[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
REAUTHORIZATION OF THE FEDERAL COMMUNICATIONS COMMISSION
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TELECOMMUNICATIONS,
TRADE, AND CONSUMER PROTECTION
of the
COMMITTEE ON COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
MARCH 17, 1999
__________
Serial No. 106-13
__________
Printed for the use of the Committee on Commerce
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55-640CC WASHINGTON : 1999
------------------------------------------------------------------------------
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COMMITTEE ON COMMERCE
TOM BLILEY, Virginia, Chairman
W.J. ``BILLY'' TAUZIN, Louisiana JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas RALPH M. HALL, Texas
FRED UPTON, Michigan RICK BOUCHER, Virginia
CLIFF STEARNS, Florida EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio FRANK PALLONE, Jr., New Jersey
Vice Chairman SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania BART GORDON, Tennessee
CHRISTOPHER COX, California PETER DEUTSCH, Florida
NATHAN DEAL, Georgia BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma ANNA G. ESHOO, California
RICHARD BURR, North Carolina RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California BART STUPAK, Michigan
ED WHITFIELD, Kentucky ELIOT L. ENGEL, New York
GREG GANSKE, Iowa THOMAS C. SAWYER, Ohio
CHARLIE NORWOOD, Georgia ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma GENE GREEN, Texas
RICK LAZIO, New York KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming TED STRICKLAND, Ohio
JAMES E. ROGAN, California DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING,
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland
James E. Derderian, Chief of Staff
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Telecommunications, Trade, and Consumer Protection
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL G. OXLEY, Ohio, EDWARD J. MARKEY, Massachusetts
Vice Chairman RICK BOUCHER, Virginia
CLIFF STEARNS, Florida BART GORDON, Tennessee
PAUL E. GILLMOR, Ohio BOBBY L. RUSH, Illinois
CHRISTOPHER COX, California ANNA G. ESHOO, California
NATHAN DEAL, Georgia ELIOT L. ENGEL, New York
STEVE LARGENT, Oklahoma ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming BILL LUTHER, Minnesota
JAMES E. ROGAN, California RON KLINK, Pennsylvania
JOHN SHIMKUS, Illinois THOMAS C. SAWYER, Ohio
HEATHER WILSON, New Mexico GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi JOHN D. DINGELL, Michigan,
VITO FOSSELLA, New York (Ex Officio)
ROY BLUNT, Missouri
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Furchtgott-Roth, Hon. Harold W., Commissioner, Federal
Communications Commission.................................. 69
Huber, Peter W., Partner, Kellogg, Huber, Hansen, Todd, and
Evans...................................................... 21
Kennard, Hon. William E., Chairman, Federal Communications
Commission................................................. 41
Ness, Hon. Susan, Commissioner, Federal Communications
Commission................................................. 64
Powell, Hon. Michael K., Commissioner, Federal Communications
Commission................................................. 74
Tristani, Hon. Gloria, Commissioner, Federal Communications
Commission................................................. 80
Material submitted for the record by:
Federal Communications Commission, response for the record... 115
(iii)
REAUTHORIZATION OF THE FEDERAL COMMUNICATIONS COMMISSION
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WEDNESDAY, MARCH 17, 1999
House of Representatives,
Committee on Commerce,
Subcommittee on Telecommunications,
Trade, and Consumer Protection,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:06 a.m., in
room 2123, Rayburn House Office Building, Hon. W.J. ``Billy''
Tauzin (chairman) presiding.
Members present: Representatives Tauzin, Oxley, Stearns,
Gillmor, Deal, Largent, Cubin, Shimkus, Wilson, Pickering,
Fossella, Blunt, Ehrlich, Markey, Gordon, Rush, Eshoo, Engel,
Wynn, Luther, Sawyer, Green, McCarthy, and Dingell (ex
officio).
Staff present: Justin Lilley, majority counsel; Mike
O'Reilly, professional staff; Cliff Riccio, legislative clerk;
and Andy Levin, minority counsel.
Mr. Tauzin. Please come to order.
Today, the subcommittee begins a process of re-authorizing
and, hopefully, reforming the Federal Communications
Commission. The Commission has been operating without statutory
authority since 1991. It is my hope that this will be the first
in a series of public hearings leading to the introduction of a
comprehensive FCC reform legislation later this summer.
When Congress passed the historic, much-publicized
Telecommunications Act of 1996, I believe we made a fundamental
mistake. We failed to reform an outdated, out-of-touch FCC when
we overhauled the law. As a result, as America prepares to
enter the 21st century, we have in effect a horse-and-buggy
agency trying to bridle supersonic technology. And it is simply
not working as well as it should.
Simply put, can the agency created in the 1930's, instilled
with the regulatory purpose and ingrained with the regulatory
mindset, effectively oversee the deregulatory policies
engineered by Congress for a modern-day marketplace? I believe
the answer is no.
And little wonder why. Keep in mind the FCC is based on the
old Interstate Commerce Commission model, dating back to 1888,
a time when telegraphs, not telephones, televisions, satellites
or computers. In today's marketplace, it is more important for
the FCC, literally, to get out of the way rather than to try to
lead the way.
To better understand the problem. Consider how the
Commission is divided into six operating bureaus: mass media,
common carriers, wireless telecommunications, compliance and
information, international, and cable services.
Twenty years ago, it made sense to have one bureau
overseeing a monopoly like Ma Bell. But what about today?
Because of cross-pollination in the telecommunications
industry, hundreds of companies are involved in telephony,
high-speed Internet services, cable television, satellite-
cellular, just to name a few.
Suddenly the one-size fits all mentality simply doesn't
work anymore. So we need to fundamentally restructure the
agency and develop a 21st century model that works in a high-
tech global economy. But we must change the FCC's thinking as
well. Today, nearly 3 years have passed since we passed the
landmark Telecommunications Act. There is still no effective
competition in residential telephone markets across America.
We have failed to achieve full competition in the long-
distance loop. Why? Is the law flawed? I don't think so. In my
opinion, it is the way the law is being interpreted and
enforced. Instead of concentrating its efforts in areas where
it can play useful roles and make a difference to consumers,
FCC in recent years has delved into such controversial areas as
free time for politicians, prohibiting liquor advertisement in
radio and television, conditioning telecommunications mergers,
and, worst of all, the FCC effectively, in my opinion, levied a
$2 billion tax on telephone consumers to establish this so-
called E-Rate program.
For the first time I have looked, no where in the
Constitution is the FCC or any other Federal agency given the
power to levy, raise, or collect taxes. While the FCC may call
these new charges fees, I believe they are taxes in disguise.
I have other deeper concerns as well. Concurrently, both
the Department of Justice and the Federal Trade Commission
possess statutory authority to review all mergers and
acquisitions for anti-competitiveness. It is troubling to me
and many of my colleagues that the FCC has assumed authority to
condition mergers based on certain requirements even when these
mergers have already passed DOG and FTC scrutiny--DOJ and FTC
scrutiny.
Based on this troubling track record, the FCC in the future
may find the emerging Internet too tempting to resist, and
therefore, I think it is vitally important for Congress to
reform the agency from top to bottom.
Simply put, FCC regulation of the Internet could have a
paralyzing effect on the American economy, and I think the
forbearance exercised by the Commission ought to be codified in
law.
Recently, I met with Chairman Bliley and pledged my support
to work with him on a sweeping FCC reform bill. Among other
things we plan to look at: forbearance, whether, indeed,
forbearance can be codified; privatization, whether the FCC
activities could or should be privatized, such as record
keeping and information gathering; duplication, what FCC
programs duplicate those of Federal agencies and could be
eliminated; devolution, what FCC functions presently handled in
Washington could be handled at the state level, and
organization, what FCC structural changes can be made to
streamline the agency and make it user friendly in today's
competitive, fast-paced marketplace.
As we begin these hearings, Chairman Bliley and I have two
major goals in mind. We want to fundamentally restructure the
agency, and second, we want to redefine the FCC's mission. We
are starting today with a blank piece of paper.
I want to welcome the input of Chairman Kennard and the
entire Commission. Let me thank you all in advance. Your
statements, which are a part of your record when we begin here
today, are excellent starting points I think for this
discussion.
Astonishingly, there has been no comprehensive
Congressional review of the FCC and its operations since the
1970 Ashe Council report. Back then, there was only one
telephone company, two commercial satellite providers, three
television networks, and no one, not even Bill Gates in his
wildest of dreams, had ever heard of a laptop computer with
high-speed Internet access.
Times have changed. Now it is time to change the FCC.
I, of course, did not create the FCC, but I would love to
recreate it in this process beginning today.
I will be happy to yield to my friend, Mr. Markey, for an
opening statement.
Mr. Markey. Thank you, Mr. Chairman, very much. And I want
to thank you for calling this hearing today on proposals to
reform the Federal Communications Commission. And I want to
thank Chairman Kennard as well as Commissioners Ness and Powell
and Furchtgott-Roth and Tristani for being with us here today.
The purpose of this hearing is to explore proposals to
reform the Commission. I believe that constructive proposals to
help the Commission do its job better and more efficiently are
always welcome. I want to commend Chairman Kennard and the
other Commissioners for the work they have already done to
reinvent the Commission so that its functions are, in fact,
discharged in a very competent and productive manner.
Before we launch into a discussion about the job the
Commission does and any proposals to help the Commission
perform its tasks better, I think it is important to remember
that the Commission has been entrusted with implementing the
Telecommunications Act of 1996, a job that is unparalleled in
scope and detail since the enactment of the 1934 act itself.
We must also be cognizant that Americans today have the
finest telecommunications system in the world. We are looking
over our shoulders at No. 2 and three. It is overall, the most
competitive, most diverse, and most innovative
telecommunications marketplace on the planet.
We should be very proud of what this committee has done,
and we should be very proud of what the Federal Communications
Commission has done in our private sector to bring us to this
point. This is an American strategy. This is the blueprint
which we laid out and has so far surpassed anything else that
any other country in the world has even remotely contemplated.
The fact is that this is the case, is, in fact, no small
measure due to the fine work of the Federal Communications
Commission and its staff. And I want to note that.
But the fact also remains that we are not satisfied with
the status quo. Most consumers still lack affordable
alternatives to cable TV. Most consumers still lack choices for
local phone service.
Can we continue to add choices in the marketplace for the
American consumer? Can we continue to foster ever-more ruthless
competition and create more jobs?
Yes, we can. And we should.
Will there simultaneously be proposals to collapse the
existing choices, either in the name of deregulation, or to
concentrate economies of scope and scale?
Yes, there will always be such proposals.
Now that the communications act is finally getting out of
its major rulemaking stages and we can get would-be marketplace
participants out of the courtrooms--and I deeply regret all of
the cases that have been brought by the Bell operating
companies against the Telecommunications Act--we finally, 3
years later, have most of them out of the way so that the
marketplace can begin to work. I would suggest that reopening
the Telecommunications Act or radically restructuring the
Commission itself would be counter-productive.
The last thing we should do right now is reverse the course
of battling to de-monopolize telecommunications markets and
jeopardize or delay deregulation.
After all, we are not going to be able to deregulate until
we de-monopolize and to break up monopoly barriers to
competition. The Commission will need tools and resources, and
competitors, both large and small, will need certainty in the
marketplace.
That certainty has finally arrived. I hope that this
committee and the Congress does not create uncertainty by
giving a promise to the monopolizers that they may get relief
their need to open up their markets.
Given the fact that there are literally billions of dollars
being invested today, with billions more to come, now that the
major legal challenges have run their course, the relatively
small amount of funding that the FCC represents is pennies on
the dollar in terms of the benefits consumers and workers
ultimately derive from implementing the bill properly.
To risk delaying emergence of a truly competitive
marketplace and the arrival of the consumer choices and jobs it
creates would be terribly shortsighted.
I want to applaud the Commission for coming forward today
with some suggestions for how to do its job more efficiently
and better fulfill the numerous tasks and goals that Congress
requires it to achieve.
Common sense, consensus approaches to reform of the FCC are
welcome as they are with any government agency. And I look
forward to working with Chairman Tauzin in exploring how we can
make progress together. And I look forward to working with
Chairman Bliley and Mr. Dingell and the other members of the
committee as we work with the FCC to ensure the full
implementation of the Telecommunications Act so that it
successfully works for all of the American people.
On a final note, I would like to point out that our first
witness today is a brilliant man. I have no doubt that he is
one of the most brilliant men who has ever appeared before the
committee. However, there are brilliant people on the other
side of all of the issues, which Mr. Huber represents as well.
And I would have preferred that we had two witnesses at least
today, rather than one, because as well as Mr. Huber over the
years has represented the Bell operating companies' perspective
before regulatory agencies and in the courts, there are others
who disagree with his perspective in terms of where we are at
this point in time.
And I know that Mr. Huber was invited very late to testify,
and we had some difficulty in having an alternative point of
view presented at this time. But I would like to stipulate for
the audience and for the members of our committee that Mr.
Huber represents one perspective, but there is another; there
are other perspectives, but there is at least one other
competing philosophical perspective that is at great odds with
Mr. Huber in terms of what needs to be done to open up this
marketplace more fully.
And in the future, I would hope those other voices will be
given a chance to testify as well. And I thank the chairman for
allowing me that extra time.
Mr. Tauzin. The Chair thanks the gentleman. Let me, before
recognizing the vice chairman of the committee, let me point
out to my good friend as we have had in private conversations,
Mr. Huber is but the first of a number of voices we are going
to hear. I think there are more than two perspectives. I think
there are quite a few.
And we are going to look for the brightest of minds who can
paint pictures for us of where this incredible world is going
so that all of us can work in a bipartisan and collegial way to
find the right kind of agency for the Federal Government to
work cooperatively with communications in our country.
I pledge to my friend my cooperation in that regard, as I
did privately. We will have other perspectives today. Mr. Huber
I think will present an extraordinary picture for us. And we
will have extraordinary pictures painted by people of,
hopefully, equal men of capacity as Mr. Huber is, as we go
forward.
The Chair is now pleased to recognize the gentleman from
Ohio, the vice chairman of the committee, Mr. Oxley, for an
opening statement.
Mr. Oxley. Thank you, Mr. Chairman. I applaud the decision
to hold this morning's hearing, and I pledge my support for the
committee's effort to re-authorize and reform the Federal
Communications Commission. I believe the restructuring and
modernization of the FCC is perhaps the most important project
that we will undertake in this Congress--indeed, an attic to
basement review of the FCC and its structure.
I want to also welcome our witnesses and want to commend
the Commissioners, in particular, for their testimony. From
their prepared remarks, it is obvious that they have put
serious thought into their recommendations. This kind of self-
analysis isn't necessarily easy. So I appreciate the fact that
we begin this process with some excellent proposals.
And let me throw a few bouquets to the Commissioners.
Chairman Kennard's suggestion that the Commission focus on
core functions not addressed by market forces is right on
point. Increasing competition means a reduced need for
regulation and a golden opportunity to streamline. Regulatory
and statutory inertia are our enemies here.
I would like to quote from the Telecom Reports dated March
15 in which, based on Chairman Kennard's testimony, they say:
``One of the difficult issues policymakers must grapple with is
whether the convergence of new technologies requires the FCC to
move away from its current structure, which includes separate
bureaus handling common carrier, wireless, cable TV, mass
media, and international matters. We are going to put that on
the table, the chairman said. We are grappling with this issue
of convergence.''
Although it theoretically may make sense to break the
agency down along functional lines rather than industry
sectors, the Chairman goes on to say the FCC is bound by
statute to treat industry segments differently. We need to
recognize, the Chairman says, to recognize that we are dealing
with statutes that haven't really dealt with convergence.
And that is indeed our obligation as writers of law to make
certain that that becomes a reality.
Commissioner Powell's points on the duplication of the
functions of other governmental agencies within the FCC are, I
believe, especially insightful. This is a problem which hasn't
received much scrutiny, but the implications are quite
significant.
Not only is it inefficient to have redundant regulation,
but the replication of other bodies of law in FCC regulations
and the creation of mini-regulatory agencies within the
Commission invite the gaming of those rules to realize other
means.
Commissioner Powell cites the example of the FCC EEO
program and points out that the telecommunications firms are
already subject to the scrutiny of the EEOC as well as other
Federal, state and local civil rights authorities.
Commissioner Ness raises, in my view, one of the most
important points of the day when she discusses the need to
strengthen the FCC's technical assets and commit more resources
to international representation. We provide a powerful benefit
to American communication workers and consumers when the U.S.
is well-represented in trade and standard-setting venues.
Commissioner Furchtgott-Roth articulates the need for the
Commission to make greater use of its regulatory forbearance
authority and makes the cased for downsizing the FCC over time.
I couldn't agree more.
And Commissioner Tristani's comments on the need for an
organizational restructuring that reflects technology and
industry convergence are certainly well received, at least from
this member.
Let me also take a moment to praise the Commission for a
few of the tasks it has executed quite well of late. I believe
that your handling of disputes pertaining to CALEA has
demonstrated great fairness and an appreciation of the needs of
law enforcement.
Congressman Stupak and I wrote the Commission last year on
this topic, as you will recall, and I feel our concerns were
heard. I hope you will continue to recognize the importance of
digital wiretap capability to public safety.
Second, I want to praise the international bureau for some
outstanding work. The implementation of the market-opening WTO
telecommunications agreement and the Commission's effort to
bring international settlement rates more in line with costs
are benefiting consumers in the U.S. and around the world.
Last, I want to endorse the Commission's decision not to
mandate cable unbundling as a condition of the AT&T-TCI merger
or in other contexts. It is my view that unbundling will happen
as market forces dictate, and that there is no need for
Government to force that issue.
Having said these things, I nonetheless believe that the
Commission needs to be refocused. Reorganization of the FCC is
an opportunity to make it more efficient and improve its
ability to fulfill its mission. We need to repeal obsolete
statutes, eliminate outdated regulations, and otherwise clear
out the underbrush in the law.
It is my view that the FCC modernization is an attainable
goal this Congress, but only, and only, if we stay focused on
restructuring and don't get sidetracked in old fights over
telecommunications policy. There is no surer way to kill reform
than to reopen those old disputes.
Mr. Chairman, we need to stay focused on the regulatory
framework of the Commission itself. If we can do that, we can
remake the Commission into a model of what an independent
agency ought to be, with long-term benefits for all
telecommunications sectors and all telecommunications
consumers.
Again, Mr. Chairman, thank you. And I yield back.
Mr. Tauzin. Thank you, my friend. The Chair is now pleased
to recognize the ranking minority member of the full committee,
the gentleman from Michigan, Mr. Dingell, who I know has some
modest views on this subject.
Mr. Dingell.
Mr. Dingell. Thank you, Mr. Chairman. I always have
moderate views, as you very well know.
First of all, Mr. Chairman, thank you for recognizing me. I
would like to commend you for holding this hearing and
encourage you to persevere in your efforts, as you have said,
to ``re-mission'' the FCC. I'm not quite sure what the re-
missioning means. As I note, remission is used where cancer is
involved, and it would appear that in certain parts of the
Commission something of that kind is going on.
So if that is your interpretation, I support it. If you
intend also to give them a better appreciation of what it was
the Congress intended when we wrote the Telecommunications Act
so that they may better and more fairly apply that statute and
carry out the intentions of the Congress I actively support you
in that undertaking, Mr. Chairman, and commend you.
Just 3 short years ago, many of us trooped back here from
the Library of Congress after the President signed the
Telecommunications Act into law. At that time, many of us were
optimistic that we had succeeded in crafting a good law, one
that would provide the telecommunications road map into the
21st century. We were going to allow everyone to get into
everybody else's businesses. Let the consumers pick winners and
losers through the marketplace.
And we were not going to support any particular part of the
marketplace, but we were going to see that competition gave us
the best service that we could possibly get for all the
American people.
That was then. I would regretfully observe this is now. And
it would appear that many of us, especially myself, are
extremely frustrated with the manner in which the FCC has
disregarded Congressional intent and implemented the new law.
I will only give a few examples. And there are legions more
of these.
The Telecom Act required the Commission to issue new
regulations to curb slamming of consumers by long-distance
companies. The practice is, of course, one of the principal
complaints we hear from consumers. The Commission postponed
implementing this requirement for years until members of this
committee finally did something about it and until we finally
got on the Commission about a period of slothful inactivity on
this matter.
The Telecom Act required the Commission to establish a
universal service fund to make sure that all Americans would
continue to receive affordable basic telephone service,
something of enormous importance to residents of inner cities
and of enormous importance to people in rural areas, who,
without this, will pay excessive and exorbitant costs for
telephone service.
The Commission has repeatedly postponed full implementation
of that requirement as well. Inexcusable.
As a result, we have now found ourselves having continued
hidden subsidies in the system. Plus we have the new universal
service charges showing up on consumer bills. That too is a
source of many justified consumer complaints, and is of course
reason to call the Commission to account.
The act required the Commission to forbear from anything
rather than from applying statutory and regulatory requirements
that were no longer necessary in light of technological and
economic changes. Essentially, we thought that they were big
boys and big girls and that they would know how to implement
the wishes of the Congress. We are disappointed.
The Commission has ignored this mandate as well.
On the other hand, when you search the law, the legislative
history, and all the hearings for any reference to the term
operational support systems, or OSS, you can't find a single
one. The Commission in a remarkable exercise of imagination run
wild, has grounded each of its five decisions denying a Bell
company authority to offer long-distance service on the failure
of the company to meet OSS requirements.
I don't know what these are. I'm not convinced that the
Commission does, but the Commission applies them with enormous
diligence.
I would note that there is virtually no increase in
competition in long-distance. I would note that there is no
competition in service to residential users. However, the FCC
has diligently kept competition out of long-distance and has
not done anything to stimulate competition with regard to
service for the individual householder. A most curious set of
circumstances.
I have been regrettably driven to the conclusion that this
Commission and the one preceding it have not only disregarded
the law but has thumbed its nose at the Congress. The agency is
implementing a law they wished that the Congress had drafted
instead of the black and white version that the President
signed into law.
We are talking here about extension of the life of the
Commission. It would appear to me that perhaps the re-
authorization should be for a period of 1 year or less,
certainly not more, because we are going to need them before us
to talk to us again about the mishandling of the business of
the Commission and the derision that they have shown for the
intentions of the Congress.
In our government, everybody is accountable to somebody
else for his or her actions, a very important Constitutional
principle. We here in the Congress are accountable to our
constituents. The lower courts are accountable to the higher
courts. And, most curiously, the FCC thinks that it is not
accountable to the Congress.
I intend to have a few fine questions for the members of
the Commission, and I intend an active role as the subcommittee
develops its plans for restructuring the agency or, perhaps,
re-missioning, as you have so wisely observed, Mr. Chairman.
My efforts will be guided by the need for accountability by
an agency that I believe is out of control and is not
implementing the law. The agency has found that it needs more
staff and more money. The agency has, however at the same time,
required the filing of thousands and thousands of pages of
documents in connection with applications by the Bell companies
to enter long-distance. Nothing, however, has been done on any
of these except kind promises from the Chairman that at some
distant point in the future they would, of course, look with
kindness on permitting competition to enter the long-distance
service.
I think that we find this whole situation a bit ironic. I
would observe that in Monday's Telecommunications Daily, the
Chairman of the FCC has kindly warned the Congress that we
should not turn these proceedings into a backdoor rewrite of
the Telecommunications Act.
There speaks a real expert on the subject of backdoor
rewrites of the Telecom Act.
Writing laws is the business of the Congress. Those to whom
the Congress delegates the implementation of law should refrain
from giving us warnings about what we should or shouldn't do,
or the job that the people elected us to do.
Almost all of us who have been in here at this desk have
been in public service long before the Chairman of the FCC
received a Presidential appointment. And I would remind him
that I think I was writing laws when he was wearing three-
cornered pants.
I find his choice of words particularly distressing when I
consider the Commission's action in implementing the 1996 act.
I am sure that Chairman Kennard speaks as a real expert on
backdoor rewrites. His comments proved to me, at least, that
the chairman knows full well that the Commission's
implementation of the act has been inconsistent with the
intention of the Congress and, indeed, with the clear language
of that statute.
He has gotten away with it so far and does not want us to
step in and to spoil his fun. Holding the Commission
accountable and correcting its mistakes may require that we do
rewrite portions of the act, or it may be possible that in
prudence we will decide that we can cut certain portions of his
budget so that he no longer needs to require massive piles of
paper, so that he and the bureaucrats at the FCC may have a
great deal of time running their shredders overtime and acting
important by going to meetings to discuss over-large filings
that need not be made under the statute.
I see no reason to defer to Mr. Kennard on this point. We
should do whatever is necessary to assure that the
prohibitive--that the prohibited actions that he is taking, the
anti-competitive actions that he is carrying forward, and the
deregulatory goals that we have set are, in fact, achieved in a
proper way.
I thank you for recognizing me, Mr. Chairman. I yield back
the balance of time. I may have some more things that will be
less kind to say at a later time in the proceedings.
Thank you.
Mr. Tauzin. The Chair thanks the gentleman. The gentleman's
time is slightly expired. I just want to----
My friend, Mr. Markey, pointed out, Mr. Kennard, we were
all wearing three-cornered pants when Mr. Dingell was already
legislating.
We deeply respect the dean of the House. The Chair, in
order to recognize punctuality, is--follow our procedure of
recognizing the most senior member when the proceedings opened,
and that is Mrs. Cubin, will be recognized for an opening
statement.
Mrs. Cubin. Thank you, Mr. Chairman. And I gave up
complaining for lent. And so what I say is I am not
complaining, I am making a simple observation. And I guess that
is what the ranking was just doing. Next year I am going to
give up smoking. I haven't smoked in 21 years, and I won't be
an abject failure at that I am sure.
I do want to thank you for holding this very important
hearing on re-authorization of the FCC. My main focus today
will be to engage the Commissioners on issues pertaining to the
access of telecommunications and technology. I want to assure
all Americans that they will be able to experience the benefits
of telecommunications and the technological advances that are
rapidly being deployed across much of the United States.
And when I say much of the United States, I say that for a
reason. My constituents in the State of Wyoming are telling me
that they are not experiencing many of the same benefits such
as high-speed Internet service, increased telephone
competition, and lower rates that many people in other parts of
the country are enjoying.
I am sure that the Commissioners would agree that less
regulation in these areas, I hope they would agree, less
regulation in these areas not more will allow rural areas of
the country to partake in what truly should be a revolutionary
time in our lives.
I am encouraged by Chairman Kennard's Focus 1999 agenda
that points out that growth in advanced services will strain
the existing regulatory structure. Furthermore, the FCC should
aggressively pursue ways to give these emerging markets the
breathing room they need to innovate and prosper. Those are
encouraging words to me both for startup businesses and
existing telecommunication companies that really are burdened
by excessive regulations, stymied by artificial controls, and
hampered by a climate that seems to reward restraint instead of
encourage progress.
Advancements in technology are truly mind-boggling. Keeping
up with these issues in the area of telecommunications, being
new on this committee, is totally mind-boggling as well. And
trying to keep up is like, my husband said, herding cats. It is
virtually impossible to do.
My goal for Wyoming is to make it as friendly as possible
for outside businesses to locate there and also to maintain a
climate that encourages current businesses to stay in the
state. That means, we must work together to develop an
environment for businesses to invest capital in an information
infrastructure, create good-paying jobs, and provide a better
way of life for the citizens of Wyoming.
In considering the re-authorizing of the FCC, Congress must
look hard at what is the best for the American people. We must
develop a market-driven solution to the events that are
happening in this past-paced industry.
To believe that the Federal Government can keep up with
industry is totally unrealistic. And that is why this
regulatory dinosaur of the 1930's should be updated not only
for the next decade but for the next century.
None of us, of course, has a crystal ball. We would be
foolish to predict the advancements that are yet to come. We
must, however, look to the future as a guide so that we can
recreate an agency that rewards progress instead of restraint,
condones new ways of thinking instead of creating barriers, and
moves at the same speed as the industry that it regulates.
I look forward to hearing from the Commissioners and
listening to their ideas on possible reforms. And, again, thank
you, Mr. Chairman, for holding this hearing.
Mr. Tauzin. Thank the gentlelady. The gentleman from Ohio,
Mr. Sawyer, is recognized.
Mr. Sawyer. Thank you, Mr. Chairman. Thank you for this
hearing. I have a wonderful opening statement. I urge everyone
to take it home and read it for all of its nuance in the
evening, where you will appreciate it. It may move some of you,
but I will forgo reading it at this moment.
[The prepared statement of Hon. Thomas C. Sawyer follows:]
Prepared Statement of Thomas C. Sawyer, a Representative in Congress
from the State of Ohio
Thank you Mr. Chairman for holding this hearing this morning. I
especially want to thank Chairman Kennard and the four other
Commissioners for coming to testify before us today. I know how
difficult it is to get all of them together because of the growing
demands on their schedules. So, I appreciate their taking the time to
come to Capitol Hill.
The jurisdiction of the Federal Communications Commission is quite
extensive. The Commission's responsibilities range from regulating
interstate telephony service to cable pricing to satellites. Obvious
pressures are being placed on the Commission because of its
jurisdiction and responsibilities. However, I strongly believe the
Commission needs, and fully deserves, the tools and resources necessary
to meet its statutory requirements and to do the job it was created to
do. Unfortunately, however, the last time the FCC had a statutory
authorization was in 1991 and for every year since Congress has had to
appropriate funds without an authorization.
Last month commemorated the three-year anniversary of the passage
of the Telecommunications Act of 1996. During that debate, many thought
that Congress should have revamped the FCC and provided it with a
multi-year reauthorization package to meet the demands of deregulating
the telecommunications industry. While the reauthorization has not
occurred, the Commission has taken on a myriad of issues while
attempting to implement the Act. Moreover, the structure of the FCC has
essentially remained the same.
Although the FCC has come under some criticism for its actions
during this period, I am glad to learn that Chairman Kennard will be
outlining his proposal for consolidating bureaus and modernizing the
Commission. I believe this is an important step as we move into the
next millennium. It is even more important that the FCC receive the
proper authorization and direction from Congress so that its work on
the implementation of the Act can properly move forward.
Mr. Chairman, I believe it is important that the dialogue between
Congress and the Commission continues to be honest and open because the
work that we both do in this new era of telecommunication deregulation
is important to the American people and to the world. I hope the
Commission sees this opportunity to answer questions that have been
raised since the last time we held a Reauthorization hearing.
Again, thank you Mr. Chairman. I look forward to hearing from our
witnesses
Mr. Tauzin. I thank the gentleman. The gentlelady from New
Mexico, Mrs. Wilson, is recognized.
Mrs. Wilson. Thank you, Mr. Chairman. You know my problem
on this committee is that the Minority Leader just sugar coats
everything, and I can never understand exactly where he is
coming from. I have that trouble all the time.
I appreciate very much your holding this hearing. I kind of
have a little bit different perspective on this and a certain
amount of sympathy for those in the FCC. And the reason is that
I formerly headed a State government agency that we
reorganized, and I know that it is much easier to ask these
questions to plan a reorganization than it is to actually
reorganize and manage your way through that. So I have some
sympathy for the challenges that you face in taking that agency
to be more effective.
The questions that we are here to ask and begin to answer
today have more to do with how you do your jobs than what you
are doing. It is not about policy. It is about management and
responding and asking ourselves the questions of how has the
mission changed, how has the environment changed, and how do
you change your organization in the way in which you do your
jobs in order to more effectively serve the customer and
achieve the mission that you have been given.
I will be interested in the answers to several questions
that have been tossed around in my office, including some from
my constituents. And I have a very active telecommunications
group in Albuquerque, New Mexico, that has both positive things
to say about the FCC and some, I think, very good questions and
suggestions about how it can be made even better.
I yield the balance of my time.
Mr. Tauzin. The Chair thanks the gentlelady. The gentleman
from Minnesota, Mr. Luther.
Oh, he is gone. The gentleman from Tennessee, Mr. Gordon.
Mr. Gordon, I'm sorry, the gentlelady from California. I
think they said she was next.
Ms. Eshoo. Thank you, Mr. Chairman, and good morning to
everyone on the committee and those that are here to testify
today.
Over 3 years ago, of course, the Congress passed the
Telecommunications Act and we restructured what was almost a
century-old, monopolized industry into one based on competition
and open access. I think we have yet to see the full benefits
of the 1996 act, and I think that we have to keep looking for
new and better ways to implement and to be moving in the right
direction.
But I think that there are some positive things that are
happening. Yesterday, for the first time, the Dow, largely
driven by the exploding telecommunications sector of our new
economy, climbed over the 10,000 mark.
Soon after the new century, which is just really moments
away, it is likely that the number of people using the Internet
will climb over and past 100 million. If someone were to have
said that just a handful of years ago, would have been laughed
out of the room, probably this room.
It is estimated that Americans will spend over $1.5
trillion in electronic commerce in the next 6 years. So I think
that there are some very exciting things on the horizon.
Obviously, the FCC has to adjust as competition continues to
develop and new markets are created in this telecommunications
field.
Today, the Chairman of the FCC will present his plan for
building a new FCC, and I think the burden really falls on your
shoulders and that of the agency to really demonstrate what the
word ``new'' means. If, in fact, it has some cobwebs around it,
I suspect that there will be more Dingells around this
committee.
So it is up to you to present that plan to us and how you
are going to handle the regulatory challenges that confront the
telecommunications industry in the 21st century. The plan has
to ensure that the explosion of the new technologies really
ensure that each and every citizen in this country has access
to what I just described. If that is not the case, then we will
have all failed.
And there are many challenges, I think, ahead, obviously,
for the FCC to ensure that this is the case. I think, and I
keep hammering on this, that more work has to be done on
improving and expanding our Nation's 911 emergency phone system
so that we can locate every caller. If this isn't the case in
emergencies, then most of the citizens are going to throw their
hands up and say, well what's new and what have you done to
make it better for us.
We should be encouraging additional studies of advanced
trauma communications and elevating the public understanding of
automatic crash notification systems. We should ensure that
every student in every classroom in our country continues to
have the opportunity to tap into the wealth of what the
Internet really represents.
And all of my colleagues know, over $1.6 billion has been
sent to school districts throughout the country as part of the
E-Rate System. Now this system has been criticized by some
members of this committee, but despite that, I think the
program is not only an important one but it is proving to be a
success, enabling thousands of students across the country, as
well as their teachers, to access the great learning tool that
the Internet represents.
So I am looking forward to hearing, most especially, form
the Chairman of the Commission on some of the specifics of the
goals that you outline in your printed testimony to us.
I thank the chairman for holding this very important
hearing. Hearings I think are really terrific because they are
learning sessions for us. And I might that if we come in here
with our minds made up about everything, I really don't know
how much we are going to learn from those that we call before
us to give their testimony.
So I am looking forward to it. Thank you, Mr. Chairman. And
if I have any time back, I yield.
Mr. Tauzin. And thank the gentlelady and assure here that
that is exactly what these are hearings are designed to do, to
teach us. And we are going to learn a lot today, I hope.
The Chair is now pleased to recognize and to reward for his
punctuality the new member of our committee, Mr. Pickering from
Mississippi.
Mr. Pickering. Thank you, Mr. Chairman. And I commend you
for holding this hearing today. This is an issue of great
concern and interest to me. As many of those know, I spent
primarily 3 years of my life during the 103d and 104th Congress
as a Senate staffer, working on the Telecommunications Act of
1996. It was after that that I ran for Congress and quickly
lost all of my influence.
One of the reasons I did run is that I thought if you could
work out the complexities of this issue with the intense
competitive pressures from all of the various industry
segments, if we could find a public policy consensus in this
area, then there is no limit to what we might could do in other
areas as well, that people can come and work together. It was a
great model, I think, and example of when Congress comes
together and works together.
Now what was our hope when we passed that act? We hoped
that the rules would be in place in 1 year and that competition
and the implementation of the act would be completed in a 2-
year period.
Were we overly optimistic? Perhaps.
We are changing 60 years of law and practice and the
economy that it built up in telecommunications since that 1934
act first passed.
Did we expect the delays that came from litigation and some
of the regulatory delays? We had hoped, maybe over
optimistically, that that would not occur.
But where are we today? Just as spring comes, the sprouts
of competition are beginning to emerge, the certainty of the
litigation, as it is now nearing its end with the Supreme Court
decision, the regulatory framework seems to be almost in place,
and we are beginning to see the competition emerging.
And I do want to say that I think that we need to be
cautious and careful not to reopen or introduce uncertainty
just as we are beginning to see the fruits of our labor in the
Telecommunications Act.
Having said that, there are things that can be done better,
more quickly, more efficiently. Streamlining can occur. I am
somewhat concerned about the length of the mergers and
acquisitions and the review that has taken place at the FCC,
and see if we can have a way to put a timetable in that area so
that we can introduce greater certainty in the marketplace and
as these investment decisions are being made.
It is with that background and with that context and the
hope that we can find ways to do our job better here and
working with the FCC, that we can see the full fruit of our
labor in the Telecommunications Act, that I will be listening
and working with the chairman on this very important act.
Thank you.
Mr. Tauzin. Thank the gentleman very much. The Chair
recognizes the gentleman from Tennessee, Mr. Gordon.
Mr. Gordon. Thank you, Mr. Chairman, for your continuing
effort to help us educate ourself on these important and
complicated issues. Let me just quickly say that I think that
it is a very legitimate and important function of Congress in
the area of oversight of our various agencies, both for our
taxpayers and for our constituents. And I think that this is an
important hearing.
And I have to say that I share a lot of the frustration
that has been echoed here today about the Telecommunications
Act not reaching its full potential and what we had hoped to
see by now.
And there is plenty of fault, I think, to go around, and I
don't think I need to add additional criticism of the FCC today
because you are going to get plenty of it. You don't need my
help right now. So let me just say that certainly the FCC could
be doing a better job. Certainly industry could do a better job
of trying to compete rather than just consolidate. And I think
that maybe we probably should have done a better job in the
original efforts on this bill.
So there is improvement, I think, to go around. I think
now, though, the time if for the FCC to come forward with a new
model for a structure that, hopefully, will deal with the new
times. And I think we need to talk about this. Hopefully we can
come to a consensus and then move forward.
And I think that we in Congress have a responsibility.
After we do find this new model that we adequately fund it. If
you look at the FCC's funding over the last few years, it's
been flat. Employees have gone down. At the same time, Congress
continues to ask more and more.
So we've to sort of decide, if we are going to ask more we
are going to have to fund you, if we don't want you to do more,
then that's fine. But we can't have it both ways.
So I am glad you are here. Hopefully we can learn about
this new direction.
Mr. Tauzin. Thank the gentleman. The gentleman from
Maryland, Mr. Ehrlich, for an opening statement.
Mr. Ehrlich. Thank you, Mr. Chairman, I intend to submit a
formal statement for the record. And in view of that, I will
forgo an opening statement at this time.
Mr. Tauzin. The Chair thanks the gentleman. Mr. Green from
Texas is recognized.
Mr. Green. Thank you, Mr. Chairman. And I will submit an
opening statement. I just want to raise two concerns.
As a new member on--as a second-term member on the
committee, in watching the FCC, and not on the committee in
1996, I had some concern last year with the potential loss of
the benefits of the E-Rate program, but the FCC salvaged it
because of the opposition and the way it was structured
originally.
I also have a little concern about the recent ruling on the
long distance charges for Internet use, and hopefully we will
hear that today. But I will submit the whole opening statement.
Compared to Mr. Dingell, it is very mild.
[The prepared statement of Hon. Gene Green follows:]
Prepared Statement of Hon. Gene Green, a Representative in Congress
from the State of Texas
The Federal Communications Commission is an independent agency
whose mission is to encourage competition in all communications markets
and to protect the public interest. In response to direction from the
Congress, the FCC develops and implements policy concerning interstate
and international communications by radio, television, wire, satellite,
and cable.
That basically is the current mission statement at the FCC. Today
we are going to discuss FCC Reauthorization and FCC reform in light of
rapid communications technology achievements, and we will try to figure
out how we must reshape and refocus the FCC for the future.
Communications technology is starting to transform itself at an
exponential rate. Just in the past 5 years alone we have seen an
explosive growth in the use and development of the internet and
wireless technology.
The internet is the one innovation that has drastically altered the
telecommunications landscape. It has already started to transform the
way we communicate today and the way we will communicate and interact
in the future.
While we look at the future of the FCC and how they can deal with
the new convergence of technologies, we also must deal with current
pending issues at the FCC.
I hope that we can discuss the future of the FCC and the role they
want to play, and I hope that we can get some answers to our questions.
Mr. Tauzin. Thank the gentleman. The gentleman from
Illinois, Mr. Shimkus, for an opening statement.
Mr. Shimkus. Thank you, Mr. Chairman. I think in any
discussion of re-authorization I will be looking forward to our
first panelist and the chairman to just address a couple of
concerns. One is, what is their mission statement? What are our
goals? And what are our objectives? Then how does the
organization help or hinder those? Are these stated goals and a
mission statement; or are they implied?
I think only then, when we understand where we have evolved
to, and it really just basic problem-solving techniques, once
you understand the problem, then you develop the organization
to identify the problem.
The issue with agencies that have existed for over 60 years
is sometimes they don't reorganize themselves to meet the new
problems of today.
And with that, Mr. Chairman, I will yield back my time.
Mr. Tauzin. Thank the gentleman. The gentleman from
Maryland, Mr. Wynn, is recognized.
Mr. Wynn. Thank you, Mr. Chairman. I appreciate you calling
the hearing, but in the interest of time I will defer an
opening statement and submit for the record.
Mr. Tauzin. Thank the gentleman. The gentleman from
Florida, Mr. Stearns, is recognized.
Mr. Stearns. Good morning, and thank you, Mr. Chairman, for
holding this hearing on the re-authorization of the FCC. And I
would like to thank Chairman Kennard for coming and all the
other Commissioners.
It has been a number of years since the Commission has be
re-authorized, and I know it is the highest priority of our
chairman to pass an authorization bill this year that will
restructure the operations of the FCC. So I think it is
appropriate that we hear from the chairman.
In looking back at the Telecommunications Act of 1996, you
know, the idea here was to deregulate, set a blueprint in
place. To me the act, the purpose was threefold. One to begin
efforts to bring competition to those sectors of the
communication industry that were burdened with solitary,
dominant companies. Two, foment additional competition in
sectors with limited competitive players. And three, eliminate
all unnecessary regulations in those sectors that have proven
to be competitive for the public good.
When you look at those three criteria, I think the FCC has
done a pretty good job on the first two. It has been difficult
to bring new competition to uncompetitive sectors, I think the
FCC is attempting and fighting it out.
But in the last area of responsibility, the elimination of
unnecessary regulations, frankly, I would say to the chairman,
I think the FCC has failed.
In Title IV of the act, under section 402, titled
``Biennial Review of Regulations: Regulatory Relief,'' the FCC
was instructed ``in every even-number years, beginning with the
year 1998, the Commission will, one, shall review all
regulations issued under this act in effect at the time of the
review that apply to the operation or activities of any
provider of telecommunications service, and, two, shall
determine whether any such regulation is no longer necessary in
the public interest as the result of the meaningful economic
competition between providers of such service, and, three,
effect of determination, the Commission shall repeal or modify
any regulation it determines to be of no longer necessity in
the public interest.''
Furthermore, Title II of the act specifically instructs the
FCC to review its rules concerning broadcast services and all
of its broadcast ownership rules biennially as part of the
regulatory review and ``shall determine whether any such rules
are necessary in the public interest as a result of
competition. The Commission shall repeal or modify any
regulation it determines to be no longer in the public
interest.''
You know, I think this review process created in the act
was to rid the free market of burdensome and unwanted FCC
regulation. The FCC, under the act, does not have the statutory
power to create social solutions for our Nation. By not
fulfilling the mandated responsibilities of the act, the
Commission has failed in its duty to comply with the law.
Saying that this review of 1998 was piecemeal, I think, is
an understatement. The FCC had initiated to my latest
information, just 31 proceedings on the literally hundreds upon
hundreds of regulations the FCC maintains. And the FCC has
issued only four orders modifying or repealing various rules.
Only four.
This is not what I believe this committee had intended. In
response to this, my colleagues are aware that I have
introduced legislation to remove numerous broadcast ownership
regulations, including grandfathering of local market
agreements, which the act specifically instructed the FCC to
do. And for some unfathomable reason, they continue to refuse.
Mr. Chairman, I hope we can move that bill that I have
provided to a hearing and discussion with the committee.
