U.S. Department of State
Remarks by Terry Kramer
Ambassador U.S. Head of Delegation, World Conference on International Telecommunications
Dubai, United Arab Emirates
September 9, 2012

Remarks to SAMENA

As Prepared

Welcome/Intro

First, let me say “thank you” for allowing me to speak to you briefly here today, to give you a bit of my personal background and to speak about the importance of the upcoming World Conference on International Telecommunication – or, as we often call it, the “WCIT.”

Let me also express how impressed I am by the effort to organize and host the WCIT here in this region – I think I can safely speak for all future delegates in looking forward to a great Conference in this vibrant city. We are all deeply appreciative of the effort and resources being devoted to a successful WCIT – it says a great deal about the commitment of the UAE, and all of the countries in this region, to the goal of broadening and deepening connectivity throughout the world. Thank you for all you are doing to make us feel welcome in Dubai, both now and in December.

In this 21st Century City of Dubai, with all of its dynamism and diversity, you have really created an environment for success – with all of the elements painstakingly put into place – the business culture, infrastructure, legal and regulatory framework – and most importantly the mindset that is open to new ideas and drive to foster entrepreneurship.

The dynamism of this city really resonates with me, and it’s what I want to speak to you about today: How do we create the environment for success that will propel the global telecommunications and internet industries to greater connectivity, innovation and growth?

Building the Foundation

Let’s start with what I think has to be the foundation: a recognition that our international telecommunications and internet sectors are flourishing, not just in developed countries but around the world. And it is doing well precisely because it is an open platform – with open standards-setting, open markets, open networks and the free flow of ideas, content and commerce that is carried over those networks.

The International Telecommunications Regulations (ITRs) are a big part of this platform. As a treaty, the ITRs are remarkably short – just a handful of pages – but the ITRs nevertheless provide a consistent, open and flexible platform for commercial innovation and growth.

With the ITRs in place, what has arisen is much like the UAE itself – dynamic, diversified, decentralized and driven by consumer demand and business innovation.

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

Let’s be clear about this: the Internet continues to demonstrate the effectiveness and success of the current multi-stakeholder structure – and its own independence. No government or single organization can or should attempt to “control” the Internet.

By the same token, the basic foundation for all modern communications – including the Internet but also many other voice and data applications – is the commercial market for exchange of international traffic. This is the appropriate province for discussion of adjustments to the ITRs.

International traffic is now overwhelmingly governed by international commercial agreements that follows the logic of market supply and demand and enable operators to take advantage of efficiency in routing. Thanks to the flexibility allowed in today’s ITRs, the international telecommunications network has evolved organically over the past 25 years and now does a remarkable job of driving global connectivity.

This does not mean we have no problems or issues in international telecommunications, or that every country has reached a level of sufficient infrastructure development. But we do have a proven model, in terms of the ITRs, that has fostered a rapidly growing and vibrant sector for telecommunications, which has in turn allowed an explosion of mobile communications and Internet innovation.

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

In my view, that is our job at the upcoming WCIT: to take what works and sustain it, expand it, so that the benefits of global connectivity, with access to content, commerce and access to one another–is an opportunity for everyone worldwide.

My message to you is that we can do this as partners – and I believe we will.

Background: Mobile Industry

Why do I feel so strongly about this vision? Let me tell you a little about my background in the telecom industry. I began in 1988 working for a company called Pacific Telesis, which was one of the Bell Companies created by the court-mandated break-up of the original AT&T. Pacific Telesis’ wireless businesses were spun off to form AirTouch in 1993, and then later were acquired by Vodafone, the global wireless operator.

Another way of saying this is that when I started out in the mobile communications industry, it was a paging business, which then transformed into a “cell phone” business. That cellphone business then went from a high-end market, initially targeting wealthy individuals, to a mass-market, “must have” service. And finally, it went from a developed-country business into a truly global one.

