<DOC>
[107th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:71488.wais]
FCC CHAIRMAN MICHAEL K. POWELL: AGENDA AND PLANS FOR REFORM OF THE FCC
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
MARCH 29, 2001
__________
Serial No. 107-21
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
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COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
ROY BLUNT, Missouri THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia BILL LUTHER, Minnesota
ED BRYANT, Tennessee LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
David V. Marventano, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Telecommunications and the Internet
FRED UPTON, Michigan, Chairman
MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas BART GORDON, Tennessee
CLIFF STEARNS, Florida BOBBY L. RUSH, Illinois
Vice Chairman ANNA G. ESHOO, California
PAUL E. GILLMOR, Ohio ELIOT L. ENGEL, New York
CHRISTOPHER COX, California GENE GREEN, Texas
NATHAN DEAL, Georgia KAREN McCARTHY, Missouri
STEVE LARGENT, Oklahoma BILL LUTHER, Minnesota
BARBARA CUBIN, Wyoming BART STUPAK, Michigan
JOHN SHIMKUS, Illinois DIANA DeGETTE, Colorado
HEATHER WILSON, New Mexico JANE HARMAN, California
CHARLES ``CHIP'' PICKERING, RICK BOUCHER, Virginia
Mississippi SHERROD BROWN, Ohio
VITO FOSSELLA, New York TOM SAWYER, Ohio
TOM DAVIS, Virginia JOHN D. DINGELL, Michigan,
ROY BLUNT, Missouri (Ex Officio)
ROBERT L. EHRLICH, Jr., Maryland
LEE TERRY, Nebraska
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Powell, Hon. Michael K., Chairman, Federal Communications
Commission................................................. 14
Additional material submitted for the record:
Powell, Hon. Michael K., Chairman, Federal Communications
Commission, letter dated June 15, 2001, enclosing response
for the record............................................. 64
(iii)
FCC CHAIRMAN MICHAEL K. POWELL: AGENDA AND PLANS FOR REFORM OF THE FCC
----------
THURSDAY, MARCH 29, 2001
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Telecommunications
and the Internet,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2123, Rayburn House Office Building, Hon. Fred Upton
(chairman) presiding.
Members present: Representatives Upton, Barton, Stearns,
Gillmor, Cox, Deal, Cubin, Shimkus, Wilson, Pickering,
Fossella, Davis, Ehrlich, Terry, Tauzin (ex officio), Markey,
Rush, Eshoo, Engel, Green, McCarthy, Luther, Stupak, DeGette,
Harman, Boucher, Brown, Sawyer, and Dingell (ex officio).
Also present: Representatives Buyer and Walden.
Staff present: Howard Waltzman, majority counsel; Andy
Levin, minority counsel; and Hollyn Kidd, legislative clerk.
Mr. Upton. Good morning, everyone. Good morning, Mr.
Chairmen--men, m-e-n. Good morning. What I would like to do is
try to limit members' opening statements and, if they do so, we
will give them a little extra time on the question time, if
that works out. We will find out if it works or not.
Today, we are going to hear from Chairman Michael Powell.
No stranger to this subcommittee, Chairman Powell has taken the
reins of the Commission at the beginning of the 21st Century,
and I believe it is very good news for our country.
This is an auspicious occasion, since our subcommittee is
the very first congressional panel which will hear from Michael
Powell in his capacity as Chairman.
Today, our Nation is facing an economic downturn. In part,
it is Chairman Powell's leadership and vision that will help us
get back on course. On Tuesday, the President was in my
district speaking about his plan to get our economy back on-
track, and he noted ``In the final quarter of 2000, the
American economy grew at a sluggish 1.1 percent pace. In that
same quarter, there was no growth at all in new business
investment.''
Again last week, another major U.S. high-tech company
announced that it will lay off 4,000 workers. This trend must
change. And I think part of the formula will be reforming the
FCC and lifting regulatory obstacles from the technology
industry.
Mr. Chairman, this panel knows you are committed to the
cause, and I can say this today, that is music to our ears. If
the FCC is going to keep pace with the speed-of-light advances
of the Technology Age, it is going to have to dramatically
retool itself. I have full faith and confidence in you, and I
plan on giving you the time and resources you need to do the
job and then assess where Congress may need to take the
initiative to implement or perfect your plans.
Approving mergers more quickly and efficiently will indeed
spur business. Working with industry to deploy high-speed data
services will bring communities together, foster innovation
and, most importantly, create jobs. The technology,
telecommunications and mass media sectors need to be fully
realized, not to mention the incredible benefits to the
consumer and job creation which likely would accompany them.
We cannot afford to have an FCC which is mired in
bureaucracy and lethargic decisionmaking or, as the case often
has been, non-decisionmaking. Ultimately, I believe Congress
may need to make perspective reforms permanent to hedge against
future retreat.
Speaking last year, you stated this: ``We at the FCC are
saddled with an organizational structure that may not be adept
at efficiently addressing certain developments in the market.