In closing, Mr. Chairman, we do need to improve some areas
of the act, but that should be the responsibility of this
committee and Congress and not the Commission. I discourage the
Commission from attempting to open portions of the act for new
regulatory efforts. I think Chairman Kennard and the other
Commissioners would agree that the act should not be reopened
on their own.
Thank you, Mr. Chairman.
Mr. Tauzin. I thank the gentleman. The Chair now recognizes
the gentlelady from the show-me State of Missouri, Ms.
McCarthy, for an opening statement.
Ms. McCarthy. I do not have an opening statement, Mr.
Chairman, but thank you for recognizing me. And I would like to
put it in the record.
Mr. Tauzin. Thank the gentlelady. It will be so ordered.
The gentleman from New York, Mr. Fossella.
Mr. Fossella. Other than to wish the wanna-be Irishmen like
Ed Markey a happy St. Patrick's Day, I have nothing to add.
Mr. Tauzin. Italian-Irish is something, man. Mr. Deal from
Georgia is recognized.
The Chair thanks all the members of the subcommittee for
their contributions. And I have just received the statement by
the Speaker of the House, Mr. Hastert, which he has asked to be
submitted into the record.
I won't read it all, but just some highlights, if the
committee will allow me:
``I am a little envious of the subcommittee's collective
role in this regard because for a few days last December I was
looking forward to working with you and our colleagues to
conduct rigorous oversight of the FCC. My short tenure as O&I
subcommittee chairman-designate though gave way to another job,
as you know.
``Mr. Chairman Kennard, I say it is good hear that you and
the Commissioners see the need to scrap the outdated top-down
regulatory model and are now offering a new FCC structure
paradigm. I know we all appreciate hearing and plan to hold you
to your recent statement that `as long as I am Chairman of the
Federal Communications Commission, this agency will not
regulate the Internet.' ''
He goes on to mention, of course, that the Internet was
mentioned only twice, parenthetically, in the 1996 act. And how
rapidly times are changing. He mentioned his work with former
Chairman Fields in attempting to begin the work on FCC reform.
He said, looking back, when we enacted regulatory reform on
the telecom industries, we should have also enacted regulator
reform.
He is indicating his strong support for the work of our
subcommittee and our full committee, and his statement, like
all the written statements of the members, without objection,
will be admitted into the record at this point.
[The prepared statement of Hon. J. Dennis Hastert follows:]
Prepared Statement of Hon. J. Dennis Hastert, Speaker of the House
Mr. Chairman, although I cannot be with you in person today at the
start of these most important hearings on reform of the FCC, I wanted
to speak to a few issues that have concerned me about this 65-year old
independent agency. I appreciate your scheduling these hearings and
want to commend you, Chairman Bliley, Ranking Member Dingell and Mr.
Markey for your leadership in this important matter of FCC
modernization. I am a little envious of the subcommittee's collective
role in this regard, because for a few days last December, I was
looking forward to working with you and our colleagues to conduct
rigorous oversight of the FCC. My short tenure as O&I Subcommittee
Chairman-designate, though, gave way to another job, as you know.
To Chairman Kennard, I say it is good to hear that you and the
Commissioners see the need to scrap the outdated, ``top-down''
regulatory model and are now offering a new ``FCC structure'' paradigm.
I know we all appreciated hearing, and plan to hold you to, your recent
statement that, ``as long as I'm chairman of the Federal Communications
Commission this agency will not regulate the Internet.'' I see the
Internet as an outstanding example of what happens when we do not
micromanage, and instead let market forces design an economic engine of
growth--I do not think any politician can claim all the credit for the
success of its creation and development.
As you know, since my service began on the House Commerce Committee
in 1991, I have been integrally involved in various aspects of the FCC.
Indeed, in the mid 1980's, I had the opportunity to manage legislation
in the Illinois General Assembly which rewrote the Public Utility Act.
I saw firsthand there the interface between the Illinois Commerce
Commission (ICC) and the FCC. In 1995 and 1996, our former colleague,
Chairman Jack Fields, myself and other colleagues worked on a plan to
restructure and reform the FCC. In fact, we visited the FCC on a couple
of occasions to ``kick the tires'' and see for ourselves, after talking
with employees and observing their work, how best the FCC of the 1990's
could be restructured to make them relevant in the 21st century.
One thing that I would like to be remembered for during my tenure
as Speaker is that this was a period when we encouraged competition to
replace regulation at every opportunity. Indeed, the FCC is a classic
example of an agency that when presented with a choice as whether to
regulate or not regulate, the institutional inclination seems to be to
choose the former course.
By compiling a comprehensive hearing record on these issues, I am
confident we can possibly remedy the current regulatory situation with
a mixture of statutory changes and internal administrative reforms. We
also need to encourage all of those stakeholders who are regulated by
the FCC and to those others indirectly affected by it to come forward
and help all of us in the cause.
Finally, many of us are concerned about opening up the ``Act''
again after just barely three years since we passed a massive re-write,
known as the Telecommunications Act of 1996. It was a great undertaking
by many members of this subcommittee, and although we all agreed that
the Act as written was fair and balanced, implementation by the FCC of
congressional intent has left many of us less than satisfied. Looking
back, when we enacted regulatory reform on the telecommunications
industry, we should have also enacted ``regulator reform.''
We know that the regulation of the communications industry has been
a ``work in progress'' over the last 65 years. Title II of the
Communications Act of 1934 was taken almost verbatim from the
``railroad monopoly''-driven Interstate Commerce Act of 1887. In 1984,
Title VI on cable services was added to the 1934 Act, and in 1993, a
cellular and PCS title was added in OBRA to the 1934 Act. In fact, the
term ``Internet'' is mentioned parenthetically only twice in the 1996
Act.
Again, look at what has happened as a result of the growth of this
tremendous network in just the last three years. My point is this: we
should be willing to continue to conduct oversight and to consider
updates to the laws affecting telecommunications in this nation. We
cannot manage lightning-speed advances in technology with ``status
quo'' statutes. The growth of the Internet is a perfect example of this
conundrum.
Mr. Chairman, I look forward to following your hearings and working
with you, Chairman Bliley, and the subcommittee on this critical issue
in the future. Thank you.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Steve Largent, a Representative in Congress
from the State of Oklahoma
Mr. Chairman, I want to thank you for holding this important
hearing. The FCC has played, and will continue to play, an essential
role in implementing the rules of competition for the 1996
Telecommunications Act. Over the past three years, the
telecommunications industry has undergone a period of unprecedented
growth, resulting in the development of new technologies and services
that were unimaginable just a few years ago. I am, however,
disappointed in the amount of litigation that has ensued since the
passage of the Act, as various segments of the telecommunications
industry competes for market share.
I am interested to hear each of the Commissioners and Mr. Huber's
thoughts on what regulatory function the FCC should play in the coming
years to accelerate competition and reduce litigation as we transition
to the digital age. In particular, I want to know what the Commission's
plans are for universal service reform, access charges, and the
deployment of broadband services.
I look forward to hearing from our witnesses.
______
Prepared Statement of Hon. Tom Bliley, Chairman, House Committee on
Commerce
I thank the Chairman for yielding me the time.
Today, the Subcommittee meets to consider FCC reauthorization.
Today is also St. Patrick's Day. You have to wonder if Chairman Kennard
needs two reasons to enjoy a cold pint of ale this afternoon.
In any event, I am pleased that the Subcommittee is holding this
hearing. The reauthorization process is a good opportunity to promote
efficiency, reduce redundancy and eliminate functions that are no
longer needed.
I anticipate that the Subcommittee will soon turn its attention to
NTIA reauthorization as well.
At the outset, let me make clear what I think the FCC
reauthorization process should not be: a means to re-visit issues from
the 1996 Telecom Act. Why on earth would we want to go through yet
another multi-year cycle of implementation and litigation?
It took three years to complete the last cycle, and it's not clear
to me who benefitted from all this litigation . . . other than the
lawyers, of course.
While there is much work to be done, the Telecom Act is working
just fine. Consumers are starting to see the benefits of competition,
particularly in the area of broadband services.
And, the incumbent telephone companies appear to now realize that
competing is in their best interest, rather than spending their money
on lawyers.
Which leads me to the issue of local competition. In light of the
Supreme Court's ruling, the FCC has no excuse at this point not to make
local exchange competition its highest of priorities. Your legal
authority in this area is now unquestionable. Use it!
For instance, the Commission can and should push forward with
reform of its physical collocation rules, revise its list of unbundled
network elements, and speed implementation of intra-LATA toll dialing
parity.
I therefore hope that the reauthorization process will be a genuine
effort to streamline this important agency. This Committee has a fine
record on agency reform, namely FDA reform. I hope we can use that
experience to inform us here today, and into the future.
In that vein, I understand that Chairman Kennard is planning to
unveil some recommended changes here today. I look forward to reviewing
these changes closely.
Before I conclude, I would like to address another matter. Last
year the House passed, by a margin of 403 to 16, bipartisan satellite
reform legislation, cosponsored by Mr. Markey and I. We plan to
legislate on satellite reform again this year.
These intergovernmental satellite organizations should be
privatized. And they should be privatized in a manner that promotes
competition by ending their current cartel-like structure. Our bill
will encourage a pro-competitive privatization, and end COMSAT's
monopoly over access to the INTELSAT system. No one should be permitted
to get around the 10 percent outside-ownership cap on COMSAT, in the
absence of overall satellite reform legislation.
Some claim that one can ignore this cap under the guise of being an
authorized carrier. Any action by the Commission to facilitate
another's evasion of the cap will be treated for what it is: an attempt
to end-run Congress, and to undermine the legislative process, as well
as unjustified on the merits. I plan to eliminate the language
regarding authorized carriers in whatever legislation we introduce in
order to avoid any confusion in this regard. I also think that any
devotion of resources by the Commission to acting on a pending
application in this regard will not serve the public's interest in
comprehensive satellite reform and would add fuel to the fire of those
who argue the Commission has far more employees than it needs.
I look forward to hearing the FCC's views on this matter. I thank
the Chairman, and yield back my time.
Mr. Tauzin. The Chair is now pleased to call our first
witness and to recognize him for his contributions in public
policy, the senior fellow from Manhattan Institute of Policy
Research, a partner of Kellogg, Huber, Hansen, Todd, and Evans,
Mr. Peter Huber.
I want to point out to the committee that as we invited the
Commission to come and give us their views on what the FCC
might look like in the future, where the 1996 act is being
fully implemented in an open, competitive marketplace full of
vibrant competition and less monopolies, as my friend Mr.
Markey pointed out, or providing new services to consumers, we
thought it would be very useful to get someone of great
reputation in this area to paint a picture for us of where
these amazing technologies are going, what kind of future
communications is likely to see, so that we can begin thinking
of and formulating how we might want to picture an FCC working
in that future.
In that regard, we have invited Mr. Peter Huber because, as
Mr. Markey said, fewer people have come before our committee
and demonstrated more mental capacity in this area than Mr.
Huber.
He does have a background. He has worked for Bell
companies. Want to put that on the record. If you see some
perspectives in there that come from that affiliation and
regarded as such, we will be inviting others with different
perspectives to come, hopefully, as qualified and as
contributing as Mr. Huber.
But I want to thank you personally, Peter, for undertaking
this effort to paint this picture for us and would invite you
to do so at this time.
STATEMENT OF PETER W. HUBER, PARTNER, KELLOGG, HUBER, HANSEN,
TODD, AND EVANS
Mr. Huber. Thank you very much, Mr. Chairman.
Just a few days ago, my co-authors and I----
Mr. Tauzin. Pull the mic close to you, Peter, so we can
hear.
Mr. Huber. Just a few days ago, my co-authors and I
completed our second edition of ``Telecommunications Law'' and
sent it off to our publisher. I have a copy here. I runs about
a thousand pages. It would try your patience if I started on
page 1 and read it into the record.
Suffice it to say that nobody wishes more passionately than
I that the third edition will be much shorter. This is much
longer than the first edition, I might add.
Let me just try and paint a few facts or a picture of where
I think we are headed that I believe is, in fact, relatively
uncontroversial.
Within the next 5 years, the amount of traffic moving on
phone and cable and broadcast and satellite wireless networks
is going to increase by severalfold at least. Predictions vary,
but we are looking, conservative estimates, at a three-to
fivefold increase in total traffic moving over these networks.
And I don't there is really much dispute about those
estimates. Where is this coming. We are not going to be talking
five times more on our phones. We are not going to be watching
five times as many soaps, or five times as many Superbowls. It
is coming from the rest, from this explosive, remarkably
dynamic growth of the web and all that implies.
Second, a plain engineering fact, which I think is also not
widely disputed, the networks in place today, terrestrial
broadcast networks, cellular networks, cable networks, phone
networks, cannot accommodate a fivefold increase in traffic.
The existing networks, based largely on analog technology and
yesterday's technology, were not built for that kind of growth.
In the next 5 years, the networks that will be in place and
operating and serving businesses and residences, 5 years from
now, behind the jacks, behind the telephone jacks, behind the
antennas, behind the satellite dishes, those networks are going
to change almost beyond recognition.
We can argue at length. I have, everybody has too about who
owns the past. I am not prepared to argue about who will own
the future because I don't know. You don't either, and the very
intelligent and dedicated and skillful people sitting behind me
don't know either. And I don't think they claim to know.
The equipment that we will be using 5 years from now hasn't
been built yet, by and large. Today, already on the phone
network, there is more data traffic than voice traffic. If I
had made that prediction even 5 years ago, it would not have
been taken seriously.
Within 5 years, I think we can quite confidently predict
that on our cable networks there will be more data traffic than
the existing video traffic volumes. Within 5 years, and this is
almost unheard of to speak of in the broadcast networks, but we
are moving into the HDTV bands now--within 5 years, I think it
is quite safe to predict that most of the traffic on the
terrestrial airwaves will not be conventional fare. It won't be
the stuff--the conventional fare will still be there. We will
still be watching Superbowl and soaps and so on and so forth,
but the lion's share of the traffic will not be those things.
Every telecom medium out there is going to experience
dramatic growth. We know--I think it is safe to predict only a
few things about these networks.
They are going digital. They are all going digital. There
won't be any exceptions to that.
Overwhelmingly they will go to packetized networks. Packet
networks are quite different architecture from what we have
used in the past, but they are very much more efficient. They
are essentially the architecture of the web, and you boost them
up fast enough and they can carry anything.
And they will be boosted fast. We are talking about very,
very substantial increases in capacity on all of these
networks. As I say, they are all capable of going this way.
They all will go this way because if anyone of those networks,
the broadcasters or cable or telephone, if anyone of them says,
Look, we are happy with what we got. We are sitting still.
Their traffic will migrate onto another network that goes this
way.
Just as sure as day that this is coming. We don't know who
will win. We are talking about a very fundamental restructuring
of all of these networks.
I am, I think, also fairly confident in saying that anybody
who thinks there is one technology that will prevail, or one
provider who will prevail, is surely wrong. Different
technologies are going to be right for Wyoming, where people
are spread far apart, or for New York, where they are packed
close together.
Business markets and residential markets are going to be
drawing on different technologies. Demand will vary widely
across different types of users, business and residential
applications.
You can't guess, I can't guess, none of us can guess who
will win. And to the extent our Government institutions and our
structures, or this committee, or the FCC attempt to guess,
implicitly or explicitly, and attempt to pick winners and
losers from this fray, we are simply going to retard this very
important transition.
I think it is equally fair to say that we do not know what
pricing structures will emerge from this. We have three or four
old paradigms at hand.
We have the local phone pricing paradigm, which is an all-
you-can-eat-for-a-flat-fee, we have cable, which is a flat fee
plus charges for special and premium services, we have the
broadcast model, which is advertiser-supported, we have the
basic catalog model, where everything is free because you are
buying jellybeans online, or shopping at Land's End or
something, and the telecom comes to you free.
All of those models, I think, will their place in this new
structure. But again, once again, to think that we can predict
which is best for a market or particular class of consumers is
a big mistake.
I think it is fair to say, and this is not a reproach, I
think it is simply a statement of fact, that notwithstanding
the 1996 act, the FCC is still administratively and
bureaucratically structured around yesterday's models. The
basic title structure of the Commission, Title I, Title II,
Title III, Title VI, reflects the 1934 act and accretions that
there added with the advent of cable, satellite technology, and
so.
The 1996 act attempted to clear away some of these
divisions, but it did not go very far. In many areas, certainly
not all, but in many areas the regulatory presumptions are
still the presumptions of the 1930's.
It is forbidden until the Commission says it is permitted.
And that often takes awhile.
Does it take longer when people go to court? You get it
does. And when they go to court they quite often win. I have
represented some of them. Sometimes they win. The Commission
wins its share. Other people win their share.
Half the time the courts of appeal and the Supreme Court
think of different reasons for upholding different parties, and
the process goes up and down. And while it does, the markets
hesitate and the markets wait.
I think it is, again, accurate to say, without trying to
pick sides, that overwhelmingly today how I do at the
Commission depends on what I can persuade the Commission to
call me. If I can get them to call me a broadcaster, and trust
me, there's a whole lot of room in the word broadcast, you can
be doing paging and data and other things--if I can get them to
call me a broadcaster, that is one set of rules.
And if I can get them to call me cable company or a cable
service, that is another set of rules. And if I can get them to
call me a PCS provider, that is another set. And if I am in the
satellite DBS band, that is another set. And if I'm a local
phone company, that is another set. But it depends which
division or subsidiary I am of that local phone company,
whether I am a separate sub under 272 or the main incumbent
carrier.
The Commission itself has recognized this in their recent
analysis of--at least its staff has--in its recent analysis of
how cable, for example, should be regulated. They quite openly
and honestly and correctly, I said, said, look, we can
basically make cable, Internet on the cable, anything we like.
We can make it a cable service; we can make it a telecom
service; we can make it an information service; we can forbear
under section 10.
Well, isn't that grand. I would like to have that much
flexibility too. The problem is, you don't know how it is all
going to emerge until it emerges. And the process takes a very,
very long time.
However the Commission makes these calls. They are subject
to appeal. And as I say, the courts sometimes have different
interpretations of the law than the Commission does.
I could talk in more detail about proposed restructuring
and so on, but I don't think it is my place, although I will be
happy to answer questions.
I will say this. I think it is tremendously tempting to
look backward, to say, look, I am still worried about E-911,
very important, or my constituents concern about universal
service in poor areas, or just very cheap telephone service, a
very important thing. Of course we should be concerned about
this.
But please, I would implore this committee and the
Commission itself, look forward. We are talking, we are looking
at 80 or 100 percent growth in the next year or 2, and another
100 percent after that, and another 100 percent after that.
Looking forward. Let us please put in place structures that
let this market unfold at high speed with a minimum of advanced
oversight.
Thank you very much.
[The prepared statement of Peter W. Huber follows:]
Prepared Statement of Peter W. Huber, Senior Fellow, Manhattan
Institute for Policy Research; Partner, Kellogg, Huber, Hansen, Todd &
Evans.
Here's what won't change. Five years from now, Americans will still
make plain old phone calls on plain old wireline phones. They will
still watch movies and the Superbowl on their television sets. They
will still rely, as they do today, on some mix of wired plugs and
wireless antennas to get electronic information in and out of their
homes and businesses.
For the ordinary consumer, the change will really center on ``none
of the above.'' Voice, which until recently occupied close to 100
percent of the telephone network's capacity, will occupy under 20
percent, and quite probably a lot less than that. Consumers, in other
words, will be using phone lines to support a vast range of other
services beyond voice. Cable jacks will be delivering more content than
ever--but well under half of the traffic will be conventional
television fare. TV stations will be broadcasting as many channels as
they do today, or even more--yet conventional broadcasting will account
for a rapidly shrinking fraction of total traffic moving over
terrestrial airwaves in the UHF, VHF, and HDTV bands. We won't be
talking less on the phone, or watching much less TV. But at home and
even moreso at work, we will be spending an enormous amount of
additional time beyond telephone and television--on the Web--to shop,
read, browse, bank, invest, and chat.
The new-generation data and video services will reach consumers
over a broad array of media, and will be offered in a great variety of
service packages and prices. The wired plugs and wireless antennas
already in the home today--phone jack, cable jack, TV antenna, and
satellite dish--will look much the same as they do today--but they will
perform very differently. They will all carry digital traffic, not
analog. They will be engineered to handle traffic packetized on the
Internet's TCP/IP protocol, or more advanced successors to it. And all
of these ports and jacks will be fast--hundreds of times faster than
they are today.
As I have noted, these same jacks and antennas will still support
the services we are accustomed to today, the plain old phone calls, the
old-fashioned television, the movies, the Superbowl. From the
consumer's perspective, those old services will not have changed much
at all. But from the provider's perspective they will have changed
profoundly. No single, old service will account for most of the traffic
on any network. All major networks, phone and cable, wired and
wireless, terrestrial and satellite, will be capable of supporting all
major services. We are engaged, here, in a truly fundamental
transformation of the whole of the telecom infrastructure.
Digital networks can support encryption and addressing, which make
possible point-to-point messaging: the Internet already permits
slightly tinny, two-way, voice conversations. As bandwidth increases,
any digital network can likewise support one-to-many communication:
even on the slow, analog bandwidth of ordinary phone lines, for
example, the Internet already can deliver live radio broadcasts. With
digital broadband technology, today's text-based bulletin boards will
support voice and video--the Internet equivalent of radio and
television. E-mail will support voice and video, too--the Internet
equivalent of telephony and video-phones. High-speed data links on
cable networks will offer similar capabilities, spanning everything
from voice telephony to digital television. Digital broadcasters will
be able to provide a limitless range of other digital services in
addition to plain old broadcast fare.
Every major company operating a network is scrambling to become a
part of this future. For all of them, it means rebuilding network
infrastructure, and at enormous cost. But the opportunity is equally
enormous--and, in any event, they have no choice. Any network that is
not upgraded to high-bandwidth digital will simply lose its traffic to
others that are.
Even if nothing else were changing, soaring demand would force an
end-to-end rebuilding of existing networks. Demand for digital
bandwidth is increasing at annual rates in the range of 50 to 200
percent. By every plausible projection, it will continue growing at
those rates for the foreseeable future. It will increase at least five-
fold over the next few years.
If demand is going to grow five-fold--and it is--then network
capacities will have to increase as much. But the existing phone,
cable, broadcast, wireless, and satellite networks still rely, in
significant part, on yesterday's analog technology, and they are
already stretched to capacity. Systems deployed a decade ago cannot
begin to accommodate five-fold increases in traffic. So new networks
must be built--networks that are much more capacious than the ones they
overlay. Which means, in turn, that 80 percent or more of the wires,
trunks, cables, transmitters, receivers, switches, and routers that we
will be using for digital transport five years from now will be built
and put into commission between now and then. Nobody owns them yet.
Hardware manufacturers have to build them. Phone, cable, broadcast,
wireless, and satellite companies have to deploy them. Fast. And once
they've built and deployed them, they have to build and deploy them
again. And again, for as long as demand continues to grow at these
explosive rates.
It is impossible to say with any precision who will emerge with
what share of the market for digital bandwidth. A list of likely
contenders must surely include both phone and cable companies, along
with both terrestrial and satellite-based wireless systems, using VHF,
UHF, HDTV, cellular, PCS, satellite, and other spectrum bands. Electric
power companies may join the fray, too. The best technology will vary
from market to market. It will likely be different for rural and urban
areas, different for business and residential customers. We cannot
predict how things will shake out across technologies, providers, and
markets. Government should not be trying to. The harder Government
tries to guess, and the more it intervenes to back up its guesses with
technology-favoring or competitor-favoring policies, the more it will
get in the way of the healthy evolution of the market.
Nor can we usefully guess or predict what pricing structures will
emerge. There are countless different ways to price these services.
They range from the traditional local telephone model--all you can eat
for a flat monthly fee. To per-minute charges, like those traditionally
applied for long-distance calls. To advertiser-supported services, like
those traditionally used by broadcasters. To pay-to-play services, like
the premium services traditionally offered by cable. Some providers
will give you a free computer if you'll watch their advertising. Others
will charge you $35 for a two-hour, commercial-free streaming video
download of Wrestlemania. Service providers will offer free connections
analogous to 800 numbers--the call is free if you shop the catalogue.
Every variation in-between is possible.
We have no clear idea what kind of corporate arrangements or
structures will move us fastest toward the most productive and
efficient market. Judging from the ferment in the computer industry, it
is safe to assume that major restructuring will inevitably occur.
Again, this should come as no surprise. Most of the equipment, most of
the service that will be bought five years from now hasn't yet been
deployed, hasn't yet been built. New conglomerates, new joint ventures,
are going to emerge to build the new infrastructure.
All we can anticipate with confidence is that demand for digital
bandwidth will continue growing very fast, for many years to come.
Digital bandwidth is now the most important economic commodity in the
United States. It is the key to growth and prosperity. The computer
industry's fortunes depend on it. The productivity of both labor and
capital are, in turn, irrevocably linked to the growth of the digital
infrastructure. Whether you manufacture cars or newspapers, whether you
supply electricity or medical services, digital bandwidth will be a key
input to your business, and a vital component of your consumption.
The 1996 Act notwithstanding, the regulatory environment has not
begun to catch up with the market now emerging, and the new
technological realities. With most services, over most media, the
starting legal and regulatory presumption is still this: What you want
to do is forbidden, unless and until the Commission gets around to
permitting it. And once it's been permitted, it may get forbidden
again. You certainly can't depart sharply from past practices, or
transfer your assets to a new owner, or fail to build out on the
timetable favored by the Commission, or decline to carry traffic the
Commission likes, or insist on carrying traffic it doesn't, without
putting your licenses, permits, and regulatory favors at risk. The
Commission is forever weighing--weighing charges, services, subsidies,
interconnection, mergers, divestitures, cross-ownership, and more.
Every major Commission rulemaking is followed by endless appeals. The
Commission wins some of those appeals, loses as many more, and is
forever reconsidering orders, reopening dockets, and reviewing
licenses. While the Commission weighs things, and the courts reweigh,
the market waits.
Much of the basic structure of the 1934 Act remains in place,
despite the 1996 Act. The 1934 Communications Act was written around
the technological paradigms of its day: broadcasting and common carrier
telephony. The Act distinguishes wire from wireless, carriage from
broadcast, broadcast from cable, voice from video, and both voice and
video from data. It draws lines based on the type of content conveyed,
the prices charged or not charged for conveying it, the wealth of the
conveying company, and the novelty of the service. Although digital
broadband services were beyond imagination at the time the 1934 Act was
enacted, they are nevertheless subject to the Act's taxonomy and the
regulations that have emerged thereunder. Broadband services are
subject to the entry restrictions of Section 214, and tariffing
requirements and rate regulation under Sections 201-205. They are
subject to the franchise-like regulation that applies, under Title III,
to renewals, transfers, and ``trafficking'' of wireless licenses.
At this point, telecom law is so convoluted that much of the
regulatory battle has become one of arbitrary legal definition, nothing
more. Wireline services can be slotted into Title VI (cable), or Title
II (common carriage), or labeled Title I ``information services.''
Title II services can be treated as basic, legacy telecom services,
subject to the full panoply of Section 251 unbundling, or as new
services partly deregulated by being placed under the ambit of a
Section 272 separate subsidiary. Wireless services can be slotted into
the still quite heavily regulated broadcast model, or the less
regulated DBS model, or the differently regulated PCS model. Each of
these choices entails profoundly different regulatory consequences. The
Commission pays lip service to ``technological neutrality,'' but it
doesn't deliver it. Judging from its actions, and its own
interpretations of the law, it doesn't wish to be neutral across
broadband technologies, and doesn't believe that it lawfully can be.
Consider a recent analysis set out in a paper prepared by the
Commission's own staff. The paper discusses how the FCC might regulate,
or decline to regulate, Internet services over cable. It concludes that
under current law the Commission is free to regulate these services as
common carrier services, under Title II, or as cable service, under
Title VI, or view them as common carrier services but forbear from
regulating them under Section 10 or Section 706. Yet another option,
with slightly different regulatory consequences, would be to classify
them as ``information services'' nominally under Title I. Similarly,
the Commission has declared it can regulate high-speed data services
offered by phone companies under Section 251, or sidestep regulating
them by persuading phone companies to set up Section 272 separate
subsidiaries.
So who ends up regulated how under this labyrinth of possibilities?
If Congress does not intervene to streamline things, the answers will
emerge over the next five years, if we are lucky, after the Commission
has proposed, and the courts have disposed, and the Commission has
proposed anew, and the courts have disposed anew. Or it might take
three rounds rather than two--as the Commission's ``Computer
Inquiries'' have taken in the past. And while regulatory uncertainty
reigns, the market will hesitate and hedge.
For all of its talk to the contrary, the Commission seems quite
eager to maintain and extend the old regulatory paradigms, even in the
face of the sweeping changes set in motion by the 1996 Act. Late last
year, for example, the Commission announced it would require phone
companies to ``unbundle'' advanced services--even though the 1996 Act
made clear that unbundling was to be extended only to network elements
that were ``necessary'' to competition, elements without which
competitive services would be ``impaired.'' The Supreme Court recently
ruled that the Commission may not go so far. But it took almost three
years to resolve that basic point. Why the Commission should ever have
wished to apply the whole panoply of yesterday's regulation to highly
competitive advanced services remains a mystery. Perhaps the Commission
sincerely believed it was legally obligated to do so by the 1996 Act.
The Supreme Court, however, easily concluded that it wasn't.
The Commission has likewise failed to invoke its authority under
Section 706 of the 1996 Act. That provision plainly offers the
Commission flexibility to deregulate advanced services. The FCC,
however, declines to read it that way.
The Commission should be price deregulating the next-generation
services across the board--but it shows no inclination to do so. It
should be removing these services from the unbundling mandates of the
1996 Act--but it has been pushing in the opposite direction. It should
be lifting them out of the long-distance restrictions of section 271--
but it won't. It should be putting all providers of high-bandwidth
services, wired and wireline, telephone and cable, on the same,
deregulated footing--but it simply does not want to. The Commission
should be preparing its end game, its exit strategy. There are no signs
at all that it is doing so.
The 1996 Act contains many of the right sentiments, and attempted
to aim things in the right direction. But in its workings, as
administered by the Commission, the Act has fallen short. The
Commission, it turns out, has shown no real inclination to deregulate.
Its primary instinct is to keep a tight hand on everything, everywhere,
the law still leaves it plenty of authority to do so, and it acts
accordingly.
It is time for serious change. It is time to get the Commission out
of the business of concocting general solutions ahead of time, and into
the business of fixing specific problems, if and when they arise. It is
time to transition the Commission from its traditional role of general
regulator, to a new role of arbiter, adjudicator, and enforcer.
Mr. Tauzin. Thank you, Mr. Huber. The Chair will recognize
members who would like to engage Mr. Huber before we introduce
the Commission.
Mr. Markey.
Mr. Markey. Mr. Huber, in your testimony, you note that
every Commission that rulemaking is followed by endless appeals
and court challenges. Is that the Commission's fault?
Mr. Huber. Well, I think the easy answer to that is it
depends whether they win or lose. If they win, of course it is
not their fault. It means they called it right. But if they
lose, I suppose it probably is.
And as a statistician and somebody who writes these up, I
can say that they win some, they lose some. It is by no means
their fault. This is a very opaque law that they are operating
under.
Mr. Markey. But like the Yankees, they have been winning
lately. The Supreme Court has been upholding them on some of
the big ones.
Mr. Huber. Well, if you are referring to Iowa Utilities,
you know, I have some clients in that, and I got to tell you in
all candor, we count it, at worst, a draw and possibly a win.
We have a remand on necessary and impair. And TELRIC is wide
open.
You know, we ain't begun to find out who won on that one, I
am sorry to say.
Mr. Markey. Even if the Commission agreed with you, Mr.
Huber, and your law firm on every single substantive conclusion
which you make about how the act should be interpreted, that
still wouldn't mean that others wouldn't sue on different
grounds that you were on.
Mr. Huber. Of course you are right. Under a set of laws
that gives the Commission the power to decide everything in
advance, that will always be the case. I mean, if we win we
will be happy, and the other side will sue.
That is how laws of this kind operate. I might add, you
don't have to write laws that are structured that way. If you
write laws that say we will let the market proceed and wait for
enforcement action, deliberate intervention in specific ways,
which, I might add, is how the antitrust laws act, how a great
deal of other consumer and commercial legislation operates, you
get a quite different framework. And I might add you spend a
whole lot less time in court.
Mr. Markey. There is an ongoing tension between
deregulation and de-monopolization. Many people place
deregulation as the highest goal and stipulate that those who
don't support immediate deregulation just don't understand the
marketplace.
Let me quote from a wise man: ``The member of Parliament
who supports every proposal for strengthening the monopoly is
sure to acquire not only the reputation of understanding trade
but great popularity and influence with an order of men whose
number and wealth render them of great importance. If he
opposes them, on the contrary, and still more, if he has
authority enough to be able to thwart them, neither the most
acknowledged probity nor the highest rank nor the greatest
public services can protect him from the most infamous abuse
and detraction, from personal insults, nor sometimes from real
danger arising from the insolent outrage of furious and
disappointed monopolists.''
Now this was written by Adam Smith in 1776. And 200 years
later, whether it is telephone monopolies or cable monopolies
taken on by the Commission, depending upon the issue, I think
that there is inevitably going to be some great grief, which
the Commission is going to receive from one former monopolist
or recovering monopolist or another.
But I think at the end of the day it comes with the
territory. And I also believe that the 1996 act, as
implemented--and I'm not saying it is perfect, we are going to
have to come back and look, you know, various parts of I--but
in general, I think it is working great, by your own testimony,
that there has been this explosion of investments in capacity,
which is out in the marketplace, whether we change a single
word in the act or not.
Mr. Huber. Well, to the best of my knowledge, the FCC
funded none of that investment. I mean, the question is,
whether we would have had double that with or without it. But
even putting that aside, nobody, I am quite confident, that the
monopoly of yesterday, which assuredly did exist. I know that.
They were legal monopolies. They were de jure monopolies. The
1934 act, you were actually a criminal if you competed in
those.
Of course they were monopolies. Who could possibly dispute
that?
I can tell you with absolute confidence there is no
monopoly in this country for 200-kilobit-per-second digital
service.
Okay?
Only about a million people in the country can even get the
service.
Mr. Markey. On the other hand, Mr. Huber, we still don't
have any local phone companies. And we still don't have any
wire-based cable competition. So the whole theory is great
except for an ordinary citizen trying to get another cable
company over the wire or local phone service over the wire. And
they can't do that.
So all the band width in the world doesn't do them any good
if they can't find a competitively priced alternative to the
two services which ordinary people use, local phone service and
cable service.
Mr. Huber. I agree fully. Now let us take, I mean, let us
try and take those and look at some real history. Okay?
Cable, okay, if you look at its regulatory history, all
right, it started under de jure monopolies, franchise issued
locally--just a second, just a second, because I would like to
complete the answer.
What has been the one potent force for competition for
cable, and particularly in states that didn't even have cable,
like Wyoming and----
Mr. Markey. The 1992 act, which repealed local monopolies
and added the programming access provision.
Mr. Huber. No sir. No sir. There is virtually zero cable
overbuilt today. It has been DBS. And you know how long it took
to get a DBS license out of the Commission?
Mr. Markey. Until the 1992 cable--when we passed the
program access.
Mr. Huber. It was the authorization of DBS licensing, of
DBS spectrum, which took 10 years longer than it should have.
I mean, cellular had a 14-year monopoly, and the PCS
spectrum had been out 6 years--well, a duopoly. If PCS spectrum
had been out 6 years earlier, we would have had more
competition.
Mr. Markey. Mr. Huber, the bottom line there is the cable
industry had locked up all of its programming. Who in the world
is going to subscribe to a satellite service that doesn't have
TNT and CNN and CNBC. It just isn't going to happen. It took
the Tauzin Amendment in 1992 to make it feasible for people's
business plan to be able to gather the capital investment to
make these dishes.
Mr. Huber. It took the content, but even before it took the
content, it took the spectrum. And nobody got it until the FCC
gave it to them.
Mr. Tauzin. The gentleman's time has expired. I thank the
gentleman. The Chair now recognizes the vice chairman of the
committee, Mr. Oxley, for a round of questions.
Mr. Oxley. Mr. Huber, welcome back. Based on the
exploration of the re-regulatory scheme and the 1992 act, is
there any need for the FCC to continue the cable bureau within
the FCC?
Mr. Huber. No. We should get on with the business of
deregulating cable. We should get on with the business of
deregulating cable in the context of a market that can compete
fully and effectively against cable.
Mr. Oxley. What is your--I noted you kind of skipped over
it--but I want to bring you back in terms of what your vision
is relating to FCC reform. If you were to advise this committee
as to how best to deal with that, what would be your major
recommendation?
Mr. Huber. I could distill into two, although I could write
a book too, but No. 1, high-speed digital services, 128.8 above
or 200 and above, whatever the Commission has said 200, and
above, carve them off. Take them out of the advanced regulatory
world. Let people provide those services and, if problems
arise, get the Commission enforcing something against them.
But create more than a presumption of statutory right to
provide those services, any medium, anytime, anyplace,
anywhere--there is no monopoly. The services don't exist yet.
No. 2, at the very least, let's avoid this incredible
duplication of function between agencies. I am representing
people mergers, and I will say it first, but I don't know why I
get to represent them twice.
All right. Once before the Department of Justice and the
second time before the FCC. I could go on with these, but let's
do things right. Let's do them once and then get on with life.
Mr. Oxley. So let me address that, particularly on the
merger issue. So your testimony is basically that the FCC has
no function whatsoever in terms of mergers.
Mr. Huber. No. At the very least, I would say one agency. I
don't even want to pick winners and losers among agencies.
Okay?
If we are going--I think DOJ will do fine. I actually think
they are better at antitrust enforcers, but if Congress, in its
wisdom, said let's just do it before the Commission, let's do
it there.
Why we do it twice, I truly do not know.
Mr. Huber. Some of us had an opportunity to pay a visit to
America Online yesterday and discuss some of the burgeoning
issues with the Internet. And, one of the issues that the
officers raised was the frustration that they have with getting
enough band width to be able to provide all of the Internet
services to rural areas, to under-served areas in cities and
the like.
And I raised it--I don't know whether you saw it or not--
the Time magazine article about the gentleman who had moved out
to Leadville, Colorado, because he liked the lifestyle but
found out that he was unable to conduct his business, which was
Internet-related, because the telephone company out there was
so devoid of having the capacity to provide that kind of
service.
What are your comments in that regard? And what are your
suggestions?
Mr. Huber. I view it, if I am evading at first, I will get
directly to it, I view it as the paramount objective of this
committee and in telecom, the country, to increase availability
of high-speed digital band width.
It is the essential commodity of the next century for
business, for residents, for our civil freedoms--freedom of
speech and so on. We clearly have got to be advancing that. At
the moment, we have a bizarre structure of telephones,
telephone companies being told you are going to have to
unbundle what you haven't even deployed yet. All right? That
sort of process grinding out before the Commission. Stuff
doesn't even exist yet, and the regulations are already falling
into place.
You have the cable companies desperately jockeying, saying,
please, call this anything but Title II telecom service: cable
service, Title I information service. Call it something else so
that we don't have to give equal access, don't have to offer it
to AOL, and so on.
You have the wireless PCS providers largely deregulated,
but many other people, broadcasters among them, waiting in the
wind, wondering what is going to hit them next as they begin
rolling out their digital television, and whether they will be,
you know, how free they will be to move that into aggressive,
high-speed digital band width.
I would like to tell all of these media providers across
the board, You get up above that speed, you are free until we
find a problem. Then we will go after you.
Mr. Oxley. Thank you. Thank you, Mr. Chairman.
Mr. Tauzin. Thank the gentleman. The gentleman from
Michigan, Mr. Dingell, is recognized.
Mr. Huber. I was in three-corner pants too.
Mr. Tauzin. The gentleman from Michigan, Mr. Dingell, is
recognized for a round of questions.
Mr. Dingell. Mr. Chairman, I thank you for your courtesy. I
have no questions at this time. I will have some fine questions
later.
Mr. Tauzin. The gentlelady, Mrs. Wilson, for a round of
questions.
Mrs. Wilson. Mr. Chairman, I have no questions of this
witness.
Mr. Tauzin. The gentlelady, Ms. Eshoo.
Ms. Eshoo. Thank you, Mr. Chairman. Since today is St.
Patrick's Day and they say that the world is divided between
those that are Irish and those that wish that they were.
Something about this saint, he converted, obviously, an awful
lot of people to the faith. Now you hold a certain faith, and
you are talking about converting or conversion at the FCC over
to where you are.
In terms of restructuring, and, in your view, where it
should go, I know that Mr. Oxley asked you some questions about
that, you have given at least one manifestation of it. Is that
the sum total of how you view the FCC should be reorganized
around where we are going?
Mr. Huber. Oh no. I mean I could go on at length. There are
a great number of functions that are obsolete. Okay? And there
is a great amount of price regulation that should be obsolete.
I have fought this battle----
Ms. Eshoo. I didn't hear----
Mr. Huber. A great amount of price regulation that----
Ms. Eshoo. All right.
Mr. Huber. I think as broadcast moves into the digital
world and clearly its content delivery converges with content
delivery over the web, we should free up those spectrum
licenses step by step and give them freedom to use that
spectrum as they want.
I could go on.
Ms. Eshoo. Do you want to elaborate? I mean, that is the
question I am asking you. These are all considerations for the
committee, and I think that it is important to get these out on
the table.
Mr. Huber. The core structural problems are that this
Commission is divided. It is divided by statute and by history
and by tradition along lines that track old technologies and
old service paradigms. If you are called a broadcaster, that
has one set of luggage that comes with it. You are called a
local phone company, another set. You are called cable, it's
another.
In a high-speed digital world--it is not here today, it is
coming fast, we want it come fast----
Ms. Eshoo. Now, would your model fit with the speed we know
that all of these industries under the umbrella of
telecommunications are moving?
Mr. Huber. Well, in so far as my model is saying they are
all going there, and as they get there, and as they try and get
into those markets, let them be. Or at least start with
presumptions they are allowed to provide the services and if
problems arise we will come in regulate them. Sure.
And it cuts across them. We should not be structuring
this--I had the extraordinary experience not long ago of
talking informally somebody I would just as soon not name at
the Commission. I said, how does all this fit along with cable.
And I was talking about some phone company's problems.
He said: Cable, cable, cable. We don't do cable. Cable is
the other bureau.
All right. And that sort of answer one just shouldn't be
getting. It is not the other bureau anymore. And I'll tell you,
if you think that is the least of the problems, broadcast is
coming. In the 1996 act, you have given them additional slabs
of spectrum. It is going to be digital spectrum. Okay?
The satellite people, Teledesic and these, are doing
digital spectrum. They have got to be brought under unified and
uniform management. To say we have got all these different
regulatory models for people who are going to be in the same
industry competing to provide the same service is a bad
mistake.
Ms. Eshoo. Well, I appreciate your observations, and I
think there are several points of what you have presented to us
that we should be paying real close attention to.
Do you think that the criticism is of the FCC really rests
more with the old model that you describe that was designed a
long time ago and has not been changed or their interpretation
and reinterpretation of it?
Mr. Huber. Okay, if I have to--if I am the line judge here
or so, I would say it is sort of 90 percent of the problem is
statutory and 10 percent is attitude.
I wish they all had my attitude.
They don't, but they were appointed by President Clinton
and I wasn't. Right?
Ms. Eshoo. We always wish the next person has our attitude.
Right?
Mr. Huber. Yes. Of course we wish that. But I mean--this
law is fantastically opaque. When they say, we can call cable
Internet service anything we like, I think they may well be
right. They can because that is how the law is currently
written.
Ms. Eshoo. Well, I think that you have made a very
important point here though for the members of the committee
that if in fact we come to the conclusion that you have, that
this is 90 regulatory and what needs to be cleaned up from the
first half of this century, then maybe that is what we should
be doing.
I think it can be great political sport to beat people up
because they don't agree or don't take the direction that we
would want them to or thought we laid down for them to do, but
I think that this can be a very important clarifying point in
the work of the subcommittee and what we may recommend to the
rest of the Congress and the re-authorization.
Thank you very much, and I yield back.
Mr. Tauzin. Thank the gentlelady. As we move along, and I
just point out, there are now 1,708 radio stations on the
Internet. An amazing development. Just within the last couple
of years.
