<DOC>
[106th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:61037.wais]
FEDERAL COMMUNICATIONS COMMISSION REFORM FOR THE NEW MILLENNIUM
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TELECOMMUNICATIONS,
TRADE, AND CONSUMER PROTECTION
of the
COMMITTEE ON COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
OCTOBER 26, 1999
__________
Serial No. 106-85
__________
Printed for the use of the Committee on Commerce
------------------------------
U.S. GOVERNMENT PRINTING OFFICE
61-037 CC WASHINGTON : 2000
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:
Kennard, Hon. William E., Chairman, Federal Communications
Commission................................................. 12
Furchtgott-Roth, Hon. Harold W., Commissioner, Federal
Communications Commission.................................. 24
Ness, Hon. Susan, Commissioner, Federal Communications
Commission................................................. 20
Powell, Hon. Michael K., Commissioner, Federal Communications
Commission................................................. 26
Tristani, Hon. Gloria, Commissioner, Federal Communications
Commission................................................. 32
Material submitted for the record by:
Kennard, Hon. William E., Chairman, Federal Communications
Commission:
Letter dated November 5, 1999, to Hon. Edolphus Towns.... 73
Responses for the record................................. 74
(iii)
FEDERAL COMMUNICATIONS COMMISSION REFORM FOR THE NEW MILLENNIUM
----------
TUESDAY, OCTOBER 26, 1999
House of Representatives,
Committee on Commerce,
Subcommittee on Telecommunications,
Trade, and Consumer Protection,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:36 a.m., in
room 2123, Rayburn House Office Building, Hon. W.J. ``Billy''
Tauzin (chairman) presiding.
Members present: Representatives Tauzin, Oxley, Stearns,
Gillmor, Cox, Cubin, Shimkus, Pickering, Fossella, Ehrlich,
Bliley (ex officio), Markey, Eshoo, Engel, Luther, Sawyer,
Green, McCarthy, and Dingell (ex officio).
Staff present: Justin Lilly, majority counsel; Cliff
Riccio, legislative clerk; and Andy Levin, minority counsel.
Mr. Tauzin. The committee will please come to order.
Good morning and welcome to the third hearing on FCC
reform. Today we will hear from the FCC Commission regarding
their views on the proposed FCC reforms put forth by this
Commission and its strategic plan: a new FCC for the 21st
century.
I want to welcome Chairman Kennard and all the
Commissioners and express my appreciation on behalf of the
committee for your attention to this issue and for your
presence here today. As usual, we deeply appreciate the dialog
that we are beginning to have on this very important subject.
When Congress passed the historic, much-publicized
Telecommunications Act of 1996, I believe as I have often said
in public, that we made a fundamental mistake. We failed to
reform the outdated structure and the outdated mission of the
FCC when we overhauled the law. As a result, as America
prepares to enter the 21st century, I believe we have in effect
a horse-and-buggy agency trying to bridle a supersonic
technology, and it is simply not working as well as it could
and should.
These words, I am sure, are not unfamiliar to you. I have
used them many times. But I am using them over and over in the
hopes that they will ring clear in the minds of those with the
authority to really effect change.
In an attempt to further the reform of this agency, I
recently appointed an FCC task force headed by my good friend,
Paul Gillmor. As a result of his efforts and the efforts of the
task force membership, I was presented this voluminous binder
of recommendations. It is getting thicker and thicker. And I
want to indicate how pleased I am that, in fact, they have
taken this work so seriously and are devoting so many hours to
it.
As I promised members of the minority, this task force
would be bipartisan. I again ask today that Mr. Dingell
consider the appointment of several members from the minority
to join with my Republican colleagues in that task force effort
so that we might continue this process as we continue to call
for efforts to craft comprehensive reform that is as much as
possible not only bipartisan but hopefully nonpolitical.
Let me say from the outset that I am pleased with the work
of the task force, and I agree with many of the proposals set
forth in the document. Let me also add parenthetically, one of
the things I am very disappointed with is the willingness of
the regulated community to come forward and speak to us about
problems they experienced with the agency. They tell us many
things privately, but won't go on record. That itself is
ringing testimony that there is something wrong with the
process where those who are most affected by it are unprepared
or unwilling to go public with their criticisms.
Where I and many of my colleagues as well as many in the
industry agree with the efforts being made by the Commission to
examine reform itself, let me indicate at the outset that many
of us disagree on the timing of the proposed reforms by the
Commission. Five years is simply twice as long as we believe is
necessary, and this committee is going to be relentless in
seeing that the FCC reforms are completed to a significant
degree over the next 2\1/2\ years.
Five years, Mr. Chairman. Currently 86 percent of the
Internet delivery capacity in the United States is concentrated
in the 20 largest cities in America. Five years, when analysts
are projecting that within the next 3 years there will be a
1200 percent increase in business-to-business Internet
services, generating $1.5 trillion in revenues. Five years,
when 210 of the country's 346 metropolitan statistical areas,
roughly 61 percent, do not have direct on-ramps to the
Internet. There are only 98 hubs serving towns in non-
metropolitan service areas in this country. California alone
has 177 hubs. That is more than the combined total of 31
States.
Five years. There are 80 bills pending in Congress seeking
to apply various regulatory or deregulatory provisions to
commerce over and content on or access to the Internet or
telecommunications in general. Five years is simply too long,
especially in a world of this fast-changing technology. We need
simply to catch up by creating changes in the processes here in
Washington that make sense in a modern deregulated environment.
The time for that is now.
Again, let me thank Mr. Gillmor and the members of his task
force for all of their hard work. I want to thank the minority
in advance for their interest and hopefully their commitment to
become part of this task force. And to members of the
Commission, I want to again thank you not only for appearing
today but for, as I said, taking this seriously and dialoguing
with us today on what it takes to get this really moving and
how long it will take to complete it.
Again, let me thank you for your attendance, and the Chair
will now yield to the gentlelady from California, Ms. Eshoo,
for an opening statement.
Ms. Eshoo. You caught me with coffee and a bagel, Mr.
Chairman. Thank you very much.
Mr. Tauzin. You have 5 years to take care of that.
Ms. Eshoo. Good morning to you, Mr. Chairman, and thank you
for calling this important hearing. It is always a pleasure to
see the Chairman of the FCC, the distinguished Chairman Mr.
Kennard, and each of the Commissioners, and I want to welcome
you here today.
First, let me just say that 7 months ago when you were last
before this subcommittee, I brought up the need for further
action on E. 911. Today I want to thank you publicly, each of
you, for heeding my call and that of many others to revise the
FCC's rules on this very important issue. I believe the ruling
that the FCC issued in September will provide consumers with
enhanced 911 emergency services that will promote the public's
safety and competition among wireless 911 equipment
manufacturers as well as the continued improvement in the
quality of 911 service. I commend each one of you for this
ruling, which I believe will in the end help to save countless
lives in our Nation. That isn't any small contribution, and I
am very, very sincere in saluting you for what you have done.
Chairman Kennard has nicknamed the FCC reform plan The New
FCC: fast, flat, and functional. I am pleased that part of this
plan calls for the FCC to be looking to invest in new
technologies to create a paperless FCC so that applications and
licenses can be processed more efficiently. I think the agency
has an opportunity to be a leader in the Federal Government in
this respect, and I think it can start by becoming the first
agency to accept and utilize the electronic signatures on
letters of agency and other documents. I also think the FCC has
the opportunity to take a big step in facilitating competition
in the building access issue. And I think the FCC does have the
authority to make a ruling on this issue.
In this unprecedented period of increasing competition in
the telecommunications industry, it would be unfortunate if
residential and commercial building tenants were not given the
opportunity to choose between carriers. I think that this is
one of the manifestations of the Telecom Act, and I look
forward to it being implemented. The FCC should use its
authority to offer a fair and reasonable resolution that
ensures that tenants have access to the local competitors of
their choice. There is room for improvement on the length of
time the FCC has taken to review mergers, and I am pleased the
agency is in the process of creating an interagency merger team
to streamline and accelerate the merger review process.
So again, Chairman Tauzin, I would like to thank you for
calling this hearing. I look forward to hearing more about the
FCC's reform plan this morning. And again, I welcome you here.
It is always good to see you, important to work together. I
can't think of a more powerful agency in the life of America
today, and we have to work every day to make sure the meaning
of that power is felt by each and every American citizen in our
country. After all, it is the telecommunications.
Thank you, and I yield back.
Mr. Tauzin. I thank the gentlelady. The Chair wishes to
point out--I hope the Commission understands that the paucity
of members here is not a reflection on either--any disrespect
of your presence on the issue. We have got a conference going
on of Republican members. I know there is an O&I hearing that
is drawing some of our members away. They are coming.
So let me now recognize the gentleman from California, Mr.
Cox, for an opening statement.
Mr. Cox. Thank you, Mr. Chairman. I want to thank the
Commissioners for being here and explain my immediate absence.
We have an O&I hearing exactly on top of this, which sometimes
happens. I have read all the written testimony that has been
submitted and I thank you for providing it and we will be most
interested in reading the proceedings that I am going to miss.
I don't think there is a more important issue before each
of you and before us as a Congress in our oversight capacity
than what the FCC looks like in the future. And I have to say
that I think Chairman Kennard has laid out in general terms
pretty much where we are headed and what the challenge is.
The objects of regulation are changing so rapidly that if
the FCC were not to rethink from the bottom up its entire
reason for existence, we would be overtaken by events. I also
think that we need to notice the difference between promoting
markets through regulation and promoting markets. Sometimes we
think by adopting a better, different or wiser regulation, we
can get more competition, whereas in fact we simply end up
creating another regulation.
The E-rate program, which may or may not come up in
members' questioning here, continues to trouble me because it
is emblematic of the problems we have had in oversight of the
FCC. Congress passed a law in 1996 and the FCC in many
respects, at least in the view of many of the members of this
committee, is doing something other than what the law intended.
The E-rate program, which has been much litigated, represents
probably the logical limit to which law by regulation can be
pushed. There wasn't a provision for these particulars in the
1996 act, and we have ended up imposing a tax which, however it
might be justified and however it might be litigated,
represents an enormous lapse in good judgment, it seems to me,
in the appropriate roles of the branches; it would seem it
would be for Congress to pass the taxes and to do so with a
different kind of popular input than the FCC can take advantage
of, and for the FCC not to do those things.
It is for that reason that we had a bipartisan letter
signed by the chairman and ranking Democrats in both the House
and in the Senate, with some rather strong words, I would
think, for bipartisan correspondence and for that genre,
suggesting that the age of kings passed with the American
Revolution, for example, and that we ought to impose taxes in
this fashion.
It has been called the Gore tax because of the Vice
President's support for it, but making it the focus of next
year's election is not anybody's idea of a good time. I would
rather get rid of this tax now and, more to the point, get rid
of the regulatory climate that permits the FCC to, I think,
invade the legislative turf in that fashion.
We ought to be thinking about ways to shrink regulation and
shrink the FCC itself, not create new fiefdoms and enormous new
jurisdictions with several sustaining their own non-legislative
taxes.
I thank the chairman for the time. I apologize for my
absence but I am enormously interested in this subject and will
pay very close attention to what you say, even when I am not
physically present here. Thanks.
Mr. Tauzin. Thank you, Mr. Cox. The gentleman from Texas,
Mr. Green, is recognized.
Mr. Green. Thank you, Mr. Chairman. Like my colleague from
California, we have a vote, I am told, at 10 o'clock upstairs,
on the Department of Energy, and I too will be leaving shortly.
Let me just follow up on my colleague from California on the E-
rate, support of the E-rate, and realizing it was in the 1996
act. And in fact our Chairman has a bill, and I think
originally Congressman Klink had one that would replace the E-
rate with an actual tax, and I think that is a good mechanism.
That is a tax cut on our side of the aisle, Mr. Chairman, we
could probably support as long as it would be devoted to the E-
rate and the success we have seen with E-rate funding in my own
district, at least across the State of Texas.
We also might want to look at the universal service charge,
because I have found a lot of constituents are just upset
because of all the charges on their bill that are broken out
now that used to not be broken out.
I want to thank you for calling the hearing, Mr. Chairman,
on the FCC and the New Millennium and its growing digital age.
It is nearly impossible for regulatory agencies and legislators
to keep up with the explosive growth with the telecom industry.
For example, the Internet has successfully cut across all
traditional communications boundaries so that a person over the
Internet can make a long distance call or listen to the ball
game or watch television programming. It is really exciting.
In March of this year, Chairman Kennard came to us and laid
out a vision of the FCC. It was enlightening to hear that the
FCC was going to try to keep up with the times and restructure
the Commission to meet with these demands, while sustaining the
main charge of promoting competition and communications,
protecting consumers and supporting access to all Americans to
the existing advanced telecommunications.
Like the Chairman, I encourage you to act as expeditiously
as possible on the reforms because the technology changes are
so rapid.
Let me point out the need for resources--and I was noticing
in our booklet today, Mr. Chairman, the 1996 act that was
passed, that year the FCC requested $223.6 million, we
appropriated $185.7 million in each year for the next up until
2000, when the FCC requested $230.9 million and we appropriated
$2.210 million. Each year it has been anywhere from $10 to $20
million less in appropriations than what the FCC requested. Not
that we need to exactly match the dollar, but if you give
someone a responsibility to do a job, then you also need to
give them the resources to do it. I know that is not our
committee but we may want to point that out to our folks over
at the Appropriations Committee.
I appreciate the opportunity to discuss with the
Commissioners on many issues that are before the FCC. And I,
coming from Texas, I am glad the SBC and the Ameritech issue
has been settled and that is moving along, because I know as
soon as that was done, there is another giant merger that you
have to consider. That is, I guess, the nature of the
competitive system we have today.
I do have a particular situation. We have an application
from some folks in Houston for a Spanish-language TV station in
the Blanco, Texas area, north of San Antonio and west of
Austin. It seems like it has gotten caught up in bureaucratic
problems over the FCC. We sent letters, the Texas delegation
has. And if you could look at that, there was a competing
ownership and there is one of the people that applied for it
had some, I think, ethical problems in what they were doing;
but people who actually are looking for the station have been
caught up in that problem, but they are--with their
competitors--and I would hope that under our, Mr. Chairman,
under our FCC reform bill, even though we want to auction off
the spectrum if there is no availability of bidders on certain
areas, then we set some type of minimum amount or some type of
amount that will raise money but also provide for the FCC,
where we can have in some rural areas these opportunities for
alternatives other than English-language broadcasting.
With that, Mr. Chairman, again thank you for calling this
hearing.
Mr. Tauzin. I thank the gentleman from Texas.
The chairman of the FCC Reform Task Force, vice chairman of
our committee, Mr. Gillmor, is recognized.
Mr. Gillmor. Thank you very much, Mr. Chairman. I
appreciate your holding this hearing. I want to thank the five
Commissioners for taking the time and coming up and visiting
with us. I look forward to your testimony.
Mr. Chairman, last spring you asked me to serve as the head
of the informal task force, Commerce Committee members, to look
at developing a consensus about issues affecting the
reauthorization of the FCC. I want to commend your leadership
in trying to resolve that issue. In the ensuing weeks the task
force had a number of meetings and discussions with FCC
employees. We also polled numerous industry groups for their
recommendations, and I think we have received some remarkably
useful feedback. We now have a solid body of knowledge on which
to build in the future.
I also support the notion that the task force should now
seek out additional information from the FCC itself, and I
would welcome the establishment of a working group between the
FCC and our committee so that the common areas of agreement can
be established.
I also endorse reaching out on both sides of the aisle in
our committee, and I would look forward to recommendations in
that respect as well.
To an outsider, reauthorization of a government agency with
five Commissioners and some 2,000 employees would seem like a
relatively simple endeavor. But on the contrary, I think this
is one of the greatest challenges we have. The number of legal,
of regulatory, of personnel, organizational and
telecommunications issues are staggering, very complex, and
they often do not lend themselves to easy solutions.
We are going to no doubt hear much talk in this hearing
about streamlined bureaucracy, about increased competition,
about less regulation. And I think that the vast majority of us
agree with those goals. And the devil lies in the details, and
that is why we are here today. A change in technology very
frequently bypasses a regulatory structure that we set up. The
regulatory structure that we set up, for example, in the
financial services area, where we have just completed work in
conference committee, has resulted in a major recommendation
where we are just trying to meet the changes regulatorily that
have taken place in the marketplace. And we have the same thing
in telecommunications. And what we are trying to do here is to
change our regulatory structure in a way that it meets what is
happening in the marketplace.
So I wanted to again thank the Commissioners for being here
and I yield back the balance of my time.
Mr. Tauzin. I thank the gentleman. The Chair is now pleased
to recognize the ranking minority member of our committee,
still licking his wounds from that awful beating the Yankees
put on his favorite team, my friend, Mr. Markey.
Mr. Markey. Good morning. I want to thank Chairman Tauzin
for calling this hearing today on proposals to reform the
Federal Communications Commission. And I would like to thank
Chairman Kennard as well as Commissioners Ness and Powell and
Furchtgott-Roth and Tristani for being with us here this
morning.
The purpose of the 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 it functions in a confident and
productive way.
Before we launch into a discussion about the job the
Commission does and any proposals to help the Commission
perform its task better, I think it is important to remember
that the Commission has been entrusted with implementing the
Telecommunications Act, a job that is unparalleled in scope and
detail, since the enactment of the 1934 act itself. We must
also remain cognizant that Americans today have the finest
telecommunications system in the world. It is overall the most
competitive, the most diverse, the most innovative
telecommunications marketplace on the planet.
The fact that this is the case is due in no small measure
to the fine work that the agency and its staff performs. As I
stated in our previous hearings on FCC reform, I believe that
radical restructuring of the Commission itself at this time
would be counterproductive. The last thing we should do right
now is reverse the course of battling to demonopolize
telecommunications markets and jeopardize or delay
deregulation. After all, we are not going to be able to
deregulate until we demonopolize.
To break up monopoly barriers to competition, the
Commission will need tools and resources; and competitors, both
large and small, will need certain commonsense, consensus
approaches to reform. The FCC are welcome, as they are in any
government agency. I look forward to working with Chairman
Tauzin in exploring how we can make progress together. And I
thank you for holding this hearing, Mr. Chairman. I look
forward to the testimony.
Mr. Tauzin. I thank my friend. The Chair is now pleased to
welcome the Chair of the full Commerce Committee, the gentleman
from Richmond, Virginia, Mr. Bliley.
Chairman Bliley. Thank you, Mr. Chairman. Today the
subcommittee resumes its review of proposals to reform the
Federal Communications Commission. I look forward to this
discussion as it continues with its implementation of the 1996
act.
The FCC has been assigned substantial responsibility for
ensuring that consumers enjoy the fruits of competition, but
with that added responsibility comes an obligation to ensure
that the public has confidence in the FCC's decisionmaking;
more specifically, whether the FCC is engaged in open and
transparent deliberations.
The FCC is an agency of five unelected officials who, in
theory at least, are independent of the political branches of
government. Some have gone so far as to suggest that the FCC is
even unaccountable to the will of the American people. It is
therefore critical that this committee conduct vigorous and
exacting oversight of the FCC. That is why this committee has
pending inquiries into a number of recent key decisions made by
the FCC. The FCC is vested with serious responsibilities in
this area of competition, deregulation, and consolidation. But
I intend to ensure that the FCC remains accountable to this
committee.
Let me also take this opportunity to raise my concerns with
the recent ruling by the FCC on subsidies distributed pursuant
to the Universal Service Fund. I noticed that on Thursday of
last week, the Commission took action to actually double the
amount of subsidies for the largest telephone companies like
the Bell companies and GTE. This action raises a number of
critical questions: Why are subsidies s for these large
incumbents increasing when they should be withering away as
competition develops? By how much will consumers' bills
increase to pay for these carriers subsidies? If the American
people are being asked to carrier subsidies, how can they be
assured that they, and not the large carriers, will benefit
from them?
These are important questions to which I hope the
subcommittee receives answers today. These subsidies are
increasingly difficult to justify as we transition to a
competitive market. The FCC has a heavy burden of proof when it
takes action to actually expand this subsidy program. Moreover,
consumers should know and understand the extent of subsidies
that are embedded in their monthly phone bills. I have been in
politics a long time, both as a mayor, and now as a Member of
Congress. And my experience has taught me that politicians and
regulators increasingly look to telephone services as a source
of tax revenue. Whatever one thinks about telephone taxes and
carrier subsidies, we owe it to the American taxpayers to
inform them about these taxes and subsidies.
That is why I, along with Chairman Tauzin, have introduced
H.R. 3011, the Truth in Telephone Billing Act of 1999. This
bill would require carriers to inform consumers about each and
every telephone tax, regardless of whether the tax is a flat
fee or assessed on a permanent basis.
I urge my colleagues to join us in cosponsoring H.R. 3011.
Thank you, Mr. Chairman, and I yield back the balance of my
time.
Mr. Tauzin. The Chair thanks the chairman of the committee
and yields to the gentleman from Minnesota, Mr. Luther for an
opening statement.
Mr. Luther. No, thank you.
Mr. Tauzin. The gentleman from Ohio, Mr. Sawyer.
Mr. Sawyer. Thank you, Mr. Chairman. Personally I am
grateful to you and the leadership of this subcommittee for
having this hearing today. I am particularly glad to see
Chairman Kennard and his colleagues taking serious steps in
developing a reform proposal that will put the Commission into
its own digital age and making it easier for businesses and
consumers to deal with the Commission. The efforts to promote
competition in all markets by eliminating barriers to entry
into domestic and international markets is important, as is the
enforcement of rules and regulations. I am convinced consumers
can benefit from this if done properly. I am also glad to see
the Commission has given serious consideration to consumers by
setting up a Consumer Information Bureau and a Consumer
Advisory Board.
The work that you envision in the reform that you bring
before us is important. I have to tell you that this last week
has been frustrating for me. I keep getting dunned over my cell
phone by my provider for services for which I have not yet been
billed, and when I called them back to try and straighten it
out I got put on hold literally for an hour. It was wonderful.
I put it on hold and the music really filled the office with a
lot of joy, but it was an expensive way, I suspect, to provide
that kind of service. As my colleague from California says it
is a telephone, not a radio.
In any event, I think there is much that can be done to
benefit consumers. This committee has discussed the issue of
modernizing the FCC for some time. I think probably in many
ways it has been a good thing that the 1996 act has had the
opportunity to play itself out in the real world and we can get
some practical experience with the way it is working and then
begin to address the kinds of matters that you bring before us
today. In that regard, let me simply say again in closing,
thank you to the chairman and to our ranking member and to our
witnesses today.
Mr. Tauzin. I thank the gentleman.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Michael G. Oxley, a Representative in
Congress from the State of Ohio
Mr. Chairman, thank you for calling this morning's hearing.
I want to welcome the commissioners and commend them for their
testimony. I also want to commend the Commission for the effort put
into internal reform of the FCC since we last met on this subject in
March of this year.
At the March hearing I said that I believed that FCC reform was one
of the most important telecommunications issues before the Committee
and that I believed comprehensive reform was possible this Congress.
While I still believe reform is important, the passage of seven months
has not enhanced the viability of the effort.
That is not to suggest that there hasn't been some good work done
in the interim. Congressman Gillmor's task force developed a range of
excellent proposals for restructuring and refocusing the Commission,
including many proposals on which I believe the Committee could find
consensus if it set itself to the task. But if we are going to take a
serious run at even a consensus reform effort, we had better get
started. The recommendations of the task force and the commissioners
would be an excellent place to start.
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.
If FCC modernization is to be an attainable goal this Congress or
even in the next Congress, we must stay focused on restructuring and
not get sidetracked in old fights over telecommunications policy. There
is no surer way to kill reform than to reopen those disputes.
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.
Mr. Chairman, I also want to take a moment to praise the Commission
for its hard work on CALEA, the digital wiretap legislation. My thanks
to each of the commissioners on behalf of the men and women of law
enforcement. The order demonstrated great fairness and an appreciation
of the requirements of public safety, in my opinion, and I hope that
the Commission will dedicate itself to its timely implementation.
Finally, Mr. Chairman, I'd like to highlight a few especially
noteworthy items from the testimony I reviewed. I believe Commissioner
Powell makes very important points with respect to the relationship
between competition and deregulation, and the need to presumptively
favor deregulation. I also found his thoughts on curtailing duplication
with other government agencies insightful. Any reform effort ought to
begin there.
Commissioner Ness's emphasis on enhancing the Commission's
technical resources, especially as they pertain to international
representation, is well taken. Such wise investments are sure to
benefit U.S. consumers and workers in the long run.
Finally, I always appreciate Commissioner Furchtgott-Roth's
admonition that the Commission stick to implementing the law as
written. I never get tired of hearing it, even if some of the other
commissioners do.
Thank you again, Mr. Chairman. I yield back.
______
Prepared Statement of Hon. Cliff Stearns, a Representative in Congress
from the State of Florida
Mr. Chairman: Thank you for holding this hearing on the Federal
Communications Commission's reform proposal.
I also would like to thank Congressman Gillmor, chairman of task
force responsible for undertaking the daunting task of reforming the
FCC for the work he has done.
Since the FCC was last reauthorized in 1991, I find this hearing to
be much needed and timely, particularly during an era in which segments
in the telecommunications sector often change in the blink of an eye.
As Commissioner Powell put it, Commissioners ``have to read the paper
every day to know what we all will be doing in the next 24 hours.''
I would also like to thank Chairman Kennard, Commissioners Ness,
Powell, Furchtgott-Roth, and Tristani for appearing before the
subcommittee today.
Mr. Chairman, the FCC has started the journey down the long road of
reform. My concern is that it takes the off-ramp before reaching its
final destination.
The commission has taken some little steps in the right direction
toward reform. Last August, the FCC adopted several provisions from my
legislation removing onerous restricts on broadcasters. The commission
relaxed its local TV and radio ownership rules, its attribution rules,
and national TV cap calculations.
