issues thats been resolved for a long time. I, frankly, think that it was resolved long before the adoption of the current regulation. Because it was, it was over ten years ago that the commission promulgated its internet principles, and for over a decade now companies have been operating in complete conformance with those principles, things like do not block, compare, degrade, attach any device, run any application. So ten year withs ago that was really sort of established, and today you have so much competitioning in the field competition in the field that no company is going to sort of change the terms of service for its consumers. Theres a, but theres a court case right now that the Net Neutrality appeal is before the d. C. Circuit. Is it your expectation that parts of the order are going to be overturned or remanded . What you used to be the general counsel at the department of transportation, right . So i know you know how to youre a pretty good court watcher. A whats your expectation based on what youve seen and heard so far . Guest from what ive seen and heard, i think the court began to ask questions as the courts usually do about ambiguity. About the extent of the commissions authority and about the impact of certain words if theyre not completely clear. You know, i think that the reason verizon bought this is because the way in which the regulation was crafted, it was crafted in a way that it would appear to potentially limit companies from offering to consumers in the future services that consumers may well want to have. And it was that ambiguity and and that uncertainty that, i think, led verizon to say, you know, this could be problem problematical not just for us, but for Public Policy. That having been said, howard, i dont know how the court will rule. And as i said before, no matter how the court rules, i believe that there has been established at this point sort of the a commonlyaccepted set of standards for the way in which people do business with regard to internet access, and i just do not expect consumers are going to see any changes in that regard. One final question, do you feel like to date the rules that have been in place more than a year now, have they had any effect be on your competition or on your members . Guest i havent seen them have an effect on competition, our members or on the way we do business. Host mr. Mccormick, you came into tech and telecom kind of through a become door. You have a transportation background, transportation lawyer as well. How did you get into tech . Guest so, my background is actually both communications and transportation. I began in communications. I moved into transportation. I moved back into communications. And so what you could say is that my background is in networks. My background is in railroad networks, in trucking networks, in Highway Networks and in communications networks. And what we have seen is that the Telecommunications Networks historically were structured along the lines of transportation networks. And the fcc was modeled on the interstate commerce commission, federal Communications Act was modeled on the interstate commerce act. So its been kind of a natural, a Natural Professional discipline to be able to move in both environments. Host what percentage of the u. S. Population has access to broadband today . Is. Guest so today, well, lets just begin with phone service. 98 of americans have access to phone service today. With regard to broadband, the latest statistics at the end of 2012 were that 95. 8 of americans had access to a fixed broadband provider and that nearly 90 of americans had access to at least two fixed broadband providers. And virtually 100 president of americans 100 of americans have access to broadband delivered over satellite. So we have about 4 of america that still is not covered by a fixed broadband provider, and i think that, you know, one of the areas we havent talked about is what to do with those remote, rural areas of america that that need to have access. Certainly, its never been more important than today. We are an informationbased economy, but were even seeing the federal government on important initiatives like access to health care and signing up for health care making that primarily available over the internet. So its extraordinarily important that we get broadband out to that last 4 of americans who lives if the highest cost areas where Companies Just really cant make a reasonable business case, and its going to require government support. In that regard, the fcc, i think, has been proceeding forward very favorably with regard to the price cap carriers, publiclytraded companies. I think its reforms have been very, very helpful, and theyre leading to very significant investment. In fact, theres going to be the fcc made available nearly half a billion dollars in the investment this year to those carriers. For the smaller rate of return carriers, there remains some uncertainties with the fcc reforms, and i think theres going to need to be some further refine m. There have been a lot of questions about whats going on with the usf, and a lot of it gets very technical, but is everything the way where it should be right now . Or are things a little bit of a mess on usf, would you say, in terms of some of the what is it, the quad remember yall quadrennial. [laughter] [inaudible conversations] i found myself having to write something about that the other day, and i was like im mostly a wireless reporter. Guest so for the Smallest Companies in the nation serving the most rural, remote areas, these are companies that tend to be the sole provider of service in those areas because they are so remote. Its the 4 of america that does not have access to broadband. And these companies, um, want to invest in broadband, know that thats what their Consumers Want to have. But when the fcc reformed the program, it established a mechanism to cap support. The idea was well intentioned, the idea was to make sure that companies were not overrecovering from the universal service fund. But the mechanism that was adopted had the adverse effect of creating enormous uncertainty about the predictability of funding going forward. As a result, applications for loans from the federal governments Rural Utility Service collapsed. Private lenders like cobank which is one of the lenders of choice for Small Companies decided that it could no longer lend money because it wasnt sure about the predictability of funding going forward. 