And the question is are they broadcasters or are they
something else? I don't know. We will find out 1 day.
Who is next? The gentleman from Mississippi, Mr. Pickering,
who has some background in radio, I think.
Mr. Pickering. Thank you, Mr. Chairman, I have no questions
at this time.
Mr. Tauzin. On this side. The gentleman from Maryland, Mr.
Wynn, is recognized.
Mr. Wynn. Thank you, Mr. Chairman. I believe I heard you
indicate that you felt that there was adequate competition in
the cable industry, or competition with cable. John Q. Citizen
that speaks to me basically complains about cable rates and the
fact that he doesn't believe there is enough competition and
his rates keep going up. What is your view of this problem? Or
do you think it is a problem?
Mr. Huber. I have watched cable regulation come and go and
come again. In 1984, Congress deregulated it largely. Some
members here part of that. In 1992 we re-regulated. Now, under
the 1996 act, there is a sunset on it. I think we will get it
right when we recognize that cable alone can't be treated as
cable alone. All right?
As long as cable alone is under one set of rules and phones
companies can't compete on even terms, my clients are among
them, as long as the airwave people, the over-the-air
broadcasters aren't----
Mr. Wynn. If I could just jump in for a minute, is that by
implication your rationale for why the phone companies or
others haven't gotten into the cable business?
Mr. Huber. The way into the cable business today is not to
overlay coax and try to do 30 channels of ``Gilligan's
Island.'' All right?
It is to deploy high-speed networks. All right? Very high
broad-band networks that can do streaming video, that can
deliver radio stations, that can deliver video. All right? And
there are many, many obstacles to phone companies getting into
that business.
For the broadcasters, the way into overlaying cable, not
with just one channel on 6 megahertz sub-spectrum, but with
four or eight channels, multiplexed and digital spectrum, is to
move ahead with that process. They labor under their own quite
serious set of regulations and, of course, constantly face new
demands soon as they try and deploy, that how much will be
children's television, what will be the political rules, and so
on and so forth.
The best solution for cable today, as it has been for
sometime, is to let other media truly liberate them to compete
head to head with cable. Until we do that, cable will not be
fully competitive. No. That is correct.
Mr. Wynn. Thank you. That was helpful. I would like to
perhaps pursue that another time.
The other thing is, you were saying we can't look to the
past or our past constructs, we have to look to the future. And
you mentioned in the course of that discussion universal
service, universal access. What do you see as the future of
this notion of universal access?
Mr. Huber. Look, let us be absolutely frank about it. One
of the great triumphs of the old monopoly was that it could
spread costs around, it could spread benefits around. We
achieved very rapidly and very well very high penetration. It
was an egalitarian, socially positive force in this country.
All right?
And there was nothing like the old monopoly phone company
to push toward universal service at a flat rate, poor area,
rich area, I mean, they did it.
We have moved away from that model for better or for worse.
Okay?
These markets are open to competition. There is now an
initiative to try and make the subsidies portable. I hope that
happens someday.
But, in any event, we are, to the extent we are going to
get universal service, it is going to be through a different
set of means now. It is going to be through competitive means,
it is going to be through making subsidies portable, in other
words, letting any company that wants to serve poor areas carry
the subsidies with it. And that is the course we are embarked
on.
I hope, in terms of spreading the telecom wealth, it works
as well as the old model. It is a challenge.
Mr. Wynn. So it is possible that, perhaps, the old model in
that respect, in terms of universal service, was a good thing.
Mr. Huber. There is no questions that regulated monopolies
are egalitarian. They spread the poverty around very uniformly.
Okay.
If you want the real abundance, however, you have to have
open markets.
Mr. Wynn. I guess it depends on where you live as to
whether is spreading poverty or spreading access.
Mr. Huber. Yes.
Mr. Wynn. One kind of follow-up question. Absent the
portability of the subsidies, is there any other way to address
this concern of folks in rural or under-served or other areas
like that, that would not be competitively attractively?
Mr. Huber. I know, my clients among them, would just be
absolutely delighted to have this Commission issue mandates to
MFS and TCG and AT&T and all the people who are serving 1301 K
Street, where my offices are, and say, go over to Anacostia, go
into the poorer areas, run your fiber networks too. They are
not doing it because they are not required to and because that
is how the new law is set up.
You can issue mandates, No. 1; No. 2, you can encourage
wireless technologies, which are very non-discriminatory. They
are especially important in rural areas as well. We have kept a
lot of wireless technology bottle up over the years. And the
more you encourage that, the more egalitarian----
Mr. Wynn. How could you encourage it? What recommendations
would you give to the committee to encourage that?
Mr. Huber. No. 1, I would begin de-zoning wireless. This
Congress in 1993 put a bunch of wireless on the same footing.
It put PCS and cellular and other on the same footing. They
hadn't been before that. It was a tremendous plus. It wasn't
enough. You have a whole bunch more spectrum in the broadcast
bands, the UHF bands especially, and certainly all the
satellite bands. And you have to let anybody from any band
provide any service. And these all have big footprints, they
serve rich and poor equally, and that the wireless lands, wired
networks never have that same automatic universal footprint.
Mr. Wynn. Thank you.
Mr. Tauzin. Thank the gentleman. Gentleman from Illinois,
Mr. Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman. I have been trying to
search for a good question to address. He is really above my
level. So I am going to defer back and wait for the chairman to
appear.
Mr. Tauzin. I'm not sure what you meant by that. Ms.
McCarthy is recognized. She's gone. Mr. Largent is recognized.
Mr. Largent. Just have one question for Mr. Huber. Mr.
Huber, have you read the testimony submitted by Mr. Kennard?
Mr. Huber. I shall do shortly, but I confess I was on
planes Monday and I just have not received a copy yet.
Mr. Largent. Let me read just a couple of his comments from
his first couple of pages. It says:
``Competition should be the organizing principle of our
communications law and policy, and should replace micro-
management and monopoly regulation.
``That consumers will receive the benefit of lower prices,
greater choices, and better services.''
It also says that ``we must expect that in 5 years there
can be fully competitive domestic communications markets with
minimal or no regulation, including total deregulation of all
rate regulation in competitive telephone services.''
It sounds to me that what Mr. Kennard is suggesting is
exactly what you are suggesting in terms of reorganization of
the FCC. Do you disagree with anything that he said?
Mr. Huber. No. That sounded very good. I wish I would see
it backed up by clearer and more definite action earlier. At
least as I look at the action, often, it doesn't appear to me
to be advancing that. I am truly mystified, honestly mystified,
notwithstanding the fact as to why we declared last fall that
we were going to unbundle advanced services that nobody has
even yet deployed yet.
How that step and that initiative was consistent with the
idea--perhaps it was compelled by law, although I don't believe
so. But how that is consistent with the notion that we are
going to try and deregulate things, if you are going to
deregulate surely the place to start is with services that
don't yet exist that nobody is yet providing and that surely
nobody has yet monopolized. You can't have a monopoly if you
are not there yet.
Those objectives are great. We see eye to eye on
objectives.
Mr. Largent. Thank you, Mr. Huber. Thank you, Mr. Chairman.
Mr. Tauzin. Thank you, Mr. Largent. Mr. Fossella.
Mr. Fossella. Thank you, Mr. Chairman. I don't know if I am
asking the same question in a different way, but do you think
the FCC should be organized by technology, telephone, cable,
broadcast, and wireless?
Mr. Huber. At least on a going-forward basis, it should be
organized around services. High-speed digital services going
forward, all right, should be under a single jurisdictional
umbrella with an absolutely compelling mandate to say open
these markets, let people do it. This trumps the other stuff,
it trumps the legacy stuff, if you are up in this domain.
Mr. Huber. Yes. That should cut across the bureaus
completely.
Mr. Fossella. And second, and along those competitive
notions, to what extent is regulation necessary, if at all?
Mr. Huber. You know, after 65, or 62 years, of statutory
monopoly, legally enforced monopoly, it is not unreasonable to
say we are going to have to have a little bit of law to change
course and direction. I have written books saying abolish the
FCC, but I wrote them with some care, if you actually read
beyond the cover. I think there is a transitional process.
It is not particularly surprising to me that we are at the
high-water mark of regulation. We have a lot of the old models
in hand, and we are also trying to build the future. What is
surprising to me is tenacious the past is, and how much it
still controls and limits our movement to the next generation.
Mr. Fossella. I haven't read your book, but one of these
years I promise to do so. Wherein do you think the regulation
should be, specifically?
Mr. Huber. A certain amount, and I think Iowa Utilities as
interpreted by the Supreme Court is on the mark here: a certain
amount of unbundling of the core residual monopoly areas is
appropriate.
That has been in process since 1968 in Carter Phone. We
unbundled the handset; we unbundled long distance; we unbundled
the wireless services. A certain amount of that made sense.
I think it can be pushed to gross excess, and in my view it
has been. But other brilliant people have different views. I am
aware of that.
I think, residual price regulation, lifeline service,
services for the poor, we are going to have that as long as
there are single providers of legacy services, all right, but
keeping it focused.
There is a going to be a residual subsidy process. I would
like to see it explicit, and I would like to see it done
through Congress rather than through a Commission. But we
subsidize lots of things in this country. It is part of a
valuable, necessary social policy.
I don't think any of us is absolutist about that. I'm
certainly not.
Mr. Fossella. I yield back, Mr. Chairman.
Mr. Tauzin. Thank the gentleman. Before I let you go, Mr.
Huber, the Chair would recognize himself briefly.
Oh, Mr. Stearns has not been recognized. I'm sorry.
Mr. Stearns. Thank you, Mr. Chairman. You know, Mr. Huber,
your opening statement mentioned that the bill intended to
deregulate but the FCC is operating under an old structure that
is not deregulatory. That is basically, I think--is that an
accurate sort of statement of what you said opening?
Mr. Huber. Yes.
Mr. Stearns. Okay. Let's say I was client and I came to you
and I wanted you to represent my Internet company, what would
you categorize the Internet company? I mean, would you say I am
a cable, or broadcast, a telecommunicator, I mean, what would
you suggest that I call myself to the FCC.
Mr. Huber. Well, first, I would have to ask you a little
bit more of what kind of an Internet company are you. Are you
like AOL, in the content layer, that easy. I want you up under
Title I. I am going to call you an information service
provider.
If you are going to provide any kind of access, or any kind
of actual transport, then it is a much tougher call. Tell me
some more. Which speed are you looking for? And which area of
the country? And maybe we will try to slot you in under cable,
if that is the medium you want to use. Maybe we are going to
get you under broadcast side band or, you know, FM side band or
VBI or something. I mean, there are--I got a book on it. We
will find a home for you.
Mr. Stearns. Oh. I understand.
Is this just the real world. We can't change that. In other
words----
Mr. Huber. You can change it. I can't.
Mr. Stearns. Are you suggesting that this committee go
ahead and try and change it so that when I came it would be
clear who I am?
Mr. Huber. On a going-forward basis for new services for
the future that is unfolding, it is readily possible.
Mr. Stearns. It is possible for us to come up with
categories that everybody would know right away who they are?
Mr. Huber. On a going-forward basis for the high-speed
services because nobody has them yet. They are just a drop in
the bucket. And that is what you have to clean up. You really
do.
Mr. Stearns. Okay. Mr. Oxley talked about the broad-band
Internet access. If you were a Congressman or Senator, what
would you propose to make sure that broadcasters, long-distance
operators, RBDOCS, cable, everybody, could get into this pipe.
How would you structure this thing? What would you do
legislatively? OR just let the market develop?
Mr. Huber. It is a little bit risky to write legislation on
the hoof here without pen in hand, but you can define a regime
of service, basically by speed, you know, 128.8 and above or
56.6 and above or 200 and above----
Mr. Stearns. Let's say like a T-1 line so that everybody
could videostream into this as well as put in other information
topped onto the videostream.
Mr. Huber. Roughly speaking, anybody with any medium,
wireless, terrestrial or satellite, wireline, cable or phone,
okay, forget the names. That is your service. We are going to
start with the presumption, A, you're allowed to provide it,
all of it, not just little bits, you can do that; B, you can
bundle or unbundle or sell and resell, I mean freedom out
there.
Those markets don't exist yet.
Mr. Stearns. So how would you assure that maybe if Oxley
and I were in our garage starting an Internet company, we would
have access just like AT&T or Disney or anybody, I mean, how
would assure that any of us could pay the money to get access?
Mr. Huber. Look, the absolute assurance I can't give. I can
only propose the same assurance that I can give you on your
ability to buy a hamburger, okay, which is that open markets
and open entry and many different media somehow guarantee that
if it is not McDonald's it will be Burger King. All right?
I mean that is how competitive markets work. But can I
guarantee for everybody. It is in the nature of open and
competitive markets that absolute guarantees aren't given, not
by government.
Mr. Huber. So you don't think the Federal Government,
Congress should step in and try top say we are going to
regulate what this pipe will be to protect everybody. The only
effect of doing so will be have fewer pipes available to fewer
people.
We've been there, done that. Okay? And it was all at voice-
grade level. We had that for 60 years. Okay, so basically you
let the market decide.
Mr. Huber. Going forward for the new service--I don't want
to sound ridiculous, all right. I know the legacy services are
there. Of course there is going to be a transitional period,
perhaps a long one, in deregulating those. But we have to look
to the future to the terrible disease in the town,
particularly, is always to be solving yesterday's problems, and
in many industries that makes sense. In an industry that is
doubling in size very 2, 3 years, no, it does not make sense.
Mr. Stearns. You know, if we had an FCC for the computer
revolution, probably it would not have taken off like it did.
Wouldn't you agree?
Mr. Huber. I would.
Mr. Stearns. Yes. Cause your idea of abolishing the FCC
means just let us roll and see what happens.
You know, in my opening statement, I mentioned that under
the biennial review of 1998, the FCC had initiated to our
information, just 31 proceedings on the literally hundreds upon
hundreds of regulations that the FCC maintains, and that the
FCC had issued only four orders modifying or repealing various
rules.
Assuming that information is accurate, don't you think they
are way behind in repealing and trying to initiate----
Mr. Huber. Yes. They are way behind. I mean, this
Commission, like all Commissions before it, holds onto power
and authority. It holds onto power to control transfers of
licenses, whether they are wireline licenses or broadcast
licenses, quite unnecessarily. It holds onto power to zone
content, quite unnecessarily, in my view.
Commissions, agencies tend to do that. Yes.
Mr. Stearns. Thank you, Mr. Chairman.
Mr. Tauzin. Thank you, Mr. Stearns. Let me carry Mr.
Stearns' observations a little further, Mr. Huber. In
differentiating between the service and the facilities which
provide service, recognizing that we adopt a policy that says
everybody can get into these new services. Go to it. Offer
them. But also recognizing that are a limited number of
facilities that can now deliver those services from the
provider to the user.
Should we have classes of facilities which are open and
accessed to providers? And other classes which are closed?
Should all of them be open to all providers for access, bundled
or unbundled? Should they all be on their own to do what they
want to do, as some would propose? To use their networks the
way they see fit and to allow access for whom they choose?
Where do we go with this. I mean, the concern I hear
expressed more often than not in the high-speed broad-band area
is that if there are going to limited facilities for people to
use, and each facility eventually gets the right to pick and
choose who is using those facilities, that you end up with some
problems for users and providers.
If on the other hand, you have a company that has to be
open to all providers because it is called something, it is
called the telephone company, as a common carrier as opposed to
another company that is doing the same doggone thing, just is
called something else, and doesn't have to be open, is that the
world we want to envision? And what do you see there?
Mr. Huber. It is absolutely correct to say there are going
to be some finite number of providers, but the smallest finite
number is zero, okay? And that is where we are today for most
of these services in most places. You've got high-speed digital
services in a million, maybe a couple of million, depends whose
estimates you take, but a few million of residential lines.
Okay?
We have the old style services for 150 million, a 100
million homes. So, you know, No. 1 challenge is to get from
zero to one or two or three. All right? And we want that
process to happen as quickly as possible.
I know the fact is today that if I do Internet access on
TCPIP protocols over cable, I am going to call myself anything
but a common carrier, and I will get away with it. As of today
I will get away with it.
The dominant, I wouldn't dare go so far as to call them a
monopoly, I do know they are the dominant provider today of
high-speed residential, has got themselves a nice little
regulatory niche there.
Phone companies in this category are not the dominant
providers. They are dominant providers of slow service, but not
the fast stuff. And they are under a quite different regulatory
ambit.
Let us see if we can get up to 10 or 20 or 50 million
providers, and look, if by chance then, we find out, gee, you
know the AOL's are getting frozen, I don't for a minute think
they will be, I think there is more money to be made in open
systems than closed systems, and I think cable is probably----
Mr. Tauzin. It's a healthy debate, but it also relates to
how we restructure the FCC because you make the very valid
point that depending upon what the FCC calls you in this area,
you are either regulated as an open structure or regulated as a
closed structure. Right?
Mr. Huber. Yes.
Mr. Tauzin. So being called something is pretty
advantageous. And being regulated by the right bureau is pretty
advantageous.
Mr. Huber. Very.
Mr. Tauzin. And that is kind of silly in this new world. It
is not very rational, is it?
Mr. Huber. It is worse than silly, Mr. Chairman.
Mr. Tauzin. Yes. The second thing I wanted to get to, is
the--because some of the Commissioners will speak to in just a
minute, and I'm very interested in what they have to say about
it--the Commission has, on this 1930's model, regulating
monopolies for consumer protection purposes, universal service
purposes, what have you, is based upon the concept of public-
interest standards.
Commissioner Furchtgott-Roth correctly points out public-
interest standard means something different to each class of
service. It is either a broader standard or a weaker standard,
depending upon what kind of license you hold.
In a world where all these services are merging, they are
becoming the same in a digital world. How can the Commission
operate with so ambiguous a standard? And how do we move from a
regulatory paradigm, based upon that standard, to an
enforcement organization that might come out of this process?
Mr. Huber. Well, understand first that the main place the
public-interest standard is enforced today, is in license
issuing and license transfers. And it is enforced because it is
written into the law. The Commission didn't make up those
words. They are there in United States Code.
But there is way, way more regulation and oversight of
license issuance and license transfer than there ought to be. I
mean, routine license transfers ought to be more than routine.
We've got the Department of Justice that will dive in if it
doesn't like the hands they are ending up in. Or if not DOJ,
then the FCC do it, but let's not do it twice. Okay? Let's do
it once.
I think the Hart-Scott-Rodino Act gives pretty good review.
If you truly sweep aside the licensing transfer overhead, most
of which is wasted, you will solve a lot on that.
Mr. Tauzin. Peter, we thank you very much. The Chair wishes
to express his and the committee's appreciation for your
written presentation and for the excellent presentation this
morning. As I said, we will continue this process. And we have
a lot to think about as a result. We thank you.
Thank you, Mr. Huber. We are now pleased to call up the
Commission and to recognize the Chairman of the FCC and the
other Commissioners for their presentations today.
In that regard, Mr. Chairman, let me offer a word of thanks
and appreciation for the fact that you all are willing to
engage us in this discussion, and to offer suggestions as to
how we might move forward in this effort.
And to, indeed, separate the question of our concerns about
the FCC as an agency, as a structure, from the very excellent
individuals who serve on the Commission today and who have
served it before. We deeply all of you for the contributions
you make to our country and for the work you do on the
Commission.
I want to separate those very clearly in the beginning
because, as you know, I have deep respect for you personally
and for the other members of the Commission. Our comments, our
concerns are how we can build a better agency for the future,
and I want to direct as much as I can the work of the committee
in that respect.
I am pleased now to introduce and welcome the Chairman of
the Federal Communications Commission, Bill Kennard. Chairman
Kennard, thank you, sir. Again, your written comments are part
of our record if you would like to engage us in conversation,
we would greatly appreciate it.
Mr. Kennard.
STATEMENTS OF HON. WILLIAM E. KENNARD, CHAIRMAN; ACCOMPANIED BY
HON. SUSAN NESS, COMMISSIONER; HON. HAROLD W. FURCHTGOTT-ROTH,
COMMISSIONER; HON. MICHAEL K. POWELL, COMMISSIONER; AND HON.
GLORIA TRISTANI, COMMISSIONER, FEDERAL COMMUNICATIONS
COMMISSION
Mr. Kennard. Thank you very much, Mr. Chairman, and I
appreciate very much the remarks that you just made. And I also
appreciate your convening this hearing. I am looking forward to
having a very productive dialog with you and other members of
this committee as we look to the future of the FCC and
regulation.
And clearly we are meeting here today at quite an
extraordinary time, a time that is full of promise and
unlimited potential, and at a time when we all are privileged
to work in a field that is literally booming. I mean, all the
economic indicators in the communications business are up. Job
growth is up. Revenues are up. Investment is up. And we have
prepared some charts for you that demonstrate that very
graphically.
So I think that it is wise for us to pause for a moment and
just take stock of what is happening in the marketplace. There
is a lot of good things happening out there in the
communications marketplace.
Now there is no question that the current economic boom
that we are experiencing in this country, the longest peacetime
expansion in our economy's history, is being fueled in large
measure by advances in the telecommunications business.
Over the past 3 years alone, revenues in the communications
sector have grown by over $100 billion, as indicated by these
charts here. The revenue among local service providers,
companies that are providing competition to the incumbent local
telephone companies, are way up. Their revenues more than
doubled in 1997, and jumped again in 1998.
And with these profits and growth, this industry has
expanded and over 200,000 jobs have been created in the past 5
years.
The wireless industry is another terrific example where we
have seen a lot of growth. I don't know if we have our wireless
chart here. Oh, there it is.
In that industry, since 1993, capital investment has more
than tripled for a cumulative total of $50 billion. Service is
becoming increasingly more reliable and affordable. Almost 70
million Americans are using wireless phones today in this
country. And Americans are paying 40 percent less for wireless
service than they were 3 years ago.
And I submit to you, Mr. Chairman, that this didn't just
happen. It happened because we have in this country what I
believe to be the right statutory and regulatory framework for
this growth. And I believe that Congress got it right in the
1996 act. You established a blueprint for growth and investment
and innovation that is working.
Now, obviously, the FCC needs to change. I think--I know
that every Commissioner before you has indicated that we need
to engage in this process of change and re-evaluation. And as I
have detailed in the report that I will submit as my written
testimony, it's a report entitled ``A New FCC for the 21st
Century,'' we expect the FCC to change. It has to change. We
have no choice.
I envision an FCC that is much more efficient, more
streamlined and focusing on what I think will be the three core
functions of the agency for the future. One is consumer
protection. As these markets become more competitive, there is
a dramatic increase in the demand for the FCC to protect
consumers in the marketplace. We see that with slamming and
cramming, and issues about disclosures on telephone bills.
Consumers are confused out there. They need an agency like
the FCC to protect them, to give them the information that they
need to make informed choices in the marketplace.
And universal service is another core function. As we heard
Mr. Huber say, this is a function that will have to be taken
over by Government, and Government will have a continuing role
in this area. Because we know that the market alone is not
going to ensure that our poorest Americans and Americans in
rural communities and inner cities have service.
And the third area is spectrum management. If we were to do
as some suggest and completely abdicate our responsibility to
manage the spectrum, one of our great national resources, there
would be absolute chaos in this country, I am convinced of
that.
So this agency has to focus on its continuing spectrum
management functions.
But I do believe, as has been suggested by you earlier,
that our mission will change and that the traditional
boundaries delineating the FCC's current operating bureaus will
become increasingly less relevant over time. And I believe, as
I set forth in my written testimony, that the FCC will look
very, very different over the next 3 to 5 years.
It will be doing very different things. We are beginning
that process already. This change is inevitable, and it is
necessary.
But I do want to stress that we want change, we don't want
chaos. The implementation of the 1996 act was a monumental task
undertaken by the FCC. And we are just now reaching a point
where some of the major jurisdictional issues that arose out of
that act, that were litigated in the courts, are being
resolved.
When I talk to business people and people on Wall Street
and, indeed, many of you, what we need is stability. This is
the message that I am hearing. Give us some predictability and
stability so that this framework can come to rest and we can
stay the course and continue the job of bringing competition to
these markets.
I am proud of the work that the FCC has done over the last
few years. I think that the FCC has undertaken this monumental
task in a very professional way, and I think we have a lot to
be proud of.
And the other thing that I would stress, and this has
really come home to me as I have had the privilege of meeting
with my counterparts from other countries, many of us around
the world today are working hard to bring competition to
telecommunications markets. This is not just an issue that we
are dealing with in this country. It is a worldwide movement.
And those of us who have really put our shoulder to the oar and
are doing the hard work of opening up these markets find that
this is not a popular job.
This doesn't make you popular to go to incumbent companies
and say, open your markets because we must have competition.
But it is an essential job because we have to get it done.
If we don't get it done, the alternative is there is going
to be an antitrust suit someday in the future and we are all
going to look back at this period in history, this pivotal
time, and say, gee, if only the FCC had stayed the course, been
a little more aggressive in opening these markets to
competition, perhaps we could have avoided divestiture of some
of these facilities.
The report that I have submitted is the first step in
developing a 5-year strategic plan for the agency. I hope to
get a lot of your feedback today and over the coming weeks. I
hope that we will hear from members of industry, consumer, and
many, many others on this plan. This should be a very public
process, where we solicit comment from a lot of people.
The changes that we are proposing in this plan are not
trivial at all. They are substantive, they call for a re-making
of the agency. So it is relevant in a rapidly changing
industry.
But no matter how it changes, the FCC must remain vigilant
in ensuring that its core functions are done, and that is
promoting competition, fostering the growth of new technology,
ensuring that we have universal service and good, quality
spectrum management.
And first and foremost, we've got to ensure that all
Americans participate in this revolution. I truly believe that
if we do not ensure that all Americans participate in all of
this economic growth, this revolution in communications will
have been a failed revolution.
But I know working with you and working with terrific staff
of the FCC that we can change the FCC, and we will change it
for the better.
Thank you, Mr. Chairman.
[The prepared statement of Hon. William E. Kennard
follows:]
Prepared Statement of William E. Kennard, Chairman, Feederal
Communications Commission
i. the federal communications commission and the changing
communications marketplace
A. Introduction
Congress enacted the Communications Act of 1934 to provide for the
widest dissemination of communications services to the public. Section
1 of the Communications Act states that the purpose of the Act is to
``make available . . . to all the people of the United States, without
discrimination . . . a rapid, efficient, Nation-wide, and world-wide
wire and radio communication service . . . at reasonable charges.''
This goal remains vibrant today. What has changed since 1934 is the
means to get to this goal. With the passage of the Telecommunications
Act of 1996 (Telecom Act), Congress recognized that competition should
be the organizing principle of our communications law and policy and
should replace micromanagement and monopoly regulation. The wisdom of
this approach has been proven in the long distance, wireless, and
customer premises equipment, where competition took hold and
flourished, and consumers receive the benefit of lower prices, greater
choices, and better service.
The imperative to make the transition to fully competitive
communications markets to promote the widest deployment of
communications services is more important today than ever before. In
1934, electronic communications for most Americans meant AM radio and a
telephone, and sending the occasional Western Union telegram. Today, it
means AM and FM radio, broadcast and cable TV, wireline and wireless
telephones, faxes, pagers, satellite technology, and the Internet--
services and technologies that are central to our daily lives.
Communications technology is increasingly defining how Americans
individually, and collectively as a nation, will be competitive into
the next century. It is increasingly defining the potential of every
American child. So the goal of bringing communications services quickly
to all Americans, without discrimination, at reasonable charges,
continues to be of paramount importance. Competition is the best way to
achieve this goal, while continuing to preserve and protect universal
service and consumer protection goals.
To accomplish this goal, our vision for the future of
communications must be a bold one. We must expect that in five years,
there can be fully competitive domestic communications markets with
minimal or no regulation, including total deregulation of all rate
regulation in competitive telephone services. In such a vibrant,
competitive communications marketplace, the Federal Communications
Commission (FCC) would focus only on those core functions that cannot
be accomplished by normal market forces. We believe those core
functions would revolve around universal service, consumer protection
and information; enforcement and promotion of pro-competition goals
domestically and internationally; and spectrum management. As a result,
the traditional boundaries separating the FCC's current operating
bureaus should no longer be relevant. In five years, the FCC should be
dramatically changed.
We are working to transition the FCC to that model--based on core
functions in a competitive communications market--now. We are writing
the blueprint for it, beginning with this report describing the steps
we are already taking. After receiving input from our key stakeholders,
we plan to develop this report into a five-year Strategic Plan which
will outline precisely our objectives and timetable year by year for
achieving our restructuring, streamlining, and deregulatory objectives.
We must work with Congress, state and local governments, industry,
consumer groups, and others to ensure that we are on the right track,
and that we have the right tools to achieve our vision of a fully
competitive communications marketplace.
B. The State of the Industry
In the Telecom Act, Congress directed the FCC to play a key role in
creating and implementing fair rules for this new era of competition.
Over the course of the past three years, the FCC has worked closely
with Congress, the states, industry, and consumers on numerous
proceedings to fulfill the mandates of the Telecom Act.
By many accounts, the Telecom Act is working. Many of the
fundamental prerequisites for a fully competitive communications
industry are now in place, competitive deployment of advanced broadband
services is underway, and the stage is set for continued deregulation
as competition expands.
Furthermore, by many measures, the communications industry is
thriving. Since the passage of the Telecom Act, revenues of the
communications sector of our economy have grown by over $100 billion.
This growth comes not only from established providers, but also from
new competitors, spurred by the market-opening provisions of the
Telecom Act. (See Appendix A, Charts 1 and 2) This growth has meant new
jobs for thousands of Americans.
In the wireless industry, capital investment has more than tripled
since 1993, with more than $50 billion of cumulative investment through
1998. Mobile phones are now a common tool for over 60 million people
every day, and the wireless industry has generated almost three times
as many jobs as in 1993. (See Appendix A, Chart 3)
Consumers are beginning to benefit from the thriving communications
sector through price reductions not only of wireless calls, but also of
long distance and international calls. (See Appendix A, Charts 4 and 5)
Consumers are also beginning to enjoy more video entertainment choices
through direct broadcast satellites, which are becoming viable
alternatives to cable. We are also at the dawn of digital TV, which
offers exciting new benefits for consumers in terms of higher quality
pictures and sound and innovative services. (See Appendix A, Charts 6
and 7) As we enter this digital age, broadcast TV and radio is still
healthy, ubiquitous, and providing free, local news, entertainment, and
information to millions of Americans across the country.
Beyond the traditional communications industries, the Internet has
truly revolutionized all of our lives. According to a recent study, at
least 38% of American adults (79.4 million) already are online and
another 18.8 million are expect to go online in the next year. In 1998,
26% of retailers had a website, over three times the number in 1996,
and it is estimated that they generated over $10 billion in sales. On-
line sales for 1999 are projected to be anywhere from $12 to $18
billion.
Communications markets are also becoming increasingly globalized as
the Telecom Act's procompetitive policies are being emulated around the
world. Other countries are modeling their new telecommunications
authorities after the FCC. As other countries open their communications
markets and increase their productivity, new services and business
opportunities are created for U.S. consumers and companies, as well as
for consumers and companies worldwide.
C. Communications in the 21st Century
Even more change is expected in the telecommunications marketplace
of tomorrow. In the new millennium, millions of consumers and
businesses will be able to choose from a range of services and
technologies vastly different from those available today. Packet-
switched networks, running on advanced fiber optics and using open
Internet Protocols to support seamless interconnection to transport
immense amounts of information, will be ubiquitous. Millions of homes
and businesses will be linked to this ``network of networks `` through
``always on'' broadband connections. Outside the wired confines of the
home or office, ``third generation'' wireless technologies will provide
high-speed access wherever a consumer may be. Satellite technology will
increase the ability to transfer data and voice around the world and
into every home.
Electronic commerce will play an even more central role in the
economy of the 21st Century. Americans in the next century will be
connected throughout the day and evening, relying on advanced
technologies not only to communicate with others, but also as a vital
tool for performing daily tasks (such as shopping or banking), for
interacting with government and other institutions (such as voting, tax
filing, health, and education), and for entertainment (such as video,
audio, and interactive games).
In the marketplace of tomorrow, it is expected that traditional
industry structures will cease to exist. The ``local exchange'' and
``long distance'' telephone markets will no longer be distinct industry
segments. Video and audio programming will be delivered by many
different transmission media. In a world of ``always on'' broadband
telecommunications, narrow-band applications--such as our everyday
phone calls--will represent just a tiny fraction of daily traffic.
Cable operators, satellite companies, and even broadcast television
stations will compete with today's phone companies in the race to
provide consumers a vast array of communications services. In addition,
telephone and utility companies may be offering video and audio
programming on a wide-scale basis. As cross-industry mergers, joint
ventures, and promotional agreements are formed to meet users' demand,
the traditional distinctions between these industry segments will blur
and erode.
D. Impact of Industry Convergence
Convergence across communications industries is already taking
place, and is likely to accelerate as competition develops further.
Thus, in addition to refocusing our resources on our core functions for
a world of fully competitive communications markets, the FCC must also
assess, with the help of Congress and others, how to streamline and
consolidate our policymaking functions for a future where convergence
has blurred traditional regulatory definitions and jurisdictional
boundaries.
The issues involved in thinking about convergence and consolidation
are complex. Prior to the Telecom Act, the core of the Communications
Act was actually three separate statutes: it incorporated portions of
the 1887 Interstate Commerce Act (governing telephony), the 1927
Federal Radio Act (governing broadcasting), and the 1984 Cable
Communications Policy Act (governing cable television). Telephony is
regulated one way, cable a second, terrestrial broadcast a third,
satellite broadcast a fourth. As the historical, technological, and
market boundaries distinguishing these industries blur, the statutory
differences make less and less sense. Maintaining them will likely
result in inefficient rules that stifle promising innovation and
increase opportunities for regulatory arbitrage.
Some argue for developing regulatory principles that cut across
traditional industry boundaries. For example, the policies of
interconnection, equal access, and open architecture have served
consumers well in the wireline context, a traditionally regulated
industry. Similarly, concepts of connectivity, interoperability, and
openness are the lifeblood of the Internet, an unregulated industry.
While these similar principles appear to cut across these different
media, it is unclear whether and how the government should be involved,
if at all, in applying these principles in a world where competition
will largely replace regulation.
At the very least, as competition develops across what had been
distinct industries, we should level the regulatory playing field by
leveling regulation down to the least burdensome level necessary to
protect the public interest. Our guiding principle should be to presume
that new entrants and competitors should not be subjected to legacy
regulation. This is not to say that different media, with different
technologies, must be regulated identically. Rather, we need to make
sure that the rules for different forms of media delivery, while
respecting differences in technology, reflect a coherent and sensible
overall approach. To the extent we cannot do that within the confines
of the existing statute, we need to work with Congress and others to
reform the statute.
ii. the 21st century: a new role for the fcc
A. The Transition Period
As history has shown, markets that have been highly monopolistic do
not naturally become competitive. Strong incumbents still retain
significant power in their traditional markets and have significant
financial incentives to delay the arrival of competition. Strong and
enforceable rules are needed initially so that new entrants have a
chance to compete. At the same time, historical subsidy mechanisms for
telecommunications services must be reformed to eliminate arbitrage
opportunities by both incumbents and new entrants.
The technologies needed for the telecommunications marketplace of
the future are still evolving, and developing them fully requires
significant time and investment. Moreover, there is no guarantee that
market forces will dictate that these new technologies will be
universally deployed. The massive fixed-cost investments required in
some industries will mean that new technologies initially will be
targeted primarily at businesses and higher-income households. Even as
deployment expands, the economics of these new networks may favor heavy
users over lighter users, and in some areas of the country deployment
may lag behind.
At the same time, consumer preferences will not change overnight.
The expansion of communications choices is already leading to greater
consumer confusion. Especially in a world of robust competition,
consumers will need clear and accurate information about their choices,
guarantees of basic privacy, and swift action if any company cheats
rather than competes for their business.
While the opportunities for the United States and the world of a
global village are enormous, they can only be realized if other
countries follow our lead in fostering competition in national and
world markets. People all over the world benefit as more countries
enter the Information Age and become trading partners. Thus, as we
continue on our own course of bringing competition to former domestic
monopoly markets, we must also continue to promote open and competitive
markets worldwide.
In sum, although the long-term future of the telecommunications
marketplace looks bright, the length and difficulty of the transition
to that future is far from certain. To achieve the goal of fully
competitive communications markets in five years, we must continue to
work to ensure that all consumers have a choice of local telephone
carriers and broadband service providers, and that companies are
effectively deterred from unscrupulous behavior. We must also continue
to promote competition between different media, promote the transition
to digital technology, and continue to ensure that all Americans have a
wide and robust variety of entertainment and information sources.
B. The FCC's Role During the Transition to Competition
During the transition to fully competitive communications markets,
the FCC, working in conjunction with the states, Congress, other
federal agencies, industry, and consumer groups, has six critical
goals, all derived from the Communications Act and other applicable
statutes:
Promote Competition: Goal number one is to promote competition
throughout the communications industry, particularly in the area of
local telephony. The benefits of competition are well documented in
many communications sectors--long distance, wireless, customer-premises
equipment, and information services. The benefits of local telephone
competition are accruing at this time to large and small companies, but
not, for the most part, to residential consumers. We must work to
ensure that all communications markets are open, so that all consumers
can enjoy the benefits of competition.
To meet this goal, we must continue our efforts to clarify the
provisions of the Telecom Act relating to interconnection and unbundled
network elements, work with the Bell Operating Companies (BOCs), their
competitors, states and consumer groups on meeting the requirements of
the statute related to BOC entry into the long distance market, reform
access charges, and, as required by Sections 214 and 310(d) of the
Communications Act and section 7 of the Clayton Act, continue to review
mergers of telecommunications companies that raise significant public
interest issues related to competition and consumers.
In the mass media area, we must continue the pro-competitive
deployment of new technologies, such as digital television and direct
broadcast satellites, and the maintenance of robust competition in the
marketplace of ideas. To meet these goals, we must continue rapid
deployment of new technologies and services and regular oversight of
the structure of local markets to ensure multiple voices, all the while
updating our rules to keep pace with the ever-changing mass media
marketplace.
Deregulate: Our second goal is to deregulate as competition
develops. Consumers ultimately pay the cost of unnecessary regulation,
and we are committed to aggressively eliminating unnecessarily
regulatory burdens or delays. We want to eliminate reporting and
accounting requirements that no longer are necessary to serve the
public interest. Also, where competition is thriving, we intend to
increase flexibility in the pricing of access services. We have already
deregulated the domestic, long distance market as a result of increased
competition, and we stand ready to do so for other communications
markets as competition develops. We have also streamlined our rules and
privatized some of the functions involved in the certification of
telephones and other equipment. We are currently streamlining and
automating our processes to issue licenses faster, resolve complaints
quicker, and be more responsive to competitors and consumers in the
marketplace.
Protect Consumers: Our third goal is to empower consumers with the
information they need to make wise choices in a robust and competitive
marketplace, and to protect them from unscrupulous competitors.
Consumer bills must be truthful, clear, and understandable. We will
have ``zero tolerance'' for perpetrators of consumer fraud such as
slamming and cramming. We will make it easier for consumers to file
complaints by phone or over the Internet, and reduce by 50 percent the
time needed to process complaints. Further, we will remain vigilant in
protecting consumer privacy. We will also continue to carry out our
statutory mandates aimed at protecting the welfare of children, such as
the laws governing obscene and indecent programming.
Bring Communications Services and Technology to Every American: Our
fourth goal is to ensure that all Americans--no matter where they live,
what they look like, what their age, or what special needs they have--
should have access to new technologies created by the communications
revolution. Toward this end, we must complete universal service reform
to ensure that communications services in high-cost areas of the nation
are both available and affordable. We must also ensure that our support
mechanisms and other tools to achieve universal service are compatible
and consistent with competition. We must evaluate--and if necessary,
improve--our support mechanisms for low-income consumers, and in
particular Native Americans, whose telephone penetration rates are some
of the lowest in the country. We must make certain that the support
mechanisms for schools, libraries, and rural health care providers
operate efficiently and effectively. We must make sure that the 54
million Americans with disabilities have access to communications
networks, new technologies and services, and news and entertainment
programming.
Foster Innovation: Our fifth goal is to foster innovation. We will
promote the development and deployment of high-speed Internet
connections to all Americans. That means clearing regulatory hurdles so
that innovation--and new markets--can flourish. We must continue to
promote the compatibility of digital video technologies with existing
equipment and services. Further, we will continue to encourage the more
efficient use of the radio spectrum so that new and expanding uses can
be accommodated within this limited resource. More generally, we will
continue to promote competitive alternatives in all communications
markets.
Advance Competitive Goals Worldwide: Our sixth goal is to advance
global competition in communications markets. The pro-competitive
regulatory framework Congress set forth in the Telecom Act is being
emulated around the world through the World Trade Organization
Agreement. We will continue to assist other nations in establishing
conditions for deregulation, competition, and increased private
investment in their communications infrastructure so that they can
share in the promise of the Information Age and become our trading
partners. We must continue to intensify competition at home and create
growth opportunities for U.S. companies abroad. We will continue to
promote fair spectrum use by all countries.
C. The FCC's Core Functions in a Competitive Environment
As we accomplish our transition goals, we set the stage for a
competitive environment in which communications markets look and
function like other competitive industries. At that point, the FCC must
refocus our efforts on those functions that are appropriate for an age
of competition and convergence. In particular, we must refocus our
efforts from managing monopolies to addressing issues that will not be
solved by normal market forces. In a competitive environment, the FCC's
core functions would focus on:
Universal Service, Consumer Protection and Information. The FCC
will continue to have a critical responsibility, as dictated by our
governing statutes, to support and promote universal service and other
public interest policies. The shared aspirations and values of the
American people are not entirely met by market forces. Equal access to
opportunity as well as to the public sphere are quintessential American
values upon which the communications sector will have an increasingly
large impact. We will be expected to continue to monitor the
competitive landscape on behalf of the public interest and implement
important policies such as universal service in ways compatible with
competition.
In addition, as communications markets become more competitive and
take on attributes of other competitive markets, the need for increased
information to consumers and strong consumer protection will increase.
We must work to ensure that Americans are provided with clear
information so that they can make sense of new technologies and
services and choose the ones best for them. We must also continue to
monitor the marketplace for illegal or questionable market practices.
Enforcement and Promotion of Pro-Competition Communications Goals
Domestically and Worldwide. As markets become more competitive, the
focus of industry regulation will shift from protecting buyers of
monopoly services to resolving disputes among competitors, whether over
interconnection terms and conditions, program access, equipment
compatibility, or technical interference. In the fast-paced world of
competition, we must be able to respond swiftly and effectively to such
disputes to ensure that companies do not take advantage of other
companies or consumers.
The FCC is a model for other countries of a transparent and
independent government body establishing and enforcing fair, pro-
competitive rules. This model is critical for continuing to foster fair
competition domestically as well as to open markets in other countries,
to the benefit of U.S. consumers and firms and consumers and firms
worldwide. There always will be government-to-government relations and
the need to coordinate among nations as communications systems become
increasingly global. As other nations continue to move from government-
owned monopolies to competitive, privately-owned communications firms,
they will increasingly look to the FCC's experience for guidance.
Spectrum Management. The need for setting ground rules for how
people use the radio spectrum will not disappear. We need to make sure
adequate spectrum exists to accommodate the rapid growth in existing
services as well as new applications of this national and international
resource. Even with new technologies such as software-defined radios
and ultra-wideband microwave transmission, concerns about interference
will continue (and perhaps grow) and the need for defining licensees
and other users' rights will continue to be a critical function of the
government. We will thus continue to conduct auctions of available
spectrum to speed introduction of new services. In order to protect the
safety of life and property, we must also continue to consider public
safety needs as new spectrum-consuming technologies and techniques are
deployed.
D. Coordination with State and Local Governments and other Federal
Agencies
In order to fulfill our vision of a fully competitive
communications marketplace in five years, we need a national, pro-
competitive, pro-consumer communications policy, supplemented by state
and local government involvement aimed at achieving the same goal. The
Telecom Act set the groundwork for this goal, and the Commission is
fulfilling its role of establishing the rules for opening
communications markets across the country, in partnership with state
regulators. The Commission must continue to work with state and local
governments to promote competition and protect consumers. Toward this
end, we have instituted a Local and State Government Advisory Committee
to share information and views on many critical communications issues.