We have limited resources, a legacy bias, and limited ability
to keep pace with the technological changes and trends.
Therefore, we must constantly and honestly ask ourselves
whether a proposed rule can be crafted quickly and clearly
enough to make a positive contribution to the market, for a
really good rule adopted too late may as well not have been
adopted at all.''
Chairman Powell, I appreciate your acknowledgement of these
issues, and I look forward to working with you on positive
reforms. And as I look at my congressional district, I hear
from business leaders about how the lack of broadband access is
retarding growth in Southwest Michigan. I also have great
concern about what is going to happen to my constituents if we
flip the digital TV switch in 2006. What about spectrum
management? Will my constituents have access to the less wire
and satellite telecommunication services?
These are but a few issues which confront our Nation and my
district. In large part, resolution of these weighty issues
relies upon FCC decisionmaking, which makes reform of the FCC
all the more essential.
Chairman Powell, we look forward to your testimony and
perspective on FCC reform and the myriad which face this
subcommittee and the country.
I yield to the ranking member of the subcommittee, my
friend Ed Markey, from Massachusetts.
Mr. Markey. Thank you, Mr. Chairman, very much, and I want
to commend you for holding this very important hearing, and I
want to welcome the new Chairman of the Federal Communications
Commission, Chairman Powell, to our committee.
Chairman Powell, people are constantly asking me to compare
you to your father, and what I always tell them is you are just
as smart as your father, but you have a lot more power to
affect the world. And so, obviously, there are millions of
people and thousands of companies, not only in the United
States but all around the world, that hang on your every word
and what the Federal Communications Commission decides in just
about every major area that affects the Internet and
telecommunications and cable and satellite and on and on. So,
we look forward to your hearing.
Before we launch into a discussion, however, of the Federal
Communications Commission and its structure and the job which
it performs, I think it is very important for us to note that
the United States has the very best telecommunications system
in the world. It is the envy of the world. It is, overall, the
most competitive, it is the most diverse, it is the most
innovative telecommunications marketplace on the face of the
earth. And that fact is in no small measure due to the
excellent work which the Federal Communications Commission and
its excellent staff has done over the last generation in
implementing the laws which have been passed by this
subcommittee.
I think we need to keep in mind, as we look at the Agency
today, that you have done a very good job. We just also
recognize that many of the proceedings or tasks that some
Members of Congress find unnecessary are considered vitally
important by others, and that the Agency performs many of its
tasks at the instigation of Congress or pursuant to direct
statutes or a mandate.
I would also caution against pursuing a deregulatory agenda
simply for the sake of championing reform or by recasting
Commission substantive proceedings as reform measures. The
Congress often asks the FCC to achieve certain public policy
objectives. The goal is to fulfill those objectives which
Congress asks the Agency to perform. The fact that the FCC also
achieves these goals efficiently is an important result of a
well-run agency, but efficiency itself is not the goal--
creating the proper blueprint for the United States so that it
continues to have the lead looking over its shoulder at Number
2 and 3 in the world is the objective.
So, I believe that there are certainly things that the
Agency can do itself to streamline its operations, and I know,
Chairman Powell, that you are looking at those things that the
Agency can implement to ensure that it is more efficient, that
it deals with the new issues that are constantly confronting
the Agency, and I look forward to hearing from you so that we
can help you to buildupon the reform ideas and actions that you
have in your mind, building upon your predecessor's changes.
So, I look forward to hearing from you, and I thank you,
Chairman Upton, for calling this very, very important hearing.
Mr. Upton. Thank you.
Mr. Tauzin, chairman of the full committee.
Chairman Tauzin. Thank you, Mr. Chairman. I realize you do
want to limit opening statements today, but I think it is
important that, as Chairman of the full committee, I spend a
few moments welcoming the new Chairman of the Federal
Communications Commission, Michael Powell. And I want to thank
you, Mr. Powell, for joining us today and for sharing with us
your vision of the new FCC under your stewardship.
I am reminded, by the way, of the Kennedy years, when the
theme of that Administration was to ``bring the best and the
brightest to service of our country,'' and I think President
Bush has done that in the selection he has made in terms of
your appointment as Chairman of the Commission.
To the other members of the committee, I will remind you
that Chairman Powell is extraordinarily well-qualified for this
position. Not only does he bring extraordinary intelligence and
foresight and vision to the job, but he has military command
experience, and he has strong political skills we have seen
before, and those are going to be very important as we go
forward.
He has also watched how not to run the Commission for the
last several years. It is my strong opinion that the Agency has
been adrift, has drifted from its designated mission and has
drifted from the law. And it is my profound hope that Chairman
Powell will sail the FCC back into safe waters, and I have
every confidence that he is going to be able to do that.
Chairman Powell, I of course look forward to working with
you in your efforts to reform the FCC and to finish the
deregulation begun by the 1996 Act that was so important a
piece of legislation produced by this committee. I think under
your leadership, the FCC will become an agency that fosters
innovation again, and investment, rather than one that inhibits
the deployment of new services, and that is good news.