However, it continues to hold on to vestiges of protective-
regulation from a time passed, by not increasing the broadcast
ownership cap, or allowing for cross-ownership by broadcasters and
cable and newspapers.
I have read Chairman Kennard's ``strategic plan'' for reorganizing
the FCC for the 21st century. The Chairman's own proposal is indication
of much needed reforms. The question remains, can the FCC be left to
manage its changes by itself.
I am left to answer no. The results of the FCC's attempt at
streamlining and competition are less than deregulatory. Just look at
how it has initiated its 1998 biennial regulatory review as mandated by
congress in the Telecommunications Act of 1996.
Section 11 of the Communications Act requires the commission to
review all of its regulations to determine whether the regulations are
necessary, and whether such regulations should be repealed or modified
in the public interest as a result of meaningful economic competition.
To date, the FCC has under taken less than 35 proceedings as part of
its biennial regulatory review.
For example, though the commission relaxed its television duopoly
and one-to-a-market rules, it failed to repeal or deregulate its daily
newspaper/radio cross-ownership rule, which generally prohibits the
common ownership of a daily newspaper and radio station in the same
community. The FCC decided not to consider newspapers as a voice in its
duopoly rule. It did however, count daily newspapers with more than 5%
circulation as a voice in the new one-to-a-market rule. If newspapers
are either so insignificant so as not to count at all, or only counted
if their circulation exceeds an arbitrary percentage, why should they
be subject to a total ``shut out,'' in the broadcast license
marketplace?
In fact, the FCC has increased, rather than decreased, its
regulatory intervention. And I fear that unless checked, it will be the
FCC controlling and shaping the marketplace, rather than competition
and consumers'' desires. According to the heritage foundations
calculations based on data provided by the General Accounting Office,
``from March 1997 until March 1999, the FCC promulgated 497 rules. This
is almost exactly the total number of rules promulgated by the
Department of Defense, Veterans Administration, Department of State,
Department of Justice, and the Department of Education combined during
the same period. Incredibly, in fiscal year 1998, no other Federal
agency produced as many major rules as had the FCC,'' which published
more than a quarter of all Federal agency major rules. And this is
after Congress passed the Telecommunications Act of 1996 to deregulate
the telecommunications industry. Is this deregulation?
I agree with Chairman Kennard that reorganizing and restructuring
the FCC for the 21st century is a formidable task, akin to Chairman
Kennard's description of ``trying to build a 747 while in flight.'')
But Mr. Chairman, after reading the FCC Chairman's proposal, I am
left wondering whether these proposals are meaningful acts of
deregulation and streamlining, or just an act of repackaging, with a
new name, new title, ready to regulate in the 21st century.
What will the need for the FCC be in the 21st century? Chairman
Kennard has a good idea. But is that what we need? According to
estimates, the telecommunications industry now accounts for one-sixth
of the U.S. economy. There are many examples of rampant competition all
around us. Just look at the rate consumers now pay for long-distance.
In many areas, consumers now have more than one choice in their local
phone provider.
Mr. Chairman, the monopolies of the past that the FCC was trusted
to regulate, no longer pose a threat. I believe with substantive
congressional reform of the FCC, the FCC in the near future will have a
hard time justifying its existence.
Much like how the Civil Aeronautics Board was disbanded after
airline deregulation in the 70's. I foresee the day when the FCC will
be nothing more than a foot-note in text-books.
Mr. Chairman, let me close by saying that I look forward to working
with you and the congressional FCC reform task force to ensure that the
``FCC-747-airplane'' Chairman Kennard speaks of, has its seats removed,
engines stripped, and is rebuilt into a hang glider. Then can we truly
say that we have a reformed and streamlined Federal Communications
Commission.
______
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress
from the State of Wyoming
Thank you, Mr. Chairman, for holding this very important series of
hearings on FCC reform.
During the Subcommittee's hearing in March we heard from FCC
Chairman Kennard, who had just released his strategic plan for
restructuring and streamlining the Commission's functions and
management.
Commissioner Powell, in his testimony at the time, built on
Chairman Kennard's plan by proposing additional ways in which the FCC
could become more efficient and meet the demands of its customers.
There were several points to Commissioner Powell's testimony that
struck me as being necessary before the FCC could move full force into
the next millennium.
Specifically, Commissioner Powell highlighted the need for the FCC
to limit the rules it administers. Congress stressed the need--in the
1996 Telecommunications Act--to deregulate, when necessary, the
telecommunications industry.
Furthermore, Congress provided appropriate tools for the FCC to use
to move toward deregulating this vibrant industry.
The telecommunication's industry is moving and evolving at
breakneck speed. To be effective, the FCC must evolve and move with the
same speed as the industry it regulates.
One avenue that I believe the FCC should utilize more is their
forbearance authority under Section 10 of the Act.
I commend Commissioner Powell's foresight on the issue of
forbearance and quote from his March 17 statement before this
subcommittee, ``. . . the FCC must become a dramatically more efficient
place. A decision that comes too late, might as well not have been made
at all.''
Commissioner Powell's quote provides for a great transition to the
next issue I would like to address: the FCC's role in approving
mergers.
There is no lack of controversy surrounding the FCC's role in
reviewing telecommunication mergers.
When FCC reform legislation is before us, this subcommittee must
address the Commission's propensity to duplicate the role other federal
agencies already play when considering mergers.
Any role the FCC plays, whether it be in advocating the public
interest or otherwise, must not duplicate the role of the Department of
Justice or the Federal Trade Commission.
Duplication of roles is time-consuming and unnecessary.
Telecommunication companies are unduly burdened by these delays and it
causes them and their customers valuable time and money.
There are several more issues that I would like to address, but in
the interest of time and to ensure that we hear from our distinguished
panel in a timely manner, I will ask a few questions during my 5
minutes and submit several more for the record.
Again, thank you Mr. Chairman for holding this important hearing. I
also want to thank Chairman Kennard and the Commissioners for taking
time out of their busy day to be here.
I yield back the balance of my time.
Mr. Tauzin. Seeing no other members requesting time, let me
now turn to the important work of this hearing, and this is to
hear from the Chairman of the Commission and the other
Commissioners on this important topic. Before I introduce you,
Mr. Kennard, let me thank you publicly for representing the
Commission so admirably before the High-Technology Conference
in Louisiana. When was it, a week and a half? Time passes so
strangely lately. But to all of you, the Chairman did an
extraordinary job representing the Commission at a conference
attended by almost 1,400 citizens, and deeply concerned about
this fast-moving pace of technology changes in their lives. I
want to thank you for that.
I always want to thank each of you for the submittals you
personally made and the communications you have made and the
assistance you have given Paul in the efforts he has undertaken
on behalf of the task force; and finally, to engage my friends
on the other side of the aisle and encourage you to literally
think about forming a comparable task force that we might link
the two together. We are not going to get this thing done
unless we are all cooperating across not only party lines, but
across the agency's structures.
Let me now welcome the Chairman of the Federal
Communications Commission, Bill Kennard, for an opening
statement. Bill?
STATEMENTS OF HON. WILLIAM E. KENNARD, CHAIRMAN; 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. Thank you
for those kind words. It is a pleasure to be here, to appear
again before the subcommittee. As always, I look forward to
working with all the members of the subcommittee. In
particular, I look forward to having a discussion with you,
Congressman Sawyer, to learn more about that problem you are
having with your cellular telephone provider. We will try to
get that straightened out for you if we can.
I have submitted written testimony for the record, which I
will summarize briefly. As Chairman Tauzin pointed out in his
opening statement, we are clearly living in extraordinary times
in the telecommunications industry today. We are seeing
glimpses of a very exciting future where the telephone
companies will deliver movies, and cable television operators
will carry phone calls, and hopefully we will get both over the
airwaves.
I would like to take this opportunity to briefly update you
on some of the data that we have been compiling at the FCC on
the unbelievable economic growth that we are seeing in the
telecommunications industry. Economic indicators are up across
the board. Over the past 3 years alone, revenues in the
communications sector have grown by $140 billion, climbing to a
revenue level of $500 billion in 1998. That represents an
increase of 160,000 jobs in this sector.
And if you look at specific industries, we just see
phenomenal growth. In the wireless industry in particular,
capital investment has quadrupled since 1993 for a cumulative
total of $60 billion through 1998. Now over 80 million
Americans have a mobile phone compared to only 16 million just
5 years ago.
In the long distance marketplace, by the end of 1997, there
were over 600 long distance carriers in America. We have seen
prices for interstate long distance continue to drop
dramatically by approximately 35 percent since 1992. Prices for
international calls have fallen by around 50 percent. In fact,
over 50 billion more minutes in long distance and international
calls were made in 1998 than 1996.
In the local phone sector, we are starting to see the
fruits of our procompetitive policies. There are now at least
20 publicly traded competitive local exchange carriers or CLECs
with a total market capitalization of $33 billion. That
compares with only 6 CLECs with a market capitalization of $1.3
billion at the time of the passage of the 1996 act. In the
first quarter of 1999 alone, almost a million CLEC access lines
were installed.
In the cable sector, operators have invested nearly $8
billion per year since 1996, constantly upgrading their
systems. By the end of the year we anticipate that 65 percent
of homes passed by cable will have been upgraded, bringing more
channels, enabling additional services, and in particular,
high-speed Internet access.
The cable television industry is getting into the broadband
world. It is starting to drive competition for high-speed
Internet access. We hope that by the end of this year, there
will be at least 1\1/2\ million cable modem subscribers in the
United States.
So obviously the entire telecommunications industry is
strong, it is vibrant, it is moving at breakneck speed. As I
think we all recognize, we must also have an FCC that changes
along with the industry and remains relevant to changes in the
marketplace.
The 1996 act established a blueprint for restructuring the
industry, reorganizing the industry along competitive lines.
The FCC's Strategic Plan is the work plan for carrying out the
blueprint that you wrote in the 1996 act.
We have put a lot of work into this Strategic Plan. It is
not a unilateral proposal. We reached out to lots of our
stakeholders. We reached out to industry, consumer groups, the
academic community, State and local governments, organizational
experts.
And I was interested, Mr. Chairman, to hear that you were
concerned that the industry was not being forthright with you
in coming forward with recommendations. It has been my
experience as Chairman of the FCC that the telecommunications
industry for the most part is not a shy or retiring lot. They
are not shy about communicating their concerns to us. They
certainly did that in our forums. They communicate, I know, to
you and to the press oftentimes. But I would just reiterate the
importance that you stress of complete candor and openness in
dealing with the industry, because we really need to hear from
them as we move ahead with this plan.
We have held a number of forums seeking input and much of
the input we received focused on how the FCC should be
restructured because of really three principal developments in
the industry: competition, convergence, and globalization.
There is a great deal of consensus among our stakeholders
that the FCC should focus on what its core missions should be
in the future, and these are, (1), universal service and
consumer protection and information, one category; (2),
enforcement and promotion of competitive markets both
domestically and internationally; and (3) spectrum management.
And so the Strategic Plan we presented to you really
focuses on how the FCC should be organized to further those
three principal core missions.
After we presented our Strategic Plan to you in August, we
convened another forum and brought all our stakeholders
together again. I would say that they were generally
complimentary about the plan. I think that the one thing that
we heard almost universally is the need for the FCC to move
ahead quickly on implementation, something that you mentioned
in your opening, Mr. Chairman. Last week, we held an FCC senior
management meeting to plan the next steps and keep the momentum
going.
Now some have told us, including you, Mr. Chairman, that 5
years is too long. I wanted to comment on that. First of all,
the reason why we picked 5 years for our Strategic Plan is
because that is consistent with the requirements of the
Government Performance and Results Act. That act, as you know,
requires government agencies to set forth a 5-year blueprint or
strategic plan for reinventing themselves. So we selected 5
years. But I don't want anyone to think that 5 years is the end
point; that is, that we have to wait for 5 years to get all the
benefits of this plan.
We are rolling this plan out as we speak. In fact, today I
am very pleased to announce that we are setting up the
Enforcement Bureau and the Consumer Information Bureau, which I
know you all heard about, to become effective on November 8,
and we are very proud that we have done the work to get those
two new bureaus in place. And I thank the members of this
committee for supporting us in that effort.
In thinking about our Strategic Plan, Mr. Chairman, I was
reminded of one of the first meetings that you and I had when I
first became Chairman of the FCC. We talked about this issue,
how we would reform the FCC for the next millennium, and I
remember at that time we talked about reorganizing the FCC
along functional lines, and that was an idea that you were
talking about then. And if you look at our Strategic Plan, it
calls for a reorganization of the agency along functional
lines, as we talked about when we first met a few years ago.
I also wanted to take this opportunity to publicly thank my
colleagues at the Commission for their support and work not
only in helping to develop this plan but also their support in
a number of key areas. Commissioner Ness has been doing
outstanding work on international issues and with regard to
digital television. Commissioner Furchtgott-Roth has provided
some excellent suggestions to us on the Biennial Review,
constantly pushing us to be more aggressive in our Biennial
Review responsibilities. Commissioner Powell has shown
tremendous leadership in handling the Y2K issue for the
Commission and for the country and for providing very good
analysis on our competition issues. And, of course,
Commissioner Tristani has been a true leader in the V-chip area
and has shown really unwavering commitment and courage in
fighting for consumer issues.
So I feel very honored to chair this important agency at
this time, with a group of such stellar colleagues, and I would
be remiss if I didn't mention how blessed all of us are to be
able to work with an extraordinary staff at the FCC. We can
write strategic plans until the cows come home, but if we do
not have a staff that is dedicated and professional and
hardworking, it is just so much paper. We have a lot of work
ahead, but I am confident that if we continue to work together
as an agency, as colleagues, and also with the fine FCC staff,
we will be able to create an FCC for the digital age that will
make us all very proud. Thank you.
[The prepared statement of Hon. William E. Kennard
follows:]
Prepared Statement of Hon. William E. Kennard, Chairman, Federal
Communications Commission
Thank you, Chairman Tauzin, Ranking Member Markey, and Members of
the Subcommittee for the opportunity to appear before you today to
discuss the new FCC for the 21st Century.
This hearing presents a welcome opportunity to further the dialogue
that we began last March when my colleagues and I testified before this
same Subcommittee on the future of the Federal Communications
Commission (FCC).
In March, I told the Subcommittee the era of convergence--an era in
which phone lines will deliver movies, cable lines will carry phone
calls, and the airwaves will carry both--necessitates a radically
restructured FCC. I told you that in a world where old industry
boundaries are no longer and competition is king, we need a New FCC.
I am proud to report we have taken important steps towards
restructuring the Commission. As you know, this past August, I
submitted my five-year draft strategic plan to Congress which I intend
to serve as our blueprint for change. This plan builds upon the
conceptual framework that I proposed in March.
five-year vision
In five years, we expect United States communications markets to be
characterized predominantly by vigorous competition that will greatly
reduce the need for direct regulation. We also expect that the advent
of Internet-based and other new technology-driven communications
services will erode the traditional regulatory distinctions between
different sectors of the communications industry. The FCC's primary
goals of promoting competition in communications, protecting consumers,
and supporting access for every American to existing and advanced
communications services will remain paramount. What will change are the
means and mix of resources necessary to achieve these goals in an
environment marked by greater competition and convergence of technology
and industry sectors.
In this new environment, the FCC must focus on sustaining
competitive communications markets and protecting the public interest
where markets fail to do so. As I said in March, our core functions
will include: i) universal service, consumer protection and
information; ii) enforcement and promotion of competitive markets
domestically and worldwide; and iii) spectrum management.
As a result, a number of the FCC's current functions and regulatory
structures no longer will be necessary. The FCC as we know it today
will be very different both in structure and mission. Increased
automation and efficiency will enable the FCC to streamline its
licensing activities, accelerate the decisionmaking process, and allow
the public faster and easier access to information. The FCC will be a
``one-stop, digital shop'' where form-filing and document-location will
be easy and instantaneous.
Over the next five years, the FCC must wisely manage the transition
from an industry regulator to a market facilitator. The enactment of
the Telecommunications Act of 1996--and the establishment of a new pro-
competitive, deregulatory model for communications policy--necessitates
a reassessment of our core policy functions, structure, and processes.
New competitors and technological innovation are currently transforming
communications markets, but history has shown that markets that have
been highly monopolistic often do not naturally become fully
competitive. History has also shown that domestic markets that have
been protected from foreign competition do not naturally open to global
competition.
Therefore, during this crucial period of transition, the overall
strategic objective of the FCC must be to continue to promote
competition, open markets, and technological innovation, while also
continuing to protect and empower consumers as they navigate the new
world of communications. At the same time, the Commission must
significantly revamp its functions, processes, and structure to meet
the challenges of a rapidly progressing global information-age economy
and an evolving global communications market.
Today, we see tantalizing glimpses of the competitive, deregulated
telecommunications marketplace that Congress had in mind. Many markets,
such as mobile wireless and wireline long distance markets, are already
quite competitive, and many--but by no means all--of the fundamental
prerequisites for fully competitive, deregulated local
telecommunications markets are now in place. In many markets, consumers
are receiving the benefits of competition through lower prices, greater
choices, and better quality service.
This is not to say, however, that fully competitive markets are
inevitable. Vigorous enforcement of the fundamental prerequisites for
competitive markets and expeditious dispute resolution will remain
necessary for some years to come. Consumers must also become familiar
with the myriad new communications options and providers available, as
well as the new demands which emerge from the advent of increased
competition. Consumers do not yet have the benefit of experience in
addressing the challenges of a communications marketplace that looks
and functions like other competitive industries. We must continue to
ensure, therefore, that the momentum toward competitive markets moves
forward on a technology-neutral basis, that we continue to cultivate
public support for this change, and that all Americans benefit from the
communications revolution.
development of the strategic plan
The March report served as the conceptual framework for the
Commission's senior managers to meet and discuss the implications of
the changing communications marketplace for the FCC and for the
American people. From these discussions, we developed the framework of
this Strategic Plan, including our draft vision statement, goals and
major objectives. Next, senior executives from each of our Bureaus and
Offices were asked to review their organization's functions, determine
if they were still essential to the agency's key missions as determined
by senior management, and provide specific policy initiatives and
performance measurements for the next five years.
We gathered extensive input from our stakeholders to help us
develop this strategic plan. We held forums seeking the views of
general industry, consumer, state and local government representatives,
academic and organizational experts, and our employees on the FCC's
role in the 21st century. Much of the input we received from our
stakeholders focused on how competition, convergence, globalization,
and the Internet are currently affecting the communications
marketplace, and will continue to do so in the future. Interestingly,
there was a good deal of consensus from our stakeholders about the
FCC's proposed core functions, as set forth in our March 1999 report.
the strategic plan
The underlying premise of the plan is that the FCC must
significantly restructure and streamline its functions, processes, and
organizational structure to better serve the American people in the new
millennium. Competition and convergence of technologies and industries
require that we comprehensively transform our functions, processes, and
structure to become a faster, more functional, and flexible agency.
As a result of our discussions and forums, we identified four
critical goals to carry out our core mission. For each of these goals,
we established specific objectives and policy initiatives that need to
be implemented to achieve these goals fully. To assess whether we are
on track in achieving these goals, we then established specific
performance measurements to be achieved within five years on key
dimensions such as industry outcomes, consumer benefits, and Commission
output. These five-year overall performance measures will serve as the
primary indicia of progress toward the Commission's long-term vision of
fully competitive communications markets and our transformation into a
model agency for the Digital Age. Finally, we are also taking various
actions in the short term. For while our blueprint for change is for
five years, we are taking immediate steps in all areas to facilitate
the eventual achievement of our four major goals.
(1) Create A Model Agency For The Digital Age.
Our first goal is to create a model agency for the digital age.
This means that as we promulgate policies conducive to advances in the
information age, we must lead the way in electronic government. Across
the agency, we must invest in new technology that will allow us to be
as responsive to the public as possible. Specifically, we must continue
to automate our processes and to make more information available to the
public electronically and on an interactive basis.
A comment that we heard over and over at our forums was that we
need to find ways to get the FCC's work done faster and reduce the
levels of review in the agency. We need to be a faster, flatter, and
more functional agency in order to promote industry progress rather
than impede its momentum.
Some sectors of the telecommunications market move so fast that by
the time a public notice on a proposed rule is issued, and comments are
gathered, the market has bypassed the conditions that gave rise to the
proposed rule in the first place. The regulatory process is
incremental. The market process is not. The regulatory process, by
definition and by law, has to be linear and methodical, to provide due
process. The market process, by contrast, is chaotic and nonlinear,
and, because of that, very often unpredictable.
The historic model for a regulator, is top-down, command-and-
control, with chiefs, bureaus and support staff. The model for a market
facilitator, the model we are moving to, is a flatter and more fluid
organization. Its work units are smaller and more responsive. This is
possible because much of the governance--the microdecision-making--is
passing from the FCC to the market. More governance from the
marketplace means less government from the FCC.
The FCC is currently structured along the traditional 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 along functional rather than technology lines will put
the FCC in a better position to carry out its core responsibilities
more productively and efficiently. There was consensus in each of the
public forums and in many of the other comments we have received that a
reorganization along these lines would not only be more efficient, but
is a necessary prerequisite to competition and convergence. This is not
an easy task and I look forward to detailed discussions with you and
our other stakeholders on the best way to move forward on this
reorganization. We took a huge step forward with Congress's recent
approval of our new Enforcement and Consumer Information Bureaus.
As we move toward a faster, flatter, more functional agency, we
must also invest in our employees and capitalize on their integrity and
wealth of expertise. It is the employees who have made the Commission a
unique and vital organization and who will be at the forefront of
defining how the FCC of the future responds to the dynamic changes in
today's communications industry. Moreover, we must minimize workplace
disruption that may result from restructuring efforts through staff
retraining, reassignment, and other methods. We must ensure that we
have a critical mass of trained personnel and that we empower our staff
to embark upon strategic thinking with clear policy direction.
(2) Promote Competition In All Communications Markets.
Our second goal is to promote competition in all communications
markets. Entry barriers (legal, economic, or operational) in
communications markets are antithetical to the development of robust
competition. Elimination or reduction of such barriers enables new
competitors to enter communications markets easily and enhance consumer
choice. We must also focus on the international marketplace and seek
additional market opening commitments from other countries.
As competition becomes a reality, deregulation must occur.
Eliminating outdated rules will play an important role in accelerating
the transition to fully competitive markets. Consumers ultimately pay
the cost of unnecessary regulation. Thus, one of our primary objectives
must be to deregulate as competition develops and to substitute market-
based approaches for direct regulation. This will be a central tenet of
our 2000 Biennial Review. In addition, we must resist imposing legacy
regulations on new technologies. Our goal should be to deregulate the
old instead of regulating the new.
An undesirable by-product of the rise of competition in various
telecommunications markets has been an increase in fraudulent practices
by certain providers of telecommunications services. In the fast-paced,
newly developing world of communications competition, we must be able
to respond swiftly and effectively to complaints that companies are
taking advantage of other companies or consumers. Effective use of the
Commission's enforcement resources is critical to ensure full
implementation of the Communications Act and the Commission's rules
designed to open communications markets to competition, and enhance
choice for consumers. Effective enforcement is also essential to
maintain public support for deregulation.
Competitive markets work only when consumers have the information
required to make informed choices. The creation of the new Consumer
Information Bureau will provide consumers a one-stop shop for obtaining
the information they need to make wise choices in a robust and
competitive marketplace.
(3) Promote Opportunities For All Americans To Benefit From The
Communications Revolution.
Our third goal is to promote opportunities for all Americans to
benefit from the communications revolution.
Congress has long recognized the importance of this goal and
codified it in Section 1 of the Communications Act of 1934. The statute
states that the purpose of the Act is to ``make available to all the
people of the United States, without discrimination . . . a rapid,
efficient, Nationwide, and worldwide wire and radio communication
service . . . at reasonable charges.'' Where competition cannot ensure
such access, the FCC will continue to take action to support and
promote universal service and other public interest policies.
As the nation's communications sector continues to undergo
unprecedented growth, we must ensure that Americans of all backgrounds
have the opportunity to benefit, not only as consumers of
communications services, but also as employees or owners of
communications businesses. In particular, we need to open the doors of
opportunity to women, minorities, and small-scale entrepreneurs across
all communications industries. This goal is critical to preserving
diversity of viewpoints and a vibrant democracy, and to ensuring that
all Americans are able to take advantage of the dynamic
telecommunications market.
(4) Manage The Electromagnetic Spectrum (The Nation's Airwaves) In The
Public Interest.
Our fourth and final major policy goal is to manage the use of the
electromagnetic spectrum, the Nation's airwaves, in the public interest
for all non-Federal government users, including private sector, and
state and local government users. Fundamental to this mandate is the
difficult task of advancing the pro-competitive goals of the
Communications Act, while at the same time ensuring that other public
interest goals are met. Competing demands and changing technologies
make spectrum management a unique challenge. Since spectrum is a finite
public resource, it is important that it be allocated and assigned
efficiently to provide the greatest possible benefit to the American
public. It is also important to encourage the development and
deployment of technology that will increase the amount of information
that can be transmitted in a given amount of bandwidth. To meet these
challenges, the Commission must constantly strive to improve the way it
both allocates and assigns spectrum. As part of this effort, the
Commission must privatize functions where possible and promote an
active secondary market to ensure that spectrum is being used for the
highest value end use.
The past few years have seen tremendous growth in information
technology, particularly in the wireless industry. As markets become
more competitive and new services are introduced, demand for spectrum
will increase. The Commission must seek new methods to make spectrum
available and ensure that it is put to its highest value use.
Increasing the supply of spectrum will decrease the cost of using
spectrum and thereby expand the output and lower the price of spectrum-
based services. It will also create new opportunities for competitive
technologies and services for the American public.
external factors
A number of external factors will affect our ability to achieve our
vision of fully competitive communications markets in five years. The
fortitude with which the FCC and the states enforce the pro-competition
mandates of the 1996 Act will continue to be a significant factor.
Whether or not litigation delays the introduction or implementation of
key FCC and state decisions is another factor. Our success will depend
on whether previously monopolized communications markets are
successfully opened up so that new entrants can compete in those
markets.