The importance of working and coordinating our efforts in the
communications arena with other federal agencies will also continue. We
work particularly closely with the Federal Trade Commission on consumer
and enforcement issues, and with the Department of Justice on
competition issues. We also work with other federal agencies on public
safety, disability, Y2K, reliability, and spectrum issues, just to name
a few. We see our role vis-a-vis other federal agencies as cooperative
and reinforcing, where appropriate.
iii. the 21st century: a new structure for the fcc
A. The FCC's Evolving Structure
The FCC must change its structure to match the fast-paced world of
competition and to meet our evolving goals and functions, as derived
from our authorizing statutes. Our transition goals must be
accomplished with minimal regulation or no regulation where appropriate
in a competitive marketplace. Moreover, a restructured and streamlined
FCC must be in place once full competition arrives, so that we can
focus on providing consumers information and protection, enforcing
competition laws, and spectrum management.
In sum, we must be structured to react quickly to market
developments, to work more efficiently in a competitive environment,
and to focus on bottom-line results for consumers. As competition
increases, we must place greater reliance on marketplace solutions,
rather than the traditional regulation of entry, exit, and prices; and
on surgical intervention rather than complex rules in the case of
marketplace failure. We must encourage private sector solutions and
cooperation where appropriate. But we also must quickly and effectively
take necessary enforcement action to prevent abuses by communications
companies who would rather cheat than compete for consumers.
Ultimately, throughout the agency, we must be structured to render
decisions quickly, predictably, and without imposing unnecessary costs
on industry or consumers.
B. Current Restructuring Efforts
The FCC is currently structured along the technology lines of wire,
wireless, satellite, broadcast, and cable communications. As the lines
between these industries merge and blur as a result of technological
convergence and the removal of artificial barriers to entry, the FCC
needs to reorganize itself in a way that recognizes these changes and
prepares for the future. A reorganization of the agency, over time,
along functional rather than technology lines will put the FCC in a
better position to carry out its core responsibilities more
productively and efficiently.
As the first step in this process, in October 1998, Chairman
Kennard announced plans to consolidate currently dispersed enforcement
functions into a new Enforcement Bureau and currently dispersed public
information functions into a Public Information Bureau. The
consolidation of these two key functions that are now spread across the
agency will improve efficiency and enhance the delivery of these
services to the general public and to industry. The consolidation of
these functions will also encourage and foster cooperation between the
two new bureaus, other bureaus and offices, and state and local
governments and law enforcement agencies. The end result will be
improvements in performance of both these functions through an improved
outreach program, a better educated communications consumer, and a more
efficient, coherent enforcement program.
The new Enforcement Bureau will replace the current Compliance and
Information Bureau and, likewise, the new Public Information Bureau
will include the current Office of Public Affairs. Therefore, the total
number of bureaus and offices at the Commission will remain the same.
The Commission is also investing in new technology to process
applications and licenses faster, cheaper, and in a more consumer
friendly way through electronic filing and universal licensing. Our
goal is to move to a ``paperless FCC'' that will result in improved
service to the public. Examples of these efforts include universal
licensing, streamlined application processes, revised and simplified
licensing forms, blanket authorizations, authorization for unlicensed
services, and electronic filing of license applications and
certifications.
1. Enforcement Bureau
Since the Telecom Act was passed, telephone-related complaints have
increased by almost 100%. In 1996, the Common Carrier Bureau received
over 28,000 complaints; in 1998, that number increased to over 53,000
complaints. With the increase in competition, we expect even more
complaints to be filed as consumers grapple with changes in both
service options and providers. While we have been implementing
streamlined, electronic processes to address this burgeoning workload,
we have also determined that the consolidation of the Commission's
currently dispersed enforcement functions into one Enforcement Bureau
is a necessary and important step to providing better service to the
public.
The Commission currently has four organizational units dedicated
principally or significantly to enforcement--the Compliance and
Information Bureau, the Mass Media Bureau Enforcement Division, the
Common Carrier Bureau Enforcement Division and the Wireless
Telecommunications Bureau Enforcement and Consumer Information
Division. Consolidating most enforcement responsibilities of these
organizations into a unified Enforcement Bureau will result in more
effective and efficient enforcement. The Enforcement Bureau will
coordinate enforcement priorities and efforts in a way that best uses
limited Commission resources to ensure compliance with the important
responsibilities assigned to the FCC by Congress.
The consolidation of various FCC enforcement functions also
responds to the fact that the need for effective enforcement of the
Communications Act and related requirements is becoming even more
important as competition and deregulation increase. As communications
markets become increasingly competitive, the pace of deregulation will
intensify. Those statutory and rule provisions that remain in an
increasingly competitive, deregulatory environment will be those that
Congress and the Commission have determined remain of central
importance to furthering key statutory goals--e.g., providing a
structure for competition to flourish, assisting customers and users of
communications services in being able to benefit from competitive
communications services, ensuring that spectrum is used in an efficient
manner that does not create harmful interference, and promoting public
safety.
As unnecessary regulation is eliminated and the demands of the
marketplace increase, the Commission must focus its resources on
effective and swift enforcement of the statutory and regulatory
requirements that remain. The consolidation of our enforcement
activities will allow us to do just that in a streamlined, centralized,
and more effective way.
2. Public Information Bureau
Consumer inquiries at the Commission have increased dramatically
since 1996. In 1998, we received over 460,000 phone calls to telephone
service representatives, and over 600,000 calls to our automated
response system. There were on average over 266,000 hits on the FCC's
web site a day, totalling over 97 million in 1998 (up over 400% from 21
million in 1996). We expect these numbers to increase as more consumers
seek information regarding the ever growing array of services and
providers in the communications marketplace.
Currently, consumer inquiries are handled by several different
offices and bureaus throughout the Commission and the methods used to
handle these inquiries vary widely. While each office has a small
contingent of staff handling inquiries, they have had varying degrees
of success in meeting the ever increasing volume. Although the
Commission established a National Call Center in June 1996, current
processes still require a great number of consumers seeking information
to contact other offices and bureaus directly to get their questions
answered.
The creation of the Public Information Bureau allows the Commission
to better serve the public by establishing a single source organization
as a ``one-stop'' shop or ``FCC General Store'' for handling all
inquiries and the general expression of views to the Commission,
thereby better meeting the public's information needs. Merging the
resources of the Office of Public Affairs, which includes public
service and inquiry staffs, public notice distribution, and the
management of the FCC web site, with the FCC Call Center will provide a
streamlined, more efficient, and consolidated information source for
the public. Consumers would only have to contact one source, whether by
telephone (1-888-CALLFCC) or by E-mail or the Internet
([email protected]). The Public Information Bureau also plans to
establish one source for mailing inquiries to the FCC (for example,
P.O. FCC).
The creation of the Public Information Bureau will encourage more
public participation in the work of the Commission. The staff of the
Public Information Bureau will conduct consumer forums across the
country to inform and solicit feedback from consumers about the
Commission's policies, goals, and objectives. This feedback will be
shared with other bureaus to help ensure that Commission rules are
fair, effective, and sensible, and that they support competition while
responding to consumer concerns. The Public Information Bureau also
plans to share its databases with state and local governments as
appropriate, to coordinate our respective abilities to respond to
consumer complaints and track and address industry abuses.
The creation of the Public Information Bureau supports the
Commission's efforts to foster a pro-competitive, deregulatory, and
pro-consumer approach to communications services. The staff of the
Public Information Bureau will provide consumers with information so
that consumers can make informed decisions regarding their
communications needs. The staff of the Public Information Bureau will
also work with other bureaus to issue consumer alerts and public
service announcements to give consumers information about their rights
and information to protect themselves from unscrupulous individuals and
firms. Finally, the Public Information Bureau will provide easy public
access to FCC information as well as a convenient way for the public to
make its views known, thus supporting the Commission's efforts to
assist communities across America in dealing with complex
communications issues and to provide opportunities for a wide range of
voices to be expressed publicly.
3. Streamlining and Automating the FCC Licensing Process
The Commission's ``authorization of service'' activities cover the
licensing and authorization through certification, and unlicensed
approval, of radio stations and devices, telecommunications equipment
and radio operators, as well as the authorization of common carrier and
other services and facilities. The Commission has already begun
automating and reengineering our authorization of service processes
across the agency by reengineering and integrating our licensing
databases and through the implementation of electronic filing.
The Universal Licensing System (ULS) project is fundamentally
changing the way the Commission receives and processes wireless
applications. ULS will combine all licensing and spectrum auctions
systems into a single, integrated system. It collapses 40 forms into
four; allows licensees to modify online only those portions of the
license that need to be modified without resubmitting a new
application; and advises filers when they have filled out an
application improperly by providing immediate electronic notification
of the error. During the month of February 1999, 75% of receipts (916
applications) filed under the currently implemented portions of ULS
were processed in one day.
Universal licensing is an example of how we are working to change
the relationship between the Commission, spectrum licensees, and the
public by increasing the accessibility of information and speeding the
licensing process, and thus competitive entry, dramatically. Universal
licensing is becoming the model for automated licensing for the entire
agency.
In the Wireless Telecommunications Bureau, electronic filing has
been fully implemented throughout the Land Mobile Radio services,
antenna registration, and amateur radio filings. More than 50% of the
Wireless Telecommunications Bureau's filings are now accomplished
electronically. Significant service improvements are evidenced by the
fact that 99% of Amateur Radio service filings are now processed in
less than five days, with most electronically filed applications being
granted overnight. The Wireless Bureau also has an initiative to
transfer the knowledge used by license examiners in manually reviewing
applications to computer programs so that applications can be received,
processed, and licenses granted in even less time.
The Mass Media Bureau is implementing a similar electronic filing
initiative. In October, the FCC issued rules that substantially revise
the application process in 15 key areas, including sales and license
renewals, in order to effectuate mandatory electronic filing for
broadcasters. When fully implemented, the new electronic filing system
will reduce the resources required to process authorizations,
accelerate the grant of authorizations, and improve public access to
information about broadcast licensees.
The Common Carrier Bureau has also implemented electronic filing of
tariffs and associated documents via the Internet. The Electronic
Tariff Filing System enables interested parties to access and download
documents over the Internet, and to file petitions to reject, or
suspend and investigate tariff filings electronically. Since July 1,
1998, over 10,000 electronic tariff filings have been received,
replacing approximately 750,000 pages of information.
The results of all these streamlining efforts include a more
economical use of FCC personnel resources, improvement in processing
times, the ability of our customers to file via the Internet or through
other electronic filing mechanisms, and the ability to provide our
customers with immediate status reports on their applications as well
as real time access to on-line documents. It is estimated that our move
toward a ``paperless FCC'' will save the public approximately 700,000
hours of paperwork in this fiscal year alone.
4. Budget and Workforce Impact
In anticipation of the expected increased efficiencies our
restructuring plans and other streamlining and automation improvements
will produce, the FCC is confronting the issue of how it should look
and operate in FY 2000 and beyond. We expect that our re-engineering
and restructuring efforts will yield increased efficiencies and
streamlining opportunities, particularly in the area of authorization
of service, due to automation and regulatory changes. However, these
efforts will also result in the potential displacement of staff in
certain locations and a need to retrain and reassign other staff.
Buyout authority is a tool that will enhance the Commission's
ability to alter the skills mix of its workforce to carry out its
changing mission more effectively. Targeted buyouts for staff would
facilitate our restructuring efforts in a cost-effective manner. The
Commission has requested buyout authority in its budget request for FY
2000.
The Commission is dedicated to keeping staff informed and involved
in our restructuring and streamlining efforts, and to minimizing
workplace disruption that may result from these efforts through staff
retraining, reassignment, and other methods. It is critical, as we
consider ways to restructure and streamline Commission operations, that
we continue to recognize and respect the hard work of our employees,
many of whom have been with the Commission for many years. Change is
always difficult, and it is imperative that our staff understands and
supports the necessary changes that are taking place--and will continue
to take place--at the Commission. Accordingly, we are working closely
with the National Treasury Employees Union (NTEU) to ensure that staff
is involved in all these issues and that their views are incorporated
into the Commission's planning process.
5. Restructuring Process and Timeline
Planning for the Public Information Bureau began in late November
1998 and for the Enforcement Bureau in mid-December 1998. A Task Force
comprised of both managers and staff from relevant Bureaus and Offices,
as well as NTEU representatives, has been meeting regularly since early
January to consider such issues as the appropriate functions of each of
the Bureaus and their organization. Efforts have also been made on an
informal basis both inside and outside the Commission to ensure that a
wide range of ideas are considered during the planning process. A
proposed reorganization plan should be formally submitted to the
Commission for its consideration in Spring, 1999. Upon approval by the
Commission, it will be formally submitted to the NTEU and appropriate
congressional committees.
C. Restructuring to Reflect Industry Convergence
As the traditional lines dividing communications industries blur
and eventually erode, the traditional ways of regulating or monitoring
these industries will also have to change. The FCC must think about the
complex issues resulting from converging communications markets from
both a policy and structural perspective. How the FCC should be
structured to address issues arising from a more competitive, converged
communications marketplace is inextricably tied up with the policy
choices that will be made on how to address the blurring of regulatory
distinctions.
From a structural perspective, as noted in our FY2000 budget
submitted to Congress, there are a number of steps we are committed to
take. We will continue to evaluate whether certain regulations are no
longer necessary in the public interest and should be repealed or
modified as required by Section 11 of the Communications Act. We will
continue to use our forbearance authority where appropriate. We will
continue our efforts to reduce reporting requirements and eliminate
unnecessary rules, and to level regulation to the least burdensome
possible, consistent with the public interest. In addition, in our FY
2000 budget, we have committed to reviewing our cable services and mass
media functions.
We recognize that much additional analysis is needed to consider
the impact of industry convergence on the FCC's policies and rules and
on our structure. We will continue to meet with Congress, our state
regulatory partners, industry, consumer groups, and others to solicit
input and feedback on our restructuring, streamlining and policy
initiatives and the impact of industry convergence.
iv. substantive deregulation efforts
As telecommunications markets become more competitive, we must
eliminate regulatory requirements that are no longer useful. We are
already engaged in an ongoing process of reviewing our entire
regulatory framework to see which rules should be eliminated or
streamlined.
A. FCC Biennial Review of Regulations
In November 1997, the Commission initiated a review of the
Commission's regulations, as required by Section 11 of the Telecom Act.
Beginning in 1998 and in every even-numbered year thereafter, the FCC
must conduct a review of its regulations regarding the provision of
telecommunications service and the Commission's broadcast ownership
rules. The Telecom Act charges the Commission with determining whether,
because of increased competition, any regulation no longer serves the
public interest.
Chairman Kennard announced in November 1997 that the Commission's
1998 Biennial Review would be even broader than mandated by the Telecom
Act. In addition, at the Chairman's direction, the Commission
accelerated the Congressionally-mandated biennial review requirement by
beginning in 1997 rather than in 1998. As part of the 1998 Biennial
Review, each of the operating bureaus, together with the Office of
General Counsel, hosted a series of public forums and participated in
practice group sessions with the Federal Communications Bar Association
to solicit informal input from the public. The Commission also hosted a
web site on the biennial review and asked for additional suggestions
via e-mail.
After input from the public, the Commission initiated 32 separate
biennial review rulemaking proceedings, covering multiple rule parts,
aimed at deregulating or streamlining Commission regulations. The
Commission devoted substantial attention and resources to the biennial
review. Roughly two-thirds of the proceedings involved common carrier
deregulation or streamlining. The Commission also instituted a broad
review of its broadcast ownership rules. To date, the Commission has
adopted orders in ten of the 1998 biennial review proceedings, with
others to be forthcoming. (See Appendix B)
From the outset, the focus of the Biennial Review has been on
regulating in a common sense manner and relying on competition as much
as possible. The Chairman and the other Commissioners have worked
together to make the biennial review a meaningful force for
deregulation and streamlining. The 1998 review was the Commission's
first biennial review, and was being conducted while the Commission was
still in the process of implementing the Telecom Act. The Chairman and
the Commission intend to build on the 1998 review so that the 2000
review and future reviews will produce even more deregulatory actions.
B. Continued FCC Deregulation Efforts
As we move toward our goal of fully competitive communications
markets, our efforts to streamline and eliminate unnecessary rules must
be increased and expanded. Accordingly, the 2000 Biennial Review will
be a top priority for the Commission.
As we did with the 1998 review, we plan to start the 2000 review
early, by putting a team in place in 1999 to work with the
Commissioners and the Bureaus and Offices on planning and structuring
the review. We will also continue to keep our review broad in focus.
The team would evaluate the success of the 1998 review and consider
whether changes are necessary for the 2000 review. The team would also
consider whether any changes are needed in the methodology we have used
to review our regulations. The team would again solicit input and
recommendations from state regulators, industry, consumer groups, and
others, to ensure that the 2000 review is a major force for
deregulation.
In short, we will be guided by one principle: the elimination of
rules that impede competition and innovation and do not promote
consumer welfare.
v. strategic planning efforts
A. Background
The Government Performance and Results Act of 1993 (Results Act)
provides a useful framework for a federal agency to develop a strategic
plan. The Results Act recommends including as part of such a plan: a
comprehensive mission statement; a description of the general goals the
agency wants to achieve and how they will be achieved; a discussion of
the means, strategies and resources required to achieve our goals; a
discussion of the external factors that could affect achievement of our
goals; and a discussion of the consultations that took place with
customers and stakeholders in the development of the plan.
The Results Act also recommends that an agency establish measurable
objectives and a timeline to achieve the goals specified in the
strategic plan. The agency would consult with Congress and solicit
input from its customers and stakeholders. The purpose of the Results
Act is to bring private sector management techniques to public sector
programs.
B. FCC Implementation of the Results Act
When the Results Act was passed, the FCC was already hard at work
implementing similar management initiatives. In 1993, we began the work
of reinventing ourselves, streamlining and restructuring the agency to
meet the challenges of the Information Age. In the process we created
the Wireless Telecommunications and the International Bureaus. In 1995,
we issued a report--``Creating a Federal Communications Commission for
the Information Age''--that included numerous recommendations for
administrative and legislative changes, many of which were subsequently
adopted.
Each of our bureaus and offices developed their own mission
statement, identified their customers and surveyed them on their needs.
Benchmark customer service standards were established for each of their
policy and rulemaking, authorization of service, enforcement and public
information service activities. These standards were published on their
websites and customers were periodically surveyed to determine whether
their service goals were being met.
We also volunteered to participate in Results Act implementation
pilot projects, naming the Wireless Telecommunications Bureau's Land
Mobile radio and the Office of Engineering and Technology's Equipment
Authorization activities as the agency's two participants. We organized
a Steering Committee with an ambitious schedule for completing the
requirements of the Results Act.
C. Impact of the Telecom Act
Enactment of the Telecom Act in February 1996 had a profound impact
on the FCC. Pursuant to the Telecom Act, the FCC was required to
initiate numerous rulemakings, many with statutorily mandated and
expedited notice and comment period. The impact of implementing the
Telecom Act affected every aspect of the FCC--its resource allocations,
its schedule for rulemakings, and its very organizational structure--
for more than two years.
Enactment of the Telecom Act also changed the scope and level of
our Results Act planning effort. We had to reformulate our mission and
performance goals in light of the Telecom Act. We decided for the first
three years after passage of the Telecom Act to marry the major goal of
the Act--to ``promote competition and reduce regulation in order to
secure lower prices and higher quality services for American
telecommunications consumers and encourage the rapid deployment of
telecommunications technologies''--with the FCC's four major budget
activities of policy and rulemaking, authorization of service,
compliance, and public information services.
This approach worked well during the major period that the FCC was
implementing the Telecom Act. Under this approach, however, the
performance goals for each of the individual Bureaus remained a
somewhat disconnected patchwork of objectives reflecting a collection
of individual Bureaus' efforts to implement the Telecom Act. Since
passage of the Telecom Act, with the traditional distinctions between
over-the-air broadcasting, cable, wireless, wireline and satellite
becoming less distinct, it is becoming clear that the FCC must conceive
a new approach to our mission and our structure.
D. New FCC Strategic Plan
The FCC has determined that we need a new regulatory model and a
new Strategic Plan that will serve as the Commission's blueprint as we
enter the 21st Century. We need a new Strategic Plan to point the way
to where we want to be and the means and resources by which we will get
there.
We are generally structuring our Strategic Plan based on our
future core functions: universal service, consumer protection and
information; enforcement and promotion of pro-competition
communications goals domestically and internationally; and spectrum
management. Our strategic planning efforts are thus tied into the
restructuring and streamlining efforts that are already on-going. In
addition, as noted above, we must take a hard look at how to organize
ourselves for the New Media age. The convergence of technologies and
industries require that we examine and change our stovepipe bureau
structure, and we plan to address those issues in our Strategic Plan as
well.
Key senior managers will be responsible for developing the
strategic objectives and performance goals for the Strategic Plan. As
our work on restructuring proceeds, we will convene strategic objective
planning sessions to develop a planning document for each of our core
activities. We will also develop a schedule, based on fiscal years, on
how we will achieve our objectives.
The Strategic Plan will represent the cooperative work of the
entire FCC, reflecting input from the Commissioners, Bureau management,
agency staff, and others affected by or interested in the FCC's
activities. In developing our Strategic Plan, we have already started
to seek input from a wide variety of FCC stakeholders and intend to
intensify our efforts in the next few months. These include other
Commissioners, Commission staff, Members of Congress and their staff,
the Office of Management and Budget (OMB), industry groups, consumer
groups, academia and others. Suggestions will be gathered on both the
draft Strategic Plan and on the steps to implement it--including
deregulatory actions, restructuring and realignment of FCC functions
and management. In addition, we plan to incorporate comments on this
document, ``A New FCC for the 21st Century,'' into the draft Strategic
Plan.
Our draft Strategic Plan, along with any implementation proposals,
will be made public and we will actively solicit comment. We will issue
a Public Notice encouraging the public to comment on our draft plan,
which will be displayed on our Internet Home Page by July 1999. We will
hold a series of meetings with interested groups to gain their insight
into how we can better serve the public interest. We will make
particular efforts to discuss the draft plan with Congress, the states,
industry, and with consumers and small companies affected by our work.
We plan to submit a more final plan to Congress and OMB in September
1999.
vii. conclusion
Just as the communications industry and other sectors of our
economy are constantly adapting to change and competition, so must the
FCC. A new century and new economy demand a new FCC. We must plan for
the future, while continuing to work on the challenges we face today to
promote competition, foster innovation, and help bring the benefits of
the 21st century to all Americans. We look forward to working with
Congress, industry, consumers, state and local governments, and others
on a critical assessment of what the ``New FCC'' should look like, and
how we can get there.
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APPENDIX B
1998 BIENNIAL REGULATORY REVIEW
I. Proceedings Initiated/Completed--Orders Issued
telecommunications providers (common carriers)
Streamline and consolidate rules governing application
procedures for wireless services to facilitate introduction of
electronic filing via the Universal Licensing System. 1998
Biennial Regulatory Review--Amendment of Parts 0, 1, 13, 22,
24, 26, 27, 80, 87, 90, 95, 97, and 101 of the Commission's
Rules to Facilitate the Development and Use of the Universal
Licensing System in the Wireless Telecommunications Services,
WT Dkt No. 98-20, NPRM, FCC 98-25 (rel. March 19, 1998), R&O,
FCC 98-234 (rel. Oct. 21, 1998).
Streamline the equipment authorization program by
implementing the recent mutual recognition agreement with
Europe and providing for private equipment certification. 1998
Biennial Regulatory Review--Amendment of Parts 2, 25 and 68 of
the Commission's Rules to Further Streamline the Equipment
Authorization Process for Radio Frequency Equipment, Modify the
Equipment Authorization Process for Telephone Terminal
Equipment, Implement Mutual Recognition Agreements and Begin
Implementation of the Global Mobile Personal Communications by
Satellite (GMPCS) Arrangements, GEN Dkt No. 98-68, NPRM, FCC
98-92 (rel. May 18, 1998), R&O, FCC 98-338 (rel. Dec. 23,
1998).
Eliminate rules concerning the provision of telegraph and
telephone franks. 1998 Biennial Regulatory Review--Elimination
of Part 41 Telegraph and Telephone Franks, CC Dkt No. 98-119,
NPRM, FCC 98-152 (rel. July 21, 1998), R&O, FCC 98-344 (rel.
Feb. 3, 1999).
In addition to addressing issues remanded by the Ninth
Circuit, reexamine the nonstructural safeguards regime
governing the provision of enhanced services by the Bell
Operating Companies (BOCs) and eliminate the requirement that
BOCs receive pre-approval from the FCC on their Comparably
Efficient Interconnection (CEI) plans. Computer III Further
Remand Proceedings: Bell Operating Company Provision of
Enhanced Services; 1998 Biennial Regulatory Review--Review of
Computer III and ONA Safeguards and Requirements, CC Dkt Nos.
95-20 and 98-10, FNPRM, FCC 98-8 (rel. Jan. 30, 1998), R&O, FCC
99-36 (rel. March 10, 1999).
other
Amend cable and broadcast annual employment report due
dates to streamline and simplify filing. 1998 Biennial
Regulatory Review--Amendment of Sections 73.3612 and 76.77 of
the Commission's Rules Concerning Filing Dates for the
Commission's Equal Employment Opportunity Annual Employment
Reports, MO&O, FCC 98-39 (rel. Mar. 16, 1998).
Streamline broadcast filing and licensing procedures. 1998
Biennial Regulatory Review-- Streamlining of Mass Media
Applications, Rules and Processes, MM Dkt No. 98-43, NPRM, FCC
98-57 (rel. Apr. 3, 1998), R&O, FCC 98-281 (rel. Nov. 25,
1998).
Provide for electronic filing for assignment and change of
radio and TV call signs. 1998 Biennial Regulatory Review--
Amendment of Part 73 and Part 74 Relating to Call Sign
Assignments for Broadcast Stations, MM Dkt No. 98-98, NPRM, FCC
98-130 (rel. June 30, 1998), R&O, FCC 98-324 (rel. Dec. 16,
1998).
Simplify and unify Part 76 cable pleading and complaint
process rules. 1998 Biennial Regulatory Review--Part 76--Cable
Television Service Pleading and Complaint Rules, CS Dkt No. 98-
54, NPRM, FCC 98-68 (rel. Apr. 22, 1998), R&O, FCC 98-348 (rel.
Jan. 8, 1999).
Modify or eliminate Form 325, annual cable television
system report. 1998 Biennial Regulatory Review--``Annual Report
of Cable Television System,'' Form 325, Filed Pursuant to
Section 76.403 of the Commission's Rules, CS Dkt No. 98-61,
NPRM, FCC 98-79 (rel. Apr. 30, 1998), R&O, FCC 99-12 (rel. ,
1999) [Adopted Feb. 1, 1999].
Streamline and consolidate public file requirements
applicable to cable television systems. 1998 Biennial
Regulatory Review--Streamlining of Cable Television Services
Part 76 Public File and Notice Requirements, CS Dkt No. 98-132,
NPRM, FCC 98-159 (rel. July 20, 1998), R&O, FCC 99-13 (rel.
, 1999) [Adopted Feb. 1, 1999].
II. Proceedings Initiated/Pending
telecommunications providers (common carriers)
Deregulate radio frequency (RF) lighting requirements to
foster the development of new, more energy efficient RF
lighting technologies. 1998 Biennial Regulatory Review--
Amendment of Part 18 of the Commission's Rules to Update
Regulations for RF Lighting Devices, ET Dkt No. 98-42, NPRM,
FCC 98-53 (rel. Apr. 9, 1998).
Removal or reduction of, or forbearance from enforcing,
regulatory burdens on carriers filing for technology testing
authorization. 1998 Biennial Regulatory Review--Testing New
Technology, CC Dkt No. 98-94, NOI, FCC 98-118 (rel. June 11,
1998).
Modify accounting rules to reduce burdens on carriers. 1998
Biennial Regulatory Review--Review of Accounting and Cost
Allocation Requirements, CC Dkt No. 98-81, NPRM, FCC 98-108
(rel. June 17, 1998).
In NPRM portion, considering forbearance from additional
requirements regarding telephone operator services applicable
to commercial mobile radio service providers (CMRS) and, more
generally, forbearance from other statutory and regulatory
provisions applicable to CMRS providers. Personal
Communications Industry Association's Broadband Personal
Communications Services Alliances' Petition for Forbearance For
Broadband Personal Communications Services; 1998 Biennial
Regulatory Review--Elimination or Streamlining of Unnecessary
and Obsolete CMRS Regulations; Forbearance from Applying
Provisions of the Communications Act to Wireless
Telecommunications Carriers, WT Dkt No. 98-100, NPRM, FCC 98-
134 (rel. July 2, 1998).
Provide for a blanket section 214 authorization for
international service to destinations where the carrier has no
affiliate; eliminate prior review of pro forma transfers of
control and assignments of international section 214
authorizations; streamline and simplify rules applicable to
international service authorizations and submarine cable
landing licenses. 1998 Biennial Regulatory Review--Review of
International Common Carrier Regulations, IB Dkt No. 98-118,
NPRM, FCC 98-149 (rel. July 14, 1998).
Eliminate duplicative or unnecessary common carrier
reporting requirements. 1998 Biennial Regulatory Review--Review
of ARMIS Reporting Requirements, CC Dkt No. 98-117, NPRM, FCC
98-147 (rel. July 17, 1998).
Privatize the administration of international accounting
settlements in the maritime mobile and maritime satellite radio
services. 1998 Biennial Regulatory Review--Review of Accounts
Settlement in the Maritime Mobile and Maritime Mobile-Satellite
Radio Services and Withdrawal of the Commission as an
Accounting Authority in the Maritime Mobile and the Maritime
Mobile-Satellite Radio Services Except for Distress and Safety
Communications, IB Dkt No. 98-96, NPRM, FCC 98-123 (rel. July
17, 1998).
Simplify Part 61 tariff and price cap rules. Biennial
Regulatory Review--Part 61 of the Commission's Rules and
Related Tariffing Requirements, CC Dkt No. 98-131, NPRM, FCC
98-164 (rel. July 24, 1998).
Deregulate or streamline policies governing settlement of
accounts for exchange of telephone traffic between U.S. and
foreign carriers. 1998 Biennial Regulatory Review--Reform of
the International Settlements Policy and Associated Filing
Requirements, IB Dkt No. 98-148, NPRM, FCC 98-190 (rel. Aug. 6,
1998).
Modify Part 68 rules that limit the power levels at which
any device attached to the network can operate to allow use of
56 Kbps modems. 1998 Biennial Regulatory Review--Modifications
to Signal Power Limitations Contained in Part 68 of the
Commission's Rules, CC Dkt No. 98-163, NPRM, FCC 98-221 (rel.
Sept. 16, 1998).
Streamline and rationalize information and payment
collection from contributors to Telecommunications Relay
Service, North American Numbering Plan Administration,
Universal Service, and Local Number Portability Administration
funds. 1998 Biennial Regulatory Review--Commission Proposes to
Streamline Reporting Requirements for Telecommunications
Carriers, CC Dkt No. 98-171, NPRM, FCC 98-233 (rel. Sept. 25,
1998).
Modify or eliminate Part 64 restrictions on bundling of
telecommunications service with customer premises equipment.
1998 Biennial Regulatory Review--Policy and Rules Concerning
the Interstate, Interexchange Marketplace/implementation of
Section 254(g) of the Communications Act of 1934, as Amended/
Review of the Customer Premises Equipment and Enhanced Services
Unbundling Rules in the Interexchange, Exchange Access and
Local Exchange Markets, CC Dkt Nos. 98-183 and 96-61, NPRM, FCC
98-258 (rel. Oct. 9, 1998).
Eliminate or streamline various rules prescribing
depreciation rates for common carriers. 1998 Biennial
Regulatory Review--Review of Depreciation Requirements for
Incumbent Local Exchange Carriers, CC Dkt No. 98-137, NPRM, FCC
98-170 (rel. Oct. 14, 1998).
Repeal Part 62 rules regarding interlocking directorates
among carriers. 1998 Biennial Regulatory Review--Repeal of Part
62 of the Commission's Rules, CC Dkt No. 98-195, NPRM, FCC 98-
294 (rel. Nov. 17, 1998).
Seek comment on various deregulatory proposals of SBC
Communications, Inc. not already subject to other biennial
review proceedings. 1998 Biennial Regulatory Review--Petition
for Section 11 Biennial Review filed by SBC Communications,
Inc., Southwestern Bell Telephone Company, Pacific Bell, and
Nevada Bell, CC Dkt No. 98-177, NPRM, FCC 98-238 (rel. Nov. 24,
1998).
Consider modifications or alternatives to the 45 MHz CMRS
spectrum cap and other CMRS aggregation limits and cross-
ownership rules. 1998 Biennial Regulatory Review--Review of
CMRS Spectrum Cap and Other CMRS Aggregation Limits and Cross-
Ownership Rules, WT Dkt No. 98-205, NPRM, FCC 98-308 (rel. Dec.
18, 1998).
broadcast ownership
Conduct broad inquiry into broadcast ownership rules not
the subject of other pending proceedings. 1998 Biennial
Regulatory Review--Review of the Commission's Broadcast
Ownership Rules and Other Rules Adopted Pursuant to Section 202
of the Telecommunications Act of 1996, MM Dkt No. 98-35, NOI,
FCC 98-37 (rel. Mar. 13, 1998).
other
Review current Part 15 and Part 18 power line conducted
emissions limits and consider whether the limits may be relaxed
to reduce the cost of compliance for a wide variety of
electronic equipment. 1998 Biennial Regulatory Review--
Conducted Emissions Limits Below 30 MHz for Equipment Regulated
Under Parts 15 and 18 of the Commission's Rules, ET Dkt No. 98-
80, NOI, FCC 98-102 (rel. June 8, 1998).
Streamline AM/FM radio technical rules and policies. 1998
Biennial Regulatory Review--Streamlining of Radio Technical
Rules in Parts 73 and 74 of the Commission's Rules, MM Dkt No.
98-93, NPRM, FCC 98-117 (rel. June 15, 1998).
Streamline application of Part 97 amateur service rules.
1998 Biennial Regulatory Review--Amendment of Part 97 of the
Commission's Amateur Service Rules, WT Dkt No. 98-143, NPRM,
FCC 98-1831 (rel. Aug. 10, 1998).
Streamline the Gettysburg reference facilities so that
electronic filing and electronic access can substitute for the
current method of written filings/access. 1998 Biennial
Regulatory Review--Amendment of Part 0 of the Commission's
Rules to Close the Wireless Telecommunications Bureau's
Gettysburg Reference Facility, WT Dkt No. 98-160, NPRM, FCC 98-
217 (rel. Sept.18, 1998).
Streamline Part 90 private land mobile services rules. 1998
Biennial Regulatory Review--47 C.F.R. Part 90--Private Land
Mobile Radio Services, WT Dkt No. 98-182, NPRM, FCC 98-251
(rel. Oct. 20, 1998).
Mr. Tauzin. Thank you very much, Mr. Chairman.
Now I am pleased to welcome the honorable Susan Ness, FCC
Commissioner. Susan, again, your written statements are part of
our record. We appreciate your presentation today.
STATEMENT OF HON. SUSAN NESS
Ms. Ness. Thank you very much, Mr. Chairman and members of
the subcommittee. I appreciate the opportunity to be before you
today.
The initial rulemakings required by the Telecom Act have
been completed, and most of the judicial challenges to your law
and to our orders are winding down, mercifully, although plenty
of work remains.
Even when viewed through ``green-colored'' glasses, there
is no denying that companies are taking advantage of the
opportunities that were created by the act, and consumers are
beginning to reap the benefits.
As has been mentioned, as a result of this law and other
Congressional and FCC decisions, cable companies are now in
fact beginning to offer telephone services in a number of
markets. Wireless subscribership is substantially up, and
prices are substantially down. In telephone services, new
entrants have raised tens of billions of dollars in capital and
are making inroads in local business and even in residential
markets.
Broad-band services are rapidly being rolled out by cable
companies, incumbent telcos, and new companies that are
sometimes called PCLECs or DATALECs. Fixed wireless and mobile
satellite services are being launched. And every day, 50,000
more Americans are using the Internet for the first time.
Hundreds of thousands of classrooms are now being connected
to the information superhighway, and communities that never
would have dreamed of being able to afford this service in the
past are now receiving access. Broadcasters and, to some
extent, cable companies are moving ahead with deployment of
digital television. And nations abroad are beginning to open
their markets to competition, often establishing independent
agencies modeled after the FCC.
In short, we are clearly not there yet, but it is on track,
with good progress. There is a lot of good news, and I think
you all deserve a tremendous amount of credit for making these
developments possible.
The nature and velocity of the change is stunning, and as
the marketplace changes so too must the FCC. We must continue
to evaluate ways in which we can be more efficient and
responsive and also so that the marketplace can enjoy, for
once, regulatory certainty.
Chairman Kennard's report provides an excellent foundation
for that discussion, and in my written testimony I have
suggested additional areas for consideration. I look forward to
working together with all of you to ensure that the Commission
remains efficient and responsive, and has the resources
necessary to fulfill its present and future statutory
obligations.
Thank you very much, Mr. Chairman.
[The prepared statement of Hon. Susan Ness follows:]
Prepared Statement of Susan Ness, Commissioner, Federal Communications
Commission
Mr. Chairman and Members of the Subcommittee, I appreciate the
opportunity to appear before you today.
I welcome a dialogue between the Commission and our authorizing
subcommittee. In particular, I am pleased to review with you our
actions in implementing the Telecommunications Act of 1996, and to seek
your guidance as we proceed on the course you have set based upon the
principles of competition, deregulation, and universal service.
This interaction between the Commission and our oversight committee
is especially valuable now, during a period of monumental change. The
telecommunications and information industries are currently undergoing
a transition of epic proportions. The Internet and IP technology are
splintering the regulatory structures of the past. Convergence is
presenting an abundance of new opportunities--and challenges--as voice,
data, and video are delivered over a host of new technologies.
Recognizing an historic transition, Congress passed the
Telecommunications Act of 1996. That law is working. The nature and
velocity of the changes that are now underway are truly breathtaking,
and although I would not recommend that the Act be reopened to a major
rewrite, nonetheless a continued reassessment of both law and
regulation is warranted.
Surely the most profound development of the past three years has
been the rapid growth of the Internet. The third anniversary of the
Telecommunications Act was not much more than a month ago, and yet in
these few weeks approximately two million Americans have logged on to
the Internet for the first time! E-commerce is exploding and is likely
to play a major role in the economy of the 21st Century.
As a result, demand for bandwidth is burgeoning, and a variety of
players are racing to be the provider of choice. Telcos are rolling out
digital subscriber line services, and cable companies are offering
cable modems, each spurring the other to deploy faster and more
extensively. Meanwhile, fixed and mobile wireless, and soon satellites
and even broadcast stations, are planning to expand consumer choices.
The potential for consumer benefits is enormous, but the challenge for
traditional regulatory paradigms is also substantial.
managing the transition
Congress has established clear goals, and the means to get there.
Our overarching goal is ``to accelerate rapidly private sector
deployment of advanced telecommunications and information technologies
to all Americans . . . '' Our primary tool is competition, which to
varying degrees requires both regulation (see, e.g., 47 U.S.C. Sec.
251(c)) and deregulation (see, e.g., 47 U.S.C. Sec. 160).
We are already well along in the development of fully competitive
and unregulated markets for long distance service, information
services, customer-premises equipment, and wireless services. In these
areas, choice is abundant, innovation is rampant, and prices are
declining.
Consider: just three years ago most residential consumers paid 20
or 25 cents a minute for a long distance call. Today, 10 cent or even
lower rate plans are widely available, and special offers abound, such
as all-you-can-talk pricing for weekends and free calls on Monday
nights.
In commercial mobile radio service, the benefits of competition
have been even more dramatic. A few years ago, a wireless call commonly
cost 50 to 75 cents a minute, and customers paid hefty roaming fees.
But when the first PCS providers challenged the cellular incumbents,
rates plummeted 25%. They dropped even further as the 4th, 5th, or even
6th operators joined the fray. And now we have ``one-rate'' pricing,
where consumers are offered big buckets of minutes that equate to as
low as 10 cents a minute--and often with regional or national calling
and no roaming fees. Increasingly, it is cheaper to make an intrastate
toll call by wireless phone than over the wired telephone system.
Similarly, international call prices have plummeted as countries
implement their World Trade Organization market-opening commitments,
and as the FCC's accounting rate policies take hold.
Competition has been more elusive in the video and local telephone
markets, but even here there are signs of progress. DBS is becoming a
more credible competitor to cable, and competitive local exchange
carriers are making inroads against the incumbent local exchange
carriers in business markets and in a handful of residential markets as
well.
In these markets, the challenge is to manage a successful
transition from regulated monopoly to unregulated competition as we
maintain our commitment to universal service.
This transition is complicated. New services and technologies are
surfacing that do not fit neatly into discrete regulatory structures.
This leads both to creative tensions, and to anomalies.
We need to remember that the development of full competition takes
time. Just as we saw in the long distance market, and more recently
with wireless services, there is often a gestation period of multiple
years between when the key steps needed to promote competition are
taken and when robust competition actually emerges.
As we seek to accelerate the transition to competition, we need to
be willing to take risks, as we did several years ago when we denied
state petitions to retain price regulation of commercial mobile radio
services. But we also need to be careful not to undermine basic tenets
of the Telecommunications Act. Sometimes, when we hear ``if only the
FCC would eliminate this requirement,'' the requirement in question is
one that Congress carefully chose as a tool to enable competition--and
even told us specifically that the provision was not subject to our
forbearance authority until it had first been fully implemented.
We also need to think with greater care about the layers of
regulation that can flow from different levels of government. An
incumbent or a new entrant may need to deal not only with the
requirements of the Communications Act and the FCC, but also with state
and local laws and regulations. Each layer of government has its own
responsibilities, and its own legitimacy, but where possible we need to
strive for cooperation and consistency that advance the national goals
of competition, universal service, and deregulation. I am pleased to
report that we have made considerable progress working with our state
and local government colleagues in a renewed spirit of cooperation.
guiding principles
As we move forward with our implementation of the
Telecommunications Act, and with an evolution in the philosophy and
structure of the FCC, I am guided by certain principles. First and
foremost, of course, I take my direction from the law. It is not my
place to second-guess your judgments, or to be selective in deciding
which provisions of the law will be enforced.
The law, however, leaves us a measure of discretion, and in
exercising that discretion our principal goal should be to foster
competition whenever and wherever it is practical to do so. And where
competition has advanced, regulation can and should retreat. Thus, we
must place greater reliance on marketplace solutions, rather than the
traditional regulation of entry, exit, and prices; and on surgical
intervention rather than complex rules in the case of marketplace
failure. The forbearance authority which you gave us is an excellent
tool.
Another principle is reduction of regulatory risk. Capital
formation is hampered when rule changes are pending or are uncertain.
Rules and decisions should be as clear and as consistent as possible.
Decisions, whether in resolving rulemakings or complaints or simply in
processing routine applications, need to be prompt, and predictable.
Enforcement should be swift and certain, so that regulatory delay is
not a hindrance to market entry, or an impediment to protecting
consumers against inappropriate conduct by service providers.
In addition, government often serves best by focusing a spotlight
on problems, and prodding parties to work together to design solutions.
Public/private partnerships can speed the introduction of new
technologies and help pave the competitive way in a global marketplace.
Consumer interests, not those of any industry player, should be
paramount. The Commission should not try to pick winners or losers,
either individually or by industry segment. Nor should we be tempted by
short-term ``fixes'' that impede long-term objectives.
Finally, we should continually review our progress. It is important
to evaluate, regularly and periodically, what is working and what is
not.
``reinventing'' the fcc
As the marketplace changes, so too must the FCC. The FCC must
continue to evaluate ways in which we can be more efficient and
responsive.
Chairman Kennard recently shared with all of us a preliminary draft
of the report he filed with his hearing testimony. This report, ``A New
Federal Communications Commission for the 21st Century,'' provides an
excellent contribution to the discussion. Based on my initial review, I
believe that the general thrust of the report is right on target.
The report enumerates the critical functions of the FCC in a
competitive marketplace. I generally agree with that assessment, and
elaborate below on several of Chairman Kennard's points.