I think it is becoming an agency that unleashes market
forces rather than managing competition, and that is good news.
And I think it is going to be an agency that shakes the
competitive landscape free of regulation rather than
facilitating the shakedown of companies on behalf of special
interests, and that will be an important change.
In particular, Chairman Powell, I want to work with you to
rationalize the structure of the FCC so that the type of
service rather than the service-provider dictates the
regulatory or deregulatory frame. We are, frankly, tired of
watching disparate treatment of broadband services, disparity
that has skewed the deployment of broadband services--and I
think deprive many constituents, my own--of access to high-
speed Internet services.
I realize that some of that disparity stems from the
different way we treat C-LEX and I-LEX and cable companies and
satellite companies and wireless companies in the law, but I
intend to work with my colleagues and Mr. Dingell and Mr.
Markey and Mr. Upton, to see to it that this committee tries to
fix that.
Also, I want to work with you to streamline the approval
process so that applications do not languish in bureaus for
years on end, and I notice that you have already begun that
process, and I thank you for that.
I want to work with you to end the merger review process in
which companies are shaken down and prevented from having
judicial recourse from outlandish Commission requirements of
voluntary conditions on every approval.
Congressmen Burr and Pickering worked hard last year to put
some reasonable restraints on the FCC merger review process. I
intend to help them this year to enact a bill in this Congress.
Mr. Chairman, I am confident that we have before us a man
with a real vision that is going to take the FCC into the 21st
Century. I think he knows, like Mr. Markey has pointed out,
that the high-tech sector is now driving this economy, both up
and down, and that the FCC regulations or its deregulations are
going to have a profound effect on our economic viability both
today and into the future.
I have got a great sense of optimism as Chairman Powell
takes the reins of this important Agency, and I look forward to
his describing the new vision to this important committee as we
work together to help this economy continue to grow. Thank you,
Mr. Chairman.
Mr. Upton. Thank you, Mr. Chairman.
Recognize for an opening statement, my friend from the
great State of Michigan, the ranking member of the full
committee, Mr. Dingell.
Mr. Dingell. Mr. Chairman, I thank you and, as you wisely
observed, you and I do serve a great State. First of all, thank
you. Second of all, welcome to the new Chairman of the FCC.
Chairman Powell, we are delighted you are here today and we
wish you great success in your undertaking.
I have expectations, and they are high, that you will
impose a more disciplined approach to the management of the
Agency's business. Specifically, I expect one that will require
judicious use of the Agency's delegated authority, fair
treatment of all Agency and industry participants and, above
all, an abiding appreciation that the public interest is
paramount.
The public interest standard is, of course, the guiding
principle of all the Commission's activity. It is at the heart
of FCC's grant of authority, and carries with it broad powers
to regulate and to also forebear from regulation. The breadth
of this power can be used to accomplish many worthy goals, but
it can be just as easily been abused, as it has more recently
in the past.
My hope is the new Chairman will avoid using this authority
as a means to justify a particular agenda but, rather, to
establish clear standards, objective guidelines that will
govern the Commission's use of its broad authority.
In his prepared testimony, the Chairman has established a
specific, four-pronged agenda for the Commission that appears
to me to be right on the money. The FCC clearly needs a new
vision that takes into account the rapid technological changes
occurring with the industry. Convergence of technologies is
more than just a cliche, it is real. It is here. And more than
anything else, it is the key to breaking down traditional
monopolies.
The FCC can try with all its might to regulate its way to a
competitive marketplace, but it won't succeed until all the
companies have the proper incentives to use these new
technologies to compete freely in each other's markets.
The current regulatory approach is to treat companies based
on the service which they provide, but on the technology they
use to provide it. Clearly, this is an old-fashioned, unwise
and unworkable approach.
This approach to regulation causes a fundamental disparity
between companies competing to provide the same service. Left
unresolved, it will result in less effective competition, less
innovation, less investment, fewer choices for the American
public, and poorer service.
The most obvious example of this regulatory disparity
exists in the broadband market, but it is a growing problem for
other services as well. It makes, to me, no sense whatsoever
for broadband services offered by a cable company to be
regulated differently than broadband services offered by a
telephone company, a wireless provider, or any other
telecommunications company, and I will ask the Chairman about
his views on this matter. The FCC must address this problem
across-the-board, and the sooner, the better.
The Chairman should be commended for his commitment to
improving management efficiency at the Agency. This has been
one of the regrettable failures of the Agency. While none of
these changes will happen overnight, I hope there will be a
concerted, among everything else, to streamline Section 271
application processes. This area is particularly important to
achieving a key Telecom Act objective sometime before the next
millennium.
I would note that the Bell Company entry into long distance
was designed to accomplish two distinct, but equally important,
goals. One was to encourage more facilities-based long distance
competition, the other was to facilitate and to stimulate
facilities-based competition in the local market. In my view,
these goals are flip-sides of the same coin, and we have seen
compelling evidence that they are inextricably linked. One only
need check AT&T's Web site to see how Bell Company long
distance entry has the effect of stimulating local competition.