Nonetheless, a range of additional external factors--some of which
can be influenced by FCC actions, and others which largely cannot--may
affect the continued development of competition in communications
markets. For example, convergence-driven competition depends heavily on
investments in new technology by incumbent and new communications
providers. The breadth and depth of long-run consumer demand for new
services remain unknown and therefore may also impact the development
of competition.
The prospects for competitive communications markets are
significantly affected not only by national developments, but also by
developments in world markets. The opportunities for United States
telecommunications companies can be more fully realized if other
countries join us in fostering competition in their communications
marketplaces. Market access restrictions in foreign counties
significantly impede U.S. companies' ability to compete on a global
scale.
Finally, the Commission's ability to carry out its vision is
largely dependent on adequate resources from Congress to carry out
critical activities. In many cases, the FCC will need to redeploy
existing budget and staff resources to address changing priorities. In
addition, many of the initiatives listed in the plan to reinvent
ourselves as a model agency for the digital age may require
Congressional approval and continued adequate funding. Additional
resources also may be required for new initiatives, for example in the
areas of universal service, enforcement of disability access
provisions, enforcement of slamming/cramming rules, electronic
government, alternative dispute resolution, and spectrum management,
all of which ultimately will result in a more effective and efficient
organization. Our success is tied directly to our ability to maintain
critical staffing levels and fund ongoing and new initiatives.
next steps
We look forward to working with Congress, industry, consumers, and
all our stakeholders to refine our Draft Strategic Plan. It is a work
in progress and we are committed to ongoing discussions and additional
input. Our goal is a blueprint for change that we can all be proud of
and commit to as we enter the new millennium.
We plan to conduct ongoing reviews of our goals and objectives to
ensure that they accurately represent our highest priorities, even as
the communications marketplace continues to evolve. In addition, we
will conduct ongoing reviews of our policy initiatives and programs to
ensure their effectiveness, and we will continuously assess our
progress toward achieving the performance measures proposed in this
plan.
conclusion
Congress provided the blueprint for competition by passing the
Telecommunications Act of 1996. This strategic plan is intended to
provide a roadmap to guide the FCC's transition from an industry
regulator to a market facilitator.
The FCC was created to serve the public, and now it has recommitted
itself to serve the public in a new century, in a new fashion.
We have a lot of critical work in front of us: local competition
rules, universal service reform, access reform, BOC entry into long
distance, promoting the deployment of high-speed Internet access,
consumer protection measures such as truth-in-billing, and opening up
more spectrum for new services.--to name just a few. I am committed--
and the FCC's staff are committed--to taking on all of these challenges
as well as reinventing the FCC. For, in the end, both will better serve
our customers--the American people.
The changes that we propose are not trivial. The FCC, in five
years, will be unrecognizable to those of us who know it today. It will
be re-made for a new century and for a rapidly changing industry. But
no matter how much it changes, the FCC will remain committed to
promoting competition, fostering the growth of new technology, and
bringing the opportunities inherent in the telecommunications
revolution to all Americans.
And I mean all Americans. As I have reiterated time and time again,
this Information Age must be the age of inclusion. No one should be
left behind.
Thank you for your time. I'd be pleased to answer any questions.
Mr. Tauzin. Thank you very much, Mr. Chairman.
Let me make one correction for the record. My comments
regarding the industry was not that they were not forthcoming
with ideas and suggestions. They have been. They have been very
candid about that. My concern is when they talk about problems
they have with the rate, they don't want to go public. They do
it all off the record, confidentially, because they are
concerned about consequences. That is not a good comment. That
is what I meant. We need to examine them more thoroughly and
find out why that is so.
I thank the Chairman for his comments.
Mr. Tauzin. Let me now welcome Commissioner Susan Ness to
the hearing and ask Ms. Ness if she has comments.
STATEMENT OF HON. SUSAN NESS
Ms. Ness. Thank you, Mr. Chairman. I welcome the
opportunity to appear before you today to hear your thoughts on
FCC reform and to proffer my views on Chairman Kennard's
excellent proposal, A New FCC for the 21st Century. As you
said, Mr. Chairman, and as Mr. Kennard elaborated, the
marketplace is literally changing before our eyes. Commercial
deployment of the Internet and deployment of IP protocol
technology have fundamentally and irreversibly transformed
markets. Technological advances have spawned a stunning array
of innovative products and services. Competitors are beginning
to offer bundles of voice, video and data services at enticing
prices. Reforms embodied in the 1996 Telecommunications Act and
in the WTO Telecom Agreement have spurred global competition,
resulting in plummeting prices for wired and wireless
intrastate and international telecommunications.
The FCC has embraced these revolutionary changes, and the
blueprint for FCC reform outlines a vision of a structurally
and directionally reordered and streamlined FCC. I commend the
Chairman and the FCC staff for their excellent work. I support
the principal goals of the plan. I won't repeat them; they were
already discussed by the Chairman. But I did want to comment on
a few specific proposals.
First, I support the notion of reorganizing the Commission
along functional lines. The Commission's current structure
invites industry-specific analysis which runs counter to our
desire to achieve cross-industry competition. Use of
multibureau task forces to work on items and our Spectrum
Coordinating Committee helped to alleviate some of that
problem. Nonetheless, reorganization along functional lines
should facilitate a cross-pollinization of policy ideas. I
recognize however, that we are still implementing an act which
is organized along industry lines.
Second, wireless technology is going to be a major
component of future services, and I strongly support the
exploration of innovative spectrum allocation and assignment
mechanisms to promote efficient spectrum use, including where
appropriate private band plan managers. Also, flexibility is
key to ensure that licensees can respond quickly to consumer
demands. And new technologies such as software-defined radio
and ultra-wideband have tremendous potential; and we need to be
able to explore those possibilities in a new spectrum
environment. I therefore especially applaud proposals to
strengthen the technical and spectrum-planning expertise of the
Commission. It takes very seasoned engineers to be able to
understand what is happening as we try to have spectrum sharing
to facilitate efficient use.
Therefore, the addition of technologists at the Commission
is going to be extremely helpful. This is particularly true in
the international arena where we are working with our
regulatory partners abroad to promote spectrum efficiency and
global competition.
Finally, I enthusiastically support the establishment of a
consumer advisory panel and the consumer information bureau.
These will help inform our thinking as we endeavor to serve the
public interest. All too often we see that consumers are absent
from the mix of folks that come before us. They are a critical
component that I would like to see involved on a day-to-day
basis.
While the proposed Strategic Plan is an excellent road map,
the true road test will come as we address each matter before
us. We must ask ourselves whether intervention truly is
necessary or whether we can avoid regulation; how we can
narrowly tailor our regulations when we do intervene; and how
we can creatively use our tools for the allocation and
assignment of spectrum. Ultimately it is our successful answers
to these questions that will determine how rapidly Congress's
vision of a competitive and deregulatory communications
marketplace is fulfilled, and it is only then that the American
public will truly reap the benefits of the proliferation of new
services and convergence that will characterize the new
millennium.
Thank you very much, Mr. Chairman.
[The prepared statement of Hon. Susan Ness follows:]
Prepared Statement of Hon. Susan Ness, Commissioner, Federal
Communications Commission
Mr. Chairman and Members of the Subcommittee, I appreciate the
opportunity to appear before you today.
I welcome this opportunity to address proposed reforms to the
Federal Communications Commission as we greet the new Millennium. In
particular, I am pleased to discuss with you my views on FCC Chairman
Kennard's strategic plan--``A New FCC for the 21st Century.'' This
ongoing dialogue between our authorizing subcommittee and the FCC is
especially important as we proceed to reform our agency based upon the
growing competition and convergence in the communications industries.
the changing marketplace
The marketplace is literally changing before our eyes. Advances in
technology have produced enormous benefits to consumers. Services that
did not exist ten, five or even two years ago now permit instantaneous
contact between co-workers, family, and friends. These same services
provide for immediate receipt of news and information anywhere in the
world, and ready access to extensive data files wherever they are
stored.
Cable companies now are launching telephone service and Internet
access; telephone companies are deploying high-speed lines for the
delivery of video services and data; satellites are blanketing the
country with video, voice and data services; palm sized devices are
providing two way wireless delivery of voice and data, including
connections to the Internet; and broadcasters are exploring ways to
enhance the airways with interactive information services.
Wireline, wireless, cable and satellite service providers are
offering--or are contemplating offering--bundles of voice, video, and
data services. Mergers and joint ventures are forming--and dissolving--
at a dizzying pace, as companies hedge their bets and struggle to find
a competitive niche in a rough and tumble marketplace.
Prices for many services have plummeted as competition takes hold.
Where wireless calls recently cost 30 to 50 cents a minute with hefty
roaming fees, the development of competitive nationwide cellular and
PCS networks has prompted the offering of buckets of wireless minutes
with nationwide rates as low as 10 cents per minute. Long distance
calls that cost 25 cents per minute in 1996 have been replaced with
campaigns by competing carriers touting five cents per minute. Sports
and movies that recently were found only on broadcast networks and
cable systems now are delivered to our homes by direct broadcast
satellites and power companies.
The Telecommunications Act of 1996 and the World Trade Organization
Basic Telecommunications Agreement (whose core principles reflect
concepts embodied in the Act) have spurred many of these changes.
Another big driver of change has been the commercial deployment of the
Internet--coupled with the development of Internet protocol
technology--which has revolutionized the dissemination of information
and literally transformed commerce, creating a new and thriving
marketplace that defies geographic boundaries and traditional market
structures.
The implications of the Internet and Information revolution for
telecommunications policy are profound. At the FCC, we are anticipating
and responding to these tumultuous changes. Chairman Kennard's
strategic plan outlines a vision of a structurally and directionally
reordered and streamlined Commission for the 21st Century. I commend
the Chairman and the staff for their fine efforts in developing a
comprehensive and responsive plan.
the general goals of the strategic plan
Pursuit of the Strategic Plan's four principal goals should ensure
that new services at lower prices reach the market as expeditiously as
possible.
1. FCC Reform
First, I agree that we must reform the agency to act faster and
more responsively to requests from licensees and the public. Licenses
must be issued in timely fashion with less paperwork; actions on
requests to provide service must be taken without undue delay. Lengthy
processing times and cumbersome procedures hamper innovation and
competition. Reorganization along functional lines--bringing together
FCC policy experts from each of the industry sectors--will enable us to
comprehend better marketplace trends and be more responsive.
2. Promote Competition
Second, it is critical that we continue to promote competition and
swiftly eliminate rules that intrude in competitive markets and that do
not provide tangible benefits to consumers. As a general matter, new
services should not need new authorization; and we should remove any
rate regulations, service restrictions, and record-keeping and filing
requirements that no longer serve the public interest. Our forbearance
authority and biennial reviews are excellent tools.
Where service providers violate our rules, we must take swift and
deterrent action. Speedy enforcement is critical, especially where
violations are aimed at disadvantaging competitors or defrauding the
public, including practices like slamming or cramming.
3. Access to Affordable Telecommunications by All Americans
Third, I agree that we must continue our efforts to ensure that all
Americans--including those living in rural and high cost areas, those
with low incomes, those with disabilities, and those living on Indian
Reservations--have access to quality basic and advanced
telecommunications services at affordable rates. In the last few years
we have taken steps to enable consumers with low incomes or who live in
high-cost rural areas to receive telephone service at affordable
prices. We have acted to extend telecommunications services to
classrooms, libraries and non-profit rural healthcare facilities. As we
move into the new millennium, we must continue these efforts to
implement your vision as embodied in the law.
4. Efficient Management of the Spectrum in the Public Interest
Finally, and perhaps crucial to the three goals just discussed, we
must develop new ways to manage Spectrum. Spectrum planning must create
opportunities for multiple service providers, including new entrants,
as mandated by the Act. We must seek ways to manage the nation's
airwaves more efficiently, as an increasing number of innovative and
competitive services make their way to the marketplace. And as the
Commission's representative to the World Radio Conferences in 1995 and
1997, I am acutely aware that, through early high-level government
participation in the international planning and negotiation process, we
can make a significant difference in the opportunities that are
available both for U.S. industry abroad and American consumers at home.
specific proposals in the strategic plan
I would now like to highlight some of the specific proposals in the
Strategic Plan that are designed to implement these four principal
goals:
1. Increasing Technical Expertise
First, I strongly support those aspects of the plan that are aimed
at strengthening the technical and spectrum planning expertise of the
Commission. Some of the Commission's most productive actions in the
recent past have included the authorization of newer and more efficient
spread spectrum technologies and the establishment of allocations for
shared spectrum.
The FCC's ability to assess technology and efficiently manage the
non Federal government use of the spectrum will be increasingly
important in the new millennium, and will be enhanced by the proposals
in the plan. These proposals emphasize recruitment of high-quality
staff knowledgeable about the communications marketplace. Chairman
Kennard has proposed to strengthen the technical capabilities of the
Commission by hiring more engineers and technologists, and to re-
establish an entry-level engineering training program, a proposal I
welcomed in my testimony before you last March.
2. Innovative Spectrum Policies
Second, I strongly support the proposed exploration of innovative
spectrum assignment mechanisms to promote efficient use of the
spectrum. The use of more flexible allocations and relaxed service
rules will enable competitors to respond more rapidly to changes in the
marketplace and will create value for consumers and other users.
Further development of the auction process will continue to
increase the effective and orderly licensing of services. Facilitating
the ability of licensees to aggregate and disaggregate frequency by
fostering a secondary market for spectrum is an innovative approach,
worthy of consideration. I am also interested in exploring our ability
to combine auctions and the use of private band managers and
coordinators in an effort to privatize as much as possible the site
specific licensing that is desirable in many services and in congested
channel bands. Finally, we must examine technological breakthroughs,
including software defined radio, ultra-wideband, and other spectrum-
efficient methodologies, which could fundamentally change the way in
which we allocate spectrum nationally and globally.
3. Enhancing Global Competition
Third, I applaud the Chairman's proposal to work with regulators
from other countries to promote full implementation of existing WTO
commitments and to resolve outstanding spectrum issues at the upcoming
World Radiocommunications Conference. U.S. consumers will benefit
greatly from the further reduction of entry barriers in foreign
communications markets and the development of global standards that
encourage competition and innovation in wireless and satellite
services.
I have long been concerned about the adequacy of resources for our
international representation in spectrum planning and negotiation, as
well as our ability to encourage opening of foreign telecommunications
markets. I am pleased that the Chairman has made a priority of
adequately identifying, coordinating, and advocating our international
interests, and I hope that the other U.S. agencies as well as Congress
will support this effort.
4. Streamlining the FCC
Fourth, I support the Chairman's efforts to find ways to speed up
the Commission's adjudication and rulemaking processes. Consumers and
carriers alike will benefit from faster Commission actions made
possible by expeditious treatment of petitions seeking reconsideration
or review of decisions, greater use of alternative dispute resolution
mechanisms and the accelerated docket, as well as generally improving
the staff's ability to resolve complaints against carriers.
As I noted previously, I support the proposal to organize the
Commission along more functional lines. Indeed, we have already headed
down that path, with the establishment of the Enforcement and Consumer
Information Bureaus.
As part of this effort, it is my hope that we can explore new
techniques to build industry consensus on issues that come before the
Commission. Industry-driven solutions to problems generally expedite
the resolution of issues pending before the Commission--provided that
consumer interests are also represented at the table.
5. Ensuring the Public Interest is Served
In that context, I am pleased to see the proposed establishment of
a consumer advisory committee. Commission actions have a profound
effect on the public. Unfortunately, the public generally is woefully
underrepresented in our proceedings. I hope that this modest proposal,
coupled with efforts to beef up consumer information, will help us
better to assess what is in the public interest.
conclusion
The proposed Strategic Plan is an excellent blueprint for the FCC
as we enter the new millennium. The real challenge, however, in
reforming the Agency remains. As we address each decision before us, we
must ask ourselves: When should we intervene and when should we avoid
regulation? How can we narrowly tailor our regulations when we do
intervene, and then reduce their burden, as markets grow more
competitive? How do we creatively use our tools for the allocation and
assignment of spectrum? How can we most expeditiously meet the needs of
our consumers?
Ultimately, it is our successful answers to these questions in each
instance that will determine how well and how rapidly Congress' vision
of a competitive and deregulatory communications marketplace is
fulfilled. And it is only then that the public will truly reap the
benefits of the proliferation of new services and convergence that will
characterize the new millennium.
Thank you for the opportunity to testify before you today. I am
happy to answer your questions.
Mr. Tauzin. Thank you very much, Ms. Ness.
The Chair is now pleased to welcome the Honorable Howard
Furchtgott-Roth for an opening statement.
STATEMENT OF HON. HAROLD W. FURCHTGOTT-ROTH
Mr. Furchtgott-Roth. Thank you, Mr. Chairman. It is good to
be home. It is good to be back in this chamber where I spent
many a day and many fond memories of this place.
I have a prepared statement that I would like to submit for
the record, AND I would just like to make a few other comments.
Mr. Tauzin. Without objection, all written statements are
part of the record.
Mr. Furchtgott-Roth. Thank you, Mr. Chairman.
This room is part of the Commerce Committee and it is part
of Congress. This meeting here today, this hearing, it is about
Congress, it is about congressional oversight far more than it
is about the FCC. I recall that Congress has hearings that you
can put in two general categories: oversight and legislative.
We have these oversight hearings in part for Congress to learn
from the agencies, but in large part also for the agencies to
learn from Congress. I am very much looking forward to learning
from you all today.
The Commission has enormous responsibilities. We do some
things well, we do some things maybe not quite so well. We have
heard about a few of them today. I am sure we are going to hear
about more as we go forward.
Much has been made about the organizational structure of
the FCC. I must say there are scores of Federal agencies around
Washington. I doubt there is anyone who can describe in any
detail how each of these is organized. They are all organized
in different ways, and I don't think there is anyone who could
say that how well each of these agencies performs its duties
that is related in any predictable way to how well it is
organized.
Organizational structure matters, but what matters more is
having the Commission follow the law as it is written. If there
are problems in how the Commission is executing the law, they
will not be cured by organizational changes. If the Commission
is doing something well, that performance will not be
substantially degraded by organizational changes.
Chairman Kennard and the FCC staff have invested a lot of
time and have come up with a very fine and well-thought-out
product and a Strategic Plan. It has not yet come before the
Commission for a vote. It is an interesting plan, one that I
think has a lot of merit, one that I don't know that I would
agree with everything in it, but I certainly recognize the very
fine quality of it, and one that frankly the Commission under
section 5(b) of the act could implement on its own, but as a
Commission as a whole.
Finally, I would like to note that I share many of the
committee's concerns this morning, particularly those of
Chairman Bliley, on transparency process, and I welcome the
oversight of this committee. Thank you, Mr. Chairman. I look
forward to the remainder of the hearing.
[The prepared statement of Hon. Harold W. Furchtgott-Roth
follows:]
Prepared Statement of Hon. Harold W. Furchtgott-Roth, Commissioner,
Federal Communications Commission
Chairman Tauzin, Congressman Markey, distinguished Members of this
Subcommittee, thank you for the invitation to testify on ``Federal
Communications Commission Reform for the New Millennium.''
Chairman Kennard, the Bureau chiefs, and representatives of the
Office of Plans & Policy have, I am sure, worked hard on this
Chairman's Draft Strategic Plan. Parts of this document have real
merit. I am equally sure, however, that if I were asked to cast a
formal vote to adopt this Plan as that of the Commission's, I would
have real issues with the document as written. A brief review of the
Plan reveals that it includes as ``key policy initiatives'' some
matters that are controversial and about which Members of this
Committee have expressed serious concern.
At this point, however, allow me to make a more general point about
FCC reform and the direction in which it should be headed: plans for
internal agency restructuring are well and good. Under section 5(b) of
the Communications Act, ``the Commission'' as a whole can reorganize
the agency in order to promote its proper functioning. I am skeptical,
however, that organizational restructuring alone can do much to improve
the efficiency--much less the policy positions--of the Commission.
The federal government consists of scores of agencies, no two of
which have identical organizations, and each of which changes
organizational structure from time to time. No review of these federal
agencies--or of private business organizations, for that matter--would
show that organizational structure is the primary criterion that
distinguishes efficient from inefficient agencies, or that separates
those agencies that adhere closely to the law and Congressional intent
from those that do not. When a member of Congress objects to the
processes or decisions of a government agency, organizational structure
is rarely the primary target of his or her frustration.
The most important ``reform'' that could occur at the agency--i.e.,
the one that would go the furthest toward curing the institutional
deficiencies for which it is sometimes criticized--would be for the
Commission to simply follow the law as Congress has written it. If we
concentrated on executing the tasks clearly assigned to us by Congress,
and in doing so followed the guidance provided by the statute--as
opposed to initiating our own regulatory schemes without statutory
direction to channel them--we would do better by all involved.
It is my firm belief that Congress--not the Federal Communications
Commission--makes the basic decisions about federal telecommunications
policy. Indeed, if Congress did not make those fundamental policy
choices, we would be faced with an unconstitutional delegation of
authority. These legislative choices are spelled out in the
Telecommunications Act of 1996 and in the Commission's enabling
statute, the Communications Act of 1934. Taken together, these statutes
establish the limits of the Commission's power in implementing
Congressional mandates and define the substance of those mandates.
The Telecommunications Act of 1996 gave the Commission the great
responsibility of implementing the dramatic changes effected by the
Act. The role of the Commission was, in many respects, fundamentally
altered by the Telecommunications Act of 1996.
Those changes have been largely for the better. Four years ago,
regulation at the federal, state, and local levels was based on a
framework that placed businesses in discrete regulatory categories.
Businesses were pigeonholed by their operations, and limitations on
their activities by line of business, by territory, and by customer
class were defined by those identities. A broadcaster was a
broadcaster, and nothing else. A local exchange carrier was a local
exchange carrier, and nothing else. And so on.
Regulation meant that competition was, at best, managed by
government agencies and, at worst, illegal. Consumers paid a high price
for this form of regulation: higher prices than necessary; lower
quality than necessary; fewer choices than necessary; and less
innovation than necessary.
Advances in technology and changes in the law, however, have worked
to the advantage of consumers in the past few years. It would be wrong
to attribute all of the benefits of lower prices, new services, new
innovations, and improved service quality to changes brought on by the
Telecommunications Act of 1996. But it would be equally wrong to assert
that the increased competition made possible by that Act has meant
nothing.
I have not always agreed with the Commission's interpretation of
specific sections of the Act. Commission rules and interpretations
have, in my opinion, been at times much broader than the relevant
statute, and thus in excess of statutory authority and unlawful under
the Administrative Procedure Act. In some instances, the Commission has
simply failed to implement the law. But where the Commission has acted
in accordance with the directives and limits of the statute, I believe
the American public has been well served. And where we have not
implemented the law as written, consumers could have been better off.
There are those who say that the Telecommunications Act of 1996 has
failed. I disagree. There are those who say that simply restructuring
the FCC will remedy any possible shortcomings of the Act. I disagree.
I think that we need to finish the job that we have started but
have yet to complete. We should implement faithfully the 1996 Act by
its terms, and neither reinvent, embellish, nor nullify it.
The Act describes itself as both ``deregulatory'' and ``pro-
competitive.'' I believe that it can and must be both. Indeed, the
theory of the Act, as evidenced by its various provisions, is that
deregulation--not more regulation--is the best way to promote
competition. I believe that we have yet to implement the Act in a way
that achieves these twin goals. If we did that--and only that--Congress
could spend less time on oversight and reform of the FCC.
This Committee and its Members have invested much in this Act. I
hope that you will continue to insist on its full and proper
implementation. Such implementation--more than anything else--will
bring the agency's processes in better line with Congressional intent
and thus ultimately with the democratic process.
Mr. Tauzin. Thank you.
The Chair is now pleased to welcome the Honorable Michael
Powell, Commissioner for the FCC.
STATEMENT OF HON. MICHAEL K. POWELL
Mr. Powell. Thank you, Mr. Chairman, and to the members. I,
too, want to commend Chairman Kennard's leadership in
developing his Strategic Plan. Its vision is laudable and
consistent with the goals of the 1996 act. And I generally
support the goals of the plan to make the agency faster,
flatter, and more functional, for such actions are critically
important to meeting the challenges of a vigorous, innovation-
driven marketplace. I am pleased that many of the areas
discussed in our testimony last March are considered in the
draft plan, but I believe that the plan alone will not
completely obviate the need for Congress to consider the
parameters of the Commission in a period of rapid change in the
industry.
In the first instance, as we know, Congress sets the
Commission's mission. It is our duty to implement specific
statutory direction before any discretionary authority. This
simple priority principle to me should stand at the summit of
any Commission plan.
As to the general goals of the draft plan, I would like to
note two particular areas of my role as Defense Commissioner
that I believe should be featured as well, flowing from section
1 of the act. In addition to those core functions, we must
include protecting public safety and the national security.
These statutory objectives continue to be important as the FCC
confronts a variety of challenges relating to reconciling
commercial and governmental interests which are becoming
increasingly difficult in a world of digitalization.
In addition, I would like to express my limited concern
that the plan takes a fairly long-term view of our mission and
priorities over a 5-year period. What form the communications
market will have taken by then is anyone's guess, and one must
be a bit skeptical that any restructuring along that time
horizon will unfold as planned. While a long-range Strategic
Plan has merit and some value in setting our proximate course,
it is perhaps going to be more important to work on specific
priorities calibrated to shorter timeframes.
The more significant challenge is to transform the vision
so well articulated in the plan into daily operations. For
example, I continue to believe that the Commission would be
well served to enumerate, clearly and widely communicated, a
set of priorities on an annual basis. This would help focus the
Commission's work for the coming year and create greater
regulatory certainty for the marketplace.
I also believe the FCC needs to make quicker, more timely
decisions. While automated tools are appropriate for the bulk
of the routine non-controversial work that we do, we also need
to endeavor to find ways to accelerate decisions involving
complex transactions and important policy questions. I am
interested in the proposal to consolidate the agency's various
functions. However, in light of the current structure of the
organic statute itself along technical lines, I do caution us
not to expect revolutionary changes in analysis or outcomes of
our decision by that simple structure change.