Competition and enforcement: As the marketplace becomes
competitive, the emphasis increasingly should be on enforcement, rather
than rulemaking. Of course, the Commission has always had enforcement
responsibilities in the past, and it is not likely to abandon all
rulemaking functions in the future. But as competition grows, we are
reducing our prescriptive and proscriptive rules, and relying more on
public information and enforcement solutions.
I firmly believe that competitive markets thrive with minimal
regulation. I also agree that competitive markets will still generate
disputes, both between service providers and between service providers
and consumers. A separate Enforcement Bureau will help ensure that
enforcement activities have the attention and resources they require.
Consumer protection and information: Consumer protection begins
with information. As competition increases, so too does the potential
for consumer confusion. I therefore support the proposed creation of
the Public Information Bureau. Full and clear disclosure of the terms
of service offerings is essential. The Commission needs to coordinate
closely with state public utility commissions, state attorneys general,
and the Federal Trade Commission to maximize the effectiveness of our
limited resources, to ensure that consumers have the information they
need, and to avoid misconduct ``slipping through the cracks.''
Universal service: Universal service is a major continuing
responsibility of the Commission. Congress has made it clear that all
Americans should reap the benefits of the communications and
information revolution. In an economy that is increasingly dependent on
communications and information, it is critical that society take steps
to reduce the ``digital divide.''
We all benefit when everyone has access to telecommunications.
That's why it is so important that we maintain traditional support for
low-income consumers (Lifeline and Link-Up) and for consumers in high-
cost areas, and that we enhance access on the part of schools,
libraries, and rural health care providers.
In these endeavors, we must not inadvertently hamper the deployment
of advanced telecommunications technologies. We should maintain
competitive (and technological) neutrality, so that we do not preclude
solutions based on wireless, satellite, or other technologies.
We also must work closely with our partners, the state commissions.
Most of the subsidies that keep residential phone service affordable
are in their domain, not ours. And even when dealing with those parts
of the equation that are amenable to a federal solution, we need to be
mindful of the need to accommodate the legitimate--but quite
differing--interests of the high- and low-cost states.
Spectrum management: Management of the radio spectrum is and will
continue to be another critical agency function. We must ensure that
spectrum--a national resource--is used efficiently. Licenses must be
distributed fairly and swiftly. Spectrum planning needs to create
opportunities for multiple providers, including new entrants, as the
Act envisions.
With the interests of the consumer in mind, we also need to work
with the broadcast, cable, consumer electronics, computer, and content
industries, to provide a smooth and consumer-friendly rollout of
digital television. The marketplace--not government--will determine its
ultimate success.
We also need to ensure that U.S. interests are advanced in
international spectrum planning bodies. As the Commission's lead
representative at the World Radio Conferences in 1995 and 1997, I have
seen first-hand how spectrum decisions affect billions of dollars worth
of economic opportunities for U.S. industry. We must continue to
improve the planning process for international radio conferences
through early high-level government participation and frequent and
well-timed meetings with our trading partners to resolve differences in
advance of the WRC.
Global competition: Market-opening measures are underway around the
globe, spurred to a great extent by advocacy from the U.S. Greater
global competition translates directly into improved communications
infrastructure for citizens of many countries, but it also creates
export opportunities for U.S. business. Meanwhile, U.S. consumers reap
the benefits of increased foreign investment at home. The FCC has
become a role model for countries establishing independent regulatory
regimes to convert from monopoly to competitive communications markets
abroad.
Many of the forces that are changing our markets are global in
nature. Accordingly, we need not only to continue our advocacy in
multilateral and bilateral negotiations but also to continue to seek
lessons abroad that can profitably be applied at home.
specific suggestions
Subcommittee Chairman Tauzin's letter of invitation specifically
requested suggestions for structural or organizational changes to the
FCC. I appreciate the opportunity to participate in this discussion.
1. I strongly support Chairman Kennard's plan to seek a dialogue
with all stakeholders--particularly members of Congress--before
decisions are made on any structural changes beyond the creation of the
Enforcement Bureau and the Public Information Bureau.
I am interested in exploring the public's views on structuring the
Commission along functional lines, rather than by traditional industry
segments. With service convergence, a functional structure could help
stimulate innovative thinking and possibly reduce regulatory anomalies.
I recognize, however, that the Communications Act provides for
different treatment of these mechanisms: telephone (Title II),
broadcasting and wireless services (Title III), and cable (Title VI).
To avoid the pitfalls associated with thinking along industry lines,
the Commission increasingly has assigned multi-bureau task forces to
address major issues.
2. I believe the Commission needs to strengthen its technical
resources. For many years, the Commission conducted an engineering
training program. It no longer does so, and therefore is diminishing
our expertise precisely as technical issues are becoming more complex.
I believe we should consider reviving this program so that we will have
the expertise we need to evaluate spectrum sharing, equipment
authorization, and other issues.
3. I am also concerned about the adequacy of resources for
international representation. As noted above, billions of dollars worth
of economic opportunity are at stake, and it is important that we
continue to make the resources available to ensure that U.S. interests
are adequately identified, coordinated, and advocated.
4. I further believe that we should evaluate new methods of
building industry consensus. Time and again I have seen the value of
parties coming together, under Commission auspices, to develop
industry-driven solutions to problems. I believe it could be useful to
work on ways in which such approaches might be encouraged, without the
costs and delays of a full-blown APA rulemaking, the formality of an
Advisory Committee, or all the due process trappings of a Negotiated
Rulemaking.
5. I recommend that Congress consider legislating to reduce the
prospects for forum-shopping in appeals. Too often we see industry
players delay market-opening measures by challenging an FCC decision,
or even a provision of the Act itself, in first one court and then
another. I believe it may be more efficient, as well as more
predictable, to provide that all petitions for review under 47 U.S.C.
Sec. 402(a) must be filed with the U.S. Court of Appeals for the
District of Columbia Circuit, as is already required for appeals filed
under 47 U.S.C. Sec. 402(b).
I would welcome the opportunity to consider any other measures that
might be suggested for ways in which to curtail the ability of parties
to hinder or delay compliance with those orders that are intended to
promote competition or protect consumers.
6. Finally, the Commission is blessed with an extraordinarily fine
career staff. The Commission's ability to perform its mission is highly
dependent on the expertise and diligence of hundreds of professionals.
Whatever we do to streamline and refocus the Commission's activities
should take into account the working conditions and esprit de corps
that are necessary to attract and retain high-caliber employees.
conclusion
Consumers are already reaping many benefits from competition
resulting from past decisions by Congress and by the FCC. Yet the pace
of change in communications markets is still accelerating, and care
must be taken to ensure that our actions promote the goals established
by Congress.
Our main challenges during this historic transition are to know
when to intervene and when not; to use creatively and judiciously the
wide assortment of tools available as we move from monopoly to
competition; and, at all times, to keep the interest of consumers
paramount. Only then will we be fulfilling Congress' vision of
competition and deregulation for the benefit of all Americans.
Thank you very much for inviting me to testify before you today. I
am happy to answer your questions.
Mr. Tauzin. Thank you very much, Madam Commissioner.
And next we are pleased to welcome the honorable Harold
Furchtgott-Roth, the FCC Commissioner. I think I have the order
of seniority right here. Proceed, sir.
STATEMENT OF HON. HAROLD W. FURCHTGOTT-ROTH
Mr. Furchtgott-Roth. Thank you very much, Mr. Chairman. I
want to thank you for holding this hearing. Particularly want
to thank you for convincing Mr. Markey to allow this hearing to
be held on such an important day of the year. It was very good
of you, Mr. Markey, forbear from objecting to this date.
Mr. Markey. Will the gentleman yield?
Mr. Furchtgott-Roth. Yes.
Mr. Markey. Thank you. See, here's the thing with the
Irish. We were very big in the agricultural era. Then we
skipped the entire industrial age.
But, in the information age, where you can make a living
just talking or communicating with words, the Irish are back.
Okay?
So we celebrate today, you know, this convergence of our
culture with the new technologies.
Mr. Furchtgott-Roth. Well, Mr. Markey and Chairman Tauzin,
it is very good to be here. It is very good to be home, home to
this committee, to this committee room that I have been in
many, many times. I have a great deal of reverence for this
room, a great deal of respect for this committee. I am humbled
to be here.
This committee was created when communications at best
meant newspapers and at worst meant shouting. It is good to
know in America we still have both of those fine institutions.
This committee was created long before there was an FCC. I
am hopeful that this committee will endure, that it will endure
forever, and it may yet out-endure the FCC.
But the FCC has a long and proud future ahead of it as
well, but it is this committee and the Constitution that it
serves that is truly timeless. This committee is about
interstate commerce, is about the vision of James Madison.
Originally, interstate commerce was the exception in
America. Today, it is the norm.
Mere citizens have many views on what good laws and bad
laws are. Everyone has their favorite stop sign that they wish
the government would change. But we don't go around asking
policemen to change the law. And you have everyday before you
lobbyists who come through these halls, many of them my very
best and closest friends, who will tell you what the good laws
and what the bad laws are.
And I hope you listen to them because they are lobbyists,
they are folks who are answering a very high call about trying
to come up with a better America. But those individuals who are
paid to lobby this committee and do it in a very fine form are
not responsible for implementing the laws that this committee
writes.
We before you today have the burden, the responsibility of
implementing the laws that this committee drafted, that this
Congress passed into law, and that the President signed.
I am humbled to be here, and I am very humbled to answer
any questions you may have about how we have been implementing
the law.
But I am not here, and I will never be here, to ask you to
change the law. That is for people who have the luxury of being
able to express their views and not have to respond to
individuals in America who ask them enforce the law. I, for
one, cannot do that. I cannot, at the same time, enforce the
law and, at the same time, ask to have that same law changed.
I have only one request of that committee, of this
committee, and that is that you be vigilant for all of the
agencies that you oversee, and that you ask us simply and
forcefully to follow the law as it is written.
Frankly, almost everything that has been mentioned this
morning are things if this Commission could do within in the
construct of the Communications Act. And I hope that you will
use this authorization process--this re-authorization process--
to instruct us, to advise us, to guide us in the proper
implementation of the law. Help us to interpret the law that we
have. Go beyond that if you will, but do not expect me to raise
my voice one way or another in that debate.
Please make sure that we stay clearly within the law that
we have. Most of the times we do that, but in my many
statements over the past year I have from time to time noted
instances where I am not sure that we have stayed simply within
the law.
This committee is timeless. It will be here long after all
of us are gone, and I hope that the reverence that I have for
this committee is shared by all and that this committee will
give us the proper instruction that the Commission needs.
Thank you, Mr. Chairman.
[The prepared statement of Hon. Harold W. Furchtgott-Roth
follows:]
Prepared Statement of Harold W. Furchtgott-Roth, Commissioner, Federal
Communications Commission
Introduction
It is a great honor for me to testify before this Committee. It is
a homecoming for me, and I see many friends among the Members and staff
of this Committee.
I know this committee room well. It is a grand and stately room
befitting a noble committee. Long before this room was built, this
Committee was born. This Committee has seen Congresses and
Administrations come and go; it has seen government agencies develop,
evolve, and occasionally cease operations; it has seen the history of
this Nation march before it.
In many ways, this is the Committee of Madison, the Committee of
interstate commerce, the Committee that takes its charge directly from
the Constitution, the Committee that addresses that which holds this
Nation together.
Various causes have ebbed and flowed in the course of American
history. One concept that has consistently grown, however, is the
centrality of interstate commerce to American life. Two centuries ago,
interstate commerce was the exception rather than the rule; today,
interstate commerce rules. With it comes substantial federal
jurisdiction for regulation.
Regulation of interstate commerce is a weighty responsibility, one
that this Committee oversees daily. Interstate commerce can be
regulated clearly under federal statutes in open commercial markets in
which property rights and contracts are enforced, and in which the
market forces of supply and demand are allowed to blossom for the
benefit of the American consumer. Alternatively, interstate commerce
can be over-regulated to the detriment of all Americans by failing to
enforce contract and property rights, by creating disincentives for
investment, and by allowing the development of markets that are
dictated by a few individuals who happen to be government regulators
rather than by all individuals who happen to participate in a market.
I come before you as a Commissioner of an independent agency, the
Federal Communications Commission. Most of the authority that the
Commission exercises is to regulate interstate commerce, in this
instance, communications. The regulation of interstate commerce is, of
course, exclusively Congressional authority under the Constitution. It
is this Committee, the Committee on Commerce, that has primary
jurisdiction over the FCC.
The FCC is not an explicit part of the Constitution. We should
exercise with great caution the limited authority that Congress has
bestowed upon us. Three generations ago, there was no FCC. The future
of the FCC is at the mercy and discretion of Congress. Perhaps future
generations will know us directly; or perhaps we will be consigned to
footnotes in history. Congress in general, and this Committee in
particular, hold the keys to that future.
We at the FCC cannot control our ultimate institutional destiny,
but we can control our fate one day at a time. If in all of our daily
actions at the Commission, we are faithful to the Communications Act
and other statutes and interpret them narrowly as written, we will
bring honor to this agency, honor to the Committee that drafted
communications legislation, honor to the Congress that passed that
legislation, honor to the Presidents that signed the pieces of
legislation into laws, and honor to the American public. If we stray
from the Act, if we exceed our authority in some areas, and if we fail
to fulfill our obligations in others, we bring shame to ourselves and
to others.
An Independent Agency
The FCC is known as independent agency. The word ``independent''
refers to its independence from the executive branch. Some observers
particularly note the inability of the President to remove a
Commissioner at will. I think, more importantly, that the independence
stems from the inability of Congress to delegate to the executive
branch Congressional powers, in this case the power to regulate
interstate commerce.
This Committee and this Congress make federal policy about
interstate commerce and about telecommunications. The Executive Branch
cannot and does not. The FCC cannot and does not.
For these reasons, it is important for this agency to look to
Congress, and to this Committee in particular, for guidance: guidance
on how to interpret the statutes drafted and championed by this
Committee; guidance on how to regulate interstate commerce in a manner
consistent with federal statutes.
Importance of Authorization Legislation
The Commerce Committee oversees and directs the FCC in many
manners. There is correspondence from Members to the Commission. The
Committee may seek information or reports from the Commission. The
Committee holds oversight hearings as it is doing today. The Committee
marks up legislation affecting this agency, including the landmark
Telecommunications Act of 1996. The Committee may write annual
authorization legislation providing more detailed guidance to the
Commission.
We at the FCC look to this Committee for guidance in each of these
areas. Congress has only infrequently exercised its authority to pass
annual authorization legislation for the FCC. Should this Committee and
this Congress decide to pass such legislation this year, we at the FCC
look forward to your direction, and we will follow it.
FCC Should Not Lobby Congress for Statutory Changes
Congress has vested in the FCC an extraordinary concentration of
power. We draft and promulgate rules; we determine and levy fees; we
administer and interpret our rules; we enforce our rules; and we
adjudicate certain disputes involving our rules. We exercise this
extraordinary array of powers all within the framework of our statutory
authority.
As I have explained in various statements at the FCC, I do not
believe that, absent an express request from Congress, making
recommendations about how the law should be changed is an appropriate
function for the Federal Communications Commission. The Commission is
bound to take the law as Congress makes it and to implement the law
objectively; yet when we criticize extant statutes, enacted by Congress
and signed into law by the President, we draw that objectivity into
doubt. Moreover, as a creature of Congress' delegated authority, the
Commission takes it direction from that body, not the other way around.
Need for FCC to Follow the Law
It is a popular exercise in Washington to suggest what the FCC
should be doing, as if our mission is some great mystery to be solved.
I always have maintained, however, that the Commission simply should
follow the law narrowly as written by Congress. The FCC does not make
federal telecommunications policy; Congress does.
More specifically, the FCC should not rely exclusively on broad,
vague statutory grants of authority that contravene specific statutory
mandates. If, for example, we wish to participate in an antitrust
review of proposed mergers, we should do so pursuant to our clear
statutory authority under the Clayton Act. We should not review mergers
based merely on our broad authority to grant license transfers in the
public interest. In addition, we should use our specific authority
under Sections 10 and 11 of the Communications Act to help meet
Congress's twin goals ``to promote competition and reduce regulation.''
Unfortunately, we have been both slow and reluctant to forebear from
law and regulation pursuant to Section 10, and only timidly have
exercised our duty to review and reduce our regulations pursuant to
Section 11.
The Telecommunications Act
Both Section 10 and Section 11 came from the Telecommunications Act
of 1996. This Committee played a pivotal role in creating that statute
which, notwithstanding the FCC's not infrequent failures to implement
it faithfully, has been successful.
Indeed, in 1995, consumers and telecommunications companies were
hobbled by excessive regulation at the federal, state, and local
levels. Regulation pigeon-holed companies into narrow lines of business
and pigeon-holed consumers into narrow geographic markets. Regulators,
not consumers, decided which companies could serve which consumers with
certain services in a giant game of ``Mother May I?'' The answer all
too often was ``No'' or ``Maybe in a few years.''
Today, in 1999, consumers and business are less hobbled than
before, thanks in large measure to the Telecommunications Act of 1996.
The FCC has had an enormous task in implementing the Telecommunications
Act of 1996. It has implemented many parts of the Act quite well, and--
as I noted before and described in my public statements over the past
16 months--other parts not so well.
A Smaller FCC Over Time
If the Commission does its job properly in implementing Act, there
will be less and less regulation over time. Indeed, it is almost
inevitable that the FCC will shrink over time. Our largest and most
pressing responsibilities under the Act have ended. The necessarily
rigid deadlines for initial rulemakings have ended, and the Commission
met all of those deadlines. Surely, the Commission does not need nearly
as large a staff in the year 2000 as it did in 1996 and 1997.
Even if our staffing requirements were not decreasing, however, our
likely funding resources for staffing certainly are decreasing. The
FCC's staff is in the process of moving to a grand new headquarters
building in Southwest Washington, DC. It is a beautiful building--but
very expensive. Our leasing expenses are growing by more than 50
percent, and the cost of the move itself will be $8.7 million for each
of the next 9 years. The net result is that our office expenses have
increased by more than $20 million annually.
Regulatory fees levied by the FCC pursuant to Section 9 of the
Communications Act can be assessed only ``to cover the costs'' of the
services rendered by the agency. Accordingly, I believe it would be
preposterously unfair to force entities regulated by the FCC and,
thereby, American telecommunications users, to pay even a nickel more
for this new office expense in the form of higher user fees. It simply
would be impossible to show that any telecommunications user is
receiving a higher quality of service as a result of the move.
Consequently, the additional $20 million per year in office expenses
must be borne by American taxpayers. The net result is that, unless
Congress actively decides to change the law and increase the Commission
budget substantially, the Commission can only afford to retain fewer
employees.
No Need for Intermediary
The FCC does not need any intermediaries to communicate with
Congress. The Administration, however, recently sent budget proposals
under the name of the FCC to Congress. They were in fact not the
submission of the FCC, but rather the sanitized, highly edited, and
augmented version submitted to Congress by the Administration's Office
of Management and Budget. Although it is the Administration's
prerogative to submit a unified budget for all agencies, I do not
believe that the Administration can speak directly on behalf of this
agency.
The FCC submitted recommendations to OMB in a secret process. I
dissented from those recommendations for a variety of reasons, but the
recommendations proposed by the FCC were not nearly as bad as what the
Administration subsequently proposed and delivered to Congress. For
example, the Administration's proposal to impose spectrum taxes was
simply irresponsible.
Open and Public Process
Whether it be votes on FCC budget recommendations or the
Commission's internal voting procedures more generally, I do not
believe this agency should keep the American people in the dark.
Indeed, I believe there is an urgent need for this agency to conduct
its business in public. That is the principle that underlies both the
Administrative Procedure Act and the Sunshine Act. Currently, however,
the FCC's internal processes are known by but a few high-priced
Washington lobbyists. Why shouldn't everyone know how we conduct our
business?
Reorganization
Finally, Chairman Kennard today unveils some new plans for the FCC.
He is an extraordinarily bright and talented leader. I enjoy serving on
the Commission with him, and I look forward to reviewing his plans.
Ultimately, the fundamental responsibility of the FCC is to follow
the law narrowly as written by Congress. If the Commission fails to
follow the law narrowly, no reorganization plans--no matter how well-
meaning--will solve the agency's problems. If the FCC succeeds, it is
not because the agency has invented a new organizational structure but,
rather, because we have committed to following the law.
Mr. Tauzin. Thank you very much, Mr. Commissioner.
And now we are pleased to welcome the honorable Michael
Powell, Commissioner of the Federal Communications Commission.
Mike, again, your statement is a public record and we
appreciate your coming before us.
STATEMENT OF HON. MICHAEL K. POWELL
Mr. Powell. Thank you, Mr. Chairman, and good afternoon,
Congressman Markey, and other distinguished members of the
subcommittee. It is a pleasure to be here at your invitation to
help the subcommittee in its consideration of FCC re-
authorization. Apparently, the FCC has been an unauthorized
agency since 1991, and I agree wholeheartedly that it is not
wise to be driving without a license.
Although I must admit that it did not stop me when I was
15.
Nonetheless, I feel a little about re-authorization like a
sinner who has arrived at the Pearly Gates and is frantically
trying to convince St. Peter that I have met the 271 checklist
for entry.
Before beginning any exercise to fix something, or to use
Chairman Tauzin's word, to ``remission'' it, I think it is
important to start with an examination of what we think is
broken, or at least what our perception is about what is not
working.
I would first like to endorse the strategic plan offered by
the FCC Chairman because I think in its tone and direction it
is exactly on the mark. But in response to the subcommittee's
invitation, I would like to offer specific areas for
exploration that I think should guide, or would be helpful in
guiding your deliberations.
First, I believe the Commission needs to more clearly set
out its priorities and its direction. This is a common
complaint from the outside, that it is very difficult to
understand what our priorities are, what direction we are
heading, and often we are criticized for changing course
abruptly.
I believe one vehicle for consideration, on your part, is
to require the Commission, under section 4(k) of the
Communications Act of 1934 in which it submits its annual
report, to also set out its annual list of priorities that
could be developed as an outgrowth of a year-long formal,
strategic process at the Commission.
The next large area that I often hear criticism of, is the
FCC is not efficient enough to meet the demands of its
consumers. Clearly this is true. Mr. Huber talked about the
incredible pace, the intense pace of change in this industry. I
heard a telecom executive describe it the other day as ``it's
Moore's Law on Viagra.'' I suppose that captures it better than
anything else.
But one important way in which you can improve the
efficiency of any organization is, of course, have less to
administer. And I believe that Congress properly provided two
very powerful tools for doing that that have not been employed
as fully as they might be.
The first of course, under section 11, is our authority
under the biennial review to root out and eliminate regulations
that are no longer necessary. Others have said much about that.
I would also say for the record that forbearance under section
10 is a very powerful vehicle. It is well noted in my writings
that I have been somewhat critical of the Commission's
employment of that vehicle. And I want to point out that is
less the substance or the merits of those forbearance decisions
as it is the standard employed by the Commission and its
exercise.
I do believe that this subcommittee and this Congress
expected us to accept a much greater responsibility for
ourselves validating or re-authorizing regulations in the
context of a healthy, competitive market than I believe the FCC
has been willing to take on thus far.
I have some specific suggestions as how the FCC ought to
employ a proper burden-shifting mechanism along the lines of
those used in civil rights cases, which is in my full
testimony.
A second subset under operating more efficiently, which as
been referred to and is referred to in the chairman's
statements, the shift to enforcement. And I fully support the
enforcement bureau efforts as well as our ``rocket docket.''
But I just want to point out that a shift to enforcement
has to be more than a consolidated bureau. It has to be a
change in the state of mind. It has to be a vehicle that you
employ to deal with the kind of speculatory fears that are easy
to conjure up in the context of a request to deregulate. I
think the more we rely on enforcement, the more we can move
past our speculative fears.
Fourth, many have pointed out that we are not structurally
aligned to meet the market trends. Certainly we could consider
functional consolidation, but I would point out, in my own
view, that that may not be as productive as one might assume
because of, as people have pointed out previously, the statute
itself is aligned along many of these structural lines, as are
the rules that we must implement. And thus we are creating
consolidated bureaus that merely then have subdivisions that
mimic the original bureaus. I don't know whether that won't be
form over substance.
Nevertheless, it is in that context that I would guide your
attention to the possible consolidation of cable, mass media,
and DBS functions under a multi-channel video competition
bureau, as well as possible consideration of some functions
being merged between the common carrier and wireless bureaus.
As well as needing to realign our resources to where our
priorities lie, I believe fervently that more of our resources
need to be shifted to the common carrier functions. If I had a
list of 10 things I think we need to be doing, nine of them
would be the areas of common carrier and telephone regulation.
Finally, I think--second to last--I think we need to focus
on duplicative functions. There are a number of areas in which
the Commission engages in functions under its broad public-
interest standard, as well as others, that are shared in part
or whole by other regulatory agencies. There may be value to
two agencies doing two things, but those roles should be
complementary and supplementary rather than simply duplicative.
And I think that it would be a useful function for this
Commission to examine some of those functions to make a
conscious decision about where those overlaps are warranted and
where they are not.
And in my testimony I have some specific examples that
might guide you in that regard.
Finally, there is the issue of the breadth of the agency's
quasi-legislative authority. Too many disputes at the Federal
Communications Commission and in the courts are over our
jurisdiction, whether we are being excessively aggressive or
too cautious in interpretation of statutory law.
I would point out, I believe this is a continuing tension
between the 1927 act and 1934 act models and the 1996 act
model. Under the 1934 model it was assumed that we would be a
commission of enlightened wise men with a broad public-interest
standard, free to reach wise decisions in an ever-technically
changing world. It is the broadcast model.
The 1996 act tries to lay out a blueprint with highly
specific provisions, detailed provisions that we are expected
to implement and not question. There is a constant tension
between these two models, both at the Commission and by outside
parties.
I think that you have to recognize that as long as there
are public-interest standards and there is that tension, it
will empower regulators to self-initiate a broad range of
government action without specific Congressional direction.
I do not call for the elimination of the public-interest
standard by any means, but I do believe there are many fruitful
areas to consider, limiting principles on that standard, which
I have also written about.
Finally, to conclude, Mr. Chairman, I would just add a word
of caution about an effort to hollow the agency. You have the
power to cut employees, you have the power to eliminate
Commissioners. I can find another job, but I will tell you
what, at the end of the day you will still have applicants
under this statute who will need a 271 application approved,
you will still have schools and libraries that have to file for
their applications for universal service funding, you will
still have consumers who need redress from complaints.
I don't know that a severely diminished agency will be able
to serve those more efficiently than it does now.
I thank you and welcome your questions.
[The prepared statement of Hon. Michael K. Powell follows:]
Prepared Statement of Michael K. Powell, Commissioner, Federal
Communications Commission
Good morning, Mr. Chairman and other distinguished members of the
House Subcommittee on Telecommunications, Trade and Consumer
Protection. Thank you for inviting me here to assist you as the
Subcommittee deliberates the statutory reauthorization of the Federal
Communications Commission (FCC).
Initially, let me state that I support Chairman Kennard's effort to
develop a strategic plan for restructuring and streamlining FCC
functions and management. I am hopeful that we will be able to move
forward quickly under this plan to make needed changes. In my testimony
however, as the Subcommittee's invitation letter suggests, I will
attempt to provide some specific suggestions for consideration during
your deliberation on FCC reauthorization.
Before beginning any exercise to fix (or to use Chairman Tauzin's
phrase ``re-mission'') the Agency, I think it prudent to first consider
what we think is broken or is not working particularly well at the FCC.
I would submit five areas for exploration: (1) the need to more clearly
define the Commission's annual priorities and focus; (2) the need to
operate efficiently enough to meet the demands of an innovation driven
market; (3) how to structure the Agency to better align with market
trends and demands; (4) whether to continue the administration of
functions that are largely duplicated elsewhere in government; and (5)
the breadth of the Commission's quasi-legislative authority.
i. the commission needs to more clearly define its annual priorities
I believe that the key to any well-run organization is the
enumeration of a clearly understood and widely communicated set of
priorities. A common complaint I often hear is that outside parties
have no solid sense of the Commission's priorities or direction. The
Chairman often does share his view of the coming year in speeches,
press releases and in daily conversation, as do other Commissioners,
but there is no structured process by which the Commission formally
develops and publicly reports its priorities.
One way to address this problem would be the development of an
annual, full Commission statement of priorities. Congress could require
the Commission to set out a list of its priorities in the annual report
it currently files pursuant to section 4(k) of the Communications Act
of 1934. 47 U.S.C. Sec. 154(k) (West 1998). Such a compilation of
priorities would help focus the work of the Commission and create
greater regulatory certainty.
ii. the fcc is not efficient enough to meet the demands of its
customers
The extent and pace of change in the telecommunications industry is
mind-boggling. It is driven by exponential advancements in
microprocessing power, digitalization, Internet protocol-based network
models and bandwidth. As Royce Holland, Chairman and Chief Executive
Officer of Allegiance Telecom, Inc. recently remarked, the pace of
change in the industry is like Moore's Law on Viagra. Market
opportunities in this environment are lucrative but fleeting. As in the
days of old, however, the Agency still labors endlessly for many months
and even years on policy issues and ultimately implements its judgments
in the form of newly-minted rules and regulations. The relevancy of the
new rules fades rapidly with time. Some are out right obsolete the very
moment they are passed. In this environment, the FCC must become a
dramatically more efficient place. A decision that comes too late,
might as well not have been made at all.
A. Deregulation
The most obvious way to improve efficiency at the Agency is to have
fewer rules to administer. This highlights the importance of
deregulation where the cost of a rule is not justified by its benefits.
There are a number of vehicles Congress has provided for deregulating
and I believe that they must be employed with greater rigor than they
have to date. Congress wisely commanded the FCC to conduct a biennial
review of its regulations and to shed those that it determines are no
longer necessary. While we have made some progress in this area, I
believe we can be much more aggressive.
A second vehicle that I believe has been under-utilized is our
forbearance authority under Section 10 of the Communications Act. 47
U.S.C. Sec. 160 (West 1998). I have criticized many of our recent
decisions in which the Commission declined to forbear from our rules.
The merits of those forbearance petitions have been less my concern,
for reasonable minds can differ. My dissatisfaction is with the
standard we apply and our analysis, which seems to place the entire
burden of forbearance on the moving party. I believe Congress expected
the Commission to accept more responsibility for demonstrating a
continued need for regulation in the presence of a healthy, competitive
market. Indeed, I believe the Commission ought to employ a burden-
shifting device similar to that employed in civil rights cases.
In operation, once a petitioner demonstrates that the market in
which it operates is competitive (i.e., no competitive firm or entity
enjoys market power, price trends are checked or downward, innovation
is occurring) the burden would shift to the FCC to demonstrate why
regulation is still necessary. And, in making that judgment, the
Commission should not be able to simply rest on the grounds that the
rule served a public purpose and petitioners have failed to prove that
purpose is no longer worthy. The question should be whether the rule at
issue is in fact superior to competition for serving that purpose. We
should have to undertake a substantive and factual examination of the
rule and its effects to determine if its purpose truly must be achieved
through regulation instead of market forces. This approach presumes
that healthy competition will normally maximize consumer welfare.
Congress could explicitly adopt such a burden-shifting approach to
forbearance.
B. Shift To Enforcement
A second way for the Commission to become more efficient is by
shifting away from pre-approval, ``by-the-grace of us'' regulation and
toward enforcement. Telecommunications regulation has traditionally
developed along the lines of the broadcast model. That is, parties need
advance approval for initial operation, changes and deployment of new
innovations. This has become a real impediment to timely decisions. A
regime in which there are more presumptions of good faith on the part
of competitors, backed up with strong enforcement by the Agency, would
greatly enhance our efficiency.
In this regard, I applaud the Chairman's initiative to assemble
under one bureau the Commission's enforcement functions. Similarly, the
initiative to create an expedited complaint resolution process, dubbed
``the rocket docket,'' is a positive step in this direction. The shift
to enforcement, however, needs to be more than a consolidated bureau.
It needs to be a shift in thinking as well. The FCC, as a whole, must
become more comfortable with enforcement as a means of regulation and
must address our speculative fears about deregulation through
enforcement, rather than let those fears paralyze our willingness to
deregulate.
C. Need For Better Internal Process
The Commission structure is inherently inefficient. Because it is a
deliberative body with independent Commissioners who each have a vote,
it is very difficult to keep things moving along at a pace demanded by
the market. In contrast, organizations that are more hierarchical
generally have better success with moving more quickly. Nonetheless,
for the Commission to keep pace, it needs the benefit of management
professionals dedicated to managing our agenda and keeping our
substantive items on track.
I would urge the Congress to consider creating a professional
management directorate to accomplish this purpose. There are examples
of similar activities in other government institutions. The court
system has long employed a clerk's office that keeps the caseload
moving, rather than leave this responsibility to the sitting Judges.
Similarly, many divisions of the Department of Justice (such as the
Antitrust Division) have a Directorate of Operations, headed by a
substantive professional who helps keep the pipeline to the decision-
makers flowing. These functions at the FCC are presently managed by the
Chairman's personal office.
iii. the fcc is not aligned structurally with market trends
It is regularly observed that the Commission is organized around
industry segments that increasingly are less relevant as convergence
strains and eliminates their unique technical distinctions. Many
commentators have urged that Congress consider consolidating bureaus
along competitive lines. I agree that it would be useful to consider
such structural changes, though I believe there are limits to how much
can be gained by such an effort.
The balkanized structure of the Commission makes it difficult to
re-deploy employees to address urgent tasks. Attorneys currently
analyzing policy issues for the Mass Media Bureau, for example, cannot
easily be moved to work on issues in other bureaus, even though the
subject area may be similar. Thus, even though there is a need for
attorneys in the Cable Services Bureau, separation of these bureaus
prevents ready reassignment of personnel. Within larger bureaus, the
Commission would have the opportunity to maximize its use of employees.
It could, for example, cross-train the workforce through rotations and
training. In this way, the Commission could maximize employee
flexibility and enhance its ability to reallocate resources to match
priorities.
Though I do not take a strong position on any particular proposal,
I would recommend considering consolidation in a few areas. The first
would be the formation of a multi-channel competition bureau. Such a
bureau would administer our rules with regard to what are currently the
mass media, cable television and direct broadcast satellite (DBS)
industries. Regulation of each of these mediums presently rests in a
separate bureau. A single leadership structure overseeing these fields
would allow for greater harmonization of rules and decisions in
furtherance of a merged and increasingly competitive industry segment.
With the elimination of some cable rate regulation at the end of this
month, and increased attention being given to the inter-relationship
between broadcast and DBS, the time may be ripe for considering such a
proposal.
A second area worthy of some thought is complete or partial
consolidation of the Common Carrier and Wireless Telecommunications
bureaus. There has been a great deal of discussion about wireless
technologies competing with and serving as a substitute for traditional
wireline service. Indeed, some have suggested that over time most voice
communications will be carried by wireless carriers, while the wireline
infrastructure will be used more for data. These trends may argue for a
single bureau dedicated to these currently separate industries.
I do note, however, that there is a limit to the value of this
functional realignment. Because the statute is organized along industry
lines our rules necessarily do as well and functional consolidation may
be more form than substance. Additionally, many industries support
industry organization because they enjoy having a ``champion'' to
tussle over policy.
iv. administration of duplicative functions
A fifth area on which Congress may choose to focus is where
Commission authority overlaps with that of other government agencies.
Because communications is so fundamental to virtually all human
activity, there is almost always some connection to FCC authority (no
matter how tangential). Yet, the core expertise of the FCC should truly
be considered in assigning to it, rather than some other agency, a
central role on a given issue. While such governmental overlaps may be
desirable, they at least should be complementary (or supplementary)
rather than simply duplicative. A few suggested areas of inquiry are
outlined below.
A. Merger Review
The debate over the value of FCC merger review in addition to
review by one of the antitrust agencies is well-worn. Clearly, as the
keepers of the Communications Act and its policies, the FCC has some
unique expertise that it can bring to telecommunications merger review
that probably advances the public interest.
Our review, however, is not generally limited to those areas in
which we can claim primary expertise. Very often, we undertake a
classic antitrust analysis, applying the same principles, precedents
and guidelines as those employed by the antitrust authorities and
rarely does it produce different results. Such reviews can be quite
burdensome on the parties. For example, the FCC often requires
voluminous filings that are duplicative of those made to the Department
of Justice or the Federal Trade Commission. They often must incur the
expense of outside counsel to prove their case to both agencies. I have
come to doubt whether the marginal value of full blown merger review by
the Commission is justified by its cost in time and resources.
Moreover, with all due respect to our hard working staff, we do not
really possess enough personnel schooled in antitrust and competitive
economics to do the job well consistently. The antitrust authorities
do.
I believe that there is room to preserve a complementary role for
the FCC in the review of mergers, while limiting it to its areas of
expertise. Perhaps, consideration of the legislation recently
introduced by Senators DeWine and Kohl would be a good place to start.
The Commission engaging in simultaneous review with the antitrust
authorities could improve efficiency. Under such a scheme, the parties
would be required to file most documents only once and to one agency.
The Commission would consider issues such as whether the merger would
violate an express provision of the Act, or would otherwise undermine
the congressional scheme. Furthermore, it would consider the merger's
impact on other communications policies such as media diversity and
universal service that are not appropriately considered by antitrust
authorities. But the Commission would defer (either substantially or
completely) to the antitrust authority's competitive analysis.
B. Consumer Affairs
An important function of any branch of government is to safeguard
consumers. Undoubtedly, because of our regulatory authority over
certain industries and our intimate understanding of the industry, we
are uniquely positioned to administer certain consumer affairs.
Nonetheless, there are other agencies that have similar authority and
some judgment might be made as to which is best positioned to
administer certain issues. For example, the FCC has occasionally jumped
into issues that relate to advertising under its public interest
authority. The Federal Trade Commission, however, has specific
authority in these areas. The same is true of other issues such as
consumer fraud (e.g., ``cramming'' and ``slamming.'') Congress should
evaluate the benefits of such overlapping jurisdiction.
C. Equal Employment Opportunity
I personally support narrowly tailored Equal Employment Opportunity
(EEO) rules. The Commission has administered its own EEO program in
certain industries for some time. Yet, in most other industries there
is not an EEO authority separate from the Equal Employment Opportunity
Commission and the federal, state and local civil rights authorities. I
believe that there is some advantage to having the FCC involved because
of its unique relationship with certain industries, particularly those
that operate pursuant to a government-conferred license. However, I
would be remiss if I did not point out there is some overlap that
should be examined to ensure that the respective roles are
complementary and not duplicative. By eliminating duplication, such an
examination, in my view, would bolster support for the government's
role in promoting opportunity in communications.
D. Political Rules
Finally, I would point out that the FCC has historically
administered a number of rules that are designed to affect the quality
of elections. These rules are focused on the obligations of the
licensee and not the candidates, but they undoubtedly are intended to
shape the quality and tenor of elections. Greater involvement in this
area would require a more comprehensive understanding of campaigns and
existing election laws than I believe this Agency possesses.
Furthermore, any extension of such authority should be weighed against
the role of the Federal Election Commission. I am uncomfortable,
personally, as an un-elected regulator initiating policies and rules
that affect the electoral process without specific congressional
direction to do so.
v. the breadth of the fcc's quasi-legislative authority
A phenomenal amount of time is consumed in this industry in fights
over the FCC's jurisdiction. One major source of this ongoing battle is
the tension between the statutory regime that reigned under the 1927
and 1934 Acts and that predominantly adopted by Congress in the 1996
Act. The former's hallmark is that it conferred sweeping authority in
the Commission to act to ensure ``the public interest, convenience and
necessity.'' The 1996 Act, however, attempted to craft, in many
respects, a detailed blueprint for the industry and the Agency. In many
places, it provides highly detailed statutory provisions and
instructions. There is a real tension between these two regimes,
elements of which are scattered throughout the Act.
The venerable public interest standard has much to commend it. It
provides a great deal of flexibility and punctuates a consumer focus.
However, this standard does allow the Agency to self-initiate a broad
range of government action without specific statutory direction. That
is, it serves as a basis for quasi-legislative action by the
Commission.
The quasi-legislative authority of the Commission has its merits,
but if read too broadly, it serves to invite industry, consumer groups
and special interest to seek both redress and advantage from the
Agency, rather than Congress. This can lead to the Agency initiating
action that Congress subsequently disapproves of, or believes conflicts
with a more specific mandate in the statute.
I am not suggesting elimination of the public interest standard. I
do believe, however, that Congress might consider certain limiting
principles with respect to its employment as a jurisdictional basis in
certain areas.
vi. conclusion
I would like to conclude with one caution. As long as the 1996 Act
is the basis for telecommunications law, Congress would be ill-advised
to hollow or unduly wound the Commission. There are undoubtedly areas
in which we tinker where we should not. There are certainly ways to
improve our processes and our decisions. But, even controlling for all
that, the FCC will remain a very important institution for dealing with
the telecommunications sector and its transition to competition and its
transformation in response to innovation.
Congress has the power to cut employees and even Commissioners if
it chooses. But if not done carefully, rather than harm the Agency, the
industry and consumers will be harmed. It is the industry that will
still have to come to the Commission to get its licenses approved or
have a section 271 application approved. It will still be states and
local schools that have to file for universal service. Consumers will
still need somewhere to have their complaints acted upon. Such redress
will not be enhanced by a diminished Agency.
I look forward to continuing to work with Members of Congress and
with my colleagues on the many challenges, and tremendous
opportunities, that await us in implementing the 1996 Act. I trust
that, by working collaboratively and by having faith in free markets,
we will bring the benefits of competition, choice, and service to
American consumers.
Thank you for your attention.
Mr. Tauzin. Thank you very much, Commissioner Powell.
The Chair is now pleased to recognize the newest member of
the Commission, Ms. Gloria Tristani, for your testimony. Ms.
Tristani.
STATEMENT OF HON. GLORIA TRISTANI
Ms. Tristani. Thank you, Mr. Chairman. And before I begin,
I'm glad you are back, Mr. Markey, because I thought I would
let you know that I claim being Irish by association. I am
married to an Irish man. My son's middle name is Patrick, and
he has decided he may be just Patrick from now on. And I wanted
to wish you a happy St. Patrick's Day.
Mr. Markey. Thank you. Mr. Chairman, just 1 minute. If Vito
Fossella would be able to explain his political lineage, could
you, for the committee for a second? I think it would be a
little bit--I think it would be surprising to the----
Mr. Tauzin. I'm not sure we want to hear it, but go ahead.
Mr. Fossella. I'm sure everyone is on the edge of their
seat waiting for--well, Mr. Markey, you may know that my great-
grandfather, James Aloysius O'Leary was a Democratic
Congressman who served this body in the 1930's and the 1940's.
So, believe it or not, Vito is an O'Leary as well.
Ms. Tristani. Mr. Chairman, members of the committee, thank
you for this opportunity to be here today. I am pleased to
report on the progress in carrying out Congress' vision that
all Americans have the opportunity to share in the benefits of
the telecommunications revolution. I would like to highlight a
couple of areas.
Universal service. As a member of the Federal-State joint
board on universal service, I supported the principal
recommendations that the board made to the FCC on high-cost
funding. If these recommendations are adopted, I believe
consumers will benefit because local rates will be kept at
affordable levels and competition will be able to take root in
residential areas.
Another aspect of universal service that is particularly
important to me is connecting unserved areas. I know we have
talked about having wonderful connectivity in this country, but
there are still areas of this country, and I can talk about
Indian reservations where 30 to 50 percent of homes do not have
basic telephone or any kind of communication service. I believe
the Federal Government, in the interest of advancing universal
service, must take a more active role in connecting all
Americans.
E-Rate. I am the first to admit that the implementation of
this program has not always been perfect, but the goals of the
program are sound. And I am convinced that the E-Rate funds
that have been recently committed to schools around the country
will generate enormous social and economic benefits for the
Nation in years ahead.
Broad-band deployment. Our first report on the state of
broad-brand deployment under section 706 was guardedly
optimistic while recognizing that it is still too early in the
process. Indeed, with respect to rural and other hard-to-serve
areas, I remain more guarded than optimistic. I am not yet
convinced that these Americans will have access to advanced
services on a reasonable and timely basis.
I believe there are two ways we can accelerate the
deployment of advanced services. One is to ensure that
competitors have access to the basic building blocks of
advanced services that are controlled by incumbent LECs, and
two is to ensure that we are not over-regulating the provision
of advanced services by incumbent LECs.