I believe that it is more than coincidence that the only
two places AT&T advertises the offering of local telephone
service is in New York and Texas. These happen to be the first
two States for which Bell Company entry into AT&T markets was
permitted. I would also note that the rates for local service
in these two States have dropped significantly.
The FCC process for approving these applications has been
exceedingly slow--as a matter of fact, distressingly so--in
part, due to an over-reliance on State commission and DOJ
recommendations. I would note that we carefully put in the
statute when we wrote it that these two agencies were to be
consulted. We did not give them veto nor did we make them
participants beyond consultation. The statute provides then
that these get consultative roles, they are entitled to it, but
in many cases State proceedings have been interminably long,
some lasting 5 years or more. In my view, it is intolerable
that consumers should be held hostage to the slow roll of the
regulatory process, waiting years for the green light from
Government, to get the benefits of greater choices and lower
prices. I cannot explain why the State agencies have behaved
this way, but it is, indeed, to me at least, a source of
curiosity, and I would hope, Mr. Chairman, it would be a source
of curiosity to you.
I would note that the Department of Justice has never been
a friend of this legislation, has always sought extra special
privileges in dealing with a telecommunications policy
utilizing slow and inefficient antitrust mechanisms to address
the business of your Commission. I hope you will take a hard
look at their behavior, Mr. Chairman.
At the same time, Bell Companies must be held accountable
for their obligations to comply with market opening provisions
contained in the Act. You do have the enforcement tools in the
Commission at your disposal, Mr. Chairman, to ensure
compliance. These tools must be used in a fair and consistent
manner to assure that the anti-competitive consequences can be
prevented. I would note, however, that these tools, according
to the testimony of your predecessor, were rarely, if ever,
used. I am delighted, Mr. Chairman, that you have committed to
making enforcement of these and other FCC rules a top priority.
I want to thank you again, Mr. Chairman, for appearing
here, and I look forward to hearing your testimony. Thank you,
Mr. Chairman, for your kindness.
Mr. Upton. I would note that all members', under unanimous
consent--I would ask unanimous consent that all members have
their full statements as part of the record and will again
advise members that if they could limit their opening
statements, or pass, it would be terrific.
Mr. Barton.
Mr. Barton. Thank you, Mr. Chairman. I want to welcome
Chairman Powell. I will put a formal statement in the record.
It has been a pleasure to work with you in the past, as a
Commissioner. It is going to be a pleasure as the Chairman. I
have been surprised how many new friends I have gotten since I
got back on this subcommittee. I am sure you have been
surprised at how many new friends you have gotten since you
became Chairman. What are friends for, right?
We look forward to working with you. And, Mr. Chairman, I
would ask if I could submit some questions for the record, to
Chairman Powell. I am going to have to leave to do some
meetings on the energy situation. But welcome to the
subcommittee, and we look forward to working with you.
Mr. Upton. All members will be able to submit questions to
the record.
Mr. Sawyer.
Mr. Sawyer. Thank you very much, Mr. Chairman. I join my
colleagues in thanking you for this hearing, and Secretary
Powell for taking part in this way.
Mr. Powell. That is the other one.
Mr. Sawyer. Secretary Powell--thank you. Somebody had to do
it, it might as well have been me. It probably won't be the
last time today, either. It is kind of like Tom Sawyer jokes in
that way.
I am going to submit a longer statement for the record. Let
me simply observe, along with Mr. Markey, that your opportunity
to change the world really is an extraordinary thing. I have
watched over the last few years as the e-rate has worked, in
effect, in our schools in ways that I think go far deeper and
have far more lasting effect than we might ever have
anticipated when we put it in place.
And so I just want to mention a continuing interest of mine
to you, in that while we talk very much about increasing the
number of hours in a day which children devote to education,
perhaps even the number of days in a year, it seems to me that
the unexplored dimension for doing what we did at the end of
the last century--that is to say, elevating the skill levels of
an entire Nation--the unexplored dimension is more deeply into
life, so that an entire adult working population that is
effectively illiterate today in terms of the kind of technology
that has been promoted by e-rate represents an avenue for
exploration that offers enormous promise, ont only within those
who provide the technology but across our entire population.
With that, I will yield back the balance of my time and
hope to explore that question further.
Mr. Upton. Recognize the vice chairman of the subcommittee,
from Florida, Mr. Stearns.
Mr. Stearns. Thank you, Mr. Chairman, and let me
congratulate you for having this hearing and, of course,
welcome Chairman Michael Powell to our subcommittee. Chairman
Powell, as the ``good ship Michael Powell'' starts off, there
are going to be lots of storms here, and the fact that you have
all these people here and are waiting out in the hallway would
indicate there is a problem, and they will be looking to you
for guidance.