Many of you can reflect on the same rapid explosion in your own cities and countries: In just 25 years, we have come from no cell phones at all to more than 5.3 billion mobile subscriptions worldwide.

• Today, the world’s developed markets have achieved, on average, 116% mobile penetration, and even developing markets average about 70% mobile penetration – a figure estimated to reach 100% in the next 3-4 years.

• Or consider this: roughly 90% of the world’s population – and even 80% of its rural residents – now live in areas that have mobile network coverage.

Around the world, 3G and 4G services are increasingly available, and millions of users now will likely obtain Internet access — for the first time — using their cellphones.

How did the mobile revolution become so successful, so fast?

• A wave of liberalization and competition driven by national regulators who opened their markets to multiple service providers;

• Regulators who moved proactively to make spectrum available for commercial use;

• Industry-driven standards-setting which brought technological innovation to market at accelerated speeds;

• A new, consumer-oriented outlook – adopted by industry and government alike – that drove innovative services and business models, such as pre-paid services, text messaging and handset subsidies; and

• Mobile operators, device makers, internet players and infrastructure providers who all worked together to form a healthy, vibrant ecosystem to deliver customer relevant mobile internet services

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

Internet and Broadband

Meanwhile, as the mobility revolution was gathering steam, the Internet also was becoming a global phenomenon, on both mobile and fixed platforms. The adoption of the World Wide Web – as we called it then – gave the Internet a user-friendly interface, while the open and decentralized architecture invited content and easy, cost-effective access.

o And look at the results: There are now about 2.4 billion Internet users worldwide — a number predicted to rise to 3.5 billion by 2016. At least 1.2 billion of those Internet users today are in developing countries.

o The Internet economy is estimated to be worth USD 4.2 trillion by 2016, in the G20 countries alone, with an annual growth rate of 8%. Growth will be more than double that – 18% annually – in developing countries.

Not surprisingly, we are seeing an explosion in the amount of data – much of it in the form of VoIP and video – circling the globe.

o Roughly 369 million terabytes of IP data were exchanged around the world last year – a number that Cisco predicts will rise by 2016 to 1.3 billion terabytes. Overall, IP traffic is forecasted to grow at a compound annual growth rate (CAGR) of 29 percent from 2011 to 2016.

These are nice numbers, but we should focus on the real beneficiaries of mobile and internet industry growth: individuals and societies all around the world. The Internet creates:

• Economic benefits – Jobs–beginning with mobile network expansion and jobs created through online commerce and content delivery

• Commercial benefits – farmers can use cellphones to link with buyers, check weather conditions and determine commodity prices in real time;

• Social benefits – Health care providers can use mobile technology to do remote diagnostics and treatments as well as training of health professionals. Governments can now make services available online, and people can inform themselves about political events and proposals;

• Human benefits – Groups can organize themselves online, friends can re-establish contact after years of separation, and everyone explores new meanings of connectivity and connectedness.

In a global marketplace battling for growth, telecommunications and Internet industries have acted as multipliers of productivity, translating into greater employment and social benefits.

• In the OECD countries, the Internet now accounts for an average of 4.1% of GDP – and up to 7-8% in the most “wired” countries, such as South Korea or the UK.

• Moreover, a University of Munich study, reported by the ITU, found that a 10% increase in broadband penetration yields an increase in GDP of .9% to 1.5%.

As a critique, we frequently hear that the Internet, and the underlying international infrastructure, have evolved to be “US-centric.” The opposite is true. Beyond its earliest incubation stage, the Internet has exploded as a global phenomenon – and it is growing more international, not less. Internet business ventures, social media companies, and enterprise applications are sprouting up all over the globe. This is not just a phenomenon confined to the United States, or just to Western Europe or the developed economies of the Asia-Pacific region.