Slamming. I strongly supported the rules we recently
adopted to fight slamming. The highlight of our new rules is
that a customer who is slammed need not pay the slammer.
Equal employment opportunity. We have proposed new
broadcast EEO rules that we believe address the concerns raised
by the DC Circuit in striking down the outreach portions of our
previous EEO rules.
Finally, on FCC restructuring, and Mr. Chairman, I am glad
and welcome that you have brought this to the table, and I look
forward to a continuing dialog on this.
First, we need to become more enforcement oriented. Second,
we need to continue restructuring the agency to reflect the
continued convergence of technology across traditional industry
lines. And third, we should initiate a top-to-bottom review to
ensure that our staff is deployed in a way that reflects the
agency's current priorities.
Thank you again, Mr. Chairman, members of the committee,
and I look forward to answering any questions you may have.
[The prepared statement of Hon. Gloria Tristani follows:]
Prepared Statement of Gloria Tristani, Commissioner, Federal
Communications Commission
Good morning Mr. Chairman and Members of the Subcommittee. I am
pleased to be here today to discuss the role of the FCC as we continue
to work toward the goal set forth in the Telecommunications Act of 1996
of opening telecommunications markets to competition for the benefit of
all Americans.
Last year, I came before this Committee and talked about my
commitment to carrying out Congress' vision that all Americans--rural
and urban, rich and poor, minority and nonminority--have the
opportunity to share in the benefits of the telecommunications
revolution. I'm pleased to report that we have made some progress in
the past year. I wanted to update the Committee on a couple of things
we have accomplished and where we might go from here.
First and foremost is universal service. In rural states like my
home state of New Mexico, universal service permits average Americans
to have phone service who otherwise would not be able to afford it.
Right now, we are working to ensure that universal service support does
not erode as competition develops. Last summer, the FCC referred key
issues involving high cost funding to the Federal-State Joint Board on
Universal Service. As a member of the Joint Board, I was pleased to
support the principal recommendations that the Joint Board made to the
FCC last November. Among the recommendations were to move away from a
strict limit of 25 percent federal funding of universal service.
Instead, the Joint Board recommended that the FCC provide more than 25
percent of the support needed in cases where a state cannot reasonably
bear 75 percent of the cost of universal service. If this
recommendation is adopted by the FCC, I believe consumers will benefit
because local rates will be kept at affordable levels, and competition
will be able to take root in residential areas. I also believe that the
recent work of the Universal Service Joint Board, under the leadership
of my colleague Commissioner Susan Ness and Florida Commissioner Julia
Johnson, demonstrates the increasingly cooperative relationship between
federal and state commissioners in fulfilling Congress' goals for
universal service reform.
One aspect of universal service that is particularly important to
me is connecting unserved areas. In enacting section 254, Congress told
us not only to ``preserve'' but to ``advance'' universal service. I see
no more worthy means of advancing universal service than to devise
creative solutions to problem of unserved areas. In many of these
areas, customers remain unserved because the alternative is to pay the
local phone company thousands of dollars to have a line extended to
their home. This is unacceptable. I believe the federal government, in
the interest of advancing universal service, must take a more active
role in connecting all Americans.
I would note that many unserved areas are on Indian lands, and that
Indians are among the poorest groups of Americans. Chairman Kennard has
recognized this problem, and I commend his leadership on this issue.
Recently, the Chairman and I held a field hearing in New Mexico where
we were joined by Congresswoman Heather Wilson, a fellow New Mexican.
We took testimony and visited Indian reservations to learn firsthand
about the causes of this problem and some possible solutions. That
field hearing marked the beginning of a real commitment in the area of
telecommunications to better fulfill the federal government's trust
obligation with respect to Indians living on reservations.
In addition, I would like to express my continuing support for the
e-rate program. I am the first to admit that the implementation of this
program has not been perfect. But the goals of the program are sound
and I am convinced that the e-rate funds that have recently been
committed to schools around the country will generate enormous social
and economic benefits for the nation in the years ahead.
Another area of increasing importance to all Americans is broadband
deployment. Access to broadband capacity will be a crucial tool for our
citizens to compete in the information economy of the 21st century. In
Section 706 of the 1996 Act, Congress directed the Commission to
monitor the roll-out of advanced telecommunications capability, and, if
necessary, take steps to ensure that all Americans have access to such
capability on a reasonable and timely basis. We recently issued our
first Section 706 Report, which was guardedly optimistic about the
state of broadband deployment while recognizing that it is still too
early in the process to declare victory. Indeed, with respect to rural
and other hard-to-serve areas, I remain more guarded than optimistic. I
am not yet convinced that these Americans will have access to advanced
services on a reasonable and timely basis. The next several years will
be critical. As advanced services begin to become a marketplace reality
in many areas of the country, we need to improve our data collection
and assessment efforts to ensure that all Americans have reasonable and
timely access to these services.
I believe there are two ways to accelerate the rollout of advanced
services. The first is to ensure that competitors have access to the
basic building blocks of advanced services that are controlled by
incumbent LECs. That includes things like conditioned local loops and
collocation space. Competitors can then combine those inputs with their
own advanced services equipment to offer high speed connections to end
users. I believe the Commission will strengthen the collocation rules
at tomorrow's Agenda meeting, and in the near future the Commission
will, I hope, formally reinstate the requirement that conditioned loops
be made available to competitors.
The second way to spur advanced services is to make sure we're not
overregulating the provision of those services by incumbent LECs. I
recognize that there may be markets where, unlike the market for basic
local telephone service, incumbents do not have a hundred-year head
start. We need to think carefully before applying rules that may be
ill-suited for such emerging markets. If we proceed thoughtfully in
this area, I am optimistic that the FCC's policies will provide the
right incentives for both new entrants and incumbents to furnish the
bandwidth that millions of consumers are asking for.
On the broadcast side, Equal Employment Opportunity is one of the
things that we have been working on to broaden opportunities for all
Americans. As the Committee is aware, this past year a panel of the
U.S. Court of Appeals for the District of Columbia Circuit struck down
the outreach portions of our previous EEO rules because it believed
(wrongly, I think) that our rules essentially required hiring decisions
based on race. We have proposed new rules to eliminate any confusion on
this point and to clarify that all that the new rules would require is
outreach to women and minorities, not hiring preferences. Outreach
requirements simply expand the pool of candidates for consideration.
They do not exclude anyone based on race or gender. Reaching out to all
parts of the community would help ensure true equal opportunity--giving
everyone the opportunity to participate in, own, and see themselves
reflected in, the media that has such a pervasive impact on our
nation's cultural and political life.
There are those who question whether we can craft new EEO rules
that will withstand judicial review. I do not doubt that any rules we
adopt will be challenged in court, and I have no illusions that some
will argue that even simple outreach requirements require the strictest
judicial scrutiny. But if the burden of proof is high, so are the
stakes. I believe we must make every effort to develop a meaningful EEO
program that can and will be sustained.
Although much of the Commission's work addresses the broad
structure of the telecommunications industry, the actions I've drawn
the most satisfaction from are those that directly improve the dally
lives of average Americans. That is why I strongly supported the rules
we adopted last December to combat slamming. The highlight of our new
rules is that a customer who is slammed need not pay the slammer. This
is good public policy for two reasons. First, allowing consumers to
withhold payment from the slammer takes the profit out of slamming.
That should substantially reduce the frequency of slamming. Second,
allowing a slammed customer to withhold payment compensates the
slamming victim for the trouble and aggravation of being slammed. I
hope and expect that these new rules, combined with our aggressive
enforcement efforts against slammers, will dramatically reduce the
frequency with which consumers are slammed.
Another consumer issue that I've been intensely interested in is
the V-chip. This is the year that the V-chip will finally become a
reality in the lives of average Americans. By July I of this year, half
of the new television models with screens thirteen inches or larger
must have a V-chip installed. By January 1, 2000, all such sets must
have a V-chip. This will empower parents to protect their children from
material that they deem harmful to their children. I commend you, Mr.
Chairman, for helping to forge a consensus on a useful ratings system,
as well as Congressman Markey, for his long-time leadership in this
area. You have given parents an important tool to help them raise their
children even when they cannot monitor what their children are
watching.
Now, I'd like to turn to the specific issue you asked us to
address, Mr. Chairman--the restructuring of the FCC. I applaud your
efforts, Mr. Chairman, to take a fresh look at the FCC from the ground
up. We should not fear such a review; if we are doing our job, we
should welcome it. We are fortunate at the Commission to have a
tremendously talented and dedicated staff. We owe it to them, we owe it
to you, and, most importantly, we owe it to the American people, to
create an FCC that is as smart and efficient as possible. I do not
pretend to have all of the answers as I sit here today, but I do have a
few thoughts that I'd like to share.
First, I agree with those who say that we need to become more
enforcement-oriented. That is, we need to impose fewer rules that
burden all regulatees up front--the good actors and the bad actors
alike--and develop the restraint to step in only when a problem
emerges. Under Chairman Kennard's leadership, I'm pleased that we have
already been moving in that direction. In the mass media area, for
instance, we are substantially reducing the amount of paper that
broadcasters must file, and instead are relying on the wider use of
compliance certifications and a program of random audits to deter
abuse. To make this system work, we need to ensure that bad actors,
when they are identified, are subject to swift, certain and consistent
punishment.
Second, we need to rethink the way the agency is structured. As the
industries we regulate continue to advance and converge, we have to
continually ask ourselves whether our organizational structure still
makes sense. Chairman Kennard has taken some steps in this regard with
the planned consolidation of currently dispersed functions into new
Enforcement and Public Information Bureaus. I fully support those
efforts and hope to see similar efforts to restructure the Commission
in other areas that cut across traditional jurisdictional lines.
Third, given that the mix of expertise needed by the Commission
changes over time, we need to make certain that our staff is deployed
in a manner that reflects the agency's current priorities. If there are
subgroups within the agency that were formed to address a particular
need that may have dissipated, we should reassign that personnel to the
many areas within the Commission that are understaffed. There is no
rule that says that an agency subgroup, once created, can never be
disbanded. I do not have any particular subgroups in mind, but I
believe that now is a good time for a top-to-bottom review. Our staff
is too valuable to allocate them in a way that fails to maximize their
ability to contribute to the agency's mission.
Once again, I appreciate the opportunity to testify before you
today.
Mr. Tauzin. Thank you very much, Commissioner Tristani.
The Chair now recognizes himself and will recognize members
in order.
First of all, Mr. Kennard, I am pleased that you accepted
our invitation to literally describe an FCC for this future
that Mr. Huber and others have been predicting for us.
You mentioned three missions of the agency as you see it
going forward, consumer protection, the provision of universal
service, and spectrum management. I noticed you did not
mention, although your statement talks about incentivizing
competition. Where does that lie in your areas of priority?
Mr. Kennard. Well, I think it should be all-pervasive. I
think that the act that you wrote in 1996 clearly made
competition the organizing principle of our law and policy. And
in everything we do, we should always promote competition first
and foremost. I think that this is fundamental and paramount.
Mr. Tauzin. Obviously, this gets into the issue of whether
the agency remains a regulatory agency or moves successfully
into an enforcement-agency role, the question of how fast and
how efficiently we can build competitive markets. But I guess
the question is, how long do you think that takes? Is this a 5-
year plan, a 10-year effort? When do we reach a stage where, in
your opinion--I realize everyone has their own crystal ball on
this--where the agency can be less relied upon regulatory
initiatives and more reliant upon simply its enforcement
authority to police against bad behavior in a competitive
marketplace.
Mr. Kennard. Well, I think it has already happened in some
areas. You see it in the wireless area, for example, where we
have had marked competition in wireless communication in this
country. The Commission been able to deregulate in some fairly
significant ways.
Forbearance from local number portability is a good recent
example of that. In the long-distance marketplace, for example,
as we saw more and more competition over the last decade or so,
the FCC has consistently deregulated, de-tariffed in that area.
In the international satellite area, we have a record of having
eased off of regulation as we have seen more competition.
The real crux of the matter is making sure that we are
focusing our attention on what are the remaining bottleneck
facilities that need to be opened up to competition, and that
is the prerequisite to deregulation.
Mr. Tauzin. I want you comment directly upon Mr. Huber's
concern. It is one I hear a lot, and one we think is worthy of
our consideration as we move forward, and that is that the
Commission has the power under the law to define a set of
regulatory rulemaking to a class of service just depending upon
what you call that provider. How do you react to that concern?
Mr. Kennard. You know, with all respect to Mr. Huber, I
think the point was a little bit overstated because----
Mr. Tauzin. Well, give me your take on it.
Mr. Kennard. Okay. If you look in Title I of the act for
example, the Congress set forth pretty clearly some of the
definitions defining telecommunications service providers,
information services. We are bound by those definitions. And
so, clearly, there are some areas in the act where we don't
have freedom to just define what is, what service fits within
what particular definition.
But that being said, I think that Mr. Huber's point is well
taken that our overarching goal should be to promote more
competition and eliminate barriers where we have regulatory
authority to do it.
Mr. Tauzin. But, Bill, doesn't the mere fact that we are
moving into a digital age, where communications, they are all
going to look the same--visual, telephony, and data, and--it's
all going to be in the same screen. Doesn't that itself lead to
the conclusion that, depending upon what you call the facility,
it is subject to different regulatory authorities and different
regulations. Isn't that the crux of the problem here?
Mr. Kennard. My point is, is that some of that is in the
statute. I mean some of these companies----
Mr. Tauzin. So we may have to change the statute.
Mr. Kennard. I mean, some of these companies are providing
these services coming from different regulatory heritages.
Mr. Tauzin. Yes.
Mr. Kennard. From cable under Title VI and telephone is
under Title II. But the one point that I would have to take
issue with Mr. Huber on is that on advanced services. He made
the point that what we should be doing is completely
deregulating the provision of broad-band services. And I think
that certainly should be the goal, but we also have to
recognize that in many cases the provision of those services do
require the use of central facilities: the copper wire into the
home. And the act that you wrote very clearly addressed that
issue and that is why we are working hard to open up that
copper wire to competition.
Mr. Tauzin. With the indulgence of the committee, and this
will be my last question, I would each of you to quickly
respond. The chairman has outlined his three missions for a new
FCC. I just recited them for you. And, Harold, I know you don't
like to give us advice until we ask you, so I am asking you
now: If each of you could give me your top three, four missions
of an FCC in a world of competitive marketplace as opposed to
the 1930's world of monopoly, regulated marketplaces, starting
with Commissioner Ness.
Ms. Ness. Thank you, Mr. Chairman. Certainly one set of
priorities involves ensuring that competition does, in fact,
take place and that abuses of market power are addressed where
there are complaints that are filed. That's the enforcement
side.
Ensuring that universal service is afforded to all
consumers throughout this country, is another extraordinarily
important goal of the act and one that we should continue to
work on.
Spectrum management is also critical. We need to make sure
that the commercial uses of the band are in fact taken care of
expeditiously, that we work with our colleagues abroad to make
sure that all of the services are able to see the light of day.
So that is a very important mission.
Ensuring that there is no interference, or that
interference is minimized, in the spectrum is extremely
important as well.
So I see all of those pieces and then----
Mr. Tauzin. So you basically endorse Chairman Kennard?
Ms. Ness. Yes, I do.
Mr. Tauzin. Commissioner Furchtgott-Roth, again, put on
your thinking cap. You are not a member of the committee or
Commission. You are just that good citizen out there. What
should he Commission be doing in the future?
Mr. Furchtgott-Roth. Mr. Chairman, I believe under section
5 of the act the Commission has the authority to organize its
staff in any manner that it sees fit. I have not yet finished
reviewing the chairman's proposals, but I think that there are
any number of ways that the Commission could be organized that
would make sense.
If you look around, the hundreds of Federal agencies, there
is no single way in which they are organized. They each have
different organizational structures, organizational structures
that change periodically. In some cases, the organizational
structure is statutory and in some cases it is not. In the case
of the FCC, it is not statutory.
And I think if you look at the different agencies around
Washington, the ones that are successful, that you may consider
to be successful, I'm not sure you could attribute its success
to organizational structure. And the ones that are not
successful I'm not sure that you could attribute that to
organizational structure.
I believe organizational structure is an internal matter
for the Commission. I look forward to working with Chairman
Kennard and reviewing his plan, and to the extent it makes
sense, I will be very happy to----
Mr. Tauzin. Assuming it's reorganized, what's the new
mission of the agency?
Mr. Furchtgott-Roth. The mission of the agency is very
simple. It is to follow the laws as written. You know, I don't
think we can distill that into any set of principles, into
anything beyond saying we implement the law. We cannot give
added weight to some section of the act and lesser weight to
other sections, Mr. Chairman.
I have a very simple mind about this. And you know, it's a
good thing I'm not a lawyer.
Mr. Tauzin. Commissioner Powell, what's the new mission of
the new FCC?
Mr. Powell. Mr. Chairman, I think first and foremost, the
Commission has to continue to serve out its role set forth in
the 1996 act, of transitioning the legacies that we inherit out
of its current regulatory structure and all of the assumptions
that go with that: the technological assumptions, the
regulatory assumptions, the tools and devices we use to
regulate them.
A perfect example would be data information which doesn't
lend itself as much to the per-minute kind of pricing vehicles
we have used historically.
I think, first and foremost, we are in the messy business
of transitioning the legacies out. Where we get focused on
competition though is as we get those things out the door, we
have to hesitate as those things create newer realities and new
environments and the temptation to want to tinker in their
migration.
I believe competition is not something you manage, or that
you ``master chef'' for the public, it's a replacement for us
as the decisionmaker. It will make the decisions about the
highest and best uses as dialog between consumers and private
firms. But I would point out that I think we need to become
increasingly focused on what I would call innovation policy.
Innovation is what is driving these markets, more than our
classic, tired versions of price and choice regulation. And I
think deregulation has to be the central vehicle in innovation
because I think competition has proven to be the superior
vehicle for innovative economies.
Second, I would agree with the Chairman and Commissioner
Ness, as long as it is the policy of the United States that
spectrum is a resource that is owned by the Government, there
will be a role for someone, us or someone else, in the
management and issuance of the spectrum.
But I will point out that shouldn't be the end of the
question. There are many advances in thinking about what you
can do with spectrum that are more consistent with market
dynamics. And I think that is what Mr. Huber was attempting to
suggest, that some versions of pricing, spectrum flexibility
that allow quicker and more timely, more efficient uses of
spectrum rather than coming in to get permission could be that.
And finally, I think, as everybody would allude to, there
is always a residual of consumer protection and affairs that
government would never want to abdicate. If we thought mobile
phones were frying your brain, I think everyone, no matter the
truest free-marketer, would want somebody to do something about
that.
But I think there is a spectrum of consumer protection that
can quickly cross over from core protection of our consumers'
health, safety, and welfare into things that are the micro-
managements of markets, and I think we have to be careful of
where that line is. I personally believe that the high water
mark in the middle is antitrust enforcement for anti-
competitive effects.
But when you start heading on the other side of the
spectrum toward the right price, the right quality, the right
et cetera, et cetera, you are in another world I think.
Mr. Tauzin. Thank you very much. And finally, Commissioner
Tristani.
Ms. Tristani. I'm going to agree with something my fellow
Commissioner, Furchtgott-Roth, said. And I believe the new
mission is to implement the 1996 act as you wrote it,
competition and universal service.
And Mr. Markey reminded us at the beginning of this hearing
that we do have the finest communications in the world, and
still envied by everybody else. And we need to make sure that
it continues to be the finest and is accessible as it has been
to most Americans.
Mr. Tauzin. Thank you very much. Mr. Markey.
Mr. Markey. Thank you. My district is half Irish and half
Italian, and my greatest fear is that I would ever have to run
against someone who could appeal to someone whose name started
with O and ended with O.
And it is all combined in Vito Fossella over there.
Mr. Tauzin. Would the gentleman yield?
Mr. Markey. You bet.
Mr. Tauzin. Is the new phrase ``Oh forget about it''?
Mr. Fossella. Just for today, Mr. Chairman.
Mr. Markey. You know, the irony of the cellular industry--
if someone could put the wireless chart back up over here--was
that when this committee back in 1993 moved 200 megahertz over
for the PCS revolution, one of the things that I wanted and
that ultimately the FCC put on the books as a rule was that
neither of the two incumbents, cause as you remember we gave
away the first two licenses back in the early 1980's, neither
of the two incumbents would be able to bid for the third,
fourth, fifth, and sixth licenses in their marketplace.
And so because of Federal regulation, Federal law, we
created this very competitive marketplace with five and six
competitors in each marketplace with rapid technological
change, geometric plummeting of pricing, that had not happened
from 1981 all the way up to 1993 and 1994. It was only when the
Government created a policy which wouldn't allow the incumbents
to consolidate. And so it is ironic now that the industry, many
in the industry, are now arguing that there should be
consolidation which should be allowed, that there should be a
lifting of the caps in terms of what would be permitted, in
terms of any individual marketplace.
And I have, without question, great concerns about that
because that is a success story. And that is what we should be
looking for in every other marketplace.
I would like to discuss, if I could, with the Commission
how to make wireless more fungible as a service to and
competitive to the local loop.
And I would like you, Mr. Chairman, and the other
Commissioners to give me your views on when it might be
possible for us to move to, to deal with the issue of calling-
party-pays or with number portability so that we can add that
additional revolution to this wireless phenomenon so people can
keep their cell phone on all day long with a number which is
fungible.
Mr. Kennard. Certainly. I think we are--I am very
encouraged by what is happening in the wireless industry
because we are seeing the price points in wireless declining to
a point where we may well see some people turning off their
wireline phones and picking up the wireless phones. Some of the
flat-rate pricing plans that we are seeing are very
encouraging.
Calling-party-pays, I think, may also hold a lot of promise
in expediting competition in wireless. This is on the,
certainly on the front burner of the Commission's agenda. I
believe that it is time for the FCC to take up the issue of
calling-party-pays. We have to work through a lot of the
difficult policy issues to implement calling-party-pays in the
country, but it is time to do it. And I am fully supportive of
moving ahead with that.
Mr. Markey. Any other Commissioners wish to deal with that
calling-party-pays issue, especially?
Ms. Tristani. I would agree with the chairman.
Mr. Markey. Now here's another irony, which would be that
the industry, that is the cable industry, fought the DBS
revolution. They fought the program access provision. Now, of
course, they turn and use the DBS revolution as the argument
that there should be complete deregulation of their industry.
But, if this committee hadn't acted, they wouldn't have
that as an opportunity. That is, that there would be no
competition, which could have emerged absent the Congress and
the FCC having acted. And again, I just want to continue to
point out that a lot of what we are saying, and Mr. Huber
documented it quite well, this rapid expansion of technology
choices for consumers is as a result of what has happened on
this committee.
And I have one final question, if I can. One of the
complaints that new competitors are bringing to us is that they
are thwarted in providing competing services in multiple-
dwelling units, such as apartment buildings, where a consumer
may want video or other telecommunications services because
they can't get sufficient access.
Obviously, with cable rates being deregulated, we want
consumers to get the chance to choose alternatives if they can
and want to.
How can the Commission help us with this bottleneck?
Mr. Kennard. I think you put your finger on a very
important challenge in promoting competition, particularly at
the residential service level. I look forward to working with
you, Mr. Markey, and you, Chairman Tauzin, on your efforts to
revisit the law in so far as you would like to move more
aggressively on the inside wiring front. I think that that is,
like the last mile, that is one of the--it is really the last
few feet of competition. And it is a very important few feet.
And I think your efforts to look at statutory approaches to
changing that is very productive, and I offer any assistance
that we at the Commission could do.
Mr. Markey. And I would like, Mr. Chairman if I can
briefly, there is an interview with the CEO of Bell South in
USA Today on March 1st, and a question to him is, ``Do you
detect a change in attitude at the FCC?'' And his answer was,
``The working environment is as good as I have seen it over the
last 3 years. There has been a great deal of changeover in
staff, the FCC seems to be working much harder under Chairman
William Kennard's leadership to define specifically what the
requirements are for the local Bell companies to enter the
long-distance market.''
I want to congratulate you, Mr. Chairman, and the rest of
the Commissioners for creating an environment that would elicit
a comment of that nature from the chairman of Bell South.
Thank you very much.
Mr. Tauzin. They are still trying to get a permit approved.
I don't blame him for saying that.
I thank the gentleman. Let me point out for all of you that
we have already scheduled in April a hearing on the inside
wiring issue. And I want to thank you, Mr. Kennard, for your
offer of assistance. We are going to need all your advices,
including you Harold, on how to make some good policy. And we
welcome your comments as we move forward.
The Chair is pleased to welcome the vice chairman of the
committee, Mr. Oxley, for a question.
Mr. Oxley. Thank you, Mr. Chairman. Let me follow up if I
can on my opening statement and in particular on some responses
that you have had. As you know, Chairman Kennard, I quoted you
to say that we need to recognize that we are dealing with
statutes that really haven't dealt with convergence. I think
that is obviously a true statement and even reflects on the
1996 act, even though I think we have made some progress in
that regard. And you also talked about how the FCC would look
different in 5 years. And I think all of us would applaud that.
The real question is, how do we get from here to there? And
can we do it--let me just ask you this: Could you do it without
legislation?
Mr. Kennard. I think we must proceed to do all we can
without legislation, but certainly we look forward to working
with you on changes that might even advance competition more
and help the agency work even better.
Mr. Oxley. Well, you are in many respects bound by statutes
that don't recognize the changes that have taken place in the
marketplace.
Mr. Kennard. Well, that is right. And I guess the point I
am trying to make is that we would certainly welcome you to
address this issue of convergence, legislatively, because the
total solution will have to come legislatively. But I want you
to understand that we are not going to wait. We will do
everything we can in the interim to advance a pro-competitive
agenda.
Mr. Oxley. Do any other Commissioners have a comment in
that regard?
Let me, then, move on. The term universal service has been
used quite a bit. Ms. Ness and others spoke of universal
service. Will the definition of universal service change as
technologies and the markets change? If, in fact, universal
service changes, is it going to be changed by the FCC? Is it
going to be changed by the Congress? Is it is going to be
changed by the marketplace? Will what we consider the standard
of POTS, plain old telephone service, essentially being
universal service, will that change? How rapidly will it
change? And how do we adjust as policymakers to that potential
inevitability?
Mr. Kennard. Well, Mr. Oxley, I think that some of these
issues were clearly contemplated in the act. In section 254 of
the 1996 act, I believe Congress clearly contemplated that
universal service would be an evolving concept and that we
would continue to update it as technology changes. And we
certainly will follow the statue in that regard.
But I think that one thing that we could certainly do
immediately is to do everything we can to ensure that wireless
providers are part of the universal service dynamic because we
do know that in many rural, high-cost, low-density areas,
wireless is providing solutions to the universal service
conundrum. And we ought to be doing everything we can to
promote universal service support to wireless companies and
satellite companies if they can provide services most
efficiently in those remote areas.
Mr. Oxley. Well that then raises the question of how you
pay for it and who pays for it and how you structure or,
restructure essentially, the universal service fund. How soon
is that coming? How soon does it have to come?
And, let me back up a little bit, in the 1996 act, there
was a lot of debate, there were some folks on this committee
that wanted to define universal service. We, I think,
thankfully, avoided that conundrum and left, essentially, that
section relatively amorphous. I don't think we really nailed it
down, nor should we have. But where are we then? And what's
going to happen? Universal service is a big deal.
Mr. Kennard. It is.
Mr. Oxley. It is a big deal for us. It is a big deal for
the carriers. It is a big deal for the consumer. I'd like to
just ask each one of you where you see this process going in
your best judgment.
Mr. Kennard. We are working very hard on universal service
issues at the FCC. The FCC in 1997, spring of 1997, issued the
first major order implementing the universal service provisions
of the act. This Commission then turned its attention to
completing that task.
We learned very early on that we need really extensive
engagement and input from our colleagues in the States to come
up a comprehensive reform of universal service.
So we convened a joint board of Federal and State
Commissioners under the leadership of Commissioner Ness, which
provided us some very useful recommendations which the
Commission is considering now. We hope to complete our review
of universal service this summer.
Mr. Oxley. Other comments from any of the Commissioners?
Ms. Ness.
Ms. Ness. Thank you. Universal service has a number of
component parts to it. And we are trying to work through these.
But I want to assure this committee that all pieces of
universal service are in place as provided under the act. What
we are trying to do now is carry through the changes that need
to take place as competition comes into the marketplace.
In other words, today there is a high-cost fund that is
providing for subsidies in the high-cost areas. Low-income
consumers are getting the benefit of modifications that we made
to those programs. Schools and libraries funding is in place,
and with rural health care we are working through some start up
issues but there's a program there.
The issues are very complicated, and as Chairman Kennard
mentioned, they involve a partnership with the States. Most of
the implicit subsidies that support universal service are at
the State level and are controlled by the State Commissions. So
we need to work with our State colleagues to ensure that there
is adequate funding in the high-cost areas that can come from
the Federal side, but there is a limit to the amount the
Federal side can handle. We need to work through a whole host
of issues, including revision of access charges or access
reform, to make this into a composite that's going to work for
all consumers so that we also do not see any rates going up for
consumers. It is a very important piece of this puzzle.
Mr. Oxley. Thank you, Mr. Chairman.
Mr. Tauzin. Thank you, Mr. Oxley. The Chair recognizes the
gentleman from Michigan, Mr. Dingell, for a round of questions.
Mr. Dingell. My questions of the Chair----
Mr. Tauzin. What we plan to do is, if the gentleman will
complete his round, if the Commission--I'm sorry----
Mr. Dingell. What were the wishes of the Chair? Mr.
Chairman, I will go now if it be your wish or do later.
Mr. Tauzin. I would hope that the gentleman would proceed
now.
Mr. Dingell. Then I shall do so.
Mr. Tauzin. And then, but let me make an announcement, if
it is acceptable to the witnesses and to the committee. Perhaps
after Mr. Dingell completes his round that we can take a 40-,
45-minute break. That is why I am asking your thoughts on it. I
suspect this may go on a little while, and, Mr. Powell, we have
been here before where we kept you sitting here a long, long
time.
Mr. Powell. Got to let me go to the bathroom.
Mr. Tauzin. That's what my point is.
I remember the last time we did this, it went on a long
time. With your indulgence, I would like to proceed with maybe
a 40-minute break. Would that be acceptable to everyone?
Mr. Kennard. It would be fine with me, Mr. Chairman.
Mr. Tauzin. All right, let's do that. Mr. Dingell, you are
recognized at this time.
Mr. Dingell. Mr. Chairman, thank you. Chairman Kennard,
under section 254 of the Telecom Act, the FCC was required to
establish within 15 months of the date of enactment a specific
timetable for fully implementing a universal service fund. That
was to be done by May 8, 1997. Is that correct?
Mr. Kennard. Yes.
Mr. Dingell. And it has not been done. Is that correct?
Mr. Kennard. By that date, Mr. Dingell, we did issue a
universal service order which established a timetable for
completing the universal service reform. Yes.
Mr. Dingell. You were supposed, however, to implement a
universal service fund. That is not laying out a timetable.
That is implementation. So you have not done it. Very well.
Now, initially, the December 1997 date was postponed until
December 1998, which was in turn postponed to July 1, 1999. I
believe the reason for this is that the FCC cannot agree on a
model to quantify how much support is needed for this high-cost
fund. Is that correct?
Mr. Kennard. It is not exactly correct, Mr. Dingell.
Mr. Dingell. What is correct?
Mr. Kennard. On the timetable, what we did is, we came up
with the universal service order in May 1997. It would not have
been prudent for us to have completed all of universal service
reform at that time without the kind of extensive input and
engagement that we needed with our colleagues in the States.
And, as I would reiterate what Commissioner Ness said, it
is important to recognize that we do have a sufficient
universal service support system in place. This is a question
of updating it for a more competitive marketplace for the
future.
Mr. Dingell. Well, I think this brings it down to the point
that you have not yet constructed the model of what the
universal service fund is supposed to do, how much money will
be coming in, how much money will be going out as of this
moment. Have you?
Mr. Kennard. That process is ongoing as we speak. Yes.
Mr. Dingell. But it is not done?
Mr. Kennard. Correct.
Mr. Dingell. And yet, it is fair to note that you are now
allowing long-distance companies to proceed, to move forward,
to decide whether they are going to pocket the lower access
charges, whether they are going to move them back to consumers,
or whether they are going to dissipate them in other ways. Is
that not so?
Mr. Kennard. Well, I am not quite sure what you mean by
that, Mr. Dingell.
Mr. Dingell. I mean that you have done nothing to assure
that the long-distance companies address either the problem of
providing enough service at low-enough cost or whether there is
enough money in the access fund to assure that there are low-
cost services afforded to the needy categories of users that
the Congress intended would be served by that. The result of
this is that there is a strong possibility that the fund will
be dissipated by being transferred out of the fund into the
pockets and the hands of the long-distance carriers.
The practical result of this will be that those moneys will
be dissipated and, at the end of which time, there may be no
money in that particular fund to address the needs and concerns
of the residential users, the local service users, who are
supposed to be the beneficiaries of that fund.
Now deny that if you please.
Mr. Kennard. I will. That has not happened, Mr. Dingell.
Mr. Dingell. But you don't know whether it will or will not
happen, do you? You have completed neither modeling nor have
you written any orders on this matter.
Mr. Kennard. The reason why we are proceeding in a very
deliberate way in working closely with our colleagues in the
States is that we want to prevent that very thing from
happening so that we can protect consumers.
Mr. Dingell. Now are you able to sit there and tell me that
this will not happen?
Mr. Kennard. No. I am telling you that it will not happen.
Mr. Dingell. So you cannot tell me that. You are then in
the position of sitting idly by, allowing these moneys to be
returned to the long-distance carriers with a fairly assurance
that you don't know what is happening. So you cannot sit there
and tell me, with any degree assurance, that these moneys are
not going to be turned over to the long-distance carriers with
the result that the local service, particularly the residential
users and others, will find at the appropriate time there is no
money to meet the claims that the Congress wants them to have
on that fund in terms of assuring low-cost service being
readily available to all of the inner-city users and the rural
users, who were supposed to be the beneficiaries of that fund.
Mr. Kennard. Actually, the access charge revenue is flowing
not to the long-distance companies, it is flowing to the local
companies for the purposes of--some of which is being used to
provide universal service.
Mr. Dingell. There is a subsidy in access charges, is there
not?
Mr. Kennard. Yes. And we are determining the precise amount
of that subsidy that goes to universal service support.
Mr. Dingell. And that is currently supposed to be used to
provide universal service at affordable costs to inner-city
users, residential users, and to high-cost users in rural
areas. Is that not so?
Mr. Kennard. Well, some portion of it. Therein lies the
debate.
Mr. Dingell. But unfortunately you sit there in sublime
ignorance of what that amount might be. You don't have any
idea, and you don't have any way of telling us what is the
amount of that subsidy, what should be the amount of that
subsidy, how the changes that are going on with regard to the
use of that subsidy will impact either the inner-city
residential users or the high-cost rural users.
Mr. Kennard. Well, Mr. Dingell, it would be irresponsible
for me to make up a number and tell you that that is what it is
because it is an important number. And we have to make sure
that it is developed in a deliberate and comprehensive way,
working with our State colleagues.
Mr. Dingell. So you don't know the amount but you propose--
you are not contemplating doing automatic reductions in July?
Mr. Kennard. No.
Mr. Dingell. It has been widely reported that you intend to
do that.
Mr. Kennard. Well, we are----
Mr. Dingell. That you intend to do that not just this July,
but annually.
Mr. Kennard. Well, you are going back to the access----
Mr. Dingell. And to do so in blithe ignorance of what the
impact of that is or what the amounts of money involved might
be or who and how they will be impacted.
Mr. Kennard. Mr. Dingell, nobody in this room, in fact,
nobody in the country to my knowledge, knows exactly what
amount of access is devoted to universal service. It is a
complex question. That's why we are working hard to develop the
models which will answer that question.
Mr. Dingell. Well, explain to me, since you don't know the
amount of the subsidies and the access charges and the impact
of this action, why should you be proceeding now toward
reducing these access charges and helping the long-distance
carriers who have no responsibility to subsidize the people
that it was the Congress' intent would be subsidized?
Mr. Kennard. I am certainly not interested in proceeding
with access reform to help the long-distance industry.
Mr. Dingell. That will be the practical effect, however.
Mr. Kennard. Not necessarily. No, no, not necessarily.
Access reduction should flow to consumers.
Mr. Dingell. It is going to be the practical effect because
you can't tell us how this money is going to flow, how much
money there is, or what the impact is going to be on the
different persons who have claims on that fund.
So you are proceeding blithely toward dissipating this
money not knowing what is going to be the impact on the inner-
city residential user or the high-cost rural user.
Mr. Kennard. I don't believe I am, Mr. Dingell. And
frankly, I don't think my Commissioners would support a vote if
we didn't determine what those numbers were in a responsible
way.
Mr. Dingell. Well, if you don't know by July, are you going
to proceed to move forward, to do the annual reduction?
Mr. Kennard. I am going to work on the access restructuring
in tandem with the universal service proceedings and how they
are coordinated.
Mr. Dingell. That does not answer the question. Are you
going to proceed if you don't have the answers to the questions
I have been asking about how this change will impact the inner-
city residential user and the high-cost rural user?
Mr. Kennard. Well, we hope to have these answers by the
summer, and we will proceed when we have the answers.
Mr. Dingell. Will you have the answers by the summer?
Mr. Kennard. We hope to have the answers by the summer.
Mr. Dingell. If you do not have these answers, will you
proceed?
Mr. Kennard. It would be difficult to proceed if we didn't
have the answers.
Mr. Dingell. I think you should anticipate being held to
that statement at some future time.
Mr. Tauzin. The Chair would interrupt. What was the answer?
Are you proceeding or not? This may be difficult, but you
didn't say whether you would or not. I think this committee
would like an answer.
Mr. Dingell. The answer is he doesn't know.
Mr. Tauzin. Do you know?
Mr. Kennard. It is a complicated question. The X factor
does kick in in July based on the productivity of the local
exchange carriers. That is correct. But universal service
reform is proceeding in tandem, we are working hard to develop
the actual numbers, the actual amount of universal service
support which is embedded in access, and we will work on that
number and come up with an access reform plan that works in
tandem with that.
Mr. Dingell. Mr. Chairman, would you permit--this is a
wonderful answer, and I am enjoying. And if I had more time I
would probably enjoy it more. The fact of the matter is that it
is not responsive.
Mr. Tauzin. The Chair has extended the gentleman's time,
and, without objection, the Chair will extend it for another
minute or 2.
Mr. Dingell. The X factor kicks in July, does it not?
Mr. Kennard. Yes.
Mr. Dingell. So aren't we well served to get an answer to
the questions now before we proceed? Then get the X factor just
as soon as we can. Then decide what it is we ought to do about
this matter. So that you know that you are not dissipating
funds. May very well be that you are not, but you can't sit
here and tell me you are not. So why are we not waiting until
we have the answers to the question before we proceed?
Mr. Kennard. What we don't want to do, is do anything that
will jeopardize universal service support.
Mr. Dingell. That is precisely the point I make. Yet you
are blindly continuing without the vaguest idea of whether or
not you are going to impair this fund or not.
Mr. Kennard. That will not happen, Mr. Dingell. We will not
impair universal service.
Mr. Dingell. I have dealt with folks for years who have sat
in the well and told me, trust me. And way back when I was
young and dumb and green, I did. But I have gotten smarter.
Reed Hunt moved exactly the opposite direction. Did he not?
He increased the X factor. And he didn't even know whether it
was in the subsidy or not. Did he?
Mr. Kennard. I can't answer that question now.
Mr. Dingell. Are you going to repeat, replicate his error?
I wonder if the other Commissioners have a comment that they
would like to make----
Mr. Tauzin. The Chair will ask, yes, if any of the other
Commissioners wish to respond. Any of the other Commissioners
want to jump in here?
Mr. Kennard, any final statements?
Mr. Kennard. Yes. I just wanted to point out in response to
Mr. Dingell's question. I don't know whether he will find this
responsive or not. But, interstate access usage is going up in
this country, and so we can offer--we can take some comfort in
the fact that universal service is not going to be jeopardized
while we proceed with this restructuring, which we are working
very hard to do with our colleagues in the States and, really,
all of the affect industries.
Mr. Dingell. The answer is you don't know.
Mr. Kennard. Nobody knows, Mr. Dingell.
Mr. Dingell. When will you know? And when you know, what
will you do?
Mr. Kennard. As soon as I know, you will be the first to
know, I assure you.
Mr. Tauzin. With that behind us, the gentleman's time has
expired. We have beaten this X factor horse to death.
Mr. Kennard. I beg your pardon.
Mr. Tauzin. I think we beat this X factor to death. I think
we'd better move on. Let's take about a 40-minute break. Let's
get back at about 1:40. That will give everybody time to have
lunch. The committee will stand in recess.
[Brief recess.]
Mr. Tauzin. The committee will please come back to order.
While members are returning, let me do an exercise that might
be useful. Let me list a couple of--you know, one of the
things, Mr. Chairman, I have asked members of the industry to
begin doing, both the regulated industry and the unregulated
side of the communications, is to begin putting together ideas
and suggestions for us as to what direction reform ought to
take, some ideas.
I want to list a number of things, and before the day is
over I would like you to think about this and maybe comment on
each one.
I'm going to list, in fact, a list of 8, 10 approaches that
have been widely, broadly suggested to us. One is that ending
the FCC's role--somebody called it the Department of
Redundancy--that is, doing the same things other agencies are
required to do. Some of you mentioned that.
Some kind of a process that would, I know Mr. Huber talked
about it, level the playing field for different players in a
time of convergence. How do you get to a more level playing
field for all the players in a time of convergence consistent
with deregulatory approaches?
A third one we hear a lot about is ending the let's-make-a-
deal philosophy. That is, that when people come to the
Commission for licenses or merger approvals or something that
all too often they find the process held up in sort of let's
make a deal, what can you do for us that we would like you to
attitude. We hear a lot of that. And I would like some of your
comments about why you think that is either appropriate or
inappropriate for a regulatory Commission to be doing,
particularly a Commission that is migrating over to an
enforcement type agency.
The question of whether or not there ought to be a
presumption in favor of forbearance over regulation--Mr. Huber
mentioned that--as opposed to a presumption that you have to
get permission to do something as a part of the re-missioning
of the agency.
Mr. Dingell has talked about ending the uncertainties in
the implementation of universal service. What can we do in
terms of reform that would help get us to that point sooner. I
realize that may be limited, but what if anything we can do.
The using the biennial review to eliminate outdated and
outmoded regulation. That is, actually requiring the FCC to use
that biennial review process to do that.
You have all mentioned the modern, forward-looking agency
structure. Mr. Powell, you particularly expressed concerns
about whether or not it would really get anywhere. We would end
up with multiple variations of the same structure under new
headings. If you can all comment to us on what kinds of new
structures would be worthwhile pursuing, and which would not.
Another I think some have alluded to, defining a framework
for the worldwide web. That is, making some rules that would
apply to it now, some general rules that would apply to all the
systems that might come into play.
Deadlines for deliberations, instead of the open-ended
deliberations. Some outside time limit to get something done,
particularly when an applicant is before the agency. We hear
that a lot from people who are complaining to us about current
procedures, that if they only knew at some point there would be
a decision, that there would be some, perhaps, more certainty
in the marketplace.
Sunsetting. Whether or not any forms of sunsetting of FCC
rules, absent an affirmative finding, that the requirement is
necessary to serve the public interest. That is a common
element used in reform in many legislative areas. I know that
was a very popular sort of tool used in reforming executive and
legislative branches as I was coming up. You sunset unless you
can affirmatively say that this is worth doing again, and for
this new reason.
Those are all concepts that perhaps if you would think
about and as we further explore this, either now or later, if
you could comment to us on them.
Mr. Pickering is recognized from Mississippi.
Mr. Pickering. Thank you, Mr. Chairman.
Mr. Chairman, I have a few questions. First, the core
mission of the Telecommunications Act of 1996 was basically to
open up all markets and remove all barriers, but the critical
mission was to open local and then have the subsequent entry of
the regional Bells and telephone companies into long distance.
As we talked about earlier, we are seeing emerging competition,
and are seeing, I think, good developments in the marketplace
in technology and alliances and partnerships. I believe that we
are poised to have this year as the breakthrough year.
