Consumer Electronics Association 2004 International CES Conference

1. Consumer Electronics Association 2004 International CES Conference Michael D. Gallagher Acting Assistant Secretary for Communications and Information U.S. Department of Commerce National Telecommunications and Information Administration www.ntia.doc.gov

2. Economic Indicators Thanks to the President’s policies, America is once again growing robustly: • “Real” personal consumption expenditures rose 6.4 percent in the third quarter this year compared to a 3.8 percent growth rate in 2Q 2003. • “Real” GDP grew at an 8.2 percent annual rate during the third quarter. • The manufacturing sector enjoyed a 9.0 percent increase in productivity in the 3Q. • This year, the S&P 500 is up over 20 percent. • The NASDAQ Composite is ahead 42 percent. • The President will not be satisfied until every American who wants a job has a job.

3. Administration Commitment to Technology Development "The role of government is not to create wealth; the role of our government is to create an environment in which the entrepreneur can flourish, in which minds can expand, in which technologies can reach new frontiers." -- President George W. Bush, Technology Agenda, November, 2002.

4. Broadband Household Access Source: Leichtman Research Group as reported in USAToday on 11/14/2003.

5. Broadband Market Share(Residential Users) Source: Pew Internet & American Life Project (August, 2003)

6. Voice Over Internet Protocol (VoIP) • VoIP is like gravity – it is an irresistible force • 10% of international minutes were IP in 2002; projected to be more than 50% by 2007. (Source: Probe Research 2002) • About 1 billion business phone lines worldwide were IP by the 2Q 2003, or about 12% of the total; numbers are projected to be approx. 1.8 bill. (17%) by year end 2003. (Source: Wall Street Journal, Oct. 9, 2003) • VoIP could increase competition in equipment and services • Business spending on IP phone equipment worldwide more than doubled between 2002 and 2003 to approx. $1 billion (nearly 20% of all business phone equipment purchases). (Id.) • Need sound regulatory approach to VoIP – should not be a “grey market” service

7. Spectrum Policy • Spectrum Policy: The who, what, where, when, and why of access • Great potential for government action towards a positive effect on economic and national security • NTIA and FCC share joint jurisdiction over spectrum • NTIA authorizes use by Federal Government Agencies • FCC authorizes all other spectrum use, by license or by license exempt operation • NTIA and FCC work together to determine national and international allocations

8. WiFi Market • WiFi investment is growing rapidly. • Venture capital firms pumped over $2.8 billion into 296 wireless startups in 2002. • Projections for WiFi spending on hardware and subscriptions are $3.4 billion in 2003. • Network build outs over 2004 and 2005 are expected to be $8.2 billion. Source: BusinessWeek Online

9. WiFi in Schools & Hospitals • One third of K-12 public schools and 85 percent of colleges in the US now use wireless networking technology. (Source: WiFi News) • Public schools spend $6.2 billion on IT needs each year, including $500 million on wireless technologies, which is expected to quadruple in 2004. (Source: SBC Press Release) • U.S. hospitals are projected to spend nearly $295 million on WLAN technologies by 2005. (Source: SBC Press Release)

10. WiFi In-Flight • Boeing’s Connexion service will provide airline passengers with in-flight broadband connections to their computers and PDAs. (Source: PR Newswire) • Connexion uses WiFi connections inside the airplane to provide 5-10 Mbps downstream and 2 Mbps upstream. Some airlines plan to switch the link from satellite to a ground-based WiFi access point when the plane is at or near the gate. (Source:EDN, 12/25/03) • Boeing has agreements with several foreign airlines (including Lufthansa, Scandinavian Airlines (SAS), and Japan Airlines) to roll out the service in 2004. (Source: CBS MarketWatch) • The U.S. government worked at the 2003 World Radio Conference (WRC) to gain approval for use of the 12-14.5 GHZ frequency band on a global basis.

11. WiFi On The Road • A close cousin of WiFi, DSRC is a short to medium range communications service that supports both public safety and private operations in roadside to vehicle and vehicle to vehicle communication environments. • The FCC recently adopted DSRC licensing and service rules in the 5.9 GHz band to facilitate provision of public safety and Intelligent Transportation Systems (ITS). • NTIA coordinates frequency use with DSRC operators to avoid interference with governmental operations. • DSRC technology is currently used in automatic toll collection applications such as E-Z Pass. • Future applications may include intersection collision avoidance, work zone warnings, road condition warnings, and even electronic payment of gas, parking and fast food.

12. Other New Wireless Services • Ultra-wideband: phenomenal capacity to deliver rich media to many devices, at low-power and low-cost. • Third Generation (3G) Service: current generation of service provides speeds up to 300 Kbps. • WiMAX (802.16): enables wireless networks to extend as far as 30 miles at speeds up to 70 Mbps.

13. Administration’s WiFi Approach • Create a low tax and limited regulatory environment that promotes our growing economy. • Work with industry and government engineers to reduce interference and promote spectrum “best practices”. • Remove government obstacles to development of new communications technologies and applications. • Use sharing where technically feasible to increase the amount of spectrum available for wireless services and streamline the process of licensing when licenses are required.

14. Conclusion • The American economy is recovering and expanding. • WiFi is an important and growing part of U.S. productivity and consumer enrichment. • The Administration has developed successful policies to advance new wireless technologies while protecting existing critical services. • Technology will continue to challenge our policy framework – and your input is critical to finding the answers.