80 members of congress have now written to the f be cc and fcc and said the way in which you have adopted reforms for greater return companies are creating problems with investment and deployment. To her credit, chairwoman clyburn took a couple of actions to offer some immediate relief that would provide some predictability for the next year or two. But this is an area that the fcc is going to have to revisit and revise if theyre going to get well, if tom wheeler calls you tonight and says, walter, please tell me how do i fix this, what would you tell him . Whats your advice to him . Guest yeah. My advice to him would be to focus in on broadband investment and look at the objective just as you are doing more nationally. The usf program is one that for rate of return carriers continues to be primarily based upon calculating subsidies that are based upon the provision of voice Telephone Service. It needs to be a program thats based upon the costs of deploying and operating broadband, broadband infrastructure. And so i would say look towards investment and deployment in broadband for this last 4 . Host just to follow up on howards line of questioning, if mr. Wheeler called you tonight and asked you how you would like to see the spectrum auctions structured, what would be your response . Guest well, what i would say to him is that going back to his lode star promoting competition, you know, the whole idea of having spectrum auctions was to have an open competition that you put your money up, and you bid. I mean, nothing could be more open than that. And the goal is to these are public assets that are being sold to private interests. And the goal is to maximize the return to the united states. So, um, i will tell you, frankly, tom wheeler is probably more knowledgeable about how to structure spectrum auctions than the rest of the fcc staff combined. But with i would also tell him this, as that spectrum gets auctioned off, dont underestimate the importance of the need for dramatic investment in terrestriallybased fiber line infrastructure because all of this data thats going to travel that last mile connection by wireless is going to drop into a wire linebased network, and were going to need to have the wherewithal to make dramatic investments in that fiber infrastructure, in that wire line network. So policies regarding wire line, fiber and the ip transition continue to be just every bit as important as anything that you do on the wireless side. Host some have said the money, though, is all centered around verizon and at t and nobody else has the money to compete in auction. Should there be set asides . Guest well, these are large companies, tmobile, sprint, these are large, multinational companies. So historically, theyve had the wherewithal to bid for spectrum. You know, its a balance because, um, the more rules you apply, the less money thats going to to come in from the auctions. And these are, again, publiclyheld, this is a public asset. And the American People deserve a fair return on that asset. And one of the goals the commission has to have is to maximize the return on that asset. Since were talking spectrum auctions, did the department of justice the department of justice has raised concerns and wants to see limits on an at t and verizon to bid in this auction. Do you think that as a loyal member of his party and the administration that theres going to be a big break between what the doj is recommending and where the fccs ultimately going to come down on these issues . Guest i think that theres always a balancing of interests. So you lay out the priorities. Maximizing the return to the people of the united states, making sure that there is a full and fair competition for the spectrum assets and making sure that at the end of the day that consumers have choice with regard to wireless providers i think all go into the mix. And theres going to be ample time for comment and discussion as to how those auctions are eventually structured. But what i do think is that, you know, a political axiom that you have to have con census on the problem before you have consensus on the solution. I think that everybodys theres a pretty clear consensus on what the objectives are here, and now the question is how best to resolve that. And also in usf i wanted to ask you, do you expect to see that will the erate expansion many schools and libraries, is that going to be a controversial thing . Because that seems to be another the way i think were interpreting it, thats going to be another priority for mr. Wheelers chairman. Do you expect that to be a very controversial enterprise, especially with republicans in congress opposing expansion of the program . Guest um, i think that everybody agrees that access to Broadband Communications on the part of schools and our Nations School children is an objective that everyone shares. I think that the issue is how best to fund the need. Today were talking about the president s Initiative Connect you would is one that is admirable. The objective is admirable. I dont know anybody who has any concern whatsoever with the objective. But keep in mind that the current usf fund is funded by a surcharge on voice Telephone Service. So you are imposing a surcharge on a service that is going down, down, down to fund broadband access, and broadband is a Different Service as a Different Service offers many more capabilities, and you want to exb band funding for broadband. So i think that the big issue isnt, um, what you fund. I think the big issue is how do you aggregate the money that thats necessary to fund the objective . Thats where theres going to need to be a discussion. Because over time if were going to continue to see but do you think this could blow up into a big political fight and a distraction for the new chairman . Host short answer. Guest im not expecting it. Host Walter Mccormick and Howard Buskirk is with Communications Daily. Gentlemen, as always, thank you. Guest thank you. Cspan, created by americas Cable Companies in 1979, brought to you as a Public Service by your television provider. Coming up on cspan2, a discussion about the future of the republican party. Including the need to broaden its demographic base. Then live coverage from the british house of commons as Prime MinisterDavid Cameron and members offer their tributes to former South African president Nelson Mandela who died last week. After that well be live at the american