We talked about earlier, we hoped for it to be sooner, but
as we go into the third-year anniversary, my question for you
is where do we stand on any 271 agreement, a breakthrough that
would set a blueprint and, hopefully, would be a catalyst to
expedite competition across the country in local and long and
in the convergence that we hope follows from that?
Mr. Kennard. Well, as we have talked before, Congressman,
we don't have a 271 application pending before us, but we
anticipate that we will have applications later this year. I am
very encouraged by the progress that we are seeing in some of
the States that have 271 proceedings ongoing, like in Texas and
in Georgia, New York, California. And I think we went through a
process, which you alluded to during the first few years after
the passage of the act where a lot of companies were hedging
with the litigation. They had, sort of, one eye on the courts
and the other eye on the FCC.
And I think that as these legal issues get resolved, I am
seeing a change in attitude among some companies that they
really want to roll up their sleeves, do the hard work of
opening these markets, and making the 271 process work. So,
even though we don't have an application pending before us, I
do believe that progress is being made and will be made this
year.
Mr. Pickering. Let me just encourage and emphasize. I think
to a certain degree, our credibility, Congressional credibility
in the passage of the act, and the expectations that we would
see greater progress, faster progress than we have seen to
date, the FCC's credibility is, I think, at stake in this year,
the third year, to see progress and a breakthrough on a 271.
And so I encourage you and all the Commissioners in the FCC
to work closely with the States and all competitors and
participants to see a 271 agreement hammered out. And I hope it
can be done in this year.
And I hope that we see the blueprint that will then be
established for the rest of the country and the market forces
that would hopefully replicate, or cause replication, quickly.
Do you think that can be done this year? Do you predict a
271 breakthrough this year?
Mr. Kennard. Well, it is hard to predict, although, I'll
say again, I think that we are seeing some encouraging
progress. Folks are really focusing on it in some States. But I
think it is important to note that the, at least in my view,
the end in itself should not be to grant a 271. The end, and
I'm sure you share this concern because we have talked about
it, is to open the markets. That should be the goal because
that is how the public is ultimately served.
Mr. Pickering. I agree. But I do hope that everyone has the
certainty of what is required and that we do see, in those
states that you mentioned, possible breakthroughs this year.
Let me move on to the FCC merger review process, review and
approval process, with first, Bell Atlantic-Nynex, MCI-
Worldcom, now with Ameritech. What is the average time for
those approvals in the merger process?
Mr. Kennard. Well, Congressman, as you know, the FCC
approves many, many mergers in the ordinary course. And, in
fact, since the act was passed, we have literally approved
hundreds of transactions, where companies have come together
and combined and needed our approval. The time varies depending
on the complexity of the transaction.
In an unopposed, routine situation, we approve--broadcast
transactions often go through in 2 months, unopposed. Some of
the international deals go through that quickly.
The average time is about 6 months. In the extraordinary
case, where you have a hotly contested merger, where you have a
huge record, like the Big Bell mergers, it takes much longer
because you have important market structure issues to deal with
and you have just a very voluminous record. So those can take
longer than 6 months.
Mr. Pickering. As you know, in the Telecommunications Act,
we repealed 221 (A), and we tried to separate--we foresaw the
merger of some of the cable, telco issues, and we wanted to
give Justice Department the antitrust review. Now we maintained
public trust standard review for mergers as they went forward.
And this goes back to the same question of stability,
predictability, and certainty for markets and investment.
And if we come to a merger process, and it is long and it
is drawn out, then that can have a negative effect as we
position ourselves to have the companies partner-ally, deploy
networks, and the uncertainty of what is the standard at the
FCC. What is the time?
I think it does a disservice. And we need to find a way of
possibly to have a certain timetable. All through the bill, we
set timetables for the 271, for the regulatory process, for the
rulemaking process. Would you support a 180-day, a 120-day
requirement for all merger review at the FCC?
Mr. Kennard. I think we would have to look at--the short
answer is yes, but. And I think the but is an important one
because I think we would have to look at lots of factors that
play into the merger-review process, like the timing of the
Justice Department review, the timing of other regulatory
approvals, not only State approvals but also, increasingly,
approvals from other jurisdictions outside the United States.
And what we have tried to do is coordinate with these other
entities so that that we can make the process work not only
well for us at the FCC, but also work well for the companies
and the parties involved.
I definitely share your concern that we could, we need to
make this process work better so that it is not duplicative of
other Government agencies. And I would love to work with you on
that.
Mr. Pickering. Mr. Chairman, I know my time is up, could I
ask just two quick questions?
Mr. Tauzin. Without objection.
Mr. Pickering. And just to follow up to Commissioner
Powell, do you have any thoughts, you mentioned in your
testimony a possible streamlining of that process, or clearly
delineating the responsibilities of the Justice Department and
the FCC, do you have any thoughts on the merger-review?
Mr. Powell. Well, Congressman, I would certainly love to
work with you in more detail to flesh out proposals, but I will
give you a few thoughts.
I think it starts with determining what you believe to be
the unique expertise of the respective agencies that are
currently playing a role in merger review. The case is often
eloquently made that the Federal Communications Commission has
some unique expertise that add value to the merger
considerations when a telecommunication company is at issue.
And I suspect you wouldn't argue with that. Also, there are
particular policy functions that cannot be considered
appropriately under the antitrust laws. For example, the impact
on diversity in the context of a broadcast merger, for example,
would never be considered in an antitrust analysis, or
universal service, or whether it is a circumvention of section
271.
But often if you look in detail, a substantial portion of
the merger review, in fact, is a duplication of classic
horizontal or vertical merger analysis, applying the same
precedents, principles, and guidelines applied by the antitrust
division. I personally have come to believe that a great deal
of the marginal value of that full-blown analysis is not
justified by the costs imposed. That is two sets of documents
often being filed at two different agencies, two separate
arguments.
I think that there is room to work to tailor the value of
our role to the value that we do bring and nothing more, and
try to limit those areas of duplicating competitive analysis
for which we, in my opinion, are not particularly trained or
uniquely skilled to do, certainly as compared to the antitrust
authorities.
I also, with respect to your question about timeframes, I
would actually take a slightly different tack than the
chairman, maybe to your surprise, and say, ``no but.'' I think
that what you might consider playing with two variables, time
and permission to continue--it's not unlike the Hart-Scott-
Rodino process in antitrust. I could imagine a proceeding that
I know is partly contemplated in the Kohl-Dewine legislation in
the Senate on this issue, in which after a short period of
time, a quick look, it would require the vote of the full
Commission to continue the investigation.
You might have additional milestones further out. I do get
nervous in antitrust analysis, having previously been an
antitrust lawyer, of setting some prophylactic ``It's over'' at
6 months no matter where you are because I think you
potentially have dangerous or anti-competitive mergers that
only by virtue of time you begin to gamed by the companies
because they know you are running out of clock. And I think
that if you trust at all, you should allow some majority of
Commissioners to be able to say we think there are enough
serious issues to continue the evaluation.
But I think the idea of Hart-Scott-Rodino-like milestones
of which after 30 or 45 days, you would be required, the
bureaus would be required, to submit to the Commission a
recommendation on continuing this investigation and require us
to take responsibility for its continuance.
Mr. Pickering. Basically, I take it that we can work on
both the time and the scope and look forward to working with
the chairman on this issue. Just one small editorial comment in
the spirit of Hershey, which is this weekend, and in the
principles that are outlined in the Telecommunications Act of
open and non-discriminatory access. I would hope that with all
of your Commissioners, Mr. Chairman, that you would give open,
equal access, non-discriminatory access, to all information, to
all of your Commissioners.
And with that, that is my only editorial comments.
Mr. Tauzin. Well said. The Chair will now recognize the
gentleman from Chicago, Mr. Rush.
Mr. Rush. Thank you, Mr. Chairman. To the Commissioners, I
want to, again, join with my other colleagues in expressing my
sincere appreciation for your coming over here to engage us in
this dialog that we have been involved with for most of the
morning and into this afternoon. I really appreciate all that
you are doing, and, I tell you, some might not share this
opinion, but, in my humble opinion, this is one of the best
Commissions that we have had. I think that you all are doing a
fantastic job under some really difficult and trying
circumstances.
And I want you to know this is one Member of Congress who
appreciate all that you do because I can see progress. My
constituents in my district, the First District in Illinois,
they see progress. And I just want you to know I would just ask
you to keep up the good work. You are doing a fantastic job.
Problems have not been solved. There are still problems.
But from all indications from my perspective, I see some real,
sincere efforts to solve the problems, to re-focus the FCC on
the issues that face the American public. And I again want to
say thank you so very, very much for the work that you are
doing.
I read the chairman's testimony and I think that it is a
significant step in the right direction. And in my estimation,
it puts a balanced framework before the Congress, before the
American people, and for the stakeholders. It will allow us all
to have a role in determining what the FCC will look like once
this reorganization takes place.
I have one question, and that is, at relates to the
telecommunications areas and concerns in my district, which is
an urban district. In 1996, the Telecommunications Act was
supposed to deliver certain capacities to us and certain
capability to low-and moderate income urban areas, and I see a
problem because the results have been somewhat disjointed. Of
course, with the universal services and also with the E-Rate,
there is some significant attempts to equalize and provide some
equity in terms of access to the Internet.
I am somewhat frightened and somewhat concerned about the
latest developments in terms of the telecommunications industry
in terms of this advanced telecommunications capability. And in
too many of our neighborhoods and communities throughout this
Nation, we don't have the basic access to telecommunications,
to the technology. And now there is a part of this Nation, the
other America, is moving toward high-speed Internet access.
They are moving--they are light years ahead of some places
in my district, and I'm just, Mr. Chairman I want to ask you,
what methods and what approaches are we, are you engaged in to
try to bring all of America up to par, bring it up to standard,
one standard for all America as it relates to
telecommunications technology? What are you, how are you
working to correct this inequality? And what else needs to be
done in terms of correcting this inequality?
Mr. Kennard. Mr. Rush, I think you have just stated very
eloquently what I believe to be one of the greatest challenges
that confronts all of us as we move into the information age,
making sure that all Americans are a part of it. And there is
lots that we can do. We can, first and foremost, do what we are
doing to promote competition because we know that competition
does serve consumers best, it lowers cost, it promotes
innovation, and it allows more Americans to get services
faster.
But we also know that competition alone won't solve this
problem. That is why we have to have a universal-service
subsidy mechanism in place that works. That is the role of
government. That is why I believe that is one of our core
functions.
And I also believe we have to work with industry. In fact,
when AT&T and TCI first proposed their merger, and they came in
to see me to talk about it, one of the things I asked them is,
what are you doing to make sure that these advanced services
that you are promising the country reach all of the country,
particularly our lower-income areas. And they actually brought
in maps, including a map of Chicago, and they committed to me
that they had upgraded the cable systems in the city of Chicago
for the rollout of advanced services and that this will happen
in all of Chicago.
That was a commitment they made to me, and I am hoping that
we can work together to make sure that they fulfill that
commitment.
Mr. Rush. Mr. Chairman, I have no additional questions.
Mr. Tauzin. Thank my friend. Also want to point out that at
least in lots of parts of the Chicago area there are
competitive wires offering cable service now which has your
part of the world ahead of a lot of our parts of the world,
Bobby. I hope--yes, you are doing pretty good in that regard.
The Chair recognizes the gentleman from Florida, Mr.
Stearns.
Mr. Stearns. Thank you, Mr. Chairman. Mr. Kennard, Chairman
Kennard, the Commission continues to work on deciding the
technical standard for CALEA, compliance. Can you or the
committee provide us any kind of update? When will the standard
decision will be announced?
Mr. Kennard. Certainly. We have been working hard on that.
We put a notice out, I believe it was late last year, a notice
of the proposed CALEA standards, and we scheduled to have a
decision this spring.
Mr. Stearns. Okay. When we gave you the Telecommunications
Act, the Commission itself--I don't mean you personally--and
then we gave you the budget agreement in 1997, within all of
these were stipulations about the LMA's. In fact, in subsection
G of section 202 of the Telecommunications Act report language,
Congress specifically instructed the FCC to grandfather LMA's
currently in existence upon enactment of this legislation.
I guess the question is, why hasn't the Commission, why
have you refused to act based upon direct orders from Congress,
and I think this goes to several pieces of legislation, which
included that language. And we are just puzzled by why you
still don't seem to act, and in fact you are in direct opposite
to what we requested.
Mr. Kennard. Well this proceeding is teed up for action.
Indeed, we were poised to move late last year. There was some
concern about some of the proposals, and we felt we needed to
do more outreach with the industry and with Chairman Tauzin and
other members of this committee. That proceeding is still teed
up and we anticipate this spring as well on that.
Mr. Tauzin. If the gentleman will yield?
Mr. Stearns. Sure.
Mr. Tauzin. I think what the gentleman is asking, though,
is both the budget act and the Telecom Act both included
specific language that the LMA's should be grandfathered.
If the gentleman will let me ask the question?
Mr. Stearns. Yes.
Mr. Tauzin. Is the Commission going to follow the
instructions of Congress? And if not, why not?
Mr. Kennard. Well, Mr. Chairman, we may have a disagreement
about precisely what that language means on grandfathering,
although I----
Mr. Stearns. Reclaiming my time. I think you mentioned to
Sen. McCain regarding local marketing agreements--you told Sen.
McCain last year you had a different definition of
grandfathering. So maybe the key problem here is--you tell me,
what is your definition of grandfathering is?
Mr. Kennard. Well you know, the precise statutory language,
the directive in the 1996 act, I think the plain reading of
that statute gives the Commission discretion. Now the report
language is different, and I'm not saying that we are going to
exercise that discretion, but I will say that on the legal-
technical point, we may have a difference of opinion on that.
Mr. Stearns. We have a difference of opinion on what
grandfathering is?
Mr. Kennard. No. On what the----
Mr. Stearns. Yes.
Mr. Kennard. There seems to be a conflict between the
statutory language and the 1997 budget act legislative history.
Mr. Tauzin. Would the gentleman yield?
Mr. Stearns. Sure.
Mr. Tauzin. Is there any ambiguity in the report language
of both the budget act and the 1996 act that says the
Commission shall grandfather LMA's?
Mr. Kennard. There is no ambiguity in the budget act
legislative history, and there is no ambiguity in the statute,
but they don't say the same things, precisely the same things.
In fact the Commission addressed this----
Mr. Stearns. Why don't you take the language in the Telecom
Act and act? In other words, why don't you take the language in
the Telecommunications Act, I mean, basically you are just an
exemption based upon what circumstances that pre-exist. So
exempt them all.
We have had to come back and do this again and again.
Mr. Kennard. That is clearly one of the things we are
considering doing, and we will be acting on that soon.
Mr. Stearns. Okay. I urge you because it has been 3\1/2\
years or so and seems as though----
Mr. Tauzin. The Chair will be generous, will the gentleman
yield again?
Mr. Stearns. Sure. Go ahead.
Mr. Tauzin. Let me try to make this case. If there is any
ambiguity in the statute, there are pretty clear instructions
as to what Congress meant in the language of the report. Why
are you lawyering us to death on this thing? Are you hearing
anything other than what the report says from Congress, as to
what we meant when we wrote the act? Has anyone written you?
Have you gotten a lot of calls from Congress saying don't
grandfather LMA's?
Mr. Kennard. There is not unanimity of opinion on this
particular provision in the statute among all Members of
Congress.
Mr. Stearns. Well, if Congress passes a bill and we send it
to the President and he signs it, that seems pretty unanimous
in our decision. And we do it twice. I don't see how you could
come here and say there doesn't seem to a unanimous opinion on
this. Doesn't Congress have the right to act by majority vote,
pass legislation, the President sign it, give it to--aren't you
under orders to enforce it?
Mr. Kennard. I guess, Congressman, that is not exactly what
I am saying. What I am saying is that there is a discrepancy
between the legislative history of the budget act and the
statutory language of the 1996 act.
Look, I don't want to lawyer this to death. And I don't
want to get into a detailed exposition of statutory
interpretation. I will say, though, that I think we need to
preserve the point that there is a discrepancy between that
language. As a lawyer, it is an occupational hazard. I have to
point that out.
But we understand your point of view on this particular
provision, and we will be moving ahead on it this spring.
Mr. Tauzin. Would the gentleman yield again?
Mr. Stearns. It is a broader problem, Mr. Chairman. And let
me try to state it. The broader problem is--I think Mr. Huber
spoke about it, some of you spoke about it in terms of re-
authorizing and reforming the FCC, the FCC too often finds
reasons not to follow the will of Congress. And granted you may
find that there is some wiggle room in there, but the will of
Congress, and particularly those who wrote the statute, pretty
well expressed in the report language. There is a unanimity of
expression from the folks who wrote that language as to what
they meant.
They meant for these LMA's to be grandfathered. Pretty
clear. I mean, yes, you can find some wiggle room if you want
to, but the broader question is why does the FCC do that? Do we
need to change some laws so the FCC doesn't have this authority
to go out and make policy that is directly contrary to what is
clearly the intent of the folks who write the law and send it
to you to enforce it?
I mean Harold made a great statement about not wanting to
tell us how to write the law, that his job is just to enforce
it. That is pretty nice. Why isn't that the rule at the
Commission, particularly in a case where it is so very clear
what the authors of the legislation mean when they spell it out
twice in two statutes in the report language? I mean, why are
we having this legal argument over this?
Mr. Kennard. Well, I take your point, Mr. Chairman. I guess
the--whenever the Commission addresses issues of statutory
interpretation, it is not that we are just doing this to
frustrate your will, it is because if we don't raise these
issues and think them through carefully, people will raise them
in court. And that is where we get into trouble in the Judicial
Branch. So----
Mr. Tauzin. Will the gentleman yield again? I will be
generous if the gentleman wants to proceed.
But if you say you have discretion, and that is your legal
conclusion, and if there is language in the report language
from Congress saying do this. Who are on earth is going to win
a battle in court against you that you used your discretion and
did what Congress asked you to do here? Who on earth is going
to win that legal battle?
Why would any lawyer advising you say, watch out, you are
going to get sued on this one?
I mean, that is hard to follow, Bill.
Mr. Kennard. I take your point on that.
Mr. Tauzin. The gentleman may proceed.
Mr. Stearns. Let me just finish up here, Mr. Chairman.
Chairman Kennard, the D.C. Circuit Court recently
invalidated the FCC's affirmative action rules as a violation
of the Constitution's equal protection clause. Yet, I recently
read that the FCC is considering adopting new affirmative
action rules, notwithstanding the court's Constitutional
ruling. And I understood that one of your legal bases for doing
this is you are relying upon language in a conference report
accompanying the 1992 cable act.
And I guess the question is, is that true?
Mr. Kennard. Well, certainly in the 1992 cable act Congress
did pass legislation codifying EEO rules in the statute. I
don't know what you are quoting from and what we are relying
on, but I will tell you what we are doing with the EEO rules.
Mr. Stearns. Sure.
Mr. Kennard. The U.S. Court of Appeals did invalidate the
Commissions rules as applied to broadcasting. The Commission
revisited those rules in the wake of that court decision and
put out a proposal to modify the rules to address the concerns
of the court.
It was a view of the majority of the Commission that the
rules are important and that the Commission should try to
restructure the rules to address the concerns of the court. And
that is what we are doing.
Mr. Stearns. I was just trying to show how you are using
accompanying language in a Congressional report to invalidate a
D.C. Circuit Court. I think what I am suggesting, and the
chairman and I are on the same track here, we are trying to
show you how you go to Congress when you want to go ahead to
invalidate a District Court ruling, you will use language from
the report, and then when we instruct you twice dealing with
LMA's, you are sort of saying, ``Oh, we can't go forward
because there seems to be confusion between the budget act and
the Telecommunications Act.
It is not necessarily asking for an answer, but I am just
saying that the feeling we have here is that you folks are
grasping for anything you can to push a different agenda than
from which Congress is trying to instruct you.
And so we submit that the case that Chairman Tauzin and I
have brought forward dealing with the grandfathering of LMA's
is clear example where you are not doing what Congress is
asking you to do, understanding grandfathering. The definition
is very simple.
And now you say you are going to do something in spring,
but we have brought this before and there just seems to be
waiting and waiting on this issue.
So, Mr. Chairman, is there anything you want to add
certainly. I think----
Mr. Tauzin. I think you covered it. Thank you.
Mr. Stearns. Okay. And I thank the chairman.
Mr. Tauzin. Thank the gentleman. The Chair recognizes the
gentleman from Illinois, Mr. Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman. This has been very--a
good hearing and very educational. Mr. Chairman, I will yield
to the opposite side.
Mr. Tauzin. I don't think the gentleman has gone yet at all
on the first round? That's right.
Mr. Shimkus. Correct.
Mr. Tauzin. On the first round. That's right. So we joined
through the first round. I'm sorry.
No, I understand. I was answering the gentlelady's request.
We are still on the first round. If the gentlelady will allow
me, Mr. Shimkus is recognized on his own time.
Mr. Shimkus. This has been a good hearing. I know it is
kind of like the Bataan death march for many of us, but we are
learning and we are getting some good issues out on the table.
I am glad that my colleague from Florida went first because I
am pretty sympathetic. I want to keep my focus on the future
restructuring of the FCC, but I just want to associate myself
with the comments of the chairman and my colleague from
Florida. I used to teach government and politics in high
school, and this is a very simple case study of why we have to
return time and time again and continue to rewrite laws based
upon the Executive branch reinterpreting Congressional intent.
I don't think there is a clearer example than what the
gentleman from Florida brought up. Pretty clear,
straightforward, a non-lawyer can understand it, 95 percent of
the American public can understand it. We ought to just fix it,
and we ought to comply. But I appreciate my colleague bring
this up. It has fired me up, and I didn't want to be fired this
late in the day.
I do want to focus on a kind of macro issue and a micro
issue. Macro is going back to the future of the FCC, going back
to your three categories, consumer protection, universal
services, spectrum management. Mr. Huber in his comments talked
about an area of high-speed digital system. And really, I
think, from the layman's terms of taking all the analog systems
of broadcast, telephone, and looking at the high-speed digital
system, which I would think would be another sub-category, if
you were to accept his model--I guess the question is, does
that position make sense in a future of the FCC?
Mr. Kennard. I think it does in this respect. I agree with
Mr. Huber that the world is changing, the world is changing
very fast. The FCC has got to change with it. We talked earlier
about some of the statutory constraints. And I look forward to
working with this committee on addressing some of those. And
there are also regulatory constraints.
I guess I would reiterate something that Commissioner
Powell said a little earlier. And that is that, to paraphrase,
we shouldn't reform just to reform. We ought to have a clear
sense of what our mission is. I get a little bit concerned when
I hear people talk about creating these sort of super bureaus
at the FCC because I don't know if that is going to solve the
problem, because a lot of these issues sort of go beyond
structure.
So I am not sure if that directly answers your question, if
not----
Mr. Shimkus. Well, what I also have--I talked to
Congressman Oxley earlier in this day because I now serve on
his subcommittee on the financial services, and I think the
debate--I shared it with him to make sure that I was, that my
thought process made a little bit of sense. And the process is,
if you look at--the debate we are having is, where is the
future role of your agency? And is it a regulatory agency? Or
will it be an enforcement? And how do we move there?
And I think we have a great example of the SEC, who is
really more enforcement oriented. And that is where I see the
future being, especially as you address the issues of
competition, as being really another category that you thought
was critically important. So I would--is that a proper analysis
of the future: more of enforcement than regulatory?
Mr. Kennard. Absolutely. Absolutely. One of the things that
I did last year is, in consultation with my colleagues,
announced our plans to create an enforcement bureau. And this
is more than symbolic. We really do want to change the
enforcement ethic at the FCC. It is my view that as these
markets become more competitive, we have to have an enforcement
mechanism that makes more sense and that allows us to get out
of the business of being the gatekeeper, deciding who gets in
which market and who can compete where, but rather to write the
rules of competition to make sure that the real fundamental,
pro-competitive rules are in place and then enforce them
aggressively and swiftly.
So I do agree with you. The philosophy should shift toward
enforcement.
Mr. Shimkus. Mr. Chairman, if I may?
Mr. Tauzin. The gentleman may proceed.
Mr. Shimkus. On the competition side, and not just with the
merger analysis, but also on all your proceedings, I think it
would be helpful in the competitive aspect of something that
you support is that there be--I mean we are in March Madness
time--that there be a shot clock of some sort so that everybody
on board knows, especially in proceedings, how long they can
expect to wait or not to wait so that the investors can get
lined up, the process can move forward.
I am a former Army officer. You know, when you make no
decision, that is a decision. If you delay a decision, that is
a decision. And it throws the future in peril by delay. I
think--I believe that our committee would clearly be, a large
percent of us would want to encourage you to move proceedings
along at a much greater pace. And that is a comment on my part.
The last point I will make is, micro, the E-Rate. You have
heard my complaints about it before. You put us in a terrible
bind. Those of who are tax cutters and want to address the E-
Rate, we are in a bind between being a tax-cutter and against
schools, or for schools and for tax increases.
I want to publically state my support for my chairman's
position, which he will formally take, I hear, in a week to
address this problem that we have with the E-Rate and do it in
a proper way when he releases his bill. I would like to have
your comments on that position.
Mr. Kennard. Glad to.
Mr. Shimkus. I yield back.
Mr. Tauzin. Thank the gentleman very much. The Chair
recognizes the gentleman from Texas, Mr. Green, now.
Mr. Green. Thank you, Mr. Chairman. I am glad my colleague
from Illinois brought that up because the E-Rate, the way it
was originally handled, and thank you for correcting it, but
before I came to the Commerce Committee, I served on the
Education Committee, and obviously the E-Rate and the uses of
those funds are important to my schools in Houston, Texas,
getting an urban district.
But Mr. Shimkus, one of our colleagues, Congressman Klink
from Pennsylvania, has a bill that would eliminate the E-Rate
and cut the Federal excise tax. So our rate-payers would
actually save money then. And that is a bill--I know I am a co-
sponsor of--and so it is something we might want to consider in
this committee.
But let me go to some of the other questions because I
think you have heard about the E-Rate, and I am glad it has
been corrected because it is awfully important to urban areas,
and even rural areas, particularly in urban areas that do not
have the resources to wire schools, even though we work with
our local phone companies.
A few weeks ago, the Commission ruled on ISP traffic in
reciprocal compensation agreements. And in the ruling, you said
that ISP traffic on the whole is interstate in nature, and that
set off lots of letter-writing campaigns, but not that many,
mainly an e-mail campaign.
Mr. Kennard. That's right.
Mr. Green. And saying that we are going to make ISP calls
long distance. And in my opening remarks, I mentioned it. And
if you could give me your assurance, one, that the FCC will not
take those steps to make ISP calls a long distance call, and
does your ruling open the door to assessing an ISP call as a
long-distance call because if it is, and if the provider has to
pay it, then you and I know that the ultimate Internet user
will have to do it.
And I know if we have been bombarded on this committee, I
can imagine you have too. And so if you could address that.
Mr. Kennard. In the wake of that decision, Congressman, I
started getting about 500 or 600 e-mails a day. So I am very
familiar with this particular issue. And the message that we
conveyed back to those folks who sent us e-mails is that, rest
assured, we are not interested in changing the way that people
use the Internet. One of the reasons why the Internet is
growing so fast is because people can use the Internet for a
flat rate, it is treated as a local call. Nothing that we did
in our decision recently is going to change that.
And I know that there is a unanimous commitment from this
Commission not to impose any sort of permanent charges on the
use of the Internet.
Mr. Green. For long-distance calls?
Mr. Kennard. Yes.
Mr. Green. That is the fear.
Mr. Kennard. Yes. That is what I mean, long-distance
charging.
Mr. Green. And I also, you know, I know the 1996 act that I
wasn't on the committee for, also, I understand the language in
there, made sure that that is not happening.
But as my colleague, my ranking member Dingell, sometimes
the statutes may not be interpreted the same way at the
Commission as they are here. Let me go to my next question. I
appreciate that, and believe me, we will follow up with our
constituents, who have been concerned about it.
The FCC released the property record audit of the Bell
operating companies which said that these companies could not
locate over $5 billion worth of equipment. And I know Chairman
Tauzin and my ranking member Dingell sent you a letter
requesting answers to a series of questions about the audit
process, and I don't know if you have responded to the letter,
and if you have, if we could get a copy of the response. Again
the concern I have, at least it is being played out in the
newspapers and the media, that the property record audit, the
Bell operating companies did not have the opportunity to
actually show that they have these assets, and if you could
just address that.
Mr. Kennard. Sure. First of all, we did respond to the
letter that was sent to us by Chairman Tauzin and Mr. Dingell.
And I would be happy to get you that response.
Second, the Bell operating companies did have lots of
opportunities to work with the FCC in the many months leading
up to the FCC's decision to release the audit. In fact, for
approximately a year, the FCC staff worked closely with
auditors from the Bell company so that they could understand
what we are doing and we could respond to their concerns. But
they will have even more chances because the release, when the
FCC voted to release this report, we did so without drawing any
conclusions about what the report means. In other words, we
didn't take enforcement action, we didn't indicate what the
implications of this would be for rate-payers.
And so we hope to have yet another opportunity, not only
for the Bell companies, but for other people in the
marketplace, and particularly the State regulators who are very
interested in this data. In fact, the National Association of
Regulatory Utility Commissioners passed a resolution asking the
FCC to release this report so that they could have the benefit
of the information in it.
And so there will be opportunities for lots of people to
comment on it further.
Mr. Green. And so the FCC--did you consult with the
independent public accounting firms that do the annual audits
for the Bell operating companies?
Mr. Kennard. Did we what? Did we meet with them?
Mr. Green. Was there the opportunity to consult with the
independent accounting firms that perform the financial audits
for the Bell companies?
Mr. Kennard. I believe so, although I wasn't involved in
those meetings. So I am not exactly sure. But I know that I
directed the staff to meet with the Bell companies and their
auditors to get their perspective on this audit report. Whether
they were independent auditors or in-house auditors, frankly, I
don't know, but I could certainly find out.
Mr. Green. Okay.
And, also, you mentioned that the local--like in Texas we
have the Public Utility Commission--the continuing property
records I am sure will have an effect on the consumer rates and
also the access charges that may be set in local jurisdictions,
and I guess even--so that has an impact.
Mr. Kennard. Well, that is an issue that will have to be
vetted in the public record. Again, we haven't drawn any
conclusions as to how this affects access charges or rates, or
compliance with our rules. We just wanted the information out
there so that the Bell companies could have yet another
opportunity to review the information and that members of the
public, consumer groups, State regulators, competitors, will
have access to that report.
Mr. Green. Okay. Thank you, Mr. Chairman. I know we have a
vote on.
Mr. Tauzin. Thank you very much, sir. The Chair recognizes
himself. We are going to go a little while longer, take a break
for these votes, and come back. The problem is, we have a 5-, a
15-minute, and a 5-. So we may need to come back at 3:30.
Let me quickly ask you a couple questions, Mr. Chairman.
And I wanted to follow up on something Mr. Pickering was doing
regarding these mergers, time limits on them.
Ms. Eshoo. Mr. Chairman, I hate to do this, but I have been
here since 10:07 this morning. Can I just submit my questions
to the chairman to be responded to in writing so that I don't
have to stay any more? I mean, it has been instructive, but
this has really been a long haul. With your permission, I would
like to do that.
Mr. Tauzin. Let me ask the gentlelady, has she had a round
yet with the Commission?
Ms. Eshoo. No. I haven't.
Mr. Tauzin. Well, my apologies. The gentlelady is
recognized right now. Proceed.
Ms. Eshoo. At this point, I would just like to submit them
in writing and ask for permission to do that, and ask that the
chairman respond. Thank you.
Mr. Kennard. Gladly.
Mr. Tauzin. I thank the gentlelady.
What do you want to do? We are going to go another 5
minutes. We will come back at 3:30
In regard to what Mr. Pickering was moving on, the question
of mergers and holding mergers up. We repealed and got rid of
comparative license renewal and went to auctions for licenses,
trying to get away from a process where there was a lot of
green-mailing going on. A lot of people were filing objections
to licenses, green-mailing individuals, shaking them down, as
close to blackmail as I have ever seen.
And one of the reasons we moved to get rid of that process,
to go to some objective process of re-licensing was to
eliminate that opportunity. I want to ask you, is the process
by which the Commission holds up merger applications, holds up
acquisition applications for licenses, is it leading to the
same problem? People are filing objections to these mergers.
People are delaying the Commission's work in these areas. Do
you sense, do you find, do you feel that there is a chance that
people are doing this in order to green-mail or legally
blackmail applicants before the Commission?
Is this another opportunity for the same problems to
express themselves as they did in the old licensing
broadcasters situation?
Mr. Kennard. I really don't think so. The Commission
addressed this issue in the broadcast context a number of years
ago, when the Commission reformed its rules to make sure that
people couldn't do exactly you described. They would file a
petition and then hold up a licensee for money or for some
other considerations. So we scrutinize those petitions pretty
carefully, and, in fact, under our rules they have to come in
and disclose what consideration was received in exchange for
any dismissal of a petition or anything like that.
I think that, you know, a lot of the--in the current
mergers on the telcom side, what we are seeing now are
competitors coming and raising a lot of, you know, fairly
complex issues about market structure.
Mr. Tauzin. I am aware of those. I am more concerned about
these acquisition applications where--there are two concerns.
Mr. Pickering has raised the one about where it is open-ended,
where there are no time limits for adjudication, raised the
concern to make sure that there was adequate sharing of
information among Commissioners regarding those situations.
I am raising the concern that it may open the door, these
open-ended processes, may open the door to people finding it
convenient to hold somebody up for an illegitimate purpose. And
I am suggesting that reform in that area may cure that
possibility, as it did in the comparative license renewal
situations.
Second, I am deeply concerned with the notion that people
who are entitled to relief in an application before the
Commission may be held up because the Commission may decide
that we want to hold you up pending a decision as to whether we
are going to change our rules and regulations, say on an
ownership issue.
Is it fair to an applicant who is trying to purchase a
license or acquire a license and merge to have their rights
withheld them because the Commission may want to change the
rules in the future when they are entitled to their remedy
today under the current rules of the Commission?
Any one of you. Would you like to respond?
I see Mr. Powell shaking his head. Would you like to
respond, Michael?
Mr. Powell. I will say this, having worked at the antitrust
division of the U.S. Department of Justice, there is the
opportunity for what you describe. And I would probably agree
with the chairman that we are seeing rampant uses of this at
the moment, but I wouldn't be honest if I didn't say I have
seen attempted uses of it, modest, but quite frequently.
Part of the problem is that merger review in an
administrative agency's structure, is open to the
Administrative Procedures Act and the kinds of processes and
requirements that we have to go through that the antitrust
division does not. The antitrust division insulates itself from
this by insisting it is a law enforcement agency.
And I assure you, the DOJ halls are not being walked by
every opponent of every possible merger review getting
audiences with Joel Klein. At the FCC, every time someone files
an ex-parte, every time someone attempts to come in and meet on
a merger, we generally, our staffs, are required to respond to
any considerations raised in these contexts or they would be
accused on review of having not adequately addressed the
record, et cetera.
There is an enormous amount of opportunity within that
structure to abuse and use it for reasons that are, arguably,
not really merger-specific or are, in fact, an attempt to delay
or impose predatory conditions on a future competitor. And I
think that that happens a bit. I think there is potential for
it to happen a lot. Right now----
Mr. Tauzin. I understand. I would hope you would be
watching that all the time. And I am assured you would. I am
concerned that the opportunity is there.
Second, do any of you believe you have the right as a
Commission to deny someone an application because you may
change your rules later on? Any of you believe you have that
right? Are applications being held up because you may change
your ownership rules in the future, to be specific?
Mr. Kennard. What? I am confident that the Commission
wouldn't deny an application because of----
Mr. Tauzin. But you might not take action on it, just
waiting to see if you are going to change the rules.
Mr. Kennard. No. Actually, what happens is usually the
reverse.
Mr. Tauzin. How do you mean?
Mr. Kennard. Companies come in and they file an application
asking for a transaction to be conditioned on the outcome of
some future rulemaking. And frankly, that has created problems
at the FCC, particularly in the broadcast area.
Mr. Tauzin. Yes.
Mr. Kennard. And that is an area we are trying to get away
from.
Mr. Tauzin. I just want to raise an issue, because I think
as we address the issue of how mergers and applications are
handled by the Commission, those are concerns I would like you
to be thinking about and interacting with us on.
Finally, I think Mr. Dingell did want to do another round,
but I think I am going to let you go, with his indulgence. I
think we are just going to wrap it up here.
Let me just ask one more thing, Mr. Kennard. My
understanding is the President's budget includes a provision
that, if enacted, would permit the Commission to strip
bankruptcy licensees of their licenses even if they were under
the protection of the bankruptcy court.
You and I know what this is all about.
Mr. Kennard. Yes. Of course.
Mr. Tauzin. This is snuck in appropriations. This is being
done outside the authorizing committee. And, No. 1, I would
hope that the Commission is not part and parcel of an attempt
to avoid the authorizing committee in this area. And, No. 2, I
would ask you why should the Commission receive more favorable
treatment than any other creditor, including equipment
manufacturers, such as Lucent, in these cases? Why should the
Government, the Commission, get more favorable treatment in a
bankruptcy?
And more importantly, why would anyone seek to handle this
issue in an appropriations level instead of through the
committee that I hope you respect as much as we try to respect
your authority.
Mr. Kennard. Well, of course, as you know, Chairman Tauzin,
we have talked about this issue many times. And I have always
sought your input on this particular issue, and will continue
to do so. But my view is that it is important that the FCC have
the ability to take licenses, to circumvent the bankruptcy
process when we have optioned licenses and become, in effect,
the creditor for the licensee because for the auction process,
in my view, to work best, we have to have confidence that if
somebody bids in our process, gets an installment payment plan,
and then gets into trouble and can't pay, that we will be able
to re-option that spectrum because, after all, it belongs to
the public. And we have to ensure that it is put to good use
for the public----
Mr. Tauzin. You and I know we disagree on that?
Mr. Kennard. Yes.
Mr. Tauzin. But why would--I hope you are not part of it.
Why would you be part of it? I hope you tell me you are not. Of
an attempt to do this in a rider on an appropriations bill
instead of settling this before the authorizing committee?
Mr. Kennard. well, I don't know what the genesis of this
particular rider is----
Mr. Tauzin. Just snuck in there?
Mr. Kennard. Yes. I don't know how it got in there.
Mr. Tauzin. Did the Commission ask for it?
Mr. Kennard. I don't know. I will find that out for you
though.
Mr. Tauzin. I would appreciate a direct response on that.
Mr. Kennard. Certainly.
Mr. Tauzin. I have to go make the vote. And I think Mr.
Dingell will understand. I think he does. The hour is late and
we very much appreciate all of you being here, we will continue
this process, of course.
I deeply appreciate, again, your patience, your time. And
again want to reiterate how important I think this issue is and
how much I appreciate the fact that you are taking it seriously
because we certainly are. Thank you very much, sir.
Mr. Kennard. Thank you, Mr. Chairman.
Mr. Tauzin. The committee stands adjourned.
[Whereupon, at 2:52 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Responses of the Federal Communications Commission to Follow Up
Questions for the Record
question for the record from representative stearns
Question: Chairman Kennard, the 1996 Telecom Act directs the FCC to
liberalize its ``one to a market'' radio/television cross ownership
rule in the top 50 markets. Since 1993, the FCC has granted 36
permanent one to a market waivers, and of those, nine have been waivers
encompassing one television station, two FM and two AM stations. So for
6 years, it has been the FCC's policy to grant permanent waivers
authorizing one tv and four radio station combinations.
It has been widely reported that the FCC's staff proposal on one to
a market last November was to allow the one tv/two FM two AM
combination. But that strikes me as somewhat disingenuous. The '96 Act
clearly directs the FCC to liberalize the rule. But if all you do is
adopt current practice dating to 1993, doesn't that fall far short of
what Congress intended in the '96 Act?
Answer: The Commission has adopted a ``presumptive'' waiver policy
under which it will look favorably on granting a waiver to allow the
common ownership of one TV station, one FM station, and one AM station
in the top 25 television markets if at least 30 independently owned
broadcast voices remain after the merger. See 47 C.F.R. Sec. 73.3555,
Note 7(1). Section 202(d) of the Telecommunications Act of 1996
directed the Commission to extend this waiver policy to any of the top
50 television markets ``consistent with the public interest,
convenience, and necessity.'' In a Second Further Notice of Proposed
Rule Making, 11 FCC Rcd 21655, 21685 (1996), the Commission stated
that, ``[c]onsistent with Section 202(d) of the 1996 Act, we propose,
at a minimum, to extend the Top 25 market/30 voice waiver policy to the
Top 50 markets.''
It is also true that the Commission has permitted permanent
television-radio combinations consisting of up to one television
station and two FM and two AM stations in the same market, where the
applicant had made specific factual showings satisfying a stated five-
factor waiver standard. In the Second Further Notice, the Commission
invited comment on a variety of possible changes relaxing the one-to-a-
market rule beyond that specifically contemplated by section 202(d) of
the Act.
We have received a wide range of comments regarding these
proposals. Some parties have urged the Commission to relax the one-to-
a-market rule, but a number of others oppose modifying the rule given
their concerns about the impact this would have on competition and
diversity. I am studying all the options raised by these proposals. In
deciding these issues, I will of course be guided by section 202(d) of
the 1996 Act as well as section 202(h) of the Act which requires the
Commission to review its ownership rules biennially and ``determine
whether any of such rules are necessary in the public interest as the
result of competition.'' In doing so, I will ``take into account the
increased competition and the need for diversity in today's radio
marketplace,'' as is stated in the Conference Report on the 1996 Act.
questions for the record from representative largent
Question: The Telecommunications Act of 1996 required the FCC to
reform universal service in order to make universal service
competitively neutral while ensuring the delivery of service in high
cost areas. If universal service subsidies are limited to incumbent
carriers, won't competitors find it difficult to provide service in
high cost areas? What is the status of universal service reform and
when can we expect universal service to be complete?
Answer: I agree that limiting universal service support to
incumbent carriers would limit competitors' ability to enter the
market. Historically, universal service support for serving rural and
high cost areas was only available to incumbent carriers. In the First
Report & Order implementing section 254 of the Act, however, the
Commission made universal service support ``portable'' to any carrier
that wins the customer. This change took effect January 1, 1998.
I, and my colleagues on the Commission, are working diligently to
reform the universal service mechanism for large carriers serving rural
and high cost areas in an effort to make the program more consistent
with the development of competition. As required by section 254, we
convened the Federal-State Joint Board on Universal Service and
received their initial recommendations in November 1996. In May 1997,
the Commission adopted a comprehensive plan for high cost universal
service reform. The Commission determined that support should be
portable, as noted above, and that it should be based on the forward-
looking cost of providing the supported services, which is the basis of
economic decision making in a competitive market. The reform process
was bifurcated, and small, rural carriers were guaranteed that there
would be no potential decreases in the support available to them until
at least 2001. For large carriers, the Commission set about refining
and selecting a cost model for estimating forward-looking costs.
In November 1998, the Commission received further recommendations
from the Federal-State Joint Board on Universal Service as to how
support amounts should be determined in light of forward-looking costs,
particularly with respect to support for maintaining reasonably
comparable intrastate rates. The Commission is currently considering an
Order and Further Notice of Proposed Rule Making acting on the Joint
Board's recommendations in May 1999. Commission staff are working to
refine the cost model and we are striving for implementation of a
universal service support mechanism for large carriers serving high
cost areas in January 2000.
In reforming universal service support for rural and high cost
areas, I believe the Commission must ensure that support--for the
carrier that wins the local customer--will not be eroded as the Act's
competitive environment emerges, while acknowledging that high cost
universal service support is an existing program on which many carriers
depend. I am striving to strike a balance between ambition and caution
as we move forward. Of necessity, therefore, the process is and has
been an incremental one.
Question: One of the major goals of the '96 Act was to bring
competition in the local telecommunications marketplace. We have heard
a lot about competitors seeking entry into the business marketplace,
but we hear less about competitors seeking to enter the residential
market. What is the status of competition for residential service? Is
competition for residential service emerging anywhere? What ingredients
appear to be necessary for successful residential local competition?