When we passed the Telecom Act in 1996, we thought we would
be a lot further along, I think, than we are in many areas. I
will just give you sort of a litany of some of the problems
that exist, you know them better than me, but these storms are
out there, and when you come back year after year to our
subcommittee, it is my hope that a lot of these will be solved.
Some of these should have been solved under the previous
Administration, and you have a unique opportunity now to break
the Gordian knot on some of these problems: High definition
television--within that area, interoperability, deployment,
consumer demand, and must-carry; spectrum management--dealing
with caps, the auctions, the budget, the commercial versus
government; the FCC reform--this is something that you can
initiate and not wait for Congress, we have harped upon this
for years; third-generation wireless--European Union is
overtaking us in the competition, there is no reason for that
in this great country; rollout--dealing with a third
generation; and competition--opening up the local line. Here we
are, the year 2001, we don't have competition in the local
line, and we want to ensure there is competition in the long
distance, broadband, availability and access. These are just a
few of the areas that are on your plate that we need some
action and not every year just keep talking about them.
Many feel in this room that the problem has been that there
is an efficient and regulatory morass at the FCC. So, under
your leadership, we hope this will change. I trust you will
with Congress to do away with these inefficient regulations--
just for example, there are two clear examples of the
Commission's rules on spectrum aggregation limits and broadcast
ownership and cross-ownership limitations, areas in which I
introduced legislation in the 106th Congress, and intend to do
so again this year.
The FCC's recent decision to re-examine a spectrum
aggregation limit is a step, I believe, in the right direction,
and I would appreciate more insight into the Commission's
actions.
I look forward to your ship as it leaves the harbor. I wish
you well. Anytime this committee can help out, we will be here
but, in the end, we will need your leadership and your ability
and perseverance to break these regulatory problems. Thank you,
Mr. Chairman.
Mr. Upton. Thank you.
Mr. Green.
Mr. Green. Thank you, Mr. Chairman. I will put my total
opening statement into the record, but I want to welcome
Chairman Powell and, as I said before in visiting, it is good
to see you. In our past dealings with the FCC, our committee
and as an individual, we had difficulties. And I appreciate
both the follow-through of your staff on two particular issues
that were brought to your attention and your staff's attention
just recently. So, I think we have a good working relationship
for building on that. I share my colleagues' concern. The FCC
and this committee have a lot of issues dealing with the
transition to high-definition TV, the rollout of 3G services,
reciprocal compensation, the continuation of addressing the
digital divide, increased access to broadband services are just
a few, and I know we will have that opportunity today, and I
welcome you to the committee, and look forward to working with
you. Thank you, Mr. Chairman.
Mr. Upton. Thank you.
Mr. Gillmor.
Mr. Gillmor. Thank you, Mr. Chairman. I am not generally a
big fan of opening statements in subcommittee hearings because
I think it is important we move as quickly as possible to our
witnesses. I did today want to take just a moment, though, to
both congratulate and to welcome Chairman Powell, and to
especially convey my personal interest in the issue of
reforming and reauthorizing the Federal Communications
Commission.
I have been involved in this issue in one form or another
since 1995, and our subcommittee has done some splendid work
examining the structure of the FCC through the creation of
informal task forces.
I am under no illusion about the difficulty of enacting
legislation to reform the FCC, particularly if
telecommunications policy issues are rolled into a larger bill,
but I would like to indicate to Chairman Powell my deep
interest in such an undertaking in this Congress. I know that
the members look forward to hearing your views, and that all of
us look forward to working with you in the weeks and months
ahead. I yield back the balance of my time.
Mr. Upton. Thank you.
Ms. Harman.
Ms. Harman. Thank you, Mr. Chairman. I appreciate the
chance to speak for less than 1 minute to welcome a friend,
Michael Powell, before us.
The issues that have been ticked off by many here affect
real people, and that is just the point I would like to make in
my 1 minute. I represent a district that in 1992 when I was
first elected was properly called ``the Aerospace Center of the
Universe''. Nine years later, it is ``the Tech Coast''. There
are all sorts of new industry sectors--entertainment, green
technology, biotechnology, dotcoms. There are new
technologies--broadband Internet, videostreaming. There are new
services--Web design, systems engineering.
And the task obviously is for the FCC to appreciate that
human beings work there in these new industries, and to figure
out ways--and I know Chairman Powell already says he intends to
do this--to reinvent the FCC so that it can interact
effectively with these new workplaces and the new employees of
the new workplaces. This will be a hard job, and to invent a
digital FCC will take someone with the skills of Chairman
Powell.
Let me just conclude by saying that the Aspen Institute, a
place I know well, picks a group of leaders called Crown
Fellows. Michael Powell was a Crown Fellow recently. They made
a good choice. Thank you, Mr. Chairman.
Mr. Upton. Mr. Deal.
Mr. Deal. Mr. Chairman, in the hopes that I will impress
this committee more with what I don't say than what I do say, I
take your suggestion and yield back my time.
Mr. Upton. Extra time for you.