In my career with Vodafone, I gained a lot of experience working in many developing markets amd seeing first hand the real innovation happening organically all over the world.Whether it was the “Mpesa” mobile banking innovation in Kenya or Vodacom’s development of fixed/mobile services in South Africa, I became convinced that the mobile and Internet spaces are dynamic, global and unable to be contained or managed from any one place in any standard or traditional manner. There is simply too much innovation – and too many expectations – that have broken through previous paradigms of “developed” and “developing” countries.

In Papua New Guinea, for example, residents of a remote village wanted to preserve their language – spoken nowhere else in the world – on the Internet. Through a “talking dictionary” program pioneered by Swarthmore College in the US, that language (and others) is now preserved and available for those townspeople – by those townspeople — in perpetuity. The key point here is that these Papuans envisioned the Internet and what it could do for them, before they even saw it.

Consider just a few examples of entrepreneurship within this region:

o The Jordanian start-up VitalTronix has developed an I-Phone app for personal medical monitoring,

o Dubai-based Shoutit has developed a social media portal that allows businesses to reach users with targeted advertisements based on their personal preferences and locations.

o Beginning nearly 15 years ago with an Arab-language email service, Maktoob grew into a full-service Web portal, eventually attracting a buy-out by Yahoo for $164 million.

The US Approach to the WCIT

This brings us to the WCIT, which is the International Telecommunication Union’s first conference to review the International Telecommunication Regulations (ITRs) since 1988.

As we look back on what the delegates accomplished that year, we should appreciate the environment for success that they created. The true accomplishment was to create a framework for interoperability and connectivity. But they did so without over-burdening the ITRs with rigid “fixes” for specific issues or perceived inequities. Within the scope of the ITRs, the 1988 delegates created the architecture for innovation, flexibility and broad-based consultation.

The United States believes the changes that have occurred in the global communications sector since 1988 can be addressed and accommodated with limited revisions to the ITRs.

It is important that the ITRs continue to reflect high-level principles that are sufficiently flexible to accommodate existing and future technological and market changes. In addition, the existing ITRs are currently in force and so are the most relevant starting point for negotiations on their revision.

In addition, the revised ITRs should continue to be a “stable treaty,” with no need for regular or frequent updating. Moreover, the ITRs must continue to recognize the sovereign right of Member States to regulate their own telecommunications sectors.

In its initial contribution, submitted on 3 August, the United States proposed:

• Minimal changes to the preamble of the ITRs;

• Alignment of the definitions in the ITRs with those in the ITU Constitution and Convention, including no change to the definitions of telecommunications and international telecommunications service;

• Maintaining the voluntary nature of compliance with ITU-T Recommendations;

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

• Revisions of Article 6 to affirm the role played by market competition and commercially negotiated agreements for exchanging international telecommunication traffic.

Addressing WCIT Issues

Over the past months several proposals have been made for the upcoming WCIT that, although seemingly well-intentioned, do not fully acknowledge the reality of an open-platform, multi-stakeholder, liberalized and consumer-driven telecom sector and what is required for future success.

The United States strongly favors establishing national policies and a flexible international framework for investment in infrastructure. But we have significant concerns about proposals which seek to mandate a sender-party pays pricing mechanism, such as that being proposed by the European Telecommunications Network Operators (ETNO).

o The proposal appears to be an attempt to take money from (or tax) content providers – which could dampen innovation and choke off the Internet’s free flow of information.

o It would be massively complex and expensive to devise a “sender party pays” system to track and monitor packetized traffic.

o Any global “fix” would soon be outpaced by arbitrage and routing work-arounds – as the accounting rate system already has been.

o And there would be unintended consequences: Internet “black-outs” could result for developing countries if ISPs and content providers refuse to pay termination fees for downloads. Take, for example, a non-profit NGO that researches and provides specialized treatment information on a rare medical condition. If that NGO were forced to pay its ISP for every download that occurred from anywhere in the world, that non-profit may be forced to choose between cutting back on research and programming or restricting access to free downloads. That, in turn, would result in limiting the spread of vital information that might be downloaded from that non-profit’s website in developing countries or remote communities.