Answer: Thanks to the 1996 Act, competition has begun in the local
telecommunications marketplace. Today there are ten times the number of
competing local carriers (nearly 150) as there were prior to the 1996
Act. There are also over 20 publicly-traded competitive local exchange
carriers (CLECs) with a combined market value of $33 billion versus
just 6 with a combined value of $1.3 billion prior to the 1996 Act. The
Commission has worked hard to eliminate barriers to entry into the
local markets. One means the Commission uses to determine whether
incumbent LECs are taking the necessary steps to open their local
markets to competition is the section 271 review process. Another means
is through dialogues that the Commission has had with Bell Operating
Companies (BOCs), competing carriers, and other interested parties.
Information gathered using both these means shows that no BOC provides
nondiscriminatory access to its respective operations support systems
(OSS) functions consistent with the 1996 Act's nondiscrimination
requirement. Review of the BOCs' deployment of OSS functions under the
section 271 process, at both the state and federal levels, will assist
in opening the local exchange market to competitive entry as envisioned
by the 1996 Act.
Nondiscriminatory access to interconnection and collocation is also
crucial to the development of local exchange competition. Through the
review of section 271 applications, and other information, the
Commission has been unable to conclude that any regional BOC provides
nondiscriminatory access to interconnection and collocation. As part of
its Advanced Services proceeding, the Commission has recently released
new rules on collocation. With these efforts, the Commission hopes to
eliminate certain interconnection and collocation practices that pose
barriers to entry. Further, in accordance with the 1996 Act, the
Commission promulgated rules requiring incumbent LECs to combine
unbundled network elements (UNEs) for requesting carriers so that
requesting carriers could provide local exchange service entirely
through the use of UNEs. Access to combinations of UNEs allows new
entrants to provide local exchange service to end users on the same
cost basis as the incumbent LEC. The Commission's rules in this area
were vacated by the Eighth Circuit Court of Appeals. The U.S. Supreme
Court reversed much of the Eighth Circuit's decision, but also
remanded, in part, the Commission's implementation of the network
unbundling obligations as set forth in the 1996 Act. The Commission
recently released a Further Notice of Proposed Rule Making in this
proceeding and hopes to act on this issue as soon as possible. In the
meantime, the Commission will continue to review BOC section 271
applications to ensure that new entrants are able to combine network
elements in a non-discriminatory manner.
Competition in the residential market is developing, but not as
quickly as we had hoped. A number of cable television companies are
providing competing wireline local exchange service to residential
customers in their serving areas and this type of residential
competition is expected to grow rapidly in the next few years. For
example, in the context of the AT&T/TCI merger, AT&T described its
plans to upgrade TCI's cable systems in order to provide competing
telephony services and assured the Commission that it intends to use
these upgraded systems to provide residential local exchange service in
the foreseeable future. Certain industry members claim that there may
be insufficient profit margins associated with serving residential
customers within certain markets that make it difficult for competitors
to compete with the incumbent LECs in serving these customers. Costs
incurred by competitors to utilize elements of incumbent LECs' networks
such as loops and for collocation can make it economically difficult to
provide competitive service in some markets. A serious barrier to
``mass market'' competition is deficient interconnection between the
incumbent LECs and the competitive LEC's operations support systems.
Without seamless electronic interconnection between these systems,
manual intervention is required. Such manual efforts are capable of
handling only a very small volume of high revenue (i.e., business)
customers. We are seeing progress in these areas, as incumbents improve
their operations and as this Commission and our state colleagues step
up enforcement activities. In addition, by bundling local telephone
service with other services, such as long distance, Internet access,
and video, some competitors are able to create a viable package of
offerings. I also note that utility companies, either on their own, or
through joint ventures, have begun offering local telephone service to
residential customers. A number of competitive LECs are offering
residential services to apartment complexes where the density of
customers makes it economically feasible to build competitive
facilities. The development of local competition, particularly in the
residential markets, takes time. The Commission, nonetheless, is
optimistic that residential consumers will soon reap its rewards.
Question: Recently, I have heard a great deal from my constituents
on the issue of number portability charges on their phone bills. Would
any of you care to comment?
Answer: (Chairman Kennard) In the 1996 Act, Congress mandated that
all local telephone companies provide local number portability in
accordance with requirements to be established by the Commission. The
number portability charge that appears on your constituents' telephone
bills is the result of the Commission's implementation of the number
portability provisions of sections 251(b) and 251(e) of the
Telecommunications Act of 1996.
Long-term telephone number portability provides residential and
business telephone customers with the ability to retain, at the same
location, their existing local telephone numbers when switching from
one local telephone service provider to another. Congress recognized
that consumers are less likely to switch local phone companies if
required to change phone numbers in the process, and that
implementation of number portability would lower barriers to entry and
promote competition in the local exchange marketplace. Although
telecommunications carriers must incur costs to implement number
portability, and some part of those costs may be passed on to
consumers, the long-term benefits will give consumers more competitive
options, lower local telephone prices and, consequently, stimulate
demand for telecommunications services and increase economic growth.
For example, after the Commission required number portability in 800
numbers, enabling customers to keep their 800 number when changing long
distance carriers, demand for toll free service increased dramatically.
Although the savings that have accrued to consumers are not easily
quantified, since price is a significant component of demand for this
service, it is reasonable to conclude that consumers are benefitting
from lower prices and greater choice.
In the 1996 Act, Congress also mandated that the costs of
establishing number portability should be borne by all carriers on a
competitively neutral basis. In May 1998, the Commission released the
Third Report and Order, reaffirming its previously adopted
competitively neutral standard and establishing the cost recovery
standards for long-term number portability. To enable local exchange
carriers to recover number portability costs on a competitively neutral
basis, the Commission permits, but does not require, incumbent local
exchange carriers to recover some of their costs of implementing number
portability through a federal charge assessed on end-users and through
a query service charge assessed on other telecommunications carriers.
Recognizing consumers' sensitivity to end-user charges and that many of
the network upgrades made by carriers to implement number portability
also will provide other services or features, the Commission narrowly
defined the costs it would permit carriers to recover through federal
charges. The Commission determined that only costs directly related to
number portability are to be recovered through number portability end-
user and query services charges. These are costs that: (1) would not
have been incurred ``but for'' number portability; and (2) must be
incurred ``for the provision of'' number portability.
Under the Commission's rules, local exchange carriers cannot begin
to charge their end-users for the costs of local number portability
until local number portability is available in their area, can begin to
charge consumers in areas where number portability is available no
earlier than February 1, 1999, and must end consumer charges after 5
years. Moreover, not all costs are passed directly through to
consumers. For example, query service charges other carriers pay for
using the local exchange carrier's querying capabilities help lower the
charges local exchange carriers assess their end-users.
By carefully scrutinizing the local number portability tariffs
filed by local exchange carriers, the Commission is acting to ensure
that end-user and query services rates for long-term number portability
are reasonable and as low as possible. Following an investigation of
these tariffs, which must be concluded within 5 months of the effective
date of the tariff, rates found to be unreasonable may be rejected. The
Commission then may prescribe a just and reasonable rate and order
refunds of overcharges, if any.
As noted above, the Commission understands consumers' sensitivity
to additional charges on their telephone bills. In the long term,
consistent with Congress' intent, the Commission expects the
implementation of local number portability to benefit consumers by
lowering prices, making a wider variety of telecommunications services
available, encouraging more advanced telecommunications services, and
improving the quality of telecommunications services as new local
telephone companies compete for business.
Answer: (Commissioner Ness) I agree with the Chairman that long-
term number portability is crucial for competition, because it enables
consumers to change service providers without being forced to change
their phone number. Number portability is a statutory requirement, and
it imposes costs on all carriers which they are entitled to recover.
Nonetheless, as I noted at the time of the Commission's decision, I was
troubled by the prospect that a single class of carriers--the incumbent
LECs--would recover their costs from consumers who do not yet have a
choice of local exchange carrier. I would have preferred that
residential consumers be shielded from such number portability charges
until they actually experience the benefits of competition. But, in the
give and take that led to the consensus order, I ultimately agreed to a
regime under which incumbent LECs are allowed to recover number
portability costs only in areas where number portability capability has
actually been deployed. In such areas, consumers at least have a
greater potential--but not the certainty--of having a choice of local
carrier.
Answer: (Commissioner Furchtgott-Roth did not respond to this
question.)
Answer: (Commissioner Powell) I generally subscribe to the views
expressed by Chairman Kennard in his response to this question. One of
the most difficult challenges of implementing the Telecommunications
Act of 1996 concerns the need to require changes in the telephone
network, which was designed primarily for use by monopoly providers, in
order to allow multiple, competing carriers to provide service using
parts of that network. Implementation of the Act's local number
portability requirements involves one of these changes to the network.
The network modifications necessary to provide number portability are
analogous to steps taken more than a decade ago to provide long
distance companies with ``equal access'' to the local telephone network
following the divestiture of AT&T. Equal access has led to an
increasingly competitive long distance market. Similarly, I believe
that changes in the network relating to local number portability will
make it easier for firms to compete with incumbent local telephone
companies and hopefully thereby bring the benefits of competition to
consumers. Although I am sensitive to the public's concern about the
appearance of local number portability charges on customer bills, I
also believe that carriers should have some reasonable and fair
opportunity to recover their costs of complying with the statutory
requirements. That said, I firmly support taking effective steps to
scrutinize the manner in which carriers are allowed to recover these
costs.
Answer: (Commissioner Tristani) Since the 1996 Act became law,
carriers have added a number of new charges to the bill, and the
occasionally inadequate or misleading descriptions of the charges only
add to consumer frustrations. So I well understand consumers'
unhappiness with the new charge for number portability that has
recently appeared on some local telephone bills.
The 1996 Act mandated that carriers deploy number portability.
Since the carriers were forced to spend significant sums of money to
comply with this legal requirement, I believe carriers should be
allowed to recover that cost in some reasonable manner. They are doing
so through the number portability charges on local telephone bills. I
note that the Commission is currently investigating the number
portability charges of several carriers that were submitted in tariff
filings to insure that they are reasonable. It is also worth noting
that carriers are free not to impose number portability charges on
their customers. The FCC did not mandate that carriers impose number
portability charges; it only permitted this method of cost recovery. In
the end, I am optimistic that number portability will accelerate
competition in the residential telephone market and will lower prices
and improve service. Those benefits, I believe, will outweigh the
charges now being paid by some telephone customers.
Question: I understand that the FCC is about to let the U.S.
registration of the 60 deg. orbital slot lapse. Aren't satellite
orbital locations an increasingly scarce resource? Isn't this one of
the particularly valuable slots because it covers both North and South
America? Why would the FCC voluntarily give this up?
Answer: The FCC has acted aggressively to preserve the 60 deg. W.L.
orbital location for use by a U.S. satellite operator, and is
continuing to contest the expiration of the U.S. filing at 60 deg. W.L.
at the International Telecommunication Union (ITU). The FCC believes
that there is significant ambiguity within the ITU process relating to
the determination of the expiration date. Under our interpretation of
ITU rules and related ITU actions, the deadline for a timely U.S.
filing at 60 deg. W.L. was April 25, 1999. As explained below, the U.S.
sought to meet that deadline.
In September 1998--well in advance of the expiration of the nine-
year limit under our interpretation of the rules--we notified potential
U.S. operators of the impending expiration date in a concerted effort
to preserve the U.S. filing at 60 deg. W.L. At the same time, we also
initiated correspondence with the ITU, seeking to clarify the
expiration date and to extend the life of the filing at 60 deg. W.L. to
the full extent possible.
In the meantime, on February 5, 1999, PanAmSat Corporation
(PanAmSat) filed a request for Special Temporary Authority (STA) to
relocate an in-orbit satellite to 60 deg. W.L. It was aware of the
uncertainty of the filing status at the ITU at that time. On April 1,
1999, the FCC granted PanAmSat's request to locate at 60 deg. W.L. for
sixty days. The satellite, which was moved from another orbital
location, reached 60 deg. W.L. on April 12, 1999. Thereafter, PanAmSat
filed a request for STA to operate from 60 deg. W.L. for a period of
180 days. On April 13, 1999, the FCC put that STA on Public Notice. On
April 21, 1999, we granted PanAmSat interim temporary authority to
operate from the 60 deg. W.L. location for 60 days. In order to
preserve the right of the U.S. to use 60 deg. W.L., on April 21, 1999,
the FCC submitted the requisite information to the ITU in order to
complete the satellite notification process at 60 deg. W.L. prior to
the April 25, 1999 date.
At the same time, we have pursued procedural remedies within the
ITU to clarify the status of the 60 deg. W.L. location. On March 12,
1999, the ITU notified the United States by letter that the nine-year
period lapsed in June of 1998, and that the U.S. filing would be
cancelled. The FCC appealed the decision on March 22, 1999. That appeal
was denied. The FCC appealed again to a higher level of the ITU on
April 1, 1999. That appeal also was denied. We are continuing to
explore further possible appeals so as to preserve this orbital
location for a U.S. operator.
Question: Much of what we are talking about today is how to revamp
the FCC for the 21st Century. We are all looking for ways to get out of
the way of electronic commerce or enhance it where we can. With that in
mind, I understand the FCC has asked for input on whether or not
companies should be allowed to sign up customers for long-distance
service over the Internet. Assuming there is personally identifiable
information given voluntarily by a consumer (such as a credit card
number), shouldn't the FCC take this opportunity to enhance E-commerce
by recognizing a change in service request obtained over the Internet?
I would like to hear from each Commissioner on this point.
Answer: (Chairman Kennard) The Commission's recently adopted
slamming rules require that all carrier changes be verified in
accordance with one of three methods: written Letter of Agency (LOA),
electronic authorization, or independent third-party verification.
These requirements were adopted by the Commission, pursuant to
Congress' directive in section 258 of the Telecommunications Act of
1996, in order to ensure that all changes in consumers' preferred local
and long distance carriers have been knowingly authorized by the
customer.
The Commission recognized in that Order that many carriers recently
have begun to utilize the Internet as a marketing tool to gain new
subscribers and that such solicitation can be an effective and
efficient method of making these services available to the public. The
Commission expressed concern, however, as to whether carriers using the
Internet to sign up new customers were complying with the Commission's
verification requirements so as to ensure consumers utilizing this
method are afforded the protections from slamming intended by the Act
and Commission rules. For example, the Order noted that, absent
adequate verification procedures, a consumer surfing the Internet could
inadvertently sign up for a switch in long distance service or could be
misled into signing up for a contest that actually results in a long
distance carrier switch.
Accordingly, the Commission sought comment on whether further
modifications to the existing verification rules were necessary in
order to encourage the efficient use of the Internet to request carrier
switches, while still protecting consumers from fraudulent practices
such as slamming. In particular, the Commission sought comment on its
tentative conclusion that electronic signatures used in Internet
submissions of carrier changes would not comply with the signature
requirement for LOAs required under existing rules because they fail to
identify the signer as the actual individual whose name has been signed
on the Internet form and they fail to ensure that individual is the
person actually authorized to make the decision to change carriers.
Unlike a signed LOA or recorded third-party verification, an electronic
LOA, without additional personally identifiable information, does not
appear to provide tangible evidence of authorization that can be
challenged by the consumer.
Therefore, in order to enhance the ability of companies to use
electronic commerce for this purpose, the Commission specifically
sought comments from the industry and consumer groups as to what
additional information provided by the customer during such
transactions would be sufficient to verify that the consumer had
authorized a carrier switch, as mandated by section 258 of the Act. For
example, we asked whether obtaining a subscriber's credit card number,
social security number or mother's maiden name would provide sufficient
proof of a valid verification without jeopardizing the subscriber's
privacy. the comment period on this Further Notice has closed, and the
Commission expects to act soon to take whatever further action is
deemed necessary to facilitate the use of Internet commerce in this
area.
Answer: (Commissioner Ness) I agree that we should be looking for
ways to enhance electronic commerce, and that the Internet can be a
valuable tool for making telecommunications services available to the
public. Allowing carriers to sign up customers over the Internet,
however, raises some concerns. Congress and the Commission both have
been inundated with complaints about slamming, that is, the
unauthorized change of a customer's choice of carrier. We need to
ensure that changes in service providers occur only when they are
requested by a person who is authorized to make the request. The
challenge is to make it easy for appropriate changes in service
providers, while making it difficult for unauthorized changes to be
made. Given all of the fraud and confusion that we have seen lately, I
believe that we should proceed with caution--and cannot assume that
every carrier change requested via Internet is an authorized change.
Answer: (Commissioner Furchtgott-Roth) I support the Commission's
decision to ask industry and consumer groups what additional
information provided by a customer should be sufficient to verify that
a consumer has authorized a carrier switch, as mandated by section 258
of the Act, thereby enhancing the ability of companies to utilize
electronic commerce.
Answer: ( Commissioner Powell) I generally subscribe to the views
expressed by Chairman Kennard in his response to this question. As part
of the Commission's recently-adopted ``slamming'' rules, we have
already sought and received comment on whether modifications of our
verification requirements for carrier changes were necessary to
encourage the efficient use by consumers of the Internet to select new
providers, while still protecting consumers from being switched to a
new carrier without their consent. I look forward to working closely
with my colleagues to address the concerns raised in these comments and
thereby enhance consumers' ability to use electronic commerce to
request changes in telephone service.
Answer: (Commissioner Tristani) I fully support efforts to enhance
the availability of the Internet as a viable, effective means of
commerce. Indeed, the Commission's recent inquiry into the use of the
Internet by carriers to sign up new customers is intended to examine
whether the Commission needs to make modifications to its carrier
switch rules in order to allow for this type of e-commerce, while
continuing to ensure that consumers are adequately protected from
slamming and other frauds.
The Commission's recently adopted slamming rules require that all
carrier changes be verified in accordance with one of three methods:
written Letter of Agency (LOA), electronic authorization, or
independent third-party verification. These requirements were adopted
pursuant to Congress' directive in section 258 of the
Telecommunications Act of 1996, which mandates that no carrier may
submit a request to switch a customer's local or long distance
presubscribed carrier without first verifying the consumer's
authorization in a manner prescribed by the Commission.
In the Further Notice section of the Slamming Order, the Commission
noted that many carriers recently have begun to utilize the Internet as
a marketing tool to gain new subscribers and that such solicitation can
be an effective and efficient method of making competitive
telecommunications services available to the public. The Order raised
questions, however, as to whether carriers using the Internet to sign
up new customers were fully complying with the Commission's
verification requirements so as to ensure that consumers utilizing this
method are afforded the protections from slamming intended by the Act
and Commission rules. The Order expressed particular concern as to
whether the electronic signatures used in Internet submissions of
carrier changes comply with the signature requirement for written LOAs.
Unlike a signed LOA or recorded third-party verification, an electronic
LOA, without additional personally identifiable information, does not
appear to provide tangible evidence of authorization that can be
challenged by the consumer.
The Commission sought comment on whether further modifications to
the Commission's verification rules are necessary in order to encourage
the efficient use of the Internet to request carrier switches, while
still protecting consumers from fraudulent practices such as slamming.
The Commission specifically sought comments from the industry and
consumer groups as to what additional information provided by the
customer during such transactions would be sufficient to verify that
the consumer had authorized a carrier switch, as mandated by section
258 of the Act. The comment period on this Further Notice has closed,
and I expect the Commission to act soon to take whatever further action
is deemed necessary to facilitate the use of Internet commerce in this
area.
Question: Why would an electronic LOA (letter of agency or
registration for service) be any less reliable than a signature sent on
a piece of paper or a recording of a consumer's voice claiming to want
the service? People can misrepresent a signature or record a voice that
is not that of the customer. Isn't an electronic LOA with personally
identifiable information actually more secure?
Answer: (See answers to above question.)
questions for the record from representative shimkus
Question: The Commission recently voted to move ahead with a
proposed rulemaking on low-power FM. I have some concerns that in doing
so, the FCC is seemingly willing to ignore the potential impact such a
new service would have on the quality of the existing FM band.
What technical evidence does the FCC have to show that adding
hundreds or thousands of these mini-stations won't erode the quality of
the FM band? What studies have you conducted? Aren't we putting the
cart before the horse here?
Answer: The Commission has issued a Notice of Proposed Rule Making
concerning a possible low-power radio service, but it has not yet
reached any conclusions in this matter. In reviewing the record in this
proceeding, of course, the Commission will consider very carefully the
potential impact of a new low-power radio service on the reception of
existing radio service. This is a threshold issue of the rulemaking
proceeding which we will examine closely.
I and every one of my colleagues on the Commission have firmly and
repeatedly stated our individual and collective belief that one of the
Commission's primary mandates is to guard the technical integrity of
the spectrum, not to degrade it, and that before any one will conclude
that a new service is feasible, we must be satisfied that the technical
issues have been adequately addressed.
At the same time, it is our duty to see that the great natural
resource that the radio spectrum represents is fully exploited for the
benefit of the public, and to examine ways in which it can be more
efficiently utilized. We are currently conducting testing to ascertain
whether certain station-locating principles we have used for full-power
stations may be unnecessarily preclusive for low-power stations. We
also expect to receive the results of testing and analysis from other
interested parties and qualified experts as a result of our rulemaking
Notice.
Question: Isn't it true that in your own proposal and your table of
stations, you admit that the only way to create any new stations in
major metropolitan areas is by changing the 2nd and 3rd channel
interference protections currently in place? How can the Commission
support a proposal that would diminish the audio quality of the current
FM service?
Answer: The successful implementation of a low-power radio service
may depend in significant part on whether the Commission can modify
certain of its station separation requirements in the context of low-
power stations. The Commission has successfully employed modified
station separation standards in limited instances in the past to permit
improvements to some existing full-power stations without degrading
audio quality. We intend to study and test whether these principles can
be safely applied to a low-power radio service.
Question: What about the impact on in-band, on-channel digital
radio? My understanding is that the digital channel will be added on
the sides of the main analog channel, and therefore will be more easily
disrupted by interference from adjacent channels if this proposal goes
forward. Why are we willing to throw out the potential of digital radio
just to license some more people to have radio stations? And why was
the microradio issue taken up before the digital audio broadcasting
rulemaking now awaiting action was resolved?
Answer: The Commission will take care to preserve the opportunity
for terrestrial digital audio radio service in the event it establishes
a low-power radio service. The Commission has yet to determine the best
method for transitioning to terrestrial digital radio, and an in-band
on-channel (IBOC) methodology is a significant possibility. Multiple
IBOC and terrestrial digital radio systems at varying stages of
development are still being worked on, analyzed, tested and refined by
the industry, and the technical architecture of any system will
ultimately be a function of the radio environment in which it will
operate.
The Commission has made a firm commitment to developing terrestrial
digital radio service, and we intend to do so as promptly as possible.
We have issued several experimental authorizations to IBOC proponents
to test their technology and develop their systems. We have already
received comments on a petition filed by one of the IBOC proponents,
and Commission staff is consulting with industry groups as part of the
process of beginning a rulemaking proceeding. However, while we intend
to open a rulemaking proceeding as soon as is practicable, it is
possible that the rulemaking process, particularly with competing
undeveloped technologies at present, could take some time to complete.
If we can reliably establish parameters that will preserve
necessary flexibility for terrestrial digital audio, we should not
unnecessarily delay the introduction of low-power service for the
public. We have specifically asked in the low-power rule making for
comment and expert input on what measures are appropriate to maintain
appropriate flexibility for a transition to digital, including
potential IBOC systems, and have recently extended the lengthy original
comment deadlines in the low-power radio proceeding to provide
opportunity for additional input on this issue.
Question: Aren't there frequencies now in smaller markets that
people can apply for? What happens to those people already awaiting
processing for full-power stations--why is it fair to leapfrog those
folks who've been waiting patiently for stations and suddenly create a
whole new class of service out from under them?
Answer: There are a limited number of FM stations available in
certain small markets, but this is not universally so. Many small
communities with any proximity to a larger metropolis do not have full-
power frequencies available. Even where full-power frequencies are
available, full-power facilities can be unnecessarily and even
prohibitively expensive to build, and may not be supportable by the
local market.
The Commission expects to resolve the issues that have prevented
the processing of certain new FM applications and begin that processing
by this fall. This will be long before any low-power applications would
even be filed, if such a service is authorized. Our ability to resolve
these applications is unrelated to the low-power proceeding. Moreover,
for applicants seeking to provide a full-power service, low-power
facilities would be a far less desirable or even unacceptable
alternative.
Question: Mr. Furchtgott-Roth, you were the only commissioner to
oppose this proposal. Can you explain to this subcommittee why you had
concerns about it?
Answer: (from Commissioner Furchtgott-Roth) I write in response to
your follow-up question regarding my decision to dissent from the
Commission's recent Notice of Proposed Rule Making on low-power radio
stations. Below, I set forth my reasons for taking this position.
As an initial matter, I am not opposed to the creation of a low-
power radio service. Whatever new service can be provided within the
range of existing interference regulations would be something worth
considering. I do not believe that the Commission should create new
stations at the expense of current interference protection standards,
however.
As the appendix attached to the Commission's Notice of Proposed
Rule Making itself showed, under existing interference rules the
Commission can authorize so few new stations that the results would
hardly warrant the effort. In order to create any substantial amount of
new service, protection standards have to be loosened so far as to
eliminate third and even second adjacent channel safeguards. This is a
severe incursion on the rights of current license holders, as well as
on the value of their licenses, which will be drastically undercut in
the market if these proposals are adopted.
This proposal also potentially impairs the ability of current
licensees to serve their listeners, who must not be forgotten; while
new people may be able to broadcast, others may lose their ability to
receive and listen to existing stations due to interference. It
especially troubles me that the Commission has made no effort to
assess, much less quantify, the effect on existing stations of
eliminating these safeguards.
Even if the second and third adjacent channel protections were
wholly eliminated, however, very little new service would be created in
the major urban markets at which this proposal is supposedly aimed. For
instance, in New York City, there would be no LP1000 stations and no
LP100 stations, and in Los Angeles there will be only one LP1000
station, no LP100 stations with translator protections and six LP100
stations with unprotected translators. In addition to their small
number, these services will be relatively unavailable to mobile
audiences due to their low wattage.
Furthermore, while many proponents of this rule making see it as a
means of increasing broadcast ownership by minorities and women, there
is in all likelihood no constitutionally sound way to assure such a
result. There is simply no way that the Commission can say that, if a
first-come, first-served rule is adopted, these licenses will not be
awarded to whoever applies for them first or that, in the case of
mutually exclusive applications, these licenses will not go to the
highest bidder.
Also, the creation of low-power radio by elimination or
modification of current interference rules may also have an adverse
effect on the FM radio band itself by hindering the development of new,
advanced services such as in-band, on-channel digital radio.
Plans for the delivery of this service have been based on current
interference standards, and it is unclear whether these plans can be
successfully modified should those standards change. While the rest of
broadcasting (indeed the entire communications industry) moves toward
the advantages of digital technology, this contemplated FCC policy may
make it harder for the FM radio band to keep up.
Moreover, communicating with one's community or expressing a point
of view--the posited aim of low-power advocates--can be achieved
through a variety of ways other than the creation of microradio. People
can communicate with others by obtaining extant commercial or
noncommercial licenses, the purchase of air time on broadcast
properties, leased access and/or PEG cable schemes, amateur radio, e-
mail, Internet home pages, bulletins and flyers, and even plain old-
fashioned speech. The notion that a message must be broadcast over
radio spectrum before its speaker has a ``voice'' overlooks the
realities of modern life. Indeed, as time goes on, broadcasting has
faced increasing competition, becoming less and less powerful a medium.
It is no secret that the television broadcast networks are attempting
to find innovative ways to deal with decreasing viewership in the face
of cable, DBS, and other video delivery and entertainment systems that
compete for the public's attention.
And, of course, Commission enforcement of rules and regulations
applicable to the new stations will be an administrative drain and
involve the Commission in micromanagement of the smallest of
operations. Thus, the low power proposal does not do much to advance
its supposed goals. What minimal furtherance of those goals it would
achieve comes at great cost to current license holders and listeners.
Good--arguably better, even--alternatives for the dissemination of
messages in America certainly exist. And the administrative burdens on
the Commission will likely be great. Accordingly, I do not think this
proposal represents an efficient use of radio spectrum. In addition, I
do not view concern about the effects of consolidation in the radio
industry as the result of the 1996 Telecommunications Act as an
appropriate motivation for this Commission to create low-power radio
stations. These are, at bottom, arguments against consolidation.
Congress, however, made the clear policy choice to lift national
ownership limits. Whatever the results of that choice, they are the
function of Congress' elected course, and this Commission must follow
it.
In sum, given the potential harmful effects on current licensees
and their listeners; the limited benefits of creating a low-power radio
service; the burdensome regulations placed on the new stations; the new
enforcement duties for the Commission; and the availability of
alternatives for communication, I do not believe that the pursuit of
this proposal comports with the Commission's statutory duty to ``make
available . . . a rapid, efficient, Nation-wide and world-wide wire and
radio communication service.'' 47 USC section 151 (emphasis added).
Please do not hesitate to contact me if I can be of further assistance.
Question: The idea behind this microradio proposal is to give
people the chance to get into the radio business that couldn't afford
to buy an existing station. How can the FCC predict who will get these
licenses? And is there any evidence that even with low-power FM
licenses, the pirate problem will go away?
Answer: The Commission has received thousands of inquires regarding
low-power radio stations prior to and since the publication of its
Notice of Proposed Rule Making. Schools of all types, various kinds of
community groups, churches, music associations, a wide variety of
individuals, political activists and others have made inquiries,
expressed a strong interest, and are participating in the rule making.
We believe it is reasonable to infer from this that such entities would
participate in low-power radio, if it is authorized. While some illegal
activity may persist from those who simply must defy authority, we
fully expect that the availability of legal facilities will remove a
primary incentive for illegal radio operations. In any event, the
Commission will continue to vigorously enforce the prohibition against
operating a broadcast station without a license.
Question: How will the FCC have the resources to oversee this new
group of stations, most of whom will not have run a radio station
before or care about operating under regulations?
Answer: One of the significant technical issues raised in the
Notice is the type of equipment to require for low-power radio
licensees. Certified equipment, with strict technical specifications
should reduce the likelihood of signals that ``wander'', cause
interference, or cause unwanted signals on other frequencies. Also,
because we maintain data on licensees such as frequency, power, and
location, the Commission can quickly contact a licensee if technical
problems occur. Additionally, the likely reduction in illegal
operations if low-power radio is authorized should ease that demand on
our resources.
We must expect that low-power licensees, as any others, will be
conscientious about learning and performing their responsibilities.
Nonetheless, enforcement begins with making sure that licensees are
informed of their responsibilities. For licensees that are new to any
service, the Commission already provides multiple avenues for licensees
to learn their responsibilities. We also will consider how to develop a
pro-active means of effectively informing licensees of their
responsibilities. The Office of Communication Business Opportunities
(OCBO) provides information to small businesses, especially those that
are new to the communications industry. Information is also available
on the Commission's Internet site and from the National Call Center, as
well as from the Mass Media Bureau. The Commission can also provide
assistance as it does with its other broadcast licensees through its
current Alternative Broadcast Inspection Program (ABIP). The
Commission's Compliance and Information Bureau also provides checklists
on its home page on the Commission's website, www.fcc.gov, that a
licensee can use to conduct self-inspections. In addition, based on our
experience in the rulemaking proceeding and our knowledge of illegal
operations, we expect that there will be quite a network of information
exchange on the Internet within the low-power community. As stated
above, we will also search for effective means of educating licensees
as part of the application or licensing process.
questions for the record from representative blunt
Question: On July 8, 1998, the Missouri Municipal League, the
Missouri Association of Municipal Utilities, City Utilities of
Springfield, City of Columbia Water and Light, and the City of Sikeston
Board of Utilities filed a petition for preemption with the FCC,
seeking preemption of section 392.410(7) R.S.Mo. (CCPol Docket No. 98-
122). Responses have been made by all interested parties and the
parties are waiting for a decision by the FCC. Is there a time frame
for making this decision by the FCC, and when can the parties expect a
decision?
Answer: I would like the Commission to issue a decision in the
Missouri Preemption proceeding early this Fall if at all possible.
Regardless of other competing priorities, I expect the Commission to
take action in this proceeding before the end of 1999.
Question: It is my understanding that you have concerns about the
limitations that states have placed on municipal electric utilities in
telecommunications. A Missouri law, section 392.410(7), is an example
of such a limitation. A copy of this law is attached for your
information. Would it be fair to say that this is the type of state law
that concerns you?
Answer: I am concerned about the enactment of state statutes
prohibiting the provision of competitive telecommunications services or
facilities by municipalities or municipal utilities. I believe that
enactment of such statutes by the states is generally undesirable as a
matter of public policy because they eliminate a strong potential
competitor from the market. This can have a particularly undesirable
effect on rural areas where municipal utilities may be the most likely
source of facilities-based competition. At the same time, I believe
that the Commission must tread very carefully in considering requests
for preemption of such statutes under section 253 of the Communications
Act.
Question: You have been quoted as saying that there have been some
problems in the courts that haven't allowed some of these municipal
utilities to provide telecommunications services. Has the FCC made any
decisions that would preempt a limiting state law and would allow a
municipal utility to provide telecommunications services?
Answer: To date, the Commission has not preempted state laws
restricting the provision of telecommunications services by municipal
utilities. In the Texas Preemption proceeding, the Commission declined
to exercise its section 253 authority to preempt a Texas statute
generally prohibiting municipalities from providing telecommunications
services or facilities. The Commission concluded that it was not clear
that Congress intended the Commission to intrude into the relationship
between the State of Texas and its municipalities. This decision was
upheld by the U.S. Court of Appeals for the D.C. Circuit. The
Commission's decision in the Texas Preemption proceeding, however,
specifically reserved the question of restrictions on municipal utility
entry for future consideration. This question is now before the
Commission in the Missouri Preemption proceeding.
Question: You have been quoted as testifying before the Senate
Judiciary Subcommittee on Antitrust, Business Rights and Competition,
that you ``think that we ought to continue to work hard to open up
every competitive avenue, if we can.'' Is this an accurate statement of
your testimony, and if so, do you believe that the FCC should continue
to work hard to open up competition in telecommunications services?
Answer: I strongly support the competitive provision of
telecommunications services, and believe that the Commission must
continue to work hard to remove barriers to competition. It is my
experience that competition benefits consumers by increasing the
choices available to them, fostering the deployment of new technology,
and bringing downward pressure to bear on prices.
Question: Do you share the belief stated by others that letting
electric utilities compete in telecommunications was a key part of the
Telecommunications Act of 1996?
Answer: I agree with this statement and envision electric utilities
as becoming formidable competitors in the provision of
telecommunications services.
Question: Do you understand that the legislative history of the
Telecommunications Act of 1996 evidences the fact that there was an
intent by Congress to let municipal utilities compete in
telecommunications?
Answer: Our staff is considering the legislative history of the
1996 Act as part of its review of the public record we have developed
in the Missouri Preemption proceeding. I am reluctant to address this
issue while that matter is pending, but I will be glad to respond to
this question fully at the appropriate time.
Question: Section 253(a) of the Telecommunications Act of 1996 is
clear that state and local laws cannot ``prohibit . . . any entity''
from providing telecommunications services. Does a publically-owned
electric utility fit within the definition of ``any entity?''
Answer: In the Texas Preemption proceeding, the Commission declined
to exercise its section 253 authority to preempt a Texas statute
generally prohibiting municipalities from providing telecommunications
services or facilities. The Commission concluded that Texas
municipalities were not entities separate and apart from the State of
Texas for purposes of section 253 of the Communications Act. The
Commission also found it was not clear that Congress intended the
Commission to intrude into the relationship between the State of Texas
and its municipalities. This decision was upheld by the U.S. Court of
Appeals for the D.C. Circuit. The Commission's decision in the Texas
Preemption proceeding, however, specifically reserved the question of
restrictions on municipal utility entry for future consideration. This
question is now before the Commission in the Missouri Preemption
proceeding. I am reluctant to address this issue while that matter is
pending, but I will be glad to respond to this question fully at the
appropriate time.
Question: What is your view of the obligation which the FCC has
under section 253 of the Telecommunications Act to preempt state or
local laws or regulations which serve as barriers to entry?
Answer: Commission preemption of state and local laws and
regulations that violate section 253 is mandatory, assuming compliance
with the substantive and procedural requirements of that section. I
believe that the Commission's authority under section 253 to preempt
state and local requirements that prevent competitive entry is a vital
element in ensuring realization of Congress' vision of local exchange
competition. At the same time, I believe that the Commission must use
preemption of state and local actions cautiously as a last resort. I
note, for instance, that Congress specifically preserved certain
authority for state and local governments in the areas of universal
service, public safety and welfare, quality of service, consumer
rights, and management of rights-of-way, to the extent such authority
is exercised in a competitively neutral and nondiscriminatory manner.
Further, Congress authorized FCC preemption of state and local
requirements that violate section 253 only ``to the extent necessary to
correct the violation . . .'' I believe the Commission has implemented
section 253 consistent with these criteria and must continue to do so
in order to further the pro-competitive goals of the 1996 Act.
questions for the record from representative eshoo
Question: Chairman Kennard, you mention in your testimony that your
fourth goal during the transition to competition is to bring consumer
services and technology to every American. With over 60 million people
using wireless phones today, the FCC has a role to play with industry
and other government agencies, to ensure that our nation's Emergency
911 service is reliable 100 percent of the time. Where does E-911 fit
within your view of the 21st Century FCC?
Answer: I agree with you that there is an important role for the
Commission to play in ensuring that all Americans have access to
reliable and efficient wireless 911 services as we move into the 21st
Century.
A core obligation given to the Commission by the Congress in the
Communications Act of 1934 is to promote the safety of life and
property through the use of telecommunications services. Fulfilling
this obligation is a cornerstone in the transition to a more
competitive telecommunications marketplace. For these reasons, it is
critically important that the Commission continue its efforts to work
with the public safety community, emergency service providers, consumer
groups, other Federal agencies with an interest in public safety
issues, and the wireless industry in order to forge an alliance
dedicated to working for improvements in the availability and
dependability of wireless 911 service.
As you know, in the wireless E911 rulemaking proceeding, CC Docket
94-102, the Commission has developed rules that require wireless
carriers to improve 911 service. As a basic 911 requirement, wireless
carriers are now required to forward all 911 calls they receive to a
Public Safety Answering Point, without delays for validation or the
blocking of calls from non-subscribers. At the Commission's Agenda
Meeting on May 13, 1999, the Commission adopted rules to improve the
ability of analog cellular telephone users to successfully complete 911
calls. One of the important issues in the wireless E911 proceeding
concerned proposals to help improve the transmission of 911 calls,
especially in geographic locations where a wireless caller attempts to
make a 911 call but the cellular system to which the caller subscribes
has a ``blank spot''--an area where the system's radio signal is weak
or non-existent. The Commission on May 13, 1999 adopted a requirement
that new analog cellular-capable handsets manufactured starting in
February 2000 be able to complete 911 calls to the other cellular
carrier in those situations. The purpose of this new rule is to improve
911 reliability, increase the probability that 911 calls will be
efficiently and successfully transmitted to public safety agencies, and
help ensure that wireless service will be maintained for the duration
of the 911 call.
The Commission bears a continuing responsibility to ensure that we
harness the benefits of emerging technologies for wireless 911 service.
To take one example, our rules require carriers, beginning in October
2001, to provide location information for wireless 911 calls, with
accuracy within 125 meters. Our challenge is to foster the development
and application of wireless technologies that can improve upon this
level of accuracy, and can also provide information about the precise
location of callers in multi-story buildings.
As we move into the 21st Century, we should continue our active
involvement in working toward achievement of our fundamental goals for
wireless 911--increased levels of call completions, reliable and
dependable service quality, and pinpoint accuracy in locating wireless
911 callers.
I appreciate your active involvement in this proceeding and assure
you that the Commission will continue its commitment to promote public
safety.
Question: Chairman Kennard, please cite specific examples that fit
your fifth goal of fostering innovation. Do you have any specifics to
tell us about relative to development and deployment of high-speed
Internet connections to all Americans?
Answer: High-speed Internet connections are one form of--and so far
the most popular form of--what we call ``broadband'' or, in the words
of section 706 of the 1996 Act, ``advanced telecommunications
capability.'' Recently, the Commission issued a Report finding that the
deployment of broadband to all Americans appears, at this initial
stage, to be proceeding in a reasonable and timely manner.
The single most important thing the Commission has done to get such
connections built and used by Americans is to adopt a policy of open
entry into all forms of local and long distance communications. As a
result, in the past few years tens of billions of dollars have been
invested in broadband facilities by incumbent and competitive local
exchange carriers (LECs), long distance companies, satellite companies,
cable television providers, public utilities, and all kinds of wireless
licensees (fixed and mobile, land-based and satellite, licensees of
longstanding and recent winners of auctions of newly allocated
spectrum).
The history of this business over the last thirty years has shown
that competition leads to widespread, low-priced, high-quality, and
technically innovative service faster than monopoly or oligopoly.
Especially in a market where different technologies may serve different
areas and different customer needs best, the Commission wants to avoid
picking one technology and one set of companies as its chosen
instrument.
The Commission is taking targeted action to facilitate high-speed
Internet connections, and broadband in general, in many specific
proceedings. For example, we are considering the issue of access to the
``last hundred feet'' in multiple dwelling units (MDUs) such as
apartment buildings in several proceedings.1 We are moving
ahead with proceedings that promote the deployment of wireline
broadband services 2 and the commercial availability of
``set top box'' navigation devices.3
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\1\ For example, WinStar has requested that we apply section 224 of
the Communications Act, governing regulation of pole attachments, to
require public utilities to make rooftop facilities and related riser
conduit owned or controlled by the utility available to competing
providers of communications services. Implementation of the Local
Competition Provisions in the Telecommunications Act of 1996, CC Docket
No. 96-98, WinStar Communications, Inc., Petition for Clarification or
Reconsideration (filed Sept. 30, 1996). See also Inside Wiring Report &
Order & Second Further NPRM, 13 FCC Rcd at 3778-82.
\2\ See Deployment of Wireline Services Offering Advanced
Telecommunications Capability, CC Docket No. 98-147, Memorandum Opinion
& Order & Notice of Proposed Rulemaking FCC 98-188, released Aug. 7,
1998, available at 1998 WL 458500.
\3\ See, e.g., Implementation of section 304 of the
Telecommunications Act of 1996, Commercial Availability of Navigation
Devices, Report & Order, 13 FCC Rcd 14775 (1998).
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In addition, we are pursuing initiatives to ensure that wireless
services, both fixed and mobile, are true competitors in the consumer
market for broadband. We will continue to allocate, auction, and
license more spectrum for uses that include broadband, especially
facilities that serve the last mile and last hundred feet.4
We are also encouraging the next generation of mobile services and are
re-examining our 45 MHz CMRS spectrum cap.5 We are working
for efficient international harmonization of spectrum allocations,
product certifications, and technical standards for interfaces.
Moreover, we will promptly grant licenses so that broadband facilities
can be built promptly.6 We will continue authorizing
broadband capacity for traditional geostationary C- and Ku-Band
frequencies. We also expect to license new, innovative systems in the
Ka- and millimeter wave Bands.7
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\4\ See, e.g., Amendment of the Commission's Rules with Regard to
the 3650-3700 MHz Government Transfer Band, ET Docket No. 98-237,
Notice of Proposed Rulemaking & Order FCC 98-337 at para.para. 1, 6,
released Dec. 18, 1998.
\5\ See 1998 Biennial Regulatory Review--Spectrum Aggregation
Limits for Wireless Telecommunications Carriers, WT Docket 98-205,
Notice of Proposed Rulemaking FCC 98-308, released Dec. 10, 1998.
\6\ For example, the Commission is now in the second licensing
round for Ka-band satellites and will rule on 18 requests for licenses
and modifications or amendments to existing Ka-band licenses.
\7\ See, e.g., Allocation & Designation of Spectrum for Fixed-
Satellite Services in the 37.5-38.5 GHz, 40.5-41.5 GHz, & 48.2-50.2 GHz
Frequency Bands, IB Docket No. 97-95, Report & Order FCC 98-336,
released Dec. 23, 1998.
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Lastly, the Commission is monitoring on a continual basis the
appearance of chronic shortages of high-speed Internet connections and
other forms of broadband in rural areas, low-income inner city
neighborhoods, for the disabled and for educational and health-care
facilities.
I am strongly committed to bringing high-speed Internet access to
all Americans and will do all that I can as Chairman of this Commission
to make that goal a reality.