The regulatory objectives of the draft plan, to my mind,
fall a bit short. The draft repeatedly remarks that we
deregulate as competition develops. Undoubtedly that is true in
some quarters, but I also have to express my strong belief that
significant deregulation is a prerequisite ingredient for
developing competition in many areas and not always just a
reward to industry after the government determines competition
has emerged to its satisfaction.
I believe that the plan's deregulatory component could be
and should be strengthened to more presumptively favor
deregulation and place greater burdens on the Commission to
justify retaining certain rules.
For the most part, Chairman Kennard's draft Strategic Plan
can be executed by the Commission and its most highly regarded
staff without congressional intervention. However, the list of
modest legislative recommendations attached to the plan could
help facilitate its implementation, and I would urge some
consideration of them.
Thank you for having me today. It is always an honor and a
pleasure and I look forward to your questions.
[The prepared statement of Hon. Michael K. Powell follows:]
Prepared Statement of Hon. 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 discuss ``Federal
Communications Commission Reform for the New Millennium'' and Chairman
Kennard's draft ``strategic plan.''
I will start by stating that I wholeheartedly support Chairman
Kennard's efforts and commend his leadership in developing this draft
strategic plan. The ``vision'' that the draft plan has of ``vigorous
competition that will greatly reduce the need for direct regulation''
is laudable and consistent with Congress' intent in drafting the 1996
Act. I, therefore, generally support the goals of the plan and its
commitment to make the agency ``faster, flatter and more functional.''
In my testimony this morning, I would like to highlight for the
Subcommittee some of the elements of the draft plan, and, of course,
talk briefly about the few areas that may need further consideration by
both the Commission and Congress.
In March, when we were last here to testify on FCC reauthorization,
I submitted 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 better align the agency 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 am pleased that many of
these areas are considered in the Chairman's draft plan, but I believe
that it alone will not completely obviate the need for Congress to
monitor and perhaps modify the agency in response to rapid change in
the industry and to ensure that Congress' pro-competitive, deregulatory
vision, embodied in the 1996 Act, is realized.
i. the commission's mission, goals and objectives
A must-do for any organization--from the smallest to the largest--
is to establish goals and objectives that are measurable and
achievable. Congress sets the Commission's mission and goals in the
first instance. In my mind, it is our duty to implement specific
statutory direction, before, or concomitant with, any discretionary
authority. This simple priority principle should stand foursquare at
the summit of any Commission plan.
I believe, generally, that the draft strategic plan covers the
broad areas that should guide our work in coming years. However, I
would point out two areas that I believe are important and derive from
Section 1 of the Act, but are omitted in the present draft: (1) the
promotion of safety of life and property and (2) the national defense.
As the ``Defense Commissioner'' responsible for the FCC's emergency
preparedness, security and national defense matters, I have asked the
Chairman to include up-front in the plan these important statutory
goals. These issues are becoming more acute and more challenging as
competition and deregulation drive greater commercial activity. While I
intensely encourage new entry and applaud innovative business models,
these interests do not always coincide with governmental interests in
law enforcement and national security. I would alert the Congress to
the growing challenge of reconciling these competing interests. Some of
these challenges include fulfilling the spectrum needs of federal,
state and local public safety entities; ensuring that law enforcement
continues to have the necessary tools at its disposal in the digital
age; balancing the competing demands for spectrum by governmental and
non-governmental institutions, particularly in international forums;
and safeguarding critical national security and defense assets.
With an expansive and complex statute it is difficult to compress
into one sentence and four enumerated goals the purpose of the FCC
``for the 21st Century.'' I congratulate Chairman Kennard for his
attempt to do so. Such an endeavor, however, necessarily produces a
document of lofty generalities. The more significant challenge is to
translate this strategic vision into an operational plan, detailing the
means for reaching the objectives and the resources for doing so. My
only caution here is that it is always more difficult to execute a plan
than to craft one, and I have some concerns that the goals in this
strategic plan are overly optimistic and some of its numeric targets
potentially unhelpful.
I think the Chairman's draft strategic plan includes some
appropriate implementation steps and ways to measure our results. He
has also put in place a top-notch team of FCC managers and
professionals to implement these steps. My limited concern, however, is
that the plan takes a fairly long-term view of our mission and
priorities (5 years). What form the communications market will have
taken by then is anyone's guess, and one must be a bit skeptical that
any restructuring along that time horizon will unfold as planned. While
a long-range strategic plan has some value in setting an approximate
course, it is perhaps more important to work on specific priorities
calibrated to shorter timeframes.
For example, as I testified in March, I continue to believe that it
would be useful for the Commission to enumerate clearly and widely
communicate a set of annual priorities. I would favor a more structured
process by which the Commission formally develops and publicly reports
its priorities for the upcoming year to help focus the work of the
Commission and create greater regulatory certainty. To assist in this
and other managerial challenges, I would consider creating a
professional management position in the Commission, dedicated to
operational matters.
Let me now offer a few observations regarding specific subjects
covered in the draft plan.
ii. some highlights of the draft strategic plan
A. Internal Procedures
In the effort to improve internal procedures, we should be
centrally focused on drastically improving efficiency. In a market
guided by ``Internet'' time, the FCC needs to make quicker, more timely
decisions. This is why I fully support our current and future efforts
to modernize and automate many of our functions. The FCC is focused,
rightly, on becoming a ``model agency for the digital age.'' I have
been very impressed by the various automation efforts, including the
spectrum auction bidding system and the Wireless Bureau's ``ULS''
project. Automated tools are appropriate for the bulk of the routine
and non-controversial work. At the same time, however, we need to find
ways to accelerate decisions involving complex transactions and
important policy questions. Here, more than any other area, a decision
that comes too late, might as well not have been made at all.
Therefore, I am encouraged by the draft plan's proposals to
eliminate multiple levels of review, making the agency faster, flatter
and functional. We must be structured to render decisions quickly,
predictably, and without imposing needless costs on industry or
consumers through unnecessary delay. In this regard, while I agree with
the proposal to act on certain petitions for reconsideration within 60
days of the record closing, I would suggest the same expedited
treatment of applications for review of actions taken on delegated
authority, as well.
Finally, I am very pleased to see that the Chairman will
restructure the Office of the Secretary to facilitate management of
Commission proceedings and to ensure Commissioners adhere to timetables
and voting procedures. I also anticipate that the Secretary will be
instrumental in facilitating the Bureaus' disposal and release of
pending matters.
B. Structural Changes
The Chairman's draft plan clearly recognizes (as almost everyone
has) that the Commission is currently organized around industry
segments that increasingly are less relevant as convergence strains and
eliminates their unique technical distinctions. I generally concur with
the Chairman's proposals to reorganize the agency along functional
rather than technological lines. I supported the consolidation of
dispersed functions into the new Enforcement and Consumer Information
Bureaus and I look forward to these new bureaus getting started soon.
I am very intrigued (but not yet sold) by the second phase proposal
to consolidate the FCC's policy/rulemaking and authorization of
service/licensing functions. A single policy/rulemaking bureau may have
some merit. For one, it will increase the field of view of management,
hopefully in a way that harmonizes our decisions across industry
segments. However, given the depth and breadth of our policy/rulemaking
responsibilities, a single bureau overseeing these functions could
prove too large and unwieldy. Moreover, because the Communications Act
continues to categorize industries based on technology, a consolidated
bureau, while appearing functional, may in fact collapse into a ``mini
FCC'' with separate divisions charged with particular sections of the
Act. This subject requires the fullest consideration, but I caution one
not to expect revolutionary changes in the analysis or outcomes of our
decisions as a consequence of this type of organizational change.
C. Deregulatory Initiatives
I regret that the deregulatory objectives of the draft plan fall
short of my expectations. It seems that one of the core principles
articulated in the plan is that we ``deregulate as competition
develops.'' As I have written several times, I am of the view that in
many instances, deregulation is a necessary pre-requisite to
competition developing. I have often observed a hesitancy to
deregulate, under the belief that competition has not yet fully
developed or matured. The assumption is that regulation is removed only
when it has been rendered superfluous because of competition. In some
areas, this may be true. But, this approach fails to recognize the
interrelationship between regulations and the development of
competitive markets. Regulations often distort market incentives or
inhibit efficient entry and competition. Deregulation, then, is not
just desert, served after competition comes out of the oven. It is a
necessary ingredient to the competition dish.
Although I will not get into the details of the dispute over these
core beliefs, I generally see deregulation (whether in the form of
forbearance, streamlining or a biennial review) more as a means of
facilitating competition through the elimination of burdensome
regulatory requirements. It is not a reward to hold out to industry,
after the government determines that there is enough competition to
grant relief. I would suggest that the plan's deregulatory component be
beefed up to shift our paradigm for handling forbearance requests and
the next biennial review toward a presumption in favor of deregulation
and an obligation to re-justify regulations that are retained, with the
burden to do so resting with the Commission.
1. Forbearance--The draft plan says that the Commission will
``consider additional areas that may be appropriate for forbearance,''
claiming that we have already engaged in substantial forbearance. I
cannot concur with this favorable view of our forbearance record. The
true tale is not in the numbers (no matter how well massaged), but how
meekly we have wielded the powerful forbearance tool. Yes, we have
swatted a few gnats, but very few dragons. I think Congress expected us
to be much more aggressive. Indeed, I believe Congress intended that
when we are faced with a petition to forbear that we should have to
fully justify a decision that leaves the rules on the books. If we
cannot, the rule should fall. The burden rests with us.
2. Biennial Review--The Biennial Review requirement of Section 11
of the Act, like Section 10, is a very important provision enacted in
1996. I share some of Commissioner Furchtgott-Roth's concerns about the
Commission's first biennial review and, as I recall, Chairman Kennard
responded favorably to Commissioner Furchtgott-Roth's ideas for the
Year 2000 review. I am also very pleased that Chairman Kennard's draft
plan calls for ``an aggressive'' biennial review next year, citing
wireless as an area where competition has clearly emerged and where
most regulation has become unnecessary. I can only add to the thoughts
of my colleagues on this score by emphasizing that I expect that we
will take on the burden of justifying the rules that we keep and to
grapple head on with the statutory public interest test of ``meaningful
economic competition.''
D. Duplicative Functions
As I testified in March, it is very important to address areas
where Commission authority and activities overlap with those of other
government agencies. While such governmental overlaps may be desirable,
they should at least be complementary (or supplementary) rather than
simply duplicative. I am glad that the draft plan provides that we will
continue efforts to coordinate with other federal agencies (and with
state and local governments) and, especially, to improve coordination
with the Federal Trade Commission and the Departments of Justice,
Commerce and State to ensure that our respective functions are more
complementary. However, some of the FCC's functions must be thoroughly
evaluated in the context of the overlapping duties of other federal
agencies and state and local jurisdictions.
1. Merger Review--For example, merger review is the topic of
several pending bills and of much interest lately as we see a pace of
strategic consolidation in telecommunications and media markets like we
have never seen before. The FCC's review of major transactions should
be generally limited to those areas in which we can claim primary
expertise. While I believe that there is room to preserve a
complementary role for the FCC in the review of mergers, we need to
have some disciplined procedures and limiting principles to ensure the
rapid processing of such transactions, to preserve the rights of the
parties and to avoid duplication with other authorities. I have
articulated in more detail some of these limiting principles and have
criticized our current process in recent public statements, which I
would be pleased to pass on to the Subcommittee.
Chairman Kennard's plan (which is not yet part of the strategic
plan) to set up an intra-agency transactions team in the Office of
General Counsel may be a promising proposal. I fully support efforts to
make the FCC's merger review process more predictable and transparent.
But we need more than a new box on the organizational chart. We need
much more significant consideration of two areas for revision: (1) we
must institute a clearly articulated review process replete with timing
benchmarks, and (2) Congress and the Commission need to reevaluate the
applicable merger standards to limit duplication and guard against
extraneous conditions. I look forward to considering a proposal along
these lines.
2. Other Areas--Let me briefly address other areas that overlap
with other governmental institutions: consumer protection, equal
employment opportunities (EEO) and political campaigns. First, one
focus of the draft plan is rightly on consumer protection. For, as we
have seen in the slamming area, competition tends to bring out of the
woodwork those that try to cheat consumers for a fast buck. We must,
within our authority, be vigilant in keeping the cheaters at bay. At
the same time, we must recognize that there are other agencies and
jurisdictions that have similar authority and some judgment might be
made as to which is best positioned to administer certain issues.
We must also examine whether all aspects of the Commission's EEO
program should remain separate from the Equal Employment Opportunity
Commission and the federal, state and local civil rights authorities.
Although there is some advantage to having the FCC involved because of
its unique relationship with certain industries, in times of tight
resources and many other priorities at the FCC, we must ensure that the
FCC's and EEOC's respective roles remain complementary and not
duplicative. By deferring some aspects of this program to the expert
civil rights agency (as the Commission has done in certain respects
under memoranda of understanding with the EEOC), we are in better
position to justify the government's role in promoting employment
opportunities in the dynamic and growing communications industry.
Finally, with an election year soon upon us, the FCC will be facing
more pressure to enforce and even expand the political obligations of
broadcast licensees. There are unquestionably problems in our electoral
system, but I shiver at the suggestion that the Communications
Commission ought to play a central role in such matters without
comprehensive direction from Congress. Unbridled discretion to affect
campaigns by three of five unelected regulators is unwise. Moreover,
the FCC lacks the knowledge or expertise to properly balance electoral
interests or to weigh the effects on existing election law. I would
leave that to the Federal Election Commission, if anyone.
iv. legislative recommendations
Many of the concerns I have raised, in addition to many other
significant issues such as broadband access and inter-LATA data relief,
may demand Congress' attention over the coming months. However, I
recognize the difficulty of enacting major FCC reform initiatives so
soon after passage of the 1996 Act. In the near term, less
controversial legislative tweaks that support the Commission's efforts
to reform itself and become more efficient may be beneficial.
For the most part, Chairman Kennard's draft strategic plan can be
executed by the Commission and its most highly regarded staff without
congressional intervention. However, the list of modest legislative
recommendations attached to the plan will surely help facilitate its
implementation. I generally support them and I will briefly commend the
Subcommittee's attention to a couple.
First, the proposal to exempt the Commission from the Government in
the Sunshine Act should be considered. I recognize that at first blush,
it seems fantastic to support less openness. But the fact is that the
Sunshine Act not only has failed in its purpose, it may have had the
opposite effect. The notion that substantive decisions are debated by
Commissioners in public meetings and voted after such deliberation is
fiction. The press of business requires that most items be voted on
circulation. Moreover, even the votes at open meetings are ceremonial,
the decision having been debated and determined in advance. The
Sunshine Act, in fact, impedes efficient decision-making. Because three
Commissioners may not discuss a substantive matter (except at a public
forum), questions are filtered through and among layers of Commission
staff and then are communicated back and forth to the Commissioners.
This produces a lengthy and often chaotic decision-making process. Our
decisions certainly should not be cloaked in the shadows, but they are
presently being scorched by sunshine.
Second, the Chairman's legislative proposals that would provide
flexibility to restructure our operations also deserve attention. For
example, ``voluntary separation incentives'' or employee ``buyouts''
would facilitate further staff downsizing and redeployment, to be more
responsive to the ongoing industry convergence and more conducive to a
functional organizational structure. Additional flexibility to hire
outside experts and consultants would allow the Commission to attract
talented experts to augment our current staff's expertise.
Third, I favor the Chairman's proposals to strengthen our
enforcement assets, including those that toughen penalties for
violation of the Communications Act and FCC rules and that provide for
speedier judicial review of Commission forfeiture orders.
v. conclusion
I look forward to continuing to work with Members of Congress and
with my colleagues on the many challenges ahead. 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 as envisioned by the 1996 Act.
Thank you for your attention.
Mr. Tauzin. Thank you commissioner Powell.
Finally, but certainly not least, Commissioner Gloria
Tristani for an opening statement.
STATEMENT OF HON. GLORIA TRISTANI
Ms. Tristani. Thank you, Mr. Chairman. I am delighted to be
here.
I generally support the draft Strategic Plan released by
Chairman Kennard last August. It is a thoughtful and forward-
looking proposal that provides a good road map for preparing
the FCC for the new millennium.
I won't repeat the specific points made in the Chairman's
report, but I would emphasize one particular issue and make a
couple of points of my own.
First, I completely agree with the Chairman that consumer
protection should remain one of the Commission's core
functions. In particular, I agree that we should have a zero-
tolerance policy for perpetrators of consumer fraud such as
slamming. The problem of slamming is rampant and it is the
FCC's job to stop it.
I would also like to join the comments of my fellow
commissioner, Susan Ness, in saying that we need to have more
consumer input in our decisions. Consumer voices are very
rarely heard at the Commission.
Second, while I fully support the goals and key policy
initiatives set forth in the chairman's report, I am not
convinced that some of the 5-year goals described in the report
are achievable. For instance, I am not convinced that despite
our best efforts we will be able to increase market penetration
for basic telephony service in rural and underserved areas to
94 percent in 5 years, or that in that timeframe advanced
services will be available to 90 percent of American homes.
Finally, as we move into the new millennium, I would
emphasize the Commission's continuing statutory role in
ensuring that the public airwaves are used in the public
interest. For far too long, the FCC has permitted the public
interest standard to lapse into a vague, undefined, and
therefore unenforced, standard. I believe it is time for the
Commission to rectify that by defining and enforcing meaningful
public interest obligations. Again I am delighted to be here
and I look forward to your questions.
[The prepared statement of Hon. Gloria Tristani follows:]
Prepared Statement of Hon. Gloria Tristani, Commissioner, Federal
Communications Commission
I'm pleased to be here today to discuss the structure and mission
of the Federal Communications Commission as we move into the 21st
century.
I generally support the Draft Strategic Plan released by Chairman
William Kennard last August. It is a thoughtful and forward-looking
proposal that provides a good road map for preparing the FCC for the
new Millennium. As Chairman Kennard's Report proposes, the FCC can and
should: (1) create a model agency for the digital age; (2) promote
competition in all communications markets; (3) promote opportunities
for all Americans to benefit from the communications revolution; and
(4) manage the electromagnetic spectrum (the nation's airwaves) in the
public interest.
I won't repeat the specific points made in the Chairman's Report.
But I would emphasize one particular issue and make a couple points of
my own.
First, I completely agree with the Chairman that consumer
protection should remain one of the Commission's core functions. In
particular, I agree that we should have a zero tolerance policy for
perpetrators of consumer fraud, such as slamming. The problem of
slamming is rampant, and it is the FCC's job to stop it. Last December,
we promulgated new anti- slamming rules that, in concert with our
aggressive enforcement actions against slammers, would drastically
reduce the frequency of slamming. Unfortunately, the FCC's anti-
slamming rules have been stayed by the courts. The sooner meaningful
anti-slamming rules become effective, the sooner we can begin moving
toward the Chairman's aggressive goals for reducing slamming complaints
over the next five years.
Second, while I fully support the goals and key policy initiatives
set forth in the Chairman's Report, I am not convinced that some of the
five-year goals described in the Report are achievable. For instance, I
agree that we must increase market penetration rates for basic
telephony service in rural and under-served areas (currently under 50
percent). But I am not convinced that, despite our best efforts, we
will be able to bring those numbers up to the national average of 94
percent in five years. In my opinion, a more realistic number would be
something on the order of 75 percent. Similarly, given the current pace
of deployment, I am not convinced that advanced services will be
available to 90 percent of American homes in five years. I am
especially concerned about the current pace of deployment in rural and
other hard-to-serve areas.
Finally, as we move into the new Millennium, I would emphasize the
Commission's continuing statutory role in ensuring that the public
airwaves are used in the public interest. I do not believe that this is
simply a question of whether the airwaves are being used efficiently,
but whether they are being used in a manner that benefits the public.
For too long, the FCC has permitted the public interest standard to
lapse into a vague, undefined--and therefore unenforced--standard. I
believe it is time for the Commission to rectify that. We ought to
define and enforce specific, meaningful obligations that licensees must
meet, especially as we move into the digital world. Or if such
obligations do not exist, we should say so. Licensees deserve to know
the standards to which they will be held accountable, and the American
public deserves to know the benefits it is entitled to expect for the
use of its spectrum.
Mr. Tauzin. Thank you very much, Ms. Tristani.
Let me recognize members now for a round of questions, and
the Chair would start by recognizing himself.
First of all, Mr. Chairman, you all mentioned speed
matters. The technology that the FCC oversees is moving at an
incredible pace, and yet what we see at the FCC is if you are
given 180 days to do something you take 180 days.
Mr. Powell, you mentioned the concern for that. I want to
hit on that a little harder. If there is a time limit provided
in the statutes, the FCC takes it all. If there is no time
limit in the statute, there is even greater concern about how
long it takes to process matters. For example, there is no time
limit at all on license transfers, and therefore merger reviews
under the Commission are timeless. They could go on forever.
One of the big concerns we have is that if speed matters in
this world of high technology, what is the Commission going to
do in its plans to shorten the time for all these reviews and
considerations of applications that come before the Commission?
Mr. Kennard. It is a very good question. As I stated
earlier, when we convene all our stakeholders, this is an issue
that continually comes up. In the plan there are a number of
ways that we seek to address it. One is we are imposing some
deadlines on ourselves for petitions for reconsideration,
applications for review, some of the more routine pleadings
that come before us. One of the things, however, that we have
to be cognizant of is the due process rights of people who come
before us. We are subject to the Administrative Procedure Act
and we have to make sure that everybody has an opportunity to
be heard.
Mr. Tauzin. Can I jump in here for a second? One of the
things that has been pointed out to me that kind of surprised
me, I didn't realize it was true, that only two of you can talk
to each other at a time.
Mr. Kennard. Yes.
Mr. Tauzin. The law prohibits you to communicate as we
communicate with each other in the legislative process, to seek
counsel of one another and to come to a consensus. You are
unable to do that so you have to rely upon staff to go through
all this stuff and to bring your recommendation. By the time
you get it, it is pretty well cooked, isn't it?
Mr. Kennard. That is exactly right. That is because, of
course, the Government in the Sunshine Act. It was a very well-
intentioned piece of legislation; but unfortunately, the
unintended consequence is that we have difficulty
communicating, and it makes for a game of telephone at the FCC
when we are communicating----
Mr. Tauzin. One to one.
Mr. Kennard. Exactly.
Mr. Tauzin. Another good example is I have been fascinated
recently, I have even talked to one of the inventors of the
ultra-wideband technology. One of your colleagues has called
for a rulemaking. It has been 9 years that the Commission has
been considering regulatory approval also of different
applications of this technology. And it is amazing. If it is
real, it is amazing in terms of its ability to see persons,
buildings, to provide rescue, earthquakes, land mine
protection, safety at airports. I can go on and on and on about
all the incredible benefits of that technology if it is real,
and yet it is 9 years and we haven't had a rulemaking on it. I
think you get my gist.
It is pretty frustrating when that is a result of maybe the
inhibitions of the agency's capacity to talk to one another and
to collaborate and maybe move some of these things forward. If
speed matters in this technology, it could be critically
important in solving many of the last-mile problems of
broadband communications. For example, why would we not want to
have a rulemaking on it and get moving on it and literally
short-circuit a 9-year process? Mr. Kennard?
Mr. Kennard. I couldn't agree with you more. One of the
things that we have to recognize is that the FCC is an under-
resourced, overworked agency. Ultra-wideband is a good example.
We have just a limited number of quality engineers that we can
throw at a problem like that.
Mr. Tauzin. Let me see if I can save you some time then.
What did the repeal of section 221(a) of the 1934 act mean to
you guys and gals? Section 221(a) was the authority route to
review mergers. In 1996 Congress repealed, specifically
repealed, the legislative authority to review mergers. A lot of
your time is spent reviewing mergers. What did that repeal mean
to you, and did it mean nothing?
Mr. Kennard. I would like to address that question
specifically and the overall question of mergers. One is,
Congress didn't repeal the responsibility of the agency to
ensure that license transfers are only granted if they serve
the public interest. We have experienced in the last 3\1/2\
years since the act was passed an unprecedented wave of mergers
and consolidation in this industry. We have never seen anything
like it in every single sector of the communications industry.
So you can imagine the kind of strain it puts on the agency.
Now, notwithstanding that strain, I am proud to say that we
have been able to grant most of these license transfers and
assignments in very quick fashion. In fact, the overwhelming
majority of license transfers that come before the FCC are
handled in less than 6 months.
Mr. Tauzin. My time is expired. I will let you comment a
lot more on it and perhaps submit something in writing. But
before I yield, let me just ask you if any one of you want to
respond to the question I asked. What was the meaning at the
Commission in the way you viewed what we do, how I talked about
the relationship of Congress and the agency created by Congress
to carry out our policy, what was the meaning of Congress
repealing the specific authority that allowed you to review
mergers? If it had no meaning, tell me that. If you think it
had some meaning, what was it? Anyone?
Mr. Kennard. Again, I would just reiterate that we have a
statutory obligation to review license transfers to make sure
they serve the public interest.
Mr. Tauzin. I heard that. I am asking you what do you think
Congress meant when they repealed that section? Did it have no
meaning at all? Were you ignoring it because you thought you
had authority in other areas to review mergers? Did it have no
meaning? Was there no message in that repeal? Why did we do it
if it was meaningless is what I am asking. Why would you think
it meant nothing, if you are the agency commissioned by
Congress to carry out legislative policy?
Mr. Kennard. Perhaps from your perspective, it didn't go
far enough.
Mr. Tauzin. It didn't go past this diocese, apparently, is
what I am concerned about. Nobody heard it. Nobody read it as
meaningful.
Ms. Ness. My recollection--and I may be thinking of a
different change in the statute--but my recollection was that
this eliminated the preclusive effect of the Commission
electing to exercise its merger authority; under the old law,
the Commission's action precluded DOJ or the FTC from
exercising its authority to review mergers involving Bell
operating companies. Again, I may be wrong, I may be focused on
a different section--but I believe that is what the change in
the statute did.