Similarly, the United States believes that least-cost routing is a standard business practice that has resulted in much lower costs for consumers to make international calls. This could be jeopardized by proposals to mandate and track traffic routing and management practices.

o This could cripple operators’ efforts to route traffic efficiently and cost-effectively

o It could increase consumer prices, impede innovation and undercut investment

o In any case, the Internet comprises more than 40,000 networks, exchanging traffic on more than 425,000 distinct global routes, and connecting more than 600 million websites – all of them connected via commercial agreements among network operators. It would be impossible for any government to track and monitor routing and management practices throughout such a complex network of networks.

o It would open the door to Deep Packet Inspection (DPI), potentially disclosing customer information to other operators and governments.

The United States also recognizes that many countries are experiencing growing frustration with hacking and cyber-crimes. Indeed, there are, reportedly 67,000 malware attacks every day around the world – which represents a doubling of attacks since 2009. But the ITRs are not an appropriate or useful venue to address cybersecurity.

o Existing multi-stakeholder processes are better adapted to address Cybersecurity and related issues. Groups such as the Internet Engineering Task Force (IETF) and 3GPP, for example, are actively developing standards and specifications for network and device security – drawing on rapid innovations in engineering technologies.

On global mobile roaming, the US supports policies that foster consumer choice and transparency in setting and advertising of roaming rates. But the US does not support adding provisions to the ITRs that would address the actual level of roaming rates.

In general, proposals to control content transmitted over networks are outside the scope of the ITRs and, further, appear to run counter to the foundation of a free and vibrant telecommunications and Internet society.

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

So, given that approach, the United States would be concerned about any proposed changes to the ITRs that (1) restrict the free flow of content, (2) broaden the scope of the ITRs, however subtly, to impinge on the Internet’s natural growth and evolution, or (3) impose uneconomic pricing or transfer-payment obligations on Internet content providers or operators.

I also would like to draw your attention to the CITEL PCC.1 meeting that will take place in just a few days in San Salvador, El Salvador. I will fly immediately from our meetings here to attend the CITEL meeting, which will be a culmination of many months of WCIT preparations by the members of the Organization of American States. We have submitted WCIT proposals capturing our views and approach to the Conference, much as I have outlined them here, and we will be working, on the basis of those views, to gain consensus on several Inter-American Proposals (IAPs) to bring back to Dubai in December. We very much value – as I know you do – collaboration with our regional partners.

Conclusion

So I would like to invite an approach to the WCIT that is based on a recognition that the existing environment today works amazingly well, and it is empowering communications – and human — development by quantum leaps. In cases where imbalances occur, they can be addressed through market forces and consumer-focused national policies that empower local content development and stimulate local and regional traffic and demand.

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

o To reaffirm our belief in what will drive future market success;

o To recommit ourselves to the goal of maintaining and promoting global telecommunications connectivity in the 21st century;

o To create an unfettered, free flow of ideas, information and commerce;

o To establish high-level principles that foster an open and secure Internet and network operating environment; and

o To be pragmatic in understanding that telecom and Internet economies are too large, too distributed and too diverse for any one organization to control.

o So, in summary: we should congratulate ourselves on the 25-plus years of success in building a vibrant telecom and Internet economy, driving economic growth, and empowering individuals with information, connectedness and commercial opportunities. Our challenge now–more than any other — is to maintain that environment for continued success, and to expand it around the globe, in all countries.

Again, I would like to express my appreciation to our hosts here in Dubai, and to thank all of you for this opportunity to exchange views and ideas about issues that are so important to individuals and countries around the world. We are here with an open mind, ready to engage in a dialogue in pursuit of our shared vision of greater connectivity and sector development. If we follow the principles that have gotten us this far, I believe we will enable the telecommunications and Internet phenomenon to become our lasting legacy and platform of success for future generations.

Thank you.