Ms. McCarthy.
Ms. McCarthy. Thank you, Mr. Chairman, and I will be brief.
Welcome, Chairman Powell. We are delighted that you are here,
we look forward to working with you. I am particularly
interested in hearing your views on the implementation of the
Act and the enforcement of its provisions. I also would welcome
your thoughts on some of the bumps in the road that we have
experienced with regard to competitive local exchange carriers.
I have Birch Telecom in my district, and they have used the
unbundled network element platform to provide local phone and
broadband service. The ability to lease Southwestern Bell's
switching facilities to serve residential and small business
customers has enabled this 4-year-old company to thrive and
consumers to save. So, I would like to know if you view the
unbundled network element platform as a legitimate vehicle for
providing competitive service to residential and small business
customers.
Also, the Telecommunications Act codified the deregulation
of national ownership caps in radio and, KXTR, the city's sole
classical station, as a result of this, had to close, and the
deregulation resulted in a great deal of consolidation in the
industry. So I hope you will explain what the FCC is doing, or
will do, to ensure a diversity of voices are being heard over
broadcast airwaves because I understand throughout the country
stations that are diverse, but obviously not as great a revenue
producer as some of the stations now playing NSync and the
Backstreet Boys music, are being done away with, and I really
feel that is a loss to the community, and I welcome your
thoughts on that, too.
Mr. Chairman, I will put my full remarks in the record, and
I thank you for being here.
Mr. Upton. Thank you.
Mr. Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman, I will just yield
back my time.
Mr. Upton. Mr. Brown.
Mr. Brown. Thank you, Mr. Chairman. I will also enter my
statement in the record, but I welcome Chairman Powell also. I
have some concerns about the FCC proposal to reduce the amount
of information companies are required to report on service
quality with local phone service, and hope that you would
address that and rethink that, and also stress the importance
of e-rate, which has been an enormous success for communities
in my State of Ohio and other States across the country, and my
concerns about low-power FM and what that means to our
community, and would like to emphasize that there are many of
us on this committee that care deeply also about that. I yield
back the balance of my time, and thank you for joining use.
Mr. Upton. Mrs. Cubin.
Mrs. Cubin. Mr. Chairman, I will save my conversation for
later on, yield back.
Mr. Upton. Mr. Engel.
Mr. Engel. Thank you, Mr. Chairman, and good morning,
Chairman Powell. I want to congratulate you on your appointment
and look forward to working with you on a range of important
issues.
I would briefly like to take this opportunity to deal with
one of the major issues facing my district, the digital divide.
The fact is that many of the schools in New York and the Bronx,
where I grew up and your dad grew up, are too old to be wired,
do not have adequate funds to buy computers, and are too
concerned with teaching children the basics in over-crowded
schools that have leaking roofs and falling plaster. But in our
world today, we must provide our students with access to not
just computers and wordprocessors, but the Internet. These are
skills obviously they will need to just get a job.
I am supporting efforts to quickly rollout broadband
Internet access, to enable the young people of the Bronx and
Westchester to benefit. I support legislation that provides a
tax incentive to rollout broadband services to rural and low-
income communities. I also support the chairman and ranking
member's bill to alter regulations to make it easier to
introduce broadband services. We all now know how vital it is
for our students and our economy to close the digital divide.
I look forward to hearing your comments on this issue and
to learn what the FCC plans to do to close the digital divide.
Again, I welcome you. I think it was a marvelous choice to make
you Chairman, and I look forward to working with you. Thank
you.
Mr. Upton. Thank you.
Mrs. Wilson.
Mrs. Wilson. Mr. Chairman, I will reserve my times for
questions.
Mr. Upton. Ms. DeGette.
Ms. DeGette. I will reserve my time also.
Mr. Upton. Mr. Terry.
Mr. Terry. Welcome. Yield.
Mr. Upton. Wonderful.
Mr. Stupak, from the great State of Michigan.
Mr. Stupak. Thank you, Mr. Chairman. I would just like to
welcome Chairman Powell. I will be interested to see what you
have to say about rural areas and how we get the new technology
there and make sure we have competition in rural areas. So, I
look forward to questions later.
Mr. Upton. Mr. Cox.
Mr. Cox. Thank you. I just want to thank Michael Powell for
the time that he has already spent with members, talking to us
about the future of the FCC and the future of the industries
and the technologies and the information services that are the
subject of your jurisdiction.
As Chairman Tauzin has pointed out before, that only goes
off when you are not telling the truth.
Mr. Upton. Yielding back?
Mr. Cox. I particularly want to commend you for your early
emphasis on examining the structure of the FCC and of our
statutory framework for regulation. In light of changing
technology and the convergence of existing technologies, the
way that the FCC approaches this and has approached it as a
result of congressional mandate during the 20th Century
probably is not well-suited to the 21st Century. Cable isn't
just cable anymore. Wireless isn't just wireless anymore.