Mr. Tauzin. My information is specifically repeal the
authority to review mergers. I would love if you--I need to
pass it over--if you would give it some thought and come back
to us in writing as to what at all that repeal meant to you,
and that will give us an idea of how we legislate and how you
receive our legislation for the future as we go through this
reform effort.
[The following was received for the record:]
the effect of the repeal of section 221(a)
Section 221(a) of the Communications Act provided for Commission
hearings when telephone companies sought permission to consolidate,
acquire, or transfer control over their properties. If the Commission
determined that the proposed transaction was in the public interest,
antitrust scrutiny was precluded.
In the Telecommunications Act of 1996, Congress eliminated section
221(a) as part of an ``antitrust savings clause'' for the express
purpose of permitting antitrust review of telephone company mergers.
The Congress, however, did not eliminate or modify Commission
review of telephone company mergers under the Communications Act. To
the contrary, the Conference Report on the Telecommunications Act of
1996 expressly noted that:
``[This] repeal would not affect the Commission's ability to
conduct any review of a merger for Communications Act purposes,
e.g., transfer of licenses. Rather, it would simply end the
Commission's ability to confer antitrust immunity.'' Conference
Report, at 201. (Emphasis added.)
Mr. Tauzin. Let me yield to the gentlelady from California,
Ms. Eshoo.
Ms. Eshoo. Thank you, Mr. Chairman. I am glad you took some
extra time because it is always instructive to hear you press
your questions, so I look forward to the answer from the
Commission.
I have two questions, the first of Chairman Kennard, and
the area of any of the Commissioners. And I want to get the
questions out because usually if you do them one at a time, you
only get an answer to the first question and run out of time on
the second.
Chairman Kennard, in your statement you mentioned that the
FCC needs to recognize itself along a functional rather than
technological basis. I think you are saying that the current
FCC bureau's cable common carrier, may not apply to the
emerging telecommunications field, especially with cable
operators who are now offering telephone services and telephone
companies who are offering cable services and all of them
offering Internet service.
What structure do you envision for the FCC and what sign
posts will you employ to guide you in making these structural
changes? Maybe to rephrase my question, when will you know the
time is right to overhaul the current regulatory structure at
the FCC? So that is my question of you.
Let me get this other one in for any of the Commissioners.
Many of us have heard from a number of the new entrants in the
telecommunications field about the many intercarrier disputes
they continue to have. Chairman Kennard mentioned that the new
Enforcement Bureau will be functional in November. Do you
believe that a definite timeframe for FCC review of these
disputes should be implemented? We will start with Chairman
Kennard.
Mr. Kennard. Thank you. You raised an issue that really
goes to the heart of our Strategic Plan for the future. That
is, it is really being thrust upon us because of the
convergence in the industries with which we deal. What we have
attempted to do is lay out a blueprint for reorganizing the FCC
along functional lines, because we are finding that the
traditional bureau structure has severe limitations.
That being said, though, we have to recognize that the act
itself is still organized for the most part along industry
lines. You have title II dealing with the telephone industry;
title VI, cable; title III, broadcast. And so we are in effect
trying to reorganize in some senses ahead of our statutory
authority. Commissioner Powell has made some interesting
observations about that in the past.
Nevertheless, I think we have to charge ahead, because the
industry is changing. Convergence is happening. We have laid
out a plan for reorganizing along functional lines here in our
Strategic Plan. We took the first major steps with the
inauguration of these two new functional bureaus, Enforcement
and Consumer Information. The plan calls for completing our
reorganization over a period of time so that by, I believe,
January 2003, we hope to have completed this functional
reorganization.
I think it is important, though, to address the concerns of
some who have asked why is it going to take you so long to make
this happen? I think we all need to be aware of the cost of
restructuring an agency like the FCC, a small, under-resourced
agency, when we are being bombarded every day with mergers and
petitions and court appeals. We have to have sensitivity to our
employees.
If we were to reorganize the agency completely structurally
overnight, I am afraid that the place would grind to a dead
halt. So I think that what we have here is a Strategic Plan
that is reasonable and that lays out this restructuring over
time.
Ms. Eshoo. Do you have timeframes around the functions?
Mr. Kennard. Yes. They are outlined--in the plan. We
indicate when we are going to take the next steps. The next
step will be to preview the creation of a Video Competition
Bureau which would merge our Mass Media Bureau with our Cable
Bureau.
Ms. Eshoo. Great. Thank you.
My second question, to any of the Commissioners?
Mr. Furchtgott-Roth. Ms. Eshoo, I will be happy to respond
to your second question. Many CLECs do have many disputes with
incumbent local exchange carriers. Most of those disputes take
place under section 252 and State jurisdiction. They are not
necessarily FCC jurisdiction.
There are some disputes under section 251, and I think one
thing that Chairman Kennard's leadership has brought us very
well is the ``rocket docket'' to provide for expedited review
of certain disputes. This was an experiment that we started,
oh, goodness, 9, 10 months ago, and I think it has been fairly
successful so far.
Ms. Eshoo. I am not so sure I understand your answer.
I know I don't understand your answer. What I was asking
was, given what I described, do any of the Commissioners
believe that there is a definite timeframe for FCC review of
the disputes, if that should be implemented, a definite
timeframe around the disputes? And I don't think that was
addressed in your answer. If it was, I missed it.
Mr. Furchtgott-Roth. Ms. Eshoo.
Ms. Eshoo. Maybe it just can't be answered. Maybe you don't
know yet. If that is the case, then maybe that is what should
be said.
Mr. Furchtgott-Roth. Ms. Eshoo, I am happy to try again.
Ms. Eshoo. Good.
Mr. Furchtgott-Roth. The point I was making is that most of
the disputes between CLECs and incumbent local exchange
carriers are not under Federal jurisdiction. They are under
State jurisdiction.
Ms. Eshoo. And the others, what about the others?
Mr. Furchtgott-Roth. We have implemented something that is
popularly referred to as the ``rocket docket,'' that is an
expedited review process for these types of complaints.
Ms. Eshoo. So there is--you are saying that there is a good
timeframe around it because they are expedited expeditiously?
Mr. Furchtgott-Roth. For some of the disputes, it requires
the agreement of the parties. I won't say that they are all
being handled that way, and I am sure there are some that are
probably taking a lot longer than they should.
Ms. Eshoo. Thank you. Anyone want to add anything to that?
No? Thank you, Mr. Chairman.
Mr. Tauzin. I thank the gentlewoman.
The Chair recognizes the vice chairman of the committee,
Mr. Oxley. With the indulgence of members, Mr. Oxley has to sub
for the chairman of the O&I hearing, and with your concurrence,
Mr. Oxley is recognized.
Mr. Oxley. I thank you, Mr. Chairman.
Let me begin by asking about this Satellite Home Viewer
Act. All of you know this is in conference and we are getting
close, hopefully, to an agreement.
One of the issues that remains to be resolved is whether
Congress should direct the FCC to modernize the signal
reception standard, which has been in effect since 1952, and at
least in my estimation doesn't meet consumers' expectations
today as to what is really an effective picture. I also
recognize that Congress must be careful not to jeopardize free,
over-the-air broadcasting.
Mr. Chairman, if Congress were to authorize the FCC to
modernize its signal reception standard, are you confident you
could devise a standard that satisfies consumers' expectations
while also ensuring that localism will continue?
Mr. Kennard. I think we could. I think that the FCC took a
stab at this before Congress passed legislation when we tried
to update our definition of the grade B signal contour for
television stations, to try to deal with this very difficult
problem that consumers face with the advent of the satellite
industry.
Obviously, if you pass legislation and direct us to take
another stab at it in the context of a new and updated
Satellite Home Viewer Act, we will do the best we can. I am not
an engineer so I can't definitively say what the outcomes would
be, but I commend you for taking on this issue legislatively,
and we will certainly do everything we can to make it
successful.
Mr. Oxley. I appreciate it. Surely, the technology has got
to be better today than it was in 1952 in virtually every area,
and I would think that that would be most helpful.
Let me turn my next attention to the WorldCom/MCI merger,
which was approved in September 1998. And I supported that
merger, and I think many members of the committee did as well,
and the Commission found that it was not likely to lead to
anticompetitive effects.
Was part of the assumption of approving that merger, at
least the public interest aspect that you had jurisdiction
over, was that based on the fact that the Bell companies would
soon enter the long distance market and compete in the long
distance area?
Mr. Kennard. We certainly looked at that issue. I don't
think that that was dispositive of our decision in that case.
When we evaluated the MCI/WorldCom transaction, we looked at
the various markets that those companies were engaged in,
consumer long distance, the Internet backbone, and evaluated
each of those market segments to see whether that particular
transaction would serve the public interest, and we were able
to conclude that it would.
Mr. Oxley. Do any of the other Commissioners have any
comments on that?
Mr. Furchtgott-Roth. Mr. Oxley, if I might.
Mr. Oxley. Yes.
Mr. Furchtgott-Roth. I think some of this goes to Chairman
Tauzin's question about the merger review itself. The issue
involved in the WorldCom/MCI before the Commission was not a
review of a merger. It was simply the transfer of licenses, and
my personal view of that is that it in no way implicated issues
outside the license transfer and therefore it in no way
implicated other matters before the Commission, such as you
just described.
Mr. Oxley. So the issue of future competition really was
probably a role for the Justice Department as opposed to the
FCC; is that correct?
Mr. Furchtgott-Roth. The specific question you raised about
whether RBOC entry into long distance--it certainly did not
affect my judgment on that particular set of license transfers.
Mr. Oxley. Thank you.
Commissioner Powell, in the recent proceeding on cable
ownership limits, the Commission provided some relief on
attribution rules but failed to raise the ownership limit above
30 percent for video subscribers. I am perplexed. Given the
trend toward convergence, it makes no sense to have a 30
percent cap for cable, 35 percent for broadcasters and none
whatsoever for telcom. Shouldn't these caps be harmonized or,
better yet, abolished in favor of simple reliance on the
antitrust laws?
Mr. Powell. I personally absolutely agree that there is a
severe need for government to try to harmonize its perspectives
on structural caps and competitive policy, but what gets
complicated is that the caps or the structural limitations like
that derive from different provisions with different
objectives.
When one reads the statutory history and the text from
which the cable horizontal structure limitation applies, you
are struck by the degree to which the legislative history
emphasizes not competitive structural principles but principles
such as diversity and program access markets, which arguably
can be limits substantially lower than antitrust or competitive
policy would suggest.
The numbers--the amount of concentration that results at
that level in a number of markets is relatively modest or minor
from a competitive structural perspective; but when you
introduce additional notions which are more visceral and vague,
like a congressional interest in diversity, which may be
valuable, and want a prophylactic bright line number to be
associated with it, it tends to drive the structural cap lower
than it otherwise might be. In other contexts, we are not
necessarily constrained by those additional legislative
considerations and there tend to be compromises that result in
different caps.
Do I think it is defensible? On a going-forward basis, it
is going to be very difficult to maintain because you are
biasing particular business models and technologies. You are
saying that if you use this service, this type of technology
for convergent services, and you happen to have a little of
this, you are more constrained than another competitor who is
using a different infrastructure and different model, and I
think that we will have a great deal of difficulty with that on
a going-forward basis.
Mr. Oxley. Thank you.
Thank you, Mr. Chairman.
Mr. Tauzin. I thank the gentleman.
The gentleman from Ohio, Mr. Sawyer, is recognized.
Mr. Sawyer. Thank you, Mr. Chairman.
Let me return to the question that our chairman had posed
to the Commission chairman regarding merger reviews. Am I
correct in understanding the line of response that you had
begun to go down was that while you understood the difference
between what was suggested in the 1996 act in terms of merger
review, that the whole business of license transfer remains an
active part of your responsibility. And, although it may look
like a merger review because it is inherently a part of the
activity that is in itself a merger, that you are nonetheless
not discharged from that responsibility to oversee questions of
license transfer which are an inherent part of that? Is that
correct? Am I correct in saying that?
Mr. Kennard. Yes, that is very well said. We have an
obligation to make sure that every one of these license
transfers serves the public interest. It would be foolish, in
my view, when you have an industry that is completely
restructuring, that we would completely ignore the public
interest impact of these transactions on consumers, the rates
that they pay, their ability to get access to competing
programming sources. I mean, that is a bedrock, fundamental
responsibility under the Communications Act. It always has been
since 1934.
That did not change in 1996. We still have that obligation.
When I travel around the country and talk to consumers, they
are concerned about consolidation in these markets. They want
to know what the FCC is doing. So we have invoked our public
interest authority under the act to make sure that they are
protected in the context of these mergers.
Mr. Sawyer. In your original answer you began to go in a
direction that was not the focus that the chairman wanted to
put on his particular question but it was of interest to me,
and that was with regard to the typical time lines that license
transfer reviews entail. You were starting to say that
typically it takes 6 months or less. Could you talk a little
further about the direction you were beginning to go and then
talk about the exceptions to that and the reasons for those
exceptional cases?
Mr. Kennard. Certainly.
Mr. Sawyer. Mr. Chairman, let me mention also that I don't
think my light was turned on when I began my questioning. Thank
you.
Mr. Tauzin. The gentlemen is correct. The Chair is
adjusting accordingly.
Mr. Sawyer. I appreciate it. Thank you.
Mr. Kennard. Thank you, Congressman.
In the overwhelming number of cases, these transactions are
approved or disposed of by the FCC within 6 months. We take
longer when we have a merger involving very complex issues of
market structure. We have to recognize that in the wake of the
1996 act, we are being presented with transactions that were
not possible before, and they are involving a complete
restructuring of this industry, and they are presenting novel
questions of first impression at the agency. That requires
oftentimes that we take more time.
Now, one of the things that we are attempting to do is, as
we get more experience with these large transactions, to give
the public a better sense of certainty about timing. That is
why I announced about a month ago that we are going to charge
our General Counsel's Office with coming up with a merger
review team which will coordinate the efforts of the various
bureaus.
Mr. Sawyer. I assume you mean the license transfer team?
Mr. Kennard. Yes, a license transfer team, correct.
And the General Counsel will be charged with coordinating
these license transfer reviews to make sure that the public has
some sense of certainty about the timing and about when they
can expect a decision and what the role of public input will
be.
Mr. Sawyer. Let me ask you just one further question. In a
time of continuing convergence, can you talk just briefly about
how you intend to define functional distinctions?
Mr. Kennard. Well, we are, of course, guided first and
foremost by the act, and the 1996 act went a long way in
providing the Commission specific statutory definitions for
various services. And we are finding that as the market charges
on and as technology changes, some of those definitions are
being challenged.
Mr. Sawyer. Yes.
Mr. Kennard. And so we are continually trying to fit new
services into various definitions and that is really the
challenge of convergence, particularly when you have different
services regulated in a different way because of the
definitions under the act. We hope that a more functional
approach at the FCC will at least ensure that people in the
agency are communicating better and the public has a better
sense of what to expect.
Mr. Sawyer. Mr. Chairman, I suspect I have used my 5
minutes and appreciate your flexibility with that regard. Thank
you.
Mr. Tauzin. I thank the gentleman. The Chair now recognizes
the gentleman, Mr. Gillmor, for a round of questions.
Mr. Gillmor. Thank you very much, Mr. Chairman.
Commissioner Ness mentioned, so I guess I would direct this
to her as well as the Chairman, about working with regulatory
agencies in other countries. And my question is, from your
experience, are there any other countries you think might be
worth emulating that are doing things better or right?
Ms. Ness. There are a number of countries that have engaged
in innovative approaches based on their own regulatory
structures. For example, we have had very recent meetings with
OFTEL, regulatory commission of the United Kingdom, and have
found some of the solutions that they have been grappling with
to be particularly helpful.
Many other countries are looking to us for our experience
with unbundling. For example, the European Union is trying to
work with its member States to encourage greater competition
within the member States, and one of the issues that it has
been addressing is the unbundling issue. We tend to approach
things a little bit differently.
We are looking at instituting ``calling party pays'' here
in the United States. That is something that has been generally
implemented in Europe, and is the basis for the wireless system
in Europe. It seems to be working pretty well there and in
South America. So we are talking with our colleagues to get
their ideas and to share our experiences with them.
Mr. Gillmor. But there is nobody where we would look at
them and say, hey, they are doing it right, we ought to try to
do it that way, in your opinion?
Ms. Ness. There were----
Mr. Gillmor. Or maybe they are over there looking and
saying, boy, we ought to do it. The FCC does it.
Ms. Ness. Often they look to the U.S. as a model. It
depends on how complex a system they want. For example, we have
the fortune of having oversight authority over not just
telecommunications but also broadcasting, and a number of
countries are examining that structure because of convergence
issues. So we tend to be a little bit further along than many
of the other countries, who are first grappling with
privatizing a telecommunications company that was government-
owned. But there are some new ideas; different approaches where
we may very well share ideas and benefit from their experience.
New Zealand is one country that has adopted a much more
deregulatory structure. It is certainly a much smaller country,
a lot less complex, and it has found that it keeps having to
threaten to regulate in order to achieve some of the reforms
that it was hoping to achieve.
Mr. Gillmor. Has my time expired, Mr. Chairman, or did you
forget to push the button?
Mr. Tauzin. The gentleman's time has almost expired. The
gentleman may proceed.
Mr. Gillmor. All right. Let me just ask you a quick
question. It has been reported that Office of Personnel
Management rules preclude effective utilization of staff. Has
that realistically been a problem?
Mr. Kennard. What rules? I am sorry, Congressman Gillmor. I
didn't get the question.
Mr. Gillmor. Office of Personnel Management rules, that
that has caused a problem in the effective utilization of
employees. Has that been a problem?
Mr. Kennard. Well, I think that anyone managing a
government agency doesn't have the tools that people in the
private sector have, and that is a function of OPM and the
Civil Service rules. We can't give the same incentives. We
can't pay people the same amount. We can't fire people as
easily. So, sure, it is a constraint.
I mean, one thing that would be very helpful is if we could
get buyout authority from Congress, because one of the things
that we are attempting to do in order to implement this plan is
to redeploy our resources so they are more relevant to what is
happening in the marketplace. It would be very, very helpful if
Congress would give us authority to be able to buy out some
employees that don't have necessarily the skills that we need
to facilitate competition in this new environment.
Mr. Gillmor. Thank you.
Thank you, Mr. Chairman.
Mr. Tauzin. The Chair thanks the gentleman and the Chair
now recognizes the gentlewoman, Ms. Cubin, for a round of
questions.
Mrs. Cubin. Thank you, Mr. Chairman.
The first question I want to ask is of Chairman Kennard. I
have not seen the text of last week's order on universal
service, but I understand that Wyoming will receive an
incremental $3 million in high-cost support. I wondered what
specific requirements will be included in the Commission's
order to ensure that this incremental support flows to
Wyoming's ratepayers.
Mr. Kennard. Well, the order that we adopted last week,
does provide authority for the State regulators to certify how
that additional support is going to be used, and we insist that
any additional support must be used to serve universal service
needs of the State. So we will rely in the first instance on
our colleagues at the Wyoming State level to make sure that
that money is used appropriately.
Mrs. Cubin. Thank you.
Commissioner Furchtgott-Roth, the FCC voted 4-to-1 to
approve this new way of determining universal service subsidies
for large- and medium-sized phone companies, and you voted
against the plan so obviously you don't believe it is the best
way to determine subsidies. I just wondered why not, and what
do you think would be the best way?
Mr. Furchtgott-Roth. Mrs. Cubin, I have spoken about this
often. I have written quite a bit about it. The Commission has
adopted an extraordinarily complex cost model to allocate funds
for universal service. My background is as an economist. I have
worked with cost models during much of my professional career.
This is one of the most complicated, if not the most
complicated, cost model I have seen used in government. It is
built--it has taken some time to build and it is supposed to be
reflecting a technology that is changing far more rapidly than
our capacity to imitate.
I am troubled by the complexity. It is a model that changes
very quickly. It is something that is not transparent and
obvious to consumers. It is very difficult to explain to the
people of Wyoming exactly why they are getting this amount of
money as opposed to some other amount of money.
I would have preferred a much simpler approach; rough
justice, if you will. But I think it is better to be
approximately right than exactly wrong, and I think that this
model is exactly wrong.
Mrs. Cubin. Thank you.
This question or statement, or whatever, I would like
anyone who feels like they would like to respond to it to
respond to it. The recent explosion of mergers in the
telecommunications industry obviously has had a major impact on
competition and economic development, not only in Wyoming but
all across the Nation. I am a cosponsor of Chip Pickering's
legislation which has been introduced to establish time limits
for FCC review of mergers and acquisitions, because, you know,
we all are very concerned about the timeframe in approving
these.
And here is something that happens that I would like you to
respond to, because you as a Commission hold up approving
mergers based on, quote/unquote, an agreement with the
companies that are merging, and that might be--you have to
increase your prices. In the case of television, it hasn't been
increasing the programs. But I guess the point I am trying to
make is that you leverage certain policies based on approving
mergers. And so what gives you the authority to do that?
I mean, shouldn't Congress be the one that makes that
decision, or those policy decisions? I mean, they might be very
good policies or they might not be good, depending on how you
look at the issue, but nonetheless shouldn't those sort of
things be up to the Congress?
Mr. Kennard. They absolutely should be up to the Congress,
and when we look at these transactions I believe it is our
responsibility to fulfill our mandate from Congress to ensure
that they serve the public interest. Now, that means ensuring
that no merger can be approved if it would undermine the
fundamental goals of the 1996 act.
So most of the inquiries that we undertake when we look at
these transactions have to do with ensuring that this
consolidation is not going to undermine your fundamental goals
to bring competition to the marketplace.
Mrs. Cubin. Well, it seems to me that the FCC is using your
authority over the mergers and license transfers in a way that
achieves your own policy objectives. Like another chairman
might choose to use as leverage for different objectives, like
I said, the example of increasing the payments. I know you are
saying it is for the public good, but when it comes to a policy
question like that, that is your opinion of the public good and
the Congress should be setting that policy.
Mr. Kennard. Well, what we typically do, Mrs. Cubin, is
make sure that when we evaluate these transactions they are not
undermining what we believe are the goals of the 1996 act. In
delegating to the Commission authority to review these
transactions, we have to use our best judgment as to how they
would further the congressional goals, and we typically do this
consistent with the act and the Administrative Procedure Act,
which requires that we develop a record. We certainly don't do
this in a vacuum. We often hold public hearings. We develop
records. We hear from everyone who has an interest in these
particular transactions, and we hear oftentimes from many, many
Members of Congress.
So I really view our role as one of pulling together all of
this information and making our best judgment as to how the
public interest will be served.
Mrs. Cubin. Well, I knew that is what you would say but I
think we need to just talk about it. I will give you a call.
Mr. Kennard. Love to.
Mrs. Cubin. Thank you.
Mr. Tauzin. The Chair thanks the gentlewoman.
The gentleman, Mr. Stearns, is recognized for a round of
questions.
Mr. Stearns. Thank you, Mr. Chairman. I just ask unanimous
consent to make my opening statement a part of the record. I
didn't get it in.
Chairman Kennard, welcome. The question I have is under
your ``Promote Opportunities for Americans to Benefit from the
Communications Revolution,'' you state that the 5-year
performance measure goal is to have 100 percent of our schools
and libraries connected to the Internet. And I guess my
question is, is it fair to assume that once 100 percent of the
schools and libraries are wired to the Internet and the E-rate
program has fulfilled the objectives of providing universal
service under the section, will it be sunsetted then?
Mr. Kennard. I think the funding requirements will
certainly change. The E-rate is administered pursuant to
Section 254 of the 1996 act. So we would not have unilateral
authority to sunset it, but we certainly are setting the
funding levels for that program to accord with demand. So I
would expect that once we get the schools and libraries wired,
then the funding requirements would change. There would be, for
example, many fewer requirements for money for internal
connections to wire the schools. There would be some residual
needs to maintain the system and also to provide the capacity,
because that is funded from the discount matrix, but I think
the funding requirements would certainly change.
Mr. Stearns. Commissioner Furchtgott-Roth, your comments. I
think the question is many Members of Congress would just like
to see if this thing is going to be sunsetted or is this going
to ultimately just continue on and on?
Mr. Furchtgott-Roth. Mr. Stearns, as you know, I have
written about this extensively. I have grave doubts about the
legal underpinnings of the program as it is currently
constituted. I think the chairman is quite right that the
demand might change once there is 100 percent. But let me point
out that a teeny, tiny, insignificant portion of the funding
right now goes for what could conceivably be called really
internal wiring. Most of the money right now goes for very
complicated, sophisticated computer equipment, and I don't know
whether the demand for that will ever go away.
Mr. Stearns. Is this complicated computer equipment at the
libraries, or where is it?
Mr. Furchtgott-Roth. Oh, anywhere you can put it, Mr.
Stearns.
Mr. Stearns. I think what you are saying is this money is
not going for the library and schools but it is going for more
sophisticated equipment elsewhere?
Mr. Furchtgott-Roth. Well, the computer equipment, let me
be clear, probably is physically located in the libraries and
the schools, but the point is that even once there is 100
percent connectivity to the Internet----
Mr. Stearns. You will still need this?
Mr. Furchtgott-Roth. [continuing] people may still want to
upgrade.
I have asked, I am not sure whether I have gotten a clear
answer, whether schools that receive a lot of money for routers
and servers in the first year, whether or not some of the
funding in the second year is for similar equipment. I don't
know at this point.
Mr. Stearns. Are you saying that you think that not only
would it not be sunsetted but this clearly could--the money, it
would just be an ongoing government spending program and we see
another, what people call entitlement, which I generally like
to use as government spending?
I mean, from what you are saying, it seems like this will
be an ongoing government spending program. Is that your honest
appraisal of what we have here?
Mr. Furchtgott-Roth. That is one possible outcome.
Mr. Stearns. Okay.
