Reed Hundt’s Remarks at Climate Change Policy Forum

These remarks were delivered at the  Stanford Woods Forum to discuss climate priorities for the next presidential administration on 9/15.

TRANSCRIPT:

Good afternoon. I want to give a big shout out to my old friend David Hayes and all of his colleagues for arranging this. I also want to ask you to acknowledge my partner in writing our essay. Jill Bunting right here.

So, I’m going to take as a given that we have to move very, very quickly as an American society, as an economy and as a participant in the world society. We have to move very, very quickly to a clean power platform. You’ve heard the reasons eloquently, you’ve heard them in detail and we should be scared to go slow. I’m going to do three things in my time: I’m going to tell you a bed time story, I’m going to express the reasons why a competition policy is the way to move fastest to the clean power platform, and I’m going to conclude by urging on all of us the adoption of a politics of abundance.

First the bed time story. Don’t go to sleep now, just listen to the little bed time story. Once upon a time, in a Clinton administration far away there was a national system that delivered electromagnetic waves very cheaply, under one common ownership to everybody in the United States. It never changed year-to-year. The goal was to have retail price regulation by every state, to have reliability and very, very low prices and that electromagnetic system was the telephone system. The largest machine ever built. The other electromagnetic wave platform. Not the one we came to talk about, but the other one. It’s on the same telephone poles, it has very similar architecture and, starting in the state of New York in the 1970s a state said we’re going to blow this up in terms of policy, in terms of market structure, conduct and performance. In the late 1970’s and early ‘80’s, the Department of Justice filed lawsuits to break up that system, and 20 years ago this year the United States Congress passed the 1996 Telecommunications Act and said, “This system really worked great, but it isn’t competitive, it isn’t innovative, it doesn’t open the doors to change and we want competition and innovation because we don’t know what will happen but that’s the American way.

Here’s what happened: From, roughly speaking, about 1996 to 2003 about $1 trillion was invested, overwhelmingly from the private sector. The smart phone that you use every day, if you took that back as a time traveler to the late 1990’s it would not work. In fact, every single communications device that you use would not work on that old system. Total, complete transformation, from the roots all the way to the user experience. The results in terms of the economy are exactly the kind of results we would like to see right now. National income went up on a median basis, income went up for every single quintile, and American median income, household income, peaked in the year 1999. It has not yet reached the level that was reached in the year 1999. Median income in the United States is still below what it was in that year. The revenue that people used to pay for communications, roughly speaking, doubled between the mid-1990s and today. And everyone is getting the same thing for much, much, much, much less, or they’re buying a lot more for more.

We’re just on the verge of seeing the exact same transformation occur again in a very different way. When I say “the same” I mean the same scale. 5G is the new communications network. It is going to be rolled out in the next five years approximately. Instead of the world having five billion cellphones, it will have five billion smart phones, fifty billion objects that will be connected by communications technology and two-hundred and fifty billion sensors that will measure everything about the environment, including energy consumption. That’s number one in terms of change. Number two, autonomous vehicles or semi-autonomous vehicles will be deployed starting, approximately, in three years and going from three years to the next ten years. About ten-million will be sold in the United States in single digit years. Lastly, we will see the cloudification of society and the economy. Meaning all that data gathered will be on servers and it will be analyzed and it will be used and machines will tell us the answers to questions we didn’t yet know we were about to ask.

All of this is going to be and is a function of a competition policy and that is what I want to urge we adopt as we think about moving to the clean power platform for seven reasons. Here is number one: It is good to delight consumers. It is politically popular, it is sustainable and punishing them is not politically popular and not sustainable. And when I say consumers I mean business consumers and I mean residential consumers. Number two: Competition grows markets, monopoly limits them. We learned this, we learned this. Monopoly purposely says, “I’m constraining supplies in order to maximize price and maximize return on capital. Competition says, “I want to grow markets.” Why is this good? Because if you’re growing markets it means you’re delivering clean power solutions to everyone in the economy, not just to the rich. It means you’re purposely adopting an economic policy that will reduce inequality and not expand inequality. Competition brings value to everyone and increases the standard of living for everyone. Number three: competition rewards innovation, monopoly discourages it. Monopoly doesn’t like change. Competition says, “Innovators make more money and they do disrupt. This is something we want to see.” Four: Planners do not know what they do not know, so competition means we will learn by doing. Number five: regulators who are planners can, in fact, open closed markets and they can create new ones. If in every one of the geographies you opened to transmission siting you conducted an auction for the lowest cost provider of transmission and distribution services over that real estate, then you open up competition. That would be the winner, that would be the way to do it. Competition can and should tie weights to the ankles of carbon competitors. Competition doesn’t mean you don’t put a price on carbon, it means, in a competitive market, if they do carry some extra weight because of that, then they’re going to lose in that competitive market. And, lastly, liberty and entrepreneurial competition, those two things are synonymous and that is the American way of life. This not a state planning country and so, embracing concepts of liberty and experiment and adventure, that is the way to build the clean power platform. Now I get to the politics of abundance.

In conclusion, friends, the future will not be a cold and dark and penurious society. That’s not politically popular, it won’t be accepted. It also isn’t equitable, it isn’t morally sound. It is not our goal. Our goal is a smart, comfortable and ubiquitously powered society. But it needs to be smart, comfortable and ubiquitously powered with clean power. That’s our goal. Because this society will be bigger and better, it is also the case that there will be more revenue. So, when we look at the electricity sector and we say here is $400 billion of revenue, how in the world can we repurpose that $400 billion to some clean power purposes, somebody has to lose, it’s the wrong way to think about it. The right way to think about it is that, that four-hundred billion is going to be six-hundred billion in spending, but for more things. In conclusion, I will tell you the more things, because I already did tell you. Number one: 5G. This network that I’ve just described this is a power consuming network. This means that instead of just people using those smart phones, there are objects and sensors that are demanding electricity. This is a smart network and, so, it is a power consuming network. Autonomous vehicles. This time yesterday I was in Napa Valley in an autonomous BMW. It was a little bit pricey, $300,000, but, but, also this week, Uber rolled out semi-autonomous vehicles in Pittsburg.

This is the vision I would like you to come away with. Imagine this. Ten million vehicles shared through Uber or Lyft and like businesses and they’re all electric. Since the automobile is used 5% of the time, if we took those ten million and used the 50% of the time, it would be the same this as having, ten million times ten is, one-hundred million vehicles. And if they were all electric, guess what I’ve just done? There are now no more carbon emissions from transportation. That’s that math. It is not inexpensive, but it is much, much greater value per person and per mile because we aren’t even going to need to buy these cars. This is not a preposterous vision. I’m tellin’ ya, every single person I’ve bumped into in Silicon Valley is already working on this. Every one of those cars has a server in the trunk. Every one of those cars has LIDAR. Every one of those cars is a power consuming center. It needs to be clean power. And, third and last, data is doubling in volume approximately every year, used data is doubling in volume, data that’s accessed by the data centers, is doubling in volume approximately every two years. In the year 2014 data centers, alone consumed 2% of all the electricity in the United States and that will double, approximately, every two years. All of these new power sources are new revenue sources, they need to be revenue sources for the competitive clean power economy.

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