Telecos aren't just telecos anymore. Everybody is getting into
everyone else's businesses in similar ways to what we have seen
in financial services, and in similar ways we have to change
regulation to meet that new reality.
There is something else going on, and that is destructive
creativity in the very best sense. Congress and regulation and
the State are usually enemies of that process because that is
where buggywhip manufacturers go to stop progress, and we, all
of us, in our offices are constantly met with firms who wish us
to enact a law, or they perhaps will go to you so that you will
enact a regulation, to make sure that their competitors don't
take away their business.
We have to make sure that we resist that temptation, and
restructuring the FCC, and presumably for those of us sitting
on this side, restructuring the statutes in order to make sure
that our regulatory system of the future achieves the great
potential that we know the Internet and other video and voice
communications have is really our main aim.
So, thank you for placing your emphasis early on on that
precise topic, and I look forward to hearing your testimony and
responses to members' questions on those very points. Thank
you, Mr. Chairman.
Mr. Upton. Thank you.
Mr. Pickering.
Mr. Pickering. Mr. Chairman, thank you. I know that we have
limited time before our vote. I just want to welcome Chairman
Powell. I look forward to working with you on the important
issues before you, from FCC reform to spectrum reform to
advancing competition, addressing issues in rural areas. I do
think you have a tremendous opportunity to have a great legacy
as a reformer and someone who values the staff of the FCC, and
we want to work with you to make sure that you have all the
resources that you need to carry out your duties. And I also
look forward to a new era of cooperation between the FCC and
the Congress, and I think we can have a very productive
relationship. Look forward to working with you.
Mr. Upton. Mr. Davis.
Mr. Davis. Mr. Chairman, I want to commend you for giving
us the opportunity today to listen to Chairman Powell discuss
his vision for modernizing the FCC. For too long, I think, we
have seen the FCC position itself more as an obstacle to the
deployment of new technologies rather than an enabler for
economic growth.
I know that you, too, Chairman Powell, share our concerns
that the FCC re-examine its organization and mission in order
to play an efficient and effective role in encouraging
innovation.
Thanks for coming here today. I look forward to hearing
your testimony and continuing to have a dialog with you on
these issues.
Mr. Upton. That concludes our opening statements. I would
note that we have two votes on the House floor, this vote and
another one. So we will reconvene as close to 11:10 as
possible.
[Additional statement submitted for the record follows:]
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress
from the State of Wyoming
Thank you, Mr. Chairman, for holding this hearing and inviting
Federal Communications Commission Chairman Michael Powell to be with us
today. Welcome Chairman Powell. I appreciate this subcommittee being
your first stop on Capitol Hill in your new position.
You've come to lead the FCC at a very exciting time. We've just
celebrated the fifth anniversary of the 1996 Telecommunications Act.
I personally believe there were essentially two goals of the Act:
more competition and less regulation.
Since it's implementation the Act has shown tremendous potential in
advancing competition where competition didn't exist.
I represent an area of the country where we have yet to see real
competition--five years after the passage of the Act.
Although Wyoming has 50 Competitive Local Exchange Carriers (CLECs)
operating in the state, the average person living in Wyoming would be
hard pressed to find an alternative to his or her existing telephone
service.
I have several questions for you, Chairman Powell, regarding the
second goal of the Act--deregulation or the lack thereof.
First, an observation. It seems to me that a regulatory agency must
move with the speed of the industry it regulates. The FCC has
historically moved as if it is regulating the pony express instead of
high-speed communications networks.
When an emergency petition has been before the FCC for 14 months
and has yet to be acted upon, that seems to negate the fact that it's
an ``emergency petition.''
I'm concerned not only about the fact that the intent of the Act
hasn't taken hold in rural America, but also that the regulators of the
Act--in particular the FCC--doesn't give rural America a second
thought. Chairman Powell, I'd like to know your thoughts on that.
Maybe the FCC has written off rural states like Wyoming. Maybe the
Act wasn't intended for rural states. Maybe rural America should just
resign itself to the fact that competition will never be realized.
Well, I don't believe any of that is true and I certainly don't
believe that there isn't more that can be done regarding implementation
of the Act to help spur competition and bring advanced
telecommunications services to Wyoming and other rural states.
Chairman Powell, you've been around this business for quite a
while.
You know that different segments of the telecommunications industry
are stronger than others in providing services to different parts of
the country.
In Wyoming, for example, we have 14 facilities based Incumbent
Local Exchange Carriers with approximately 310,000 access lines.
Qwest CEO Joseph Nacchio has joked that he lived in an apartment
building in New York with more access lines than that.
Nonetheless, the majority of those companies are small or mid-size
carriers that make up the backbone of Wyoming's telecommunications
infrastructure.