Mr. Kennard. Would you allow me to clarify the record on
one point?
Mr. Stearns. Sure. Yes, sir.
Mr. Kennard. I just wanted to make clear that E-rate
funding does not go for certain hardware in schools. It doesn't
go to pay for actual PCs or software, the computer hardware.
The computer equipment that I believe Commissioner Furchtgott-
Roth was referring to were the routers and servers.
Mr. Stearns. The servers and routers, I understand.
Mr. Kennard. That equipment.
Mr. Stearns. But after you do that, it should be done. It
shouldn't be continuing to go on and on, because you can make
the argument that, well, these routers and servers are obsolete
after 5 years or 2 years, and we have to get new ones, and
pretty soon this little program, well intended, is going to
cost more and more and go on indefinitely. I think the FCC
should try and make a commitment to sunset this program somehow
because you are taking taxpayers' money to do it.
Mr. Kennard. Well, again, we don't have unilateral
authority to sunset it. A lot of the expenses that are being
incurred today do go for the inside wiring piece of the
program. It is not an insignificant amount of money. As I
recall, it is 40 or 50 percent of the funding requirements.
Mr. Stearns. Commissioner Furchtgott-Roth, would you like
to comment on that?
Mr. Furchtgott-Roth. Mr. Chairman, with all due respect, I
believe that the categories that the Commission has adopted
make it appear that it is for internal connections, but if you
go and look behind what is actually under internal connections
it is primarily computer equipment such as routers and servers.
If you look at the amount that is actually for, say,
coaxial cable or fiber within the schools, I think that is a
very small portion of what is being called internal
connections, or at least that is what I have been told.
Mr. Stearns. Do you think that the authority under section
254 of the 1996 act didn't allow the FCC to sunset this
program? I mean, do you have the authority to sunset this
program, in your opinion?
Mr. Furchtgott-Roth. Mr. Chairman, I think that section 254
is quite clear, that the Commission is to establish discounts
for the provision of telecommunications services to schools and
libraries. No, sir, I do not believe we have the authority to
sunset those discounts.
Mr. Stearns. So not----
Mr. Furchtgott-Roth. That is for what I would consider to
be the discounts on telecommunications services and advanced
services, which clearly would include services; but whether
that includes the purchase of very sophisticated computer
equipment, that is what I have substantial doubts about.
Mr. Stearns. Okay. Thank you, Mr. Chairman.
Mr. Tauzin. I thank the gentleman.
The Chair is now pleased to recognize the ranking minority
member, Mr. Markey, for a round of questions.
Mr. Markey. Thank you, Mr. Chairman, very much.
Mr. Tauzin. Mr. Markey, let me extend your time just a
second and ask unanimous consent to submit questions from our
colleague, Congressman Ed Towns, for the Commissioners to
respond to in writing. Without objection, it is so ordered.
The Chair will ask general consent that any members who may
wish to submit questions in writing might do so and we will ask
the Commission to respond within the next 30 days. Is there any
objection? Without objection, it is so ordered.
The Chair now recognizes my friend, Mr. Markey.
Mr. Markey. Thank you, Mr. Chairman, very much.
As Mr. Bliley mentioned earlier last week, the Commission
adopted new universal support mechanisms for America's largest
local phone companies. The result of the FCC's action is that
subsidies will increase. What is happening that prompts an
increase?
The subsidies aren't for small, rural companies. They are
destined for some of the largest companies in America, in a
booming economy, in an industry that was supposedly becoming
ever more efficient. Universal service issues are always
complex. They are frustrating, but it is a little
counterintuitive to hear that universal service reform means a
subsidy increase.
It makes me a little fearful of what reform might bring to
access-charge reform, or to high-cost rural funding.
Now, Chairman Bliley and Chairman Tauzin have introduced a
Truth in Billing Act that requires all taxes and fees to be
clearly stated on consumers' bills. I have introduced what I
have titled The Rest of the Truth in Billing Act, which would
require that not only the fees be listed but also the
subsidies.
My question to all of you is, where do you think we are
heading generally with universal service, and whether we will
ever be able to list subsidy levels or make the subsidy
portable to other competitors without accurate information on
the economic costs of providing service and the subsidy needed
to ensure universal service?
Competition helps in some areas, without question, but will
it help us everywhere? Can we get--here is my question: Can we
get a State-by-State breakdown of subsidizers and recipient
States, for the record, of last week's decision?
Mr. Kennard. We can certainly provide that information for
you, Mr. Markey, on the interstate side of the ledger. The
Federal jurisdiction is responsible for only about 25 percent
of the universal service funding obligations, so we have all
that data and we could provide that.
[The following was received for the record:]
On October 21, 1999, the Commission adopted a new forward-looking
support mechanism to provide high-cost universal service support to
non-rural carriers. At that time, the Commission also made it clear
that current support levels would remain unchanged for some time under
a ``hold harmless'' provision. Specifically, under this provision, non-
rural carriers will not receive less support from the new mechanism
than they would have received from the current mechanism.
This new forward-looking mechanism provides support to non-rural
carriers in certain high-cost states. The Commission announced in
October 1999 that the states in which non-rural carriers are expected
to receive forward-looking universal service support included Alabama,
Kentucky, Maine, Mississippi, Vermont, West Virginia, and Wyoming.
On November 2, 1999, the Commission's Common Carrier Bureau
released the attached Public Notice and spreadsheet listing the
estimated annual support amounts to be provided to both rural and non-
rural carriers in each of the 50 states, the District of Columbia, and
Puerto Rico. The support amounts shown in the spreadsheet are estimates
based on procedures and data available at the time of release. It
should be noted that the reform of high-cost universal service support
is an ongoing process, and support amounts are subject to review and
revision.
[GRAPHIC] [TIFF OMITTED] T1037.001
[GRAPHIC] [TIFF OMITTED] T1037.002
Mr. Kennard. We are not privy to all the State information.
To get to the other aspects of your question, though, universal
service and access charge reform are part of a big puzzle that
we have been grappling with, as you know, since the 1996 act
was passed.
It is somewhat of an evolutionary process. We have been
implementing reform of both access changes and universal
service in stages. Last week, we took a cut at it for the
nonrural companies. It was significant for our competition
policies because it put universal service funding for the
nonrural companies on a forward-looking cost basis, which is
important for competition.
It takes another step toward making universal service more
explicit so it can become portable, as you recognize.
I think the next stage of universal service must be to make
sure that it is technology neutral. You point out in your
remarks that competition in technology is changing this
marketplace, and I think that there are providers out there who
can provide our universal service needs more efficiently than
the wire line carriers. We have got to have a system to make
sure that the most efficient providers, be it a wireless
carrier or satellite carrier, has access to that subsidy money,
because that will be best for consumers.
Mr. Markey. Could I continue a couple of seconds, Mr.
Chairman?
Mr. Tauzin. The Chair will grant the gentleman additional
time. Without objection, so ordered.
Mr. Markey. So just up in my own region, we might subsidize
an area of Maine, for example, which used to be part of
Massachusetts until the Compromise of 1820 and they broke it
off to let Missouri in as a State, the Missouri Compromise,
based upon cost models of what it might cost a traditional
local phone company like Bell Atlantic to serve that area, yet
Bell Atlantic Mobile with cellular service might serve the same
area for a fraction of the cost. What is the service that we
are subsidizing?
Mr. Kennard. Well, the Commission defines, pursuant to your
directive, what the baseline universal service needs are, and
that particular service is subsidized. My own view is that
historically there has been somewhat of a bias toward
subsidizing the traditional wire line carriers. But as wireless
becomes much more useful to consumers, as many consumers start
to look to wireless for a substitute for wire line services,
you get all the digital bells and whistles on your wireless
phone, and wireless can be used more efficiently, particularly
in rural areas. I think then we ought to start shifting our
focus and make sure that the wireless carriers are part of the
subsidy approach.
Mr. Markey. I was in Framingham, Massachusetts, in my
district yesterday morning, in the poorest part of this
community. We have had 5,000 or 6,000 Brazilians move in in the
last 10 years, and it qualifies for the full E-rate subsidy,
and the community has decided that they would build a brand-new
school in this community, incented in part by the E-rate,
knowing that much of the service and the equipment could, in
fact, be installed to help these children gain access to the
skill set they are going to need.
Every corridor, each poster is in Portuguese and in
English, and as they teach using these computer technologies,
they help to bring these kids along.
As we know, 50 percent of all of the children in the United
States are going to be minorities by the year 2030. That is
only from 1969 to today, not that long, I think, from most of
our perspectives. We don't think of that as a long time ago.
So it is important that we continue, I think, to emphasize
how important it is to make sure that every kid gets access to
these skills, because clearly we are going to depend upon these
younger people to pay for the Social Security and Medicare
Trust Fund for all of us when we are in our old age, and they
have got to get access to it.
Mr. Tauzin. What do you mean?
Mr. Markey. It is a good program.
And I think it is also important for people to understand,
because a lot of people in rural America, I think, get a little
bit ticked off about the E-rate program fee when they see it on
their bill. And I think it might help them a lot if they could
also see on their bill, perhaps my father could see on his
bill, that he is subsidizing to the tune of 20 bucks or 200
bucks some rural consumer's ability to really get phone service
at all.
And I think as long as everyone understands the slosh that
goes on as part of this telecommunications policy, they could
easily see that perhaps the rural Americans are the greatest
beneficiaries of this universal service program, and that just
adding in a little bit here that helps the poorest children get
access to a skill set that is indispensable to our Nation's
ability to be able to democratize access to information and
ultimately to capital in our society is working today.
It is demonstrable, this great happiness I find in most
communities, all communities in my district, in terms of kids'
ability to get it. I personally want to congratulate the FCC on
implementation of the E-rate program.
I know definitively that there is no sunset authority in
the legislation and that will just have to be a battle we have
here in Congress if anyone wants to wage it, but it necessarily
invokes, then, all the subsidies that go to rural America to
give them low-cost phones. If we do believe in free market
economics, then we might as well go for it all the way. If we
are going to stop subsidizing poor children, we might as well
subsidizing wealthy farmers as well, because that is exactly
what our program in America today makes possible.
I thank you, Mr. Chairman.
Mr. Tauzin. I thank the gentleman.
The Chair will ask the indulgence of the committee. The
Chair will have to leave in just a minute and leave the
committee in Mr. Gillmor's hands.
With the indulgence of the committee, I would like to put
two questions on the record, without objection.
The first, Mr. Chairman, regards the freeze that has been
issued on the issuance of licenses commonly known as MAS, M-A-
S, the multiple address systems. It is the licensing of the
capacity of utility networks to monitor their utility and
railroad networks.
My understanding is that public safety radio services are
exempt from auctions, but the Commission has put a freeze on
these licenses because you are considering whether the agency
should auction these licenses in the future.
I have sent you communications on it, but it is a public
safety issue that I would appreciate very much if you all would
focus on it and respond to the committee, because we are
getting some concerns expressed from public utility groups
about the safety of their systems without these capacities.
The second thing is something we have all been kind of
kicking around here, that I wanted to also put in the record
and get your response to.
Chairman Kennard, you announced indeed that the agency has
received congressional approval to create the new enforcement
and consumer information bureaus. As we are looking at the law,
I think it is 5B, it indicates, generally speaking, that from
time to time as the Commission may find necessary, the
Commission shall organize its staff into integrated bureaus to
function on the basis of the Commission's principal workload
operation.
There seems to be very clear authority in the law for you
to create new bureaus, dismantle old ones, reconfigure your
bureaus according to workload, and it goes on to further give
you the right, as you deem necessary, to provide legal,
engineering, accounting, administrative, et cetera, services to
those bureaus.
Why in your plan do you refer to congressional approval in
the creation of bureaus? Do you need congressional approval?
And if so, when?
Mr. Kennard. Yes. It is my understanding that we have to
get approval from our appropriators whenever we reappropriate
funds to establish a new bureau or a large organizational unit,
and so we always talk to both the Appropriations Committee and
also the Commerce Committee so that everyone is informed. That
is what we did in this instance.
Mr. Tauzin. So you have authorized authority?
Mr. Kennard. Yes.
Mr. Tauzin. You are simply concerned that the appropriators
have some language in the appropriations bill that makes you go
back to them?
Mr. Kennard. Yes. It is required by statute, section 605 of
the Appropriations Act.
Mr. Tauzin. You are tougher than we are.
The Chair will now put Mr. Gillmor in the chair and yield
to the gentleman, Mr. Shimkus, for a round of questions.
Mr. Shimkus. Thank you, Mr. Chairman.
Chairman Kennard, I would like to follow up just on that
last point. Would the appropriation requirement for the growth
of new bureaus necessitate a larger piece of the appropriation
pie, or is that just for reorganization within the current
budgetary boundaries?
Mr. Kennard. As I understand, it is the latter. Whenever we
reprogram funds to fund a new bureau or a large organizational
unit, we have to get approval from our appropriators.
Mr. Shimkus. Thank you. I have been around long enough now,
you know my consternation with the E-rate and the billing, and
really I kind of agree with my colleague from Massachusetts
that we ought to have truth in billing and shine the light of
day and let the public understand. That would help our
discourse here in the public forum as people understand what
the universal service fund is, and breaking it out.
You know, I can go back to my poor rural farmers, based
upon commodity prices this year, and debate that.
I think he brings up a good point that I would be receptive
in addressing and shining the light of day on the universal
service fund to debate what the E-rate is, what the assistance
to rural America is.
I would love to hear the Portuguese being spoken with a
Massachusetts accent. I am sure he is probably taking language
studies now for all of those new Portuguese, or actually
Brazilians who speak Portuguese. Excuse me.
Mr. Markey. Will the gentleman yield?
Mr. Shimkus. I will.
Mr. Markus. Every time the gentleman hears Theresa Heinz,
who is Portuguese, married to Senator John Kerry, you are
hearing a Boston accent with a Portuguese twist to it.
Mr. Shimkus. Well, I haven't run in those circles yet but I
look forward to it.
Mr. Markey. Me neither. Me neither.
Mr. Shimkus. Let me just ask, going back to the Telecom
Act, and of course we use that to establish your valid position
that the E-rate has been established based upon the Telecom Act
and section 254. I wanted to use that to segue into broadband,
where broadband is not addressed. And I wish the chairman could
have stayed because I am trying to get your position on the
chairman's broadband bill because I am of the position that
what consumers really need, we need multiple pipes with
multiple choices. I think that is what the chairman brings to
the table with his legislation, and I would ask the chairman to
respond first and then if anyone else would like to chime in
after that, that will be my question to the dias.
Mr. Kennard. Certainly. Well, I know there are a number of
bills that are pending that address this area, and we as a
Commission have not taken a position formally on any of the
legislation. We typically serve in our role as the expert
agency to provide information and expertise to assist all of
the proponents of the bills. As a general matter, it has been
the policy of the Commission to try to promote as many
incentives as we can for broadband deployment.
I personally believe that we should create a little oasis
for broadband, where any company that wants to deploy broadband
should be able to do it in an unregulated environment or a
significantly deregulated environment, because I believe that
the American public need these broadband services. It is
important for electronic commerce. It is important for our
country to maintain its dominance as the world leader in the
Internet.
So I encourage this policy debate about broadband and we
will certainly commit to do everything we can to help from our
end.
Mr. Shimkus. But it is your impression--and obviously this
was not addressed in the 1996 act so we really need to talk
about it legislatively in the forum, is that correct?
Mr. Kennard. I think that people make arguments that it is
or it isn't covered by the 1996 act. I think it is fair to say
that the explosion of broadband wasn't expressly contemplated
in the act, but a lot of technologies aren't contemplated in
the act and we have to interpret the act in a way that
accommodates them. We have done that historically.
Mr. Shimkus. Do any of the other Commissioners want to add
to this? If not, then, Mr. Chairman, I yield back my time. That
is the only question I had.
Mr. Gillmor [presiding]. The gentleman yields back. The
gentleman from New York, Mr. Engel.
Mr. Engel. Thank you, Mr. Chairman.
Mr. Kennard, about 2 years ago, I think it was, you and I,
and Mr. Powell was there as well, attended a hearing in
committee that Jesse Jackson had put forth to talk about
minority ownership, I believe it was of radio stations at the
time, and the conclusion that was come to at that time was that
there had been slippage.
I am wondering if you can enlighten us as to the ensuing 2
years, has there been a stoppage of that slippage or are we
still on the same path?
Mr. Kennard. I think, unfortunately, we still are on the
same path. With the consolidation that we are seeing in the
radio industry, it is harder for new entrants, small
businesses, including minority and women-owned companies, to
get a foothold in that marketplace.
So I would encourage you and your colleagues to do
everything you can to address that issue. There are some
encouraging efforts underway. There is legislation that has
been offered in the Senate by Senator John McCain to
reinstitute the tax certificate policy. My colleague, Michael
Powell, had a lot to do with that.
We have encouraged the large group owners in the radio
business to reach out a helping hand to small and minority
businesses, and some of them have been receptive to that. But
there is a lot more that needs to be done to try to at least
get a little bit of a counter current going against this tide.
Mr. Engel. The media obviously has tremendous influence in
our day-to-day lives, and I believe the impact on this
Information Age influence needs to be examined but it doesn't
always promote accurate images. I introduced the Ethnic and
Minority Bias Clearinghouse Act of 1999 to address this issue.
Essentially what this legislation does, it would shed a good
deal of sunshine on our media. It does not attempt to place any
mandates upon broadcasters, but the legislation instructs the
FCC to begin compiling data on complaints, grievances and
opinions regarding radio and TV broadcasts in their depiction
of ethnic and minority groups.
So I would be interested in hearing the FCC's current
capability to compile such relevant data, and I am wondering if
any of the Commissioners would like to comment on the
legislation.
Mr. Kennard. I think that you put your finger on a very
important issue for our society, and that is the way that
minorities and women are portrayed in the mass media. From time
to time we hear of incidents of literally racial, in my view,
hate crimes perpetrated against minorities over the airwaves.
We saw one recently in the Don and Mike Show involving just an
outrageous attack on Hispanic Americans over the airwaves.
We collectively as a society need to be monitoring this and
we need to know what is happening on our airwaves. That is not
to say that we are going to censor or we are going to intrude
on anyone's First Amendment rights, but I believe that what you
are doing is right, to try to get a handle on who is doing this
and at least shed some light on these practices.
Mr. Engel. Well, thank you. I just want to say for the
record that I just received a letter from our former colleague
Kweisi Mfume, who is now head of the NAACP, putting the full
force of the organization behind this legislation, in support
of it. I am really hoping that we can move it because I think
it is very, very important. And I thank you for your
sensitivity on the legislation.
The FCC earlier this year released a study and conducted a
forum on the impact of advertising practices on minority-owned
and minority-formatted broadcast stations. I am wondering if
you could elaborate on this study and what will happen now as a
result of this study on this important issue.
Mr. Kennard. We did issue a study in January which
evaluated certain practices in the advertising industry
affecting minority-owned stations and stations that serve
minority audiences that appeared to be systematically
undervaluing minority consumers. These stations were not
getting their fair share of advertising dollars. This was sort
of a preliminary study in nature.
There is a lot more work to be done but it was my effort to
try to shine light on a subject of great importance to minority
consumers, and I am pleased to say that many in the advertising
industry were listening and some advertising agencies stepped
forward and wanted to know more about some of the practices we
uncovered, and we will continue to shed light on this every
chance we get.
Mr. Engel. Obviously I need not tell you, but obviously--
because you are obviously doing it, but sometimes just holding
the hearings and shedding light helps prompt people to move. It
may not be done with legislation, but legislation is always,
obviously, a possibility down the line if we don't see enough
movement in that direction.
Mr. Kennard. Thank you.
Mr. Engel. If I may, I have just one final question, not on
what I have been asking, but I would like to ask Commissioner
Tristani. You mentioned before about the public interest
standard with regard to the conversion to digital and you
mentioned that the FCC should work to define it. I am wondering
if you had--if you could share with us an opinion you would
have on a definition of it?
Ms. Tristani. It has something that certainly we should
examine and, at the very least, I think we could talk about,
when requiring broadcasters to produce local programming, some
kind of local programming oriented to community issues. That
certainly would be a good starting point. That is what
broadcasting is supposed to be about, serving a local
community.
Mr. Engel, if I could add to one of your previous
questions. I think the ethnic clearinghouse bill is an
excellent idea. The Chairman, Chairman Kennard, alluded to a
Don and Mike Show that ran August 8 in Albuquerque and I think
59 other cities. It was a 12-minute segment that I heard where
an Hispanic woman was treated in a manner that no American
should be treated. It was the most racist, bigoted offensive
and demeaning piece of radio that I have ever heard. And
certainly we can't censor that, but we ought to be talking
about how much of that is going on in America. It is just not
right.
Mr. Engel. We thank you and thank you for the comments.
And, Commissioner Kennard, thank you as well. I think it is so
important to focus on this and shed light, again, not to
censure anything, but I think we need to understand what is
going on, and, hopefully, people of goodwill can throw some
cold water on that kind of thing.
Before I yield back, Mr. Chairman----
Mr. Gillmor. The gentleman's time has expired. I would ask
the gentleman to wrap it up.
Mr. Engel. I am wrapping it up. I just wanted to make a
comment that Mr. Markey was talking about his district. I just
want to remind Mr. Markey that he lost his bet to me on the
Yankees and the Boston Red Sox, and Mr. Lewis is going to lose
his bet to me on Atlanta and the New York Yankees.
Thank you, Mr. Chairman. I forget what we bet by the way,
but you lost.
Mr. Gillmor. That was worth the extra time.
The gentleman from Mississippi, Mr. Pickering.
Mr. Pickering. Thank you, Mr. Chairman. I also want to
commend you on the work that you have done on FCC reform.
I am sorry that the gentleman from Louisiana left. Just as
I felt the pain from Mr. Markey with the loss after a
controversial call of the Boston Red Sox, I felt the pain for
the gentleman from Louisiana as the LSU football program has
struggled this year and recently lost to Mississippi State
University after a controversial call. They are beginning to
say in Louisiana that LSU is a drinking institution with a
football problem.
But to the subject at hand, Mr. Chairman, you talk in your
testimony of being faster, flatter, more functional. You talk
about radically restructuring the FCC as we move to competition
and convergence. And so what I want to focus on in my
questioning is how and when you get to the flatter, faster, and
to the radical restructuring. You have a 5-year plan. When in
your vision or in your view, when does that restructuring
occur? Over what period of time? What triggers it?
Mr. Kennard. It is ongoing, Congressman. We established 5
years because that is the requirement that is imposed on all
agencies by the Government Performance and Results Act of 1993
that we come up with a 5-year blueprint. However, we are not
waiting 5 years to implement our plan.
We announced today the creation of two new bureaus which
are an effort to eliminate duplication of efforts in our
enforcement and consumer outreach areas. We are, in addition,
continuing to streamline many of our functions within the
agency. At the same time, we are trying to deal with all the
myriad transactions and petitions and court cases that we have
to deal with. So I really see this as an evolutionary process,
but I share the sense of urgency of this committee that things
are changing fast and we need to change fast with it.
Mr. Pickering. Let me ask you your views on a possible
benchmark that could trigger restructuring. As I understand it,
the New York Public Service Commission has endorsed or
recommended the approval of the 271 of Bell Atlantic. I assume
that has been or will be submitted to the FCC in the near
future. Could you see approval of 271s as a trigger to
restructure, whether it is regionally or nationally, in some
form? Because that really is the indication of competition and
convergence, is it not? And once that has been implemented--I
assume you are trying to balance two objectives: certainty and
stability and the transition in the full implementation of the
act where, as quickly as possible, one set has occurred
restructuring to reflect the realities of the marketplace so
you can be more appropriately structured and more responsive to
the needs of those who are participating in the marketplace.
Would an implementation of 271 be an appropriate trigger for
further restructuring?
Mr. Kennard. I think if the Commission were to approve a
271 application, that would be an important benchmark.
Certainly, it could indicate that in at least one State we have
open markets and that the act is working to incentivize the
opening of those markets. I don't know, however, if that would
be the trigger that would signify a broad-scale reorganization
of the Commission, because we have already committed to doing
that and in fact, are rolling that out.
I think that the 271 process is one that is showing some
encouraging signs that the competitive vision that you outlined
in the act seems to be working in some parts of the country as
companies really do the hard work of opening up these markets.
But I don't think the grant of one 271 application is going to
be symbolic of anything beyond what I have said.
Mr. Pickering. If you had a 271 for an entire region or
for, say, two or three regions, would that then signify
sufficient competition and convergence that it would then
trigger a restructuring based on a competitive model of
regulation versus the old. You talk about the new FCC, is it at
that point that we should have the new structure, the new
order, the new FCC?
Mr. Kennard. I think that you have to look at this from the
eyes of consumers. I think it would be wonderful if we were
able to grant a regionwide 271 application, and that is
something that we have been encouraging the industry to do, to
look at this not just as a State-by-State process but as a
region-wide process. But we have a fundamental obligation to
protect consumers, and as long as some consumers are not
enjoying the benefits of competition and choice, then we have
got to make sure that we are doing everything we can to bring
that to them. So I think it is an evolutionary process, and it
is hard to say that at any given point we have reached
nationwide competition. I think we have got to use our
authority carefully to make sure that we are implementing such
competition for all consumers.
Mr. Pickering. Mr. Chairman, is my time up?
Mr. Gillmor. The gentleman's time has expired, but we are
winding down. If the gentleman wants to extend very briefly, he
may.
Mr. Pickering. Thank you, Mr. Chairman.
Just one other question. You also said on page 7 of your
testimony, more governance for the marketplace means less
government from the FCC. You have your biennial review coming
up in 2000. Can you give any examples of current regulations
that you would propose or recommend to do away with, clean away
the unnecessary, to use the forbearance authority granted to
you? Can you give any examples of that?
Mr. Kennard. Certainly I think we have received 19
forbearance petitions. We have either granted in whole or part
14 of them. We will continue to encourage the industry to file
forbearance petitions so we can use our forbearance authority
which is significant. I think, to be fair, there are some
disagreements among the Commissioners about whether we have
been aggressive enough in using our forbearance authority, and
we will continue to work through those issues.
Mr. Pickering. Would any of the other Commissioners like to
respond to either of my questions, one on the trigger toward
restructuring or the time to restructure and the forbearance?
Mr. Powell. Congressman Pickering, I would just add, with
respect to your 271 question, whether it is a trigger or not,
it is certainly a watershed. A significant amount of time-
consuming effort at the Commission is dedicated to either
issues deeply interrelated with the 271 prohibitions, awaiting
271 relief, and when we reach that day in which those
prohibitions have been lifted, there is a fairly substantial
volume of questions and issues that will largely be mitigated
or transformed. It will certainly be a moment of reflection for
something. Whether it will be to execute a plan similar to this
strategic vision or not, it certainly should substantially
alter the pressures, particularly in the common carrier
converged areas that the 271 prohibitions currently generate a
lot of issues over.
Mr. Pickering. Thank you.
Mr. Furchtgott-Roth. Mr. Pickering, if I may just add on
your second question about biennial review. That is coming up
in 2000. The Commission has an obligation to review all--and I
emphasize all--telecommunications regulations at that time. And
I hope that this will be a comprehensive review.
Mr. Pickering. Thank you, Mr. Chairman.
Mr. Gillmor. The gentleman's time has expired.
I am about to recognize the distinguished ranking member of
the full committee, but I will have to leave, and I will be
turning the chair over to Mr. Fossella, but before I do, I just
want to follow up with one thing from my opening statement on
behalf of both myself and Chairman Tauzin.
I talked about the possibility of putting together a
working group of our committee and the FCC--and, regrettably,
the Chairman has stepped out temporarily--but is that an
agreeable approach for the Commission or should I wait till the
Chairman gets back to ask that? I think 4 of 5 is good enough.
Ms. Ness. I would suspect that we would all be in agreement
on that.
Mr. Gillmor. Thank you very much.
The gentleman from Michigan.
Mr. Dingell. Mr. Chairman, I have a number of questions I
wish to direct to the Chairman of the Commission. In his
absence, I am going to be somewhat incapable of directing the
questions to him.
Mr. Gillmor. I would suggest that we take a very brief
break until he returns, because it is my understanding he will
be back momentarily, and you can start at that point.
Mr. Dingell. I have a number of questions I know he wants
to answer here.
Mr. Sawyer. If I could, I had just a couple of observations
I was going to ask about in a second round. I might fill the
time, if you would be willing to undertake that.
Mr. Gillmor. I think that would be very appropriate.
Mr. Sawyer. Except for the fact that the Chairman is back.
Mr. Gillmor. Very good. We have just recognized the
distinguished ranking member, the gentleman from Michigan.
Mr. Dingell. Thank you, Mr. Chairman.
Mr. Kennard, members of the Commission, welcome to the
committee.
Mr. Kennard. Thank you.
Mr. Dingell. Last month, the Commission issued its UNE
remand order. Of particular note is that the FCC did not
require telephone companies to unbundle network facilities used
to provide high-speed Internet or broadband services to
consumers. Congratulations on that decision. I infer from the
decision that you believe that these advanced network
facilities do not meet the necessary standards contained in the
Communications Act as instructed by the Supreme Court. Is that
true? Yes or no?
Mr. Kennard. Yes.
Mr. Dingell. It is. Very well. Members of the Commission,
do you agree with that statement?
Ms. Ness. Yes.
Mr. Dingell. We don't have a nod button so you have got to
say yes or no. Mr. Powell?
Mr. Powell. Yes.
Mr. Furchtgott-Roth. Yes.
Ms. Tristani. Yes.
Mr. Dingell. Mr. Kennard, from a competitive standpoint, is
there any relevant difference in the market for high-speed
Internet service whether it is provided through telephone line
or cable wire or any other mechanism?
Mr. Kennard. There are differences, yes.
Mr. Dingell. What are those differences?
Mr. Kennard. It is a difference in technology. It is a
difference in regulatory structure.
Mr. Dingell. But the guy who picks up the line, does he
know any difference?
Mr. Kennard. Are you talking about broadband?
Mr. Dingell. I'm calling Chairman Kennard on broadband. Do
I know any difference when I use one mechanism or another?
Mr. Kennard. Most people who are using broadband are not
picking up the phone. They are usually accessing a computer for
Internet access or data services.
Mr. Dingell. Whatever mechanism I use, do I know the
difference?
Mr. Kennard. You probably won't. There are some minor
differences in the way that broadband is delivered, for
example, over coaxial cable as opposed to ``digital subscriber
line'' service or DSL.
Mr. Dingell. But those are minor differences?
Mr. Kennard. Yes.
Mr. Dingell. From a competitive standpoint, are those
differences major or minor?
Mr. Kennard. I would say that they are minor differences in
functionality. They are major differences, though, in
regulatory structure that applies to the providers of those two
services.
Mr. Dingell. What you are saying is there are major
differences to the bureaucrat but minor differences to the
user; is that right?
Mr. Kennard. Not necessarily to the bureaucrat, Mr.
Dingell. They are pretty major differences in law in the 1996
act. A provider of----
Mr. Dingell. What the user sends and receives is pretty
much the same, though, isn't it?
Mr. Kennard. Correct.
Mr. Dingell. Now, what is the argument--is there a strong
argument treating the companies differently when they are
providing essentially the same service?
Mr. Kennard. There is clearly a disparity in the way these
two industries are being treated as a regulatory matter. There
is no question about that. It is a problem of convergence.
Mr. Dingell. Cable is not regulated and the rest of them
are; is that right?
Mr. Kennard. Cable is regulated, but it is regulated
differently.
Mr. Dingell. Regulated differently. Now, does regulation of
either type company seem wise and what would be the argument
for one getting one kind of regulation and the other getting a
different kind of regulation?
Mr. Kennard. Well, I think the goal, to try to put this in
context, is we have two industries that are rolling out, as you
point out, functionally equivalent services, but they are
regulated differently as a function of history.
Mr. Dingell. Why should they be regulated differently when
they are giving functionally equivalent service?
Mr. Kennard. They shouldn't, but the question is, how do we
get them both on an even keel?
Mr. Dingell. Let's address that in a moment here.
Now, in 1979, on September 17, you said, and I quote,
basically we told the Bell companies we want you to get into
broadband. We want you to deploy and compete. I envision a
broadband oasis where anybody who wants to compete in this
broadband marketplace and make the investment to deploy should
be able to do so in an unregulated environment or a
significantly deregulated environment. Is that a correct quote?
Mr. Kennard. Yes. In fact, I reiterated it today.
Mr. Dingell. Those have still been your sentiments?
Mr. Kennard. Yes.
Mr. Dingell. Now, this appears to be an area in which you
and I can agree. I would note, Mr. Tauzin and I have a bill
which would deregulate broadband services from the consumers'
home to the central office for both telephone and cable
companies alike.
Can I assume then from your statement that you think that
we should treat the deliverers of those two different
services--of those two services identical in character by a
different medium in the same fashion or not?
Mr. Kennard. There is one very important complicating
factor and that is the fact that those copper wires that are
transmitting broadband over the telephone lines are also being
used to transmit voice telephony, and that makes it quite
difficult because the goal of the Telecommunications Act of
1996, as I read it, is to make sure that there is competition
not only in broadband but also in voice. And so we have been
charged with ensuring that people who want to access those
copper lines, those telephone lines for voice get access to
them. If the telephone companies are providing broadband DSL
over those same lines, it makes for a very complicated and
difficult situation to put the two industries on an even keel.
Ultimately, I think we should try to.
Mr. Dingell. Why don't you just allow the marketplace to do
that?
Mr. Kennard. Well, that is one reason why I have advocated
deregulation for both of these pipes, but I only think we can
achieve that if we can get to a world of multiple broadband
pipes. I think that the goal here should not be to try to
impose new regulation on anyone but rather to try to develop
ways to get out of this regulatory system for everyone. The
only way we do that is to create incentives for more deployment
not only on cable and DSL but also terrestrial broadcast and
wireless telephony.
Mr. Dingell. Can't you deregulate DSL and cable modem
service without upsetting regulation of dial tone service?
Mr. Kennard. I think it would be difficult because we
have----
Mr. Dingell. Why would it be difficult?
Mr. Kennard. Because it is difficult to separate the copper
wire use for voice and the copper wire use for DSL.
Mr. Dingell. Let's look at this matter. Sprint, MCI,
Worldcom and AT&T control about 75 percent of Internet traffic;
isn't that right?
Mr. Kennard. I can't quote you the exact figure.
Mr. Dingell. Is that close?
Mr. Kennard. I really don't know.
Mr. Dingell. Does anybody know?
Mr. Powell. It is close on backbone transport.
Mr. Dingell. Close on backbone.
Mr. Fossella [presiding]. The gentleman's time has expired.
Mr. Dingell. If I were to say on backbone, would you----
Mr. Fossella. The gentleman's time has expired.
Mr. Kennard. That would be approximately correct, yes.
Mr. Dingell. I do need some more time, Mr. Chairman.
Mr. Fossella. You seek unanimous consent for more time?
Mr. Dingell. I do.
Mr. Fossella. Without objection.
Mr. Dingell. Thank you, Mr. Chairman.
Now, there is another part of the bill that Mr. Tauzin and
I sponsored that allows the Bells to compete in Internet
backbone traffic. Last summer, Mr. Chairman, you accused
incumbent telephone companies of wanting interlateral relief
because they want, and I quote, to throw out section 271 of the
Telecom Act. I take it from that statement you believe that the
Bells would have little incentive to meet the section 271
checklist if they were granted interlateral data relief before
then; is that correct?
Mr. Kennard. I do believe that, yes.
Mr. Dingell. Now, do you know how much revenue is derived
from just long distance voice traffic in comparison to data?
Mr. Kennard. I know that today in America the data traffic
is increasing at a far greater rate than voice today.
Mr. Dingell. What is it now?
Mr. Kennard. Well, it varies carrier to carrier. Some
carriers are moving about half of their traffic on their
networks in the data area versus voice now.
Mr. Dingell. Let's take MCI Worldcom and Sprint. Last year,
in 1998, these two companies had combined revenues of $47
billion. Seventy-three percent or nearly $35 billion of this
amount came from voice or long distance. Only 12 percent came
from data. Now, Mr. Chairman, with nearly $35 billion then up
for grabs, I remind you that you have not even counted AT&T's
voice revenue in this example. Do you still think that AT&T,
the Bell companies have no incentive to get their 271
applications approved? There is $35 billion out there. Is that
not a measurable incentive?
Mr. Kennard. At the same time, you have to look at what is
happening in the long distance marketplace. Prices are
plummeting as a result of competition, which is a good thing,
but it does diminish to some extent the incentives for people
to want to enter that business.
But I think the fundamental point here, Mr. Dingell, is
that it is important that the 271 job get done. That is, it is
important that the vision that you had in the act to open these
markets to competition, that that job get completed. And we
have to create an environment that ensures that the Bell
companies do the hard work of opening up these markets.
Mr. Dingell. Let's look at this and assume your premise is
correct. Once permitted to carry interlateral data traffic, the
Bell companies have no incentive to comply with local marketing
open requirements of the act. Now, doesn't the Commission have
strict enforcement mechanisms at hand to ensure that section
251 of the act is complied with?
Mr. Kennard. Yes, of course.
Mr. Dingell. Do the other members of the Commission agree
with that?
Mr. Powell. Yes.
Mr. Furchtgott-Roth. Mr. Dingell, I would qualify that by
saying that much of the implementation of section 251 is done
through the State commissions in the section 252 process. They
bear the primary responsibility also for enforcement of section
252, and disputes under that go to Federal court.
Mr. Fossella. The gentleman's time has expired.
Mr. Dingell. Could I just ask one more question, Mr.
Chairman? Why doesn't the agency then pursue the means that it
has at hand to enforce the compliance with section 251 of the
act?
Mr. Kennard. But we have enforcement actions ongoing to
enforce those provisions of the act. I think the----
Mr. Dingell. What specifically are those?
Mr. Kennard. Well, we have received complaints about
violations of obligations under interconnection agreements. As
Commissioner Furchtgott-Roth mentioned, though, and he is
exactly right, a lot of this enforcement authority is in the
hands of the States.
Mr. Dingell. You have it, don't you, too?
Mr. Kennard. We have some enforcement authority.
Mr. Dingell. You already indicated you have broad
authority.
Mr. Kennard. We do.
Mr. Dingell. You can't have broad authority and not much
authority. You either have broad authority or you don't have
authority. Why haven't you used it? You haven't told me what
authority you have used or not used.
Mr. Kennard. Well, we want to use more of our enforcement
authority. That is why we are creating an enforcement
division--an Enforcement Bureau rather--to consolidate our
enforcement efforts. We get a lot of complaints from----
Mr. Dingell. Mr. Chairman, remember I asked you to
enumerate what you were doing in this area. So far you have
said you are getting complaints. I understand that you are
probably getting complaints, but you have not told me what----
I ask unanimous consent to receive 3 additional minutes,
Mr. Chairman.
Mr. Fossella. If there is no objection from the gentleman
on my left--I take that as a no. Without objection.
Mr. Dingell. What enforcement actions have you taken?
Mr. Kennard. Well, we have taken all manner of enforcement
actions.
Mr. Dingell. Obviously, with this number, you can tell me
what they are. What are they?
Mr. Kennard. We have received complaints under 253 of the
act to preempt State and local authority.
Mr. Dingell. I am asking about 251. That is the market
opening requirements. What actions have you taken under 251?
253 is interesting, but I have a limited amount of time.
Mr. Kennard. I can't enumerate every enforcement
proceeding. I would be happy to provide you a list of any
enforcement proceedings we have ongoing.
[The following was received for the record:]
This responds to your request concerning the Commission's
enforcement activities related to section 251 and the interconnection,
local exchange market-opening requirements of the 1996
Telecommunications Act.
As a preliminary matter, I note that Commission staff through the
use of the FCC's Accelerated Docket process has assisted in the
informal resolution of numerous local competition-related grievances
between carriers prior to the initiation of a formal complaint. To
date, 16 grievances related to the market-opening requirements of the
1996 Act were informally resolved using this process. The Accelerated
Docket focuses on obtaining practical solutions to practical problems
by requiring that the parties meet with Commission staff for supervised
settlement discussions prior to the filing of a complaint. Staff
focuses the parties on the issues truly in dispute and tables those
matters of lesser importance. Commission staff then analyzes the
relative strengths and weaknesses of the parties' arguments and
communicates this analysis to the parties. It is often after this
critical assessment that the parties move toward settlement. While it
is somewhat difficult to quantify the number of successes in this area,
Commission staff have been instrumental in resolving many of the
disputes brought to it through these mediation processes. For example,
as the attached press release illustrates, GST Telecommunications
recently credited the Accelerated Docket process with resolving a Local
Number Portability dispute with U S West Communications.
The Commission staff also encourages settlement of formal
complaints. In this regard, during the past year, parties settled the
following formal complaints where an incumbent Local Exchange Carrier
allegedly had failed to comply with the Sec. 251, interconnection,
local market-opening provisions of the Act:
1) ACN v. PacBell and North County v. PacBell--ACN and North County
alleged that PacBell refused to make available the terms of an
interconnection agreement that PacBell had with another
carrier.
2) American Network v. U S West--American Network alleged that U S West
violated sections 201(a), 201(b), and 251 by requiring special
construction fees for coin trunk lines.
3) US Long Distance v. Southwest Bell Telephone--USLD alleged that SWBT
failed to provide resold services equal to that SWBT provided
to itself in violation of section 251.
4) Airtouch v. GTE--Airtouch contended that GTE failed to provide new
facilities in a non-discriminatory fashion as compared with
services GTE provided to itself.
5) Airtouch v. GTE Southwest--Airtouch asserted that GTE SW violated
sections 201, 202, and 251 by not providing certain services
and by engaging in wrongful billing practices.
6) RCN v. Bell Atlantic (several cases in multiple jurisdictions)--RCN
asserted that Bell Atlantic's refusal to provide voice mail
service for resale at any price violated sections 251(c)(4)(A)
and (B).
7) RCN v. NYNEX--RCN alleged that Bell Atlantic's refusal to provide
voice mail service for resale at any price violated sections
251(c)(4)(A) and (B).
The following matters relating to an incumbent Local Exchange
Carrier's failure to comply with the local market-opening provisions of
the Act are pending before the Commission:
1) MCI v. Ameritech--MCI alleges that Ameritech has violated the ``opt
in'' provision of section 252(i), which allows CLECs to opt
into various provisions contained in previously approved ILEC
interconnection agreements.
2) MCI v. Bell Atlantic--MCI alleges that Bell Atlantic has violated
sections 202(a) and 201(b) of the Act by not allowing MCI to
combine access service and local transport, an unbundled
network element.
3) Enhanced Telemanagement, Inc. v. U S West--ETI alleges that U S West
has violated section 251(c)(4) of the Act, which requires ILECs
to resell retail services to CLECs, by refusing to provide
Centrex services for resale.
4) AT&T v. NYNEX--AT&T alleges that NYNEX improperly branded calls from
NYNEX's payphones in violation of sections 201, 251, and 271 of
the Act.
5) ACSI v. BellSouth--ACSI alleges that BellSouth's failure to provide
unbundled loops is in violation of section 251 of the Act and
their interconnection agreements.
6) MCI v. Pacific Bell--MCI alleges that Pacific Bell's ``winback''
retention calls to customers who requested a change in their
local service is in violation of sections 201 and 251 of the
Act.
7) MCI v. Pacific Bell--MCI alleges that Pacific Bell's requirement
that a customer provide a letter of authorization prior to
releasing customer network configuration violates sections
201(b) and 251(c)(4) of the Act.
8) Paging Network v. BellSouth--Paging Network alleges that BellSouth
is unlawfully charging for the delivery of LEC originated local
traffic in violation of sections 201(b), 202(a), and 251(b)(5)
of the Act.
9) AT&T v. Bell Atlantic, MCI v. Bell Atlantic--Plaintiffs allege that
Bell Atlantic failed to abide by the Commission's Bell
Atlantic/NYNEX merger order in the setting of prices for
unbundled network elements.
10) MCI v. Bell Atlantic--MCI contends that Bell Atlantic failed to
negotiate performance measures for interconnection services in
good faith in violation of the Commission's Bell Atlantic/NYNEX
merger order.
Finally, I would note that the Commission has not yet exercised its
discretionary authority under section 503(b) to issue monetary
penalties against an incumbent Local Exchange Carrier for conduct
allegedly in violation of the section 251, local market-opening
provisions of the Act.
News Release
for immediate release--november 30, 1999
GST Telecommunications Reaches Settlement With US WEST Regarding Local
Number Portability Complaint
(VANCOUVER, Wash.) GST Telecommunications, Inc. (Nasdaq: GSTX), a
leading Integrated Communications Provider (ICP) in California and the
western United States, today announced it has reached a settlement with
US West Communications regarding a complaint GST filed against the
carrier earlier this year for its failure to implement Local Number
Portability (LNP) in accordance with federal rules. Terms of the
settlement are confidential.
In June, GST filed a request with the Federal Communications
Commission (FCC) to resolve the complaint on an expedited basis
utilizing the ``Rocket Docket'' procedures adopted by the FCC to
address cases or complaints which have an immediate bearing on
telecommunications competition. By utilizing the Rocket Docket
procedures, GST was able to expedite a settlement with US West. As a
result, GST will suspend further pursuit of the formal complaint.
``We applaud the efforts of the Accelerated Complaint Resolution
Branch of the FCC,'' stated Brian Thomas, vice president of external
affairs of GST. ``The FCC established the Rocket Docket procedures to
expeditiously solve carrier problems emerging as a result of a more
competitive carrier environment. From GST's perspective the process
worked the way it was intended, and further enhances the company's
ability to compete effectively moving forward.''
Local Number Portability allows customers to retain their existing
phone numbers when changing to another local telephone service
provider. LNP was mandated by Congress as part of the Telecom Act of
1996 in order to level the playing field between the Incumbent Local
Exchange Carriers, such as US West, and competitive exchange carriers,
such as GST.
GST Telecommunications, Inc., an Integrated Communications Provider
(ICP) headquartered in Vancouver, Wash., provides a broad range of
integrated telecommunications products and services including enhanced
data and Internet services and comprehensive voice services throughout
the United States, with a robust presence in California and the West.
Facilities-based GST continues to focus on its western regional
strategy by anchoring its next generation networks in local markets and
connecting them via long haul fiber networks. Visit GST's Web site at
www.gstcorp.com.
For more information, please contact: GST Telecommunications, Lisa
Miles (800) 667-4366
Mr. Dingell. Have you laid in place any fines or penalties
against the Bell companies?
Mr. Kennard. Not that I am aware of.
Mr. Dingell. That would be evidence that you were engaged
in enforcement actions, would it not?
Mr. Kennard. Yes.
Mr. Dingell. If you have not initiated that kind of
process, I just assume there is no market opening problem. If
you have got a market opening problem, broad authorities that
you could use on the Bell companies, you have not laid in place
any fines or penalties on the Bell companies, I just assume
that you have either no violations or that you are uninterested
in that matter. Is that an incorrect assumption on my part?
Mr. Kennard. I think you have to put this in context, Mr.
Dingell.
Mr. Dingell. No, no. You have got this broad authority. You
have not used it. You are constraining the Bells in entering
other areas, engaging in other competition, but you have not
done anything to use your authority under 251. I must,
therefore, assume either you are uninterested in it or that you
have--or that you have not had any violations.
I have asked you if you have had violations. You have not
told me you were aware of any violations. I am therefore of the
conclusion that you are either uninterested in the matter or
that you have no violations.
Mr. Kennard. Your assumptions are incorrect.
Mr. Dingell. Why are they incorrect?
Mr. Kennard. They are incorrect because it wasn't until
January of this year that the FCC's authority to promulgate
specific pricing rules in this area, for example, were upheld
by the United States Supreme Court. These rules were in limbo
for almost 3 years.
Mr. Dingell. My $40 Cassio watch tells me that this is
October 26. That is 10 months into the year. So I just assume
that if you had diligent interest in this matter, you would, by
October 26, 1999, after having been freed in January, have used
those 10 months to either find some abuse or to, in fact, lay
in place your authority of fines and penalties. You have not
done so.
My time is expired. I am left regrettably without time and
without any evidence that you have either shown diligence or
interest in this matter.
Thank you, Mr. Chairman.
Mr. Kennard. May I respond?
Mr. Fossella. By all means.
Mr. Kennard. First of all, Mr. Dingell, I will provide
you--I am sorry that I don't have an enumeration of all our
ongoing enforcement actions. I will provide them to you in
writing so that you will have some confidence that we are
enforcing section 251 of the act.
Second, I would like you to know----
Mr. Dingell. Remember, Mr. Kennard, we are talking about
section 251. Not 253 or any of the other sections.
Mr. Kennard. That is fine. We will give you information on
251.
Second, I want you to know----
Mr. Dingell. Could that also include fines and penalties?
Mr. Kennard. Yes, absolutely.
Mr. Dingell. I assume that is the best evidence of
diligence, is it not?
Mr. Kennard. I would also like you to know----
Mr. Fossella. Perhaps we could bring this outside
somewhere.
Mr. Kennard. I would also like you to know, Mr. Dingell, we
are creating an enforcement bureau at the FCC. I have charged
that bureau with enforcing section 251 as its top priority, and
so we will be bringing to you many, many enforcement actions in
the near term.
Mr. Fossella. The gentleman's day has expired.
The Chair recognizes himself for just a few minutes.
For the Chairman or the Honorable Commissioners, it
parallels I guess with what many have indicated today. That is,
with the emerging competitive market speed, the regulatory
process still in some people's mind grinding at precompetition
speed, what would be wrong in your opinion with the statutory
requirement mandating of the FCC to act on petitions, request
for waivers, and applications within 90 days?
And, second, if the Congress requires that a certain FCC
action shall be completed within a certain time period, what
happens if the FCC fails to act in a prescribed time period?
Should there be sanctions, penalties, or consequences resulting
from this failure?
I welcome answers from any of the Commissioners.
Mr. Kennard. I think you touched on an important issue and
that is how are we going to get this agency to act faster on
more matters. I think that putting a time limit on every agency
action would not be a very productive solution because we are
so inundated with petitions and requests and transactions, we
have to prioritize, and that means that we have to address the
issues of the greatest importance, be it enforcement or
transactions or whatever first. That means that some things are
going to get put at the bottom of the pile. It is the only way
to manage any organization.
I think that what we should do is have expected time lines
on most categories of proceedings and work diligently to meet
them. But I think that if we were to put a statutory time limit
on everything the agency does, you would really elevate form
over substance, and it would be a disaster.
Mr. Fossella. Do any of the Commissioners have any
difference of opinion?
Mr. Powell. Not really difference of opinion. I actually
believe that any honest managerial process needs the ability to
shift priorities and resources for which a time constraint can
limit. You also have the problem of reconciling different time
limits that are adopted for different purposes but nonetheless
rely on the same resources.
The one thing that I also think everyone should consider as
a caution is time limits can also produce bad decisions. I have
observed in government just as often, under the pressure of the
gun, silliness manifest itself rather than efficiency; and you
can get an eleventh hour decision that must be done by tomorrow
that gets done in a way that is counterproductive to the
industry, markets and consumers. And so one should think long
and carefully about where to appropriately introduce those
timelines and where they might nonetheless produce not better
decisions but actually a worse one.
Mr. Fossella. Thank you.
Ms. Ness?
Ms. Ness. To the extent there are timelines, they should
also reflect the need for the Commission to receive complete
and accurate information from applicants or from the licensees.
Consequently, if someone wanted to play it out until the end of
the game, so to speak, by holding the ball and not providing
the information, that should not work against the ability of
the Commission to complete its review appropriately and in a
timely manner.
Mr. Fossella. Please.
Mr. Furchtgott-Roth. Mr. Fossella, the Commission has had
in the past many statutory deadlines. There are many in the
1996 act. I recall at the time there was skepticism about
whether the Commission could meet some very ambitious
timelines. I think the Commission did. I am not sure that it
resulted in bad decisions.
There is also, and I don't have my handy copy of the act
right in front of me, but I believe it is in either section 7
or 8 of the act, a reference to public meetings and public
meetings in part having as an objective to clear out issues
that have been around for some period of time. And it may very
well be 90 days already in statute. That is a lofty goal, an
ambitious goal that the Commission often doesn't meet, but I
think that the duty of an agency is to follow the law. And if
Congress decides in its wisdom to impose deadlines upon the
FCC, that we can and we will meet those deadlines.
Mr. Fossella. Thank you.
Mr. Sawyer has been waiting patiently. I will come back
after Mr. Sawyer finishes to follow up on the other question
that I had asked. The gentleman is recognized.
Mr. Sawyer. Mr. Chairman, I appreciate your indulgence. I
will take less than a minute. I just have three very brief
observations.
With regard to the matter that a number of the members of
the Commission referred to that Mr. Engel brought up, an
inadvertent mispronunciation suggested to me that there really
is something that we can do. We may not be in a position to
censor that kind of use of the air waves but we are all in a
position to censure it, and I hope that we all will.
Second, in the coming days the Commission will receive a
letter from me and a number of colleagues asking you to look at
the question of the so-called 211 universal hotline for
community service. I believe it has enormous merit, not only
for its own sake but in relieving inappropriate pressures on
911 hotlines in ways that will benefit communities broadly in
accessing services quickly that are most important in people's
lives.
And, third, with regard to the E-rate, there's been a great
deal that has been said about E-rate, but the notion of
building internal connections within schools has one additional
application beyond connecting teachers and students with the
outside world. It can be the single most important security
device that we can put into a school, far more important than
any metal detectors or guards that are put into schools. It
connects teachers with one another and with the office in a way
that all too often is sadly lacking in our schools. It is an
expenditure, an investment for which there is virtually no cost
if the interconnections are put into the school in the first
place for learning purposes. I hope you will encourage that
broadly as you counsel with schools with regard to the use of
E-rate funds.
I thank you, Mr. Chairman. I yield back whatever time I
have.
Mr. Fossella. The gentleman yields back.
As a follow-up, the chairman recognizes himself for just a
few more minutes, and then we will call this to an end.
Just to follow up to the responses, if I am not mistaken
the Department of Justice imposes certain statutory timelines
on its decisionmaking. I have got a sense that perhaps
statutory timeline results sometimes in bad decisions, in haste
or just for the fact that you are up against this deadline. I
am just curious as to whether, Mr. Powell, or the Chairman, if
you have any thoughts on the Department of Justice--as to
whether there are parallels that can be drawn between the two?
Mr. Powell. There are parallels. The distinction is an
important one because one I would favor and one I would
caution. Prophylactic timelines that have no ability to be
extended or have no ability to be benchmarked are a different
thing.
What the Department of Justice has, as it has under the
Hart-Scott-Rodino Act, a number of mandatory periods in which
certain things have to happen for the continuance of the
investigation. Those kind of benchmarks I would wholeheartedly
support.
Many of the merger proposals coming out of both the Senate
and this body, including Congressman Pickering's bill,
recognize the notion of, for example, saying that in the first
45 days of a petition for review, the Commission would be
required to authorize further investigation. It would be the
equivalent of the Department of Justice's Hart-Scott process.
That is, it is a quick look and if in that period you don't
find things that warrant a deeper investigation, the
investigation is over, and the case is closed.
If the bureau believes that issues merit continued
consideration, it should have to get the vote of the Commission
to do so. But if five responsible individuals were to vote that
there are serious public interest issues necessitating a
continuation of an investigation, I think that would have
merit. What's missing in our process is that kind of guided
limitation on a temporal scale which I think we need and I
think are the right course for you to consider.
Mr. Fossella. Which leads to the second part of the
question I asked before. If certain actions are not completed
within a certain time period as prescribed by law, is there any
consequence that should result from that given the amount of
capital and the speed at which these mergers are taking place
and its implications in the capital marketplace and
shareholders and ultimately consumers?
Mr. Kennard. We do have timeframes on some of our
decisionmaking in the tariffing area, for example, and for some
formal complaints. We have statutory timelines where you have
directed us to act within a certain period of time. And for
some types of proceedings, that can be helpful.
I think that what has happened in the last year is the
agency has been inundated with these mergers. Most of them are
being handled quite quickly. Some of them are very, very
complex and difficult, and we are taking more time. And I think
in many cases that is appropriate because, unlike the
Department of Justice, when we issue a decision in a
transaction, we have to write an order, we have to make sure
that we have addressed the arguments of all the parties who
come before us. We have to make sure that that order is
comprehensive and will withstand judicial scrutiny. So that
makes our review very, very different from the Department of
Justice. And in very complex cases, it takes longer, and that
is a fact of life. And, ultimately, I don't think that we
should put consumers at risk in the interest of what might be
an artificial time limitation.
Mr. Fossella. I guess where my question is--asking
unanimous consent for 3 additional minutes. Hearing no
objection----
If there is a prescribed time period as we often impose
upon the private sector and folks in the private sector don't
meet it, there is often a penalty to enforce that time period.
I am just curious as to what, if any, penalties should be
imposed upon something--an entity like the FCC if they do not
comply with prescribed time periods?
Mr. Kennard. Well, unlike the private sector, our mandate
is to protect the public. And so if you are penalizing the FCC,
for example, by forcing the transaction through when it hasn't
been fully reviewed or there might be public interest
ramifications, the only people that get hurt are consumers that
we are trying to protect in our review.
I think the answer here is to provide the Commission the
resources it needs to make sure that we can deal with these
market-restructuring issues and for the Commission to impose
its own internal timelines in consultation, of course, with
Members of Congress on what is reasonable. And that is a dialog
for us to have that I would like to continue.
Mr. Fossella. Ms. Ness?
Ms. Ness. If I could add, I am the one surviving
Commissioner who actually lived through all the implementation
of the Telecom Act of 1996. We made great effort to comply with
each and every deadline, we met every single deadline that was
imposed upon us under the act. We continue to meet the
deadlines that are imposed upon us. The intentions of the
Commission I think are pure in attempting to meet those
deadlines.
Mr. Fossella. Thank you.
Last question is, if I heard the Chairman correctly, you
spoke to the process in the merger review. Some would suggest
the repeal of section 221(a) was an ability--congressional
signal to limit the review process or possibly to really leave
it up to the Department of Justice or the FCC. Therefore, I
would be curious to know the substantive aspects that the FCC
performs in a merger review and what does it add or what does
it look for specifically that the Department of Justice does
not?
Mr. Kennard. Well, it is a very difficult legal standard.
The Department of Justice and Commissioner Powell can speak to
this because he was chief of staff over there for a time.
The Department of Justice operates with a different
statutory obligation. It has the burden of proof to demonstrate
that a merger would lessen competition.
The FCC's mandate is different. The parties come before the
FCC. They bear the burden of demonstrating that a transaction
serves the public interest. So the burden is different. The
legal standard is different.
Because we have ongoing regulatory oversight, we are to
make sure that no transaction will undermine our ability to
regulate the industry and promote the pro-competitive thrust of
the 1996 act. So we look at these transactions differently.
That is not to say that there aren't some overlapping issues
but fundamentally our thrust is very different from DOJ's.
Mr. Fossella. Are there any other thoughts on that matter?
Mr. Powell?
Mr. Powell. I would just conclude by saying the Chairman is
correct that the standards are different and there are
different considerations. I am not so sure the Justice
Department review is easier because they don't have to comply
with the Administrative Procedures Act. They have to bring a
lawsuit in Federal court and bear the burden of convincing an
impartial judge of the merits of their case when they are
posed, and that is a relatively significant exercise.
The other thing I would say, in all candor, we shouldn't
let the standards of the details overstate the significance and
substantiality of the duplication. I know what horizontal
merger analysis looks like. I know what vertical integrated
merger analysis looks like. And I have worked on four or five
of these at the Commission. The standards may be different but,
in substantial measure, they are antitrust analyses, and they
can come out differently because of the standard. They can
choose or be directed to different kinds of conditions. But I
just won't accept that the overwhelming majority of the
analysis is not fundamentally different than the merger
horizontal guidelines that are employed in other agencies.
Mr. Fossella. So a lot of the work is duplicative?
Mr. Powell. Sure. The same sort of analysis. Whether that
duplication is a warranted governmental act is a question for
you.
Mr. Furchtgott-Roth. Mr. Fossella, the Commission receives
petitions to transfer tens of thousands of licenses every year,
tens of thousands of which only a small percentage receive some
degree of close scrutiny. We have no consistent set of written
rules about how we pull out some for close scrutiny and let the
tens of thousands of others go through, some of which involve,
frankly, mergers of enormous corporations. Moreover, once we
have pulled a few license transfers out which are in every way
identical to the tens of thousands which are unchallenged, we
have no standards, no written standards, no written rules about
how we will review them. It is a process that is made up as we
go along.
Very often, the standards that we use look all too familiar
to being the market analysis review that is already done at the
Department of Justice or at the Federal Trade Commission.
I think it is correct that the Commission has an obligation
to find license transfers that are in the public interest, but
we do not have a consistent set of rules about how we reach
that determination. I can't see any clear way that anyone on
the outside applying for a license transfer at the Commission
would know how their application is going to be treated,
whether it is going to be treated the same as the tens of
thousands that go through unscathed or whether they are going
to be pulled aside, held up for months.
Mr. Kennard. If I might respond, frankly, I don't think
there is a lot of mystery here. We are charged with a public
interest review that requires a public process. We seek
comment, and to some extent the extent of our review is
informed by the input that we get from the public. That being
said, I think Commissioner Furchtgott-Roth has raised some
valid concerns about our merger review process which we are
attempting to address internally by trying to come up with some
consistency of review in the General Counsel's Office, and at
least have some overall coordination.
But I think that if you were to consult with people who
appear before the FCC and ask them if they have any expectation
about when their transactions are going to be approved and how
they are going to be handled, I think that there is a fairly
high level of certainty about what to expect. Many of these
licenses are routine, and they go through quite quickly. It is
only the large transactions that involve novel issues of market
structure that draw more public input that we need to address.
Mr. Fossella. Ms. Ness, please.
Ms. Ness. I would also add that it would be informative if
you would look at the record of the mergers that we have
approved. Why do I say that? Because so often parties on the
outside have asked us to take this action or that action in
conjunction with a merger. We have not gone in those
directions. We have narrowly approached these mergers to ensure
that we really were applying the public interest standard to
effectuate the goals of the act but not go off in other
directions. And so I think if you look at the record you will
see that our efforts have been to open markets where further
concentration might hinder competition.
And then, finally, we should move faster. There is no
question about it. Some of the proposals that you have heard
put on the table today are ones that we ought to be working
with, and I am sure collectively we will be able to do that.
Mr. Fossella. I would just close and suggest that perhaps
the Chairman and the Commissioners look at ways in which to
facilitate the process. I would imagine you could create a
system whereby you almost sign off on the Department of Justice
criteria if you believe that they are satisfactory, which
presumably they are, rather than have some of these applicants
do the same exact work for just a different entity. After all,
you all fall under the same leader, last time I checked.
Ms. Ness. There is one problem with that, and that is our
record is fully public. Department of Justice records are not
made available to the public, and there are some issues
involving privacy.
Mr. Fossella. Perhaps there is a somewhere in between
whereby the two could come together.
If there is nothing else, this meeting is adjourned. Thank
you very much for your patience.
This subcommittee stands adjourned until 10 a.m. Thursday,
when it will meet to conduct an oversight hearing on the 1-year
anniversary of the Digital Millennium Copyright Act. Thank you
very much for your patience.
[Whereupon, at 12:36 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:
Federal Communications Commission
Office of the Chairman
November 5, 1999
The Honorable Edolphus Towns
U.S. House of Representatives
2232 Rayburn House Office Building
Washington, D.C. 20515
Dear Congressman Towns: This is in response to your letter of
October 22, 1999 regarding the Telecommunications Development Fund
(TDF).
I share your commitment to TDF and your desire to ensure that the
Fund is able to provide assistance to small telecommunications
businesses to the maximum extent possible. In this regard, the
Commission fully supports the legislative proposal submitted by TDF to
amend the Telecommunications Act of 1996 so that TDF may be funded from
interest earned on downpayments by auction winners as well as from
interest on upfront payments by all auction participants.
Current agency estimates indicate that over the past three years,
at least $73 million in interest could have been generated from these
spectrum auction accounts if the TDF amendment were enacted into law.
Enactment of this amendment will help ensure that the TDF more fully
meets its intended goals to ``promote access to capital for small
businesses in order to enhance competition in the telecommunications
industry; stimulate new technology development, and promote employment
and training; and support universal service and promote delivery of
telecommunications services to underserved rural and urban areas.''
In my legal opinion, which was formed while I was General Counsel
of the Commission, the proposed TDF amendment is necessary for the
following reason. The current statute provides that: ``[a]ny deposits
the Commission may require for the qualification of any person to bid
in a system of competitive bidding pursuant to this subsection shall be
deposited in an interest bearing account . . .'' with the interest
thereafter directed to TDF. 47 U.S.C. 309(j)(8)(C). Pursuant to
Commission regulations and auctions rules, the only deposits an
applicant must make to become a qualified bidder are upfront payments.
Downpayments are not required, or even calculated, until after the
auction is completed and winners have been determined. Because the
current statutory language is clear on this point, I do not believe
that the Commission can adopt any other interpretation without an
amendment to the legislation.
I am glad to know that you are working to develop such an
amendment. Please let me know if I can be of any further assistance in
this highly worthwhile effort.
Sincerely,
William E. Kennard
Chairman
______
Responses for the Record of Hon. William E. Kennard, to Questions of
Hon. Barbara Cubin
Question: In a January letter I asked the Commission to look into
an issue regarding WyoMedia Corporation which filed an application for
authority to construct a new television station on Channel 16 in
Scottsbluff, Nebraska. Yesterday, my office received a reply from you
(Chairman Kennard) telling me that you anticipate that the Commission
will open the window very shortly for all ``freeze'' waiver applicants
to amend their applications. Could you tell me specifically when that
will happen? You may remember from my letter to you that WyoMedia filed
its application in 1996. To me 3 years seems to be a unreasonably long
time for an application review.
Answer: On November 22, 1999, the Commission's Mass Media Bureau
issued a Public Notice, DA 99-2605, ``Mass Media Bureau Announces
Window Filing Opportunity for Certain Pending Applications and
Allotment Petitions for New Analog TV Stations.'' The Public Notice
announced a window filing opportunity through March 17, 2000 to allow
persons with certain pending requests for new analog (NTSC) television
stations to modify their requests, if possible, to eliminate technical
conflicts with digital television (DTV) stations and to move from
channels 60 through 69.
This window is available for WyoMedia Corporation since its pending
application seeks a new full-service NTSC television station on
channels 2-59 at a location inside of the so-called ``TV Freeze Area.''
Question: The recent explosion of mergers in the telecommunications
industry have a major impact on competition and economic development
not only in my home state of Wyoming but throughout the Nation.
Recently, my colleague, Chip Pickering, introduced a measure to
establish time limits for FCC review of mergers and acquisitions, and
because I have long been concerned about the treatment of mergers in
the telecomm industry, I am pleased to be a co-sponsor of the
legislation.
I am interested in the fundamental principle of fairness and
timeliness in reviewing and approving mergers and avoiding
extraordinary delays. I am interested to know, Mr. Chairman, from your
perspective, how do you intend to remedy the concern that we all have
on Capitol Hill with respect to the time consuming merger review
process by the FCC? Is legislation necessary?
Answer: I do not believe legislation is necessary to address the
FCC's merger review process. Instead, I have asked the Commission's
General Counsel, Christopher Wright, to organize an intra-agency merger
transaction team that will be in place by January 3, 2000. This will
streamline and accelerate the transaction review process.
The new intra-agency transaction review team will establish
deadlines for rapid processing of transfers of control associated with
transactions. The goal will be to complete even the most difficult
transactions within 180 days after the parties have filed all of the
necessary information and public notice of the petitions have been
issued. Finally, the new team will also work to make the transaction
review process even more predictable and transparent, so that
applicants know what is expected of them, what will happen when, and
the current status of their application. This is also consistent with
the Commission's current restructuring focus to transform the FCC into
a more functional, faster and flatter organizational entity.
Question: As a follow-up to the last question: with respect to my
home state, Qwest Communications and US WEST filed joint applications
for approval of their planned merger with the FCC and state
commissions, including Wyoming, over two months ago. The companies also
filed notifications of their transactions with the US Department of
Justice and the Federal Trade Commission and received clearance to
proceed with the merger in just three weeks.
The timely replies of the DOJ and FTC show that this process can
work quickly. When do you anticipate that the FCC will review this
pending application? Can you assure me that the FCC will not prolong
the process of this particular merger?
Answer: Pursuant to the Communications Act, the Commission has an
obligation to determine whether a proposed merger is in the public
interest. In determining whether a merger is in the public interest,
the Commission considers not only the competitive effects of the
proposed merger, but also takes into account various factors including
the effects of the merger on Congress' goals as stated in the
Telecommunications Act of 1996. In other words, the standard used by
the Commission differs from those used by the FTC and the Department of
Justice. Under the Act, the Commission must determine whether the
merger applicants have demonstrated that the proposed transaction, on
balance, serves the public interest, considering both its competitive
effects and other public interest benefits and harms. If our analysis
reveals that the public interest harms of a proposed merger will
outweigh its public interests benefits, the Commission may require the
merging parties to comply with the conditions designed to ensure that
the competitive promise of the merger is met. Further, the Department
of Justice and the FTC review process allows a ``no action'' decision
that requires no explanation (and no comment from interested parties.)
By contrast, the Administrative Procedure Act and the Communications
Act require full due process, including the right of interested parties
to receive notice and file comment and the right of dissatisfied
parties to seek judicial review.
As you know, on August 19, 1999, Qwest and US WEST filed
applications with the Commission requesting Commission approval for the
transfer of control of licenses and authorizations held by subsidiaries
of the two companies to merge with and into Qwest. The applications
were placed on public notice on September 1, 1999; and many parties
filed comments. In their reply comments, the applicants outlined a
divestiture plan that they claimed would bring them into compliance
with section 271. As you know, section 271 prohibits a Bell Operating
Company from providing in-region, interLATA services before opening its
local markets to competition. Given the importance of section 271 and
its pro-competitive goals, on October 19, 1999, the divestiture plan
also was placed on public notice. The pleading cycle is now complete.
Accordingly, the Commission will carefully and expeditiously review
the application filed by Qwest and US WEST. We hope to have a final
decision on this merger during the first quarter of 2000.
Question: You have stated for the record that the high speed data
market is not an inherently monopolistic market. Would you say that
this statement applies in rural areas like Wyoming?
You have also stated that one of your highest priorities is to
ensure that rural America has access to the same telecommunications
services available to the large urban areas. We share that goal. Is
there a legislative or regulatory solution that you see that would
immediately address the ``digital divide''?
Answer: I believe that, even in our most rural areas, we can not
yet conclude that there is a natural monopoly in broadband services.
Competition in all areas of telecommunications is still emerging and
will continue to grow. There is facilities-based competition in the
western part of Wyoming in areas served by US WEST and Silver Star
Communications and there is resale of residential and business
telephone service throughout the state. PCS wireless service has also
been launched. In addition, Wyoming has infrastructure important to the
development of competitive broadband services. Every community except
two is served by digital switching equipment located in each respective
central office and cable television is also available to 82 % of the
homes in Wyoming. Satellite services are available throughout Wyoming,
especially in thinly populated areas (and the cost of satellite-based
services, unlike wire-based ones, is insensitive to distance). All
these technologies are platforms for broadband.
Of course, I share your concern about rural area access to advanced
services. We are just beginning the second of our regular inquiries
into the deployment of broadband to all Americans, and are giving
particular attention to the question of how soon and whether
competition will bring broadband services to rural areas. Early in the
new year, we will issue a Notice of Inquiry on this issue and welcome
your and your constituents input.
It should also be noted that we are not required to rely entirely
on market forces to bring broadband services to rural areas. Section
706 of the 1996 Act provides that if broadband is not being deployed in
a reasonable and timely fashion to all Americans, we and state
regulators should use a variety of deregulatory and competition-
promoting techniques.
Finally, I assure you of my commitment to ensuring that rural
Americans share in the benefits of technological advancements in
telecommunications services. To that end, I have asked the universal
service Joint Board to speed up its review of the services that are
eligible for universal service support, so that they may consider
whether broadband services should be included. In addition, at the
recommendation of NARUC, the FCC has created a Joint Conference with
the states to facilitate the dialogue among state and federal
regulators about how to bring advanced services to all Americans.
Responses for the Record of Hon. William E. Kennard, to Questions of
Hon. Michael Oxley
Question: I wrote the Commission last month outlining our concern
that the FCC has not acted on Internet LOAs, or letters of agency, to
allow consumers to change pre-subscribed telecom carriers over the
Internet. Twelve of my colleagues signed onto that letter. I understand
the issue is linked to the slamming order, but our point was that
Internet LOAs should be non-controversial and should be separated out
and acted on promptly. Any chance of that?
Answer: I share your interest in resolving the issue of Internet
LOAs. As indicated, however, in my response to your recent letter
regarding LOAs, we received comments from many interested parties on
this issue but there is not unanimous agreement on whether Internet
LOAs should be permitted. Several commenting parties expressed concern
that submitting a carrier change using the Internet would not, by
itself, provide sufficient consumer protection if it were not
accompanied by additional verification. For example, most PUCs express
concern with the security of Internet transactions and urge the
Commission to use any safeguards possible, e.g., getting alternate
forms of identification and verifying changes through three prescribed
methods. Some suggest that Internet LOAs are fertile ground for
slamming. Others suggest downloading LOAs from the Internet and sending
hard copies to carriers. One consumer group is against Internet LOAs
altogether. By contrast, others strongly support the use of the
Internet to facilitate the submission of carrier changes. Because of
the importance of this issue, and in light of the strong and varied
sentiments in the comments, we intend to move as quickly as possible to
evaluate and resolve the issue of Internet LOAs.
Question: (for Commissioner Furchtgott-Roth) Congressman Stearns
and I have written the Commission twice to voice concern over the FCC's
proposed low power radio service. Our biggest concern is over the
impact on current interference standards. Can the Commission assure the
Committee that if it goes forward with the proposal there will be no
weakening of current interference standards and no increase in
interference with existing license holders?
Answer: I share your concern over the FCC's proposed low power
radio service. As I said when I dissented from the adoption of the
proposed notice of rulemaking, the Commission can authorize extremely
few new stations under existing interference rules. In order to create
any real amount of new service, protection standards must be loosened
so far as to eliminate third and even second adjacent channel
safeguards.
Accordingly, I regret that I do not think it is possible to say
that there will be no weakening of current interference standards and
no increase in interference with existing license holders. I fear that
these license holders, as well as their listeners, will bear the brunt
of the effects of this proposal. Moreover, any new low power stations
would themselves likely receive interference from full power stations,
potentially making the promise of their service illusory. In sum, this
proposal is likely to create more harm than good on all sides, that is,
for current broadcasters, their listeners, and even new low power
stations.
Responses for the Record of Hon. William E. Kennard, to Questions of
Hon. Paul Gillmor
Question: Private land mobile users have informed the Commission
for years that their spectrum needs are not being met. What plans do
you have to ensure their access to needed spectrum?
Answer: Private land mobile users' communications requirements can
be satisfied in a number of ways. One is through the reallocation of
spectrum from other uses. The Commission is currently considering an
industry proposal that includes a request for allocation of 6 MHz of
the 746-806 MHz spectrum to be licensed to Band Managers. These Band
Managers could coordinate spectrum for private use. This spectrum is
being recovered from TV channels 60-69 as a result of digital
television implementation. Also, in the Spectrum Policy Statement of
November 22, 1999, the Commission said that it would consider
establishing a new Land Mobile Communications Service in 10 megahertz
of spectrum in the 1390-1435 MHz bands. While these bands are not
contiguous, they are sufficiently close together to allow manufacturers
to design cost-effective equipment. This band was also identified last
year by the Land Mobile Communications Council as possibly being
appropriate for limited allocation to private land mobile users.
The use of new and more efficient technologies will also increase
the amount of spectrum available for private land mobile users. For
example, due to the Commission's ``refarming'' proceeding, the use of
narrower channels has been interjected into spectrum designated for
private services. Consequently, we are seeing an increasing capability
to accommodate many more private licensees and users.
Finally, the use of cellular and PCS systems is another way to meet
some private land mobile users' wireless spectrum needs. New procedures
and protocols are being developed for and incorporated into commercial
systems that will benefit the private land mobile user.
Question: In 1997, the Congress designated 24 MHz for public use in
the 746-806 MHz band. There is presently a proceeding underway with
respect to the auction of 36 MHz of commercial spectrum in the same
band. What efforts will you undertake to ensure that both federal and
municipal police, fire, and rescue services will be protected from
harmful radio interference?
Answer: In developing a band plan for this 36 MHz of spectrum, a
primary goal of the Commission is to ensure that activation of services
in these bands will not impair public safety operations through harmful
interference. The Commission has under consideration several proposed
band plans, including proposals to establish ``guard bands'', i.e.,
slices of spectrum adjacent to the public safety spectrum, that would
be licensed to Band Managers who would be responsible for assigning
frequencies and coordinating frequency use to avoid interference.
Additionally, the Commission is also considering other proposals to
license such guard bands for low power commercial uses.
Whatever band plan is ultimately adopted by the Commission, let me
assure you that my fellow Commissioners and I recognize the critically
important role that public safety plays, and will protect public safety
operations from harmful interference.
I expect a decision on the aforementioned band plans to be adopted
within the next few weeks.