Chairman Powell, I was delighted to hear you mention in a speech a
while back that ``In the war to tear down the arcane regulatory walls
that prevent firms from competing with other firms and from bringing
customers the full benefits of a free market, I sometimes think of mid-
size independents as our `special forces.' ''
I continue to quote, ``The Special Forces, for those of you who
aren't military buffs, are elite, highly-skilled forces adept at
operating undetected behind enemy lines. The infamous Green Berets, a
Special Forces unit, are small and nimble, allowing them to slip
through the cracks, untethered by the logistical constraints faced by
larger military forces.''Mr. Chairman, I feel the same way. However, I
don't believe your predecessor felt the way we do on this issue.
For too long, at the FCC, small and mid-size companies are subject
to a ``one-size-fits-all'' regulatory scheme that effectively puts
these ``special forces'' carriers on KP duty.
As you know, Chairman Powell, this Committee and the House have
overwhelmingly supported and passed legislation in the form of H.R. 496
that brings regulatory sense back into the way in which the FCC treats
small and mid-size carriers.
Many of the questions and comments I will have for you revolve
around this singular issue. I'm sure you realize that these carriers
are the only thing that stand between a rural telephone customer and
silence at the other end of the telephone line.
Mr. Chairman, I wish to once again thank you for calling this
hearing and look forward to hearing from FCC Chairman Powell.
[Brief recess.]
Mr. Upton. Chairman Powell, I would note that there are a
number of subcommittees and committees meeting today. Most of
us--all of us--are on multiple subcommittees, some of us on
multiple committees as well, so individuals will be coming in
and out throughout the hearing. At this time, I would ask
unanimous consent that all members' opening statements are made
part of the record, as well as questions that they may submit
for the record. Without objection, that is now the case.
Chairman Powell, welcome. Your statement is made part of
the record in its entirety. The time is now yours.
STATEMENT OF HON. MICHAEL K. POWELL, CHAIRMAN, FEDERAL
COMMUNICATIONS COMMISSION
Mr. Powell. Thank you, Mr. Chairman and other distinguished
members of the subcommittee. It is a great pleasure to be here.
I have had the privilege of appearing before this subcommittee
over the last few years in my capacity as a Commissioner of the
Federal Communications Commission. I am particularly humbled
and privileged, and some days daunted, to appear as its new
Chairman. I feel privileged that the President of the United
States felt enough confidence in me to designate me as such,
and I am honored to have an opportunity to continue the very
positive working relationship I have had with this subcommittee
and Members of Congress generally. I really look forward to
continuing that sound relationship. I think we will need it. I
think that we are facing collectively, as a Government, a
traumatic and important period in our history, in which
communications, communications policy, will directly affect the
future of our country.
If you think about it, the FCC is facing something, in this
regard, that it has never faced before--that is, every segment
of its portfolio is in some form of revolution, the most
profound change the industry has ever faced. Whether it be
competition and de-regulation in the context of the telephone
system; whether it be the transition to digital television for
television broadcasters; whether it be the deployment of cable
modem services and interactive services in cable; or on and on
and on. This is a daunting period for our industry and it is a
daunting period for the Commission.
Suddenly, the Commission finds itself blown into a position
in which its decisions have far-reaching impact, not only on
the industry, but increasingly on the whole of the American
national economy and that of the world. It is a profound
responsibility.
And this new environment is not linear. It is one that will
be marked by chaos and dynamism, and the FCC, in the context of
reform, will need a new business plan, to address and interact
with that world.
Mr. Chairman, I would ask that my full statement be
included in the record. As you mentioned earlier, I would
rather just speak with you about those challenges now.
The way I envision reform is that it is a comprehensive
exercise of retooling and redirecting the activities of the
Agency. I am working to build a plan that is built along
principally along four dimensions.
The first is to ensure that the Commission has a very clear
and substantive policy vision in which to guide its
deliberations, with at least some predictability.
Second, a pointed emphasis on operations and management. An
agency must be effective and responsive in Internet time.
Third, it is becoming critical that the Agency have
independent technological expertise and economic expertise.
And, fourth, it is time to consider seriously
organizational restructuring of the Commission, and I would
like to say a little bit of something about each of these
points before I yield to your questions.
Policy vision is not just the subject of Law Review
articles, it is the way an institution stakes its flag and then
drives and guides deliberations towards that flag. I believe a
policy vision is sorely needed. As we mentioned many times
earlier, I believe communication policy in the Government and
the Commission finds itself between two worlds. The first world
is one that has been relatively matured, the legacy networks
and communications systems we are all accustomed with, the
mature public switch telephone network, cable systems, the mass
market delivery systems of television and cable and
increasingly DBS, just to name a few. These systems are
relatively well known to us. We understand their technology. We
understand their cost characteristics. We understand what
consumers want out of those services, and what the right prices
are generally for those services. And in a sense, that world
stands to our back, but we look ahead and see a cresting wave
of a dramatically new communication system evolving as a
consequence of revolutions in technology and economics.
We now see a world marked by broadband infrastructure using
and deploying and experimenting with multiple new technological
platforms. Today for example fiber optic-coaxial cable is used
as a broadband infrastructure. There have been systematic
improvements in public switch copper that allow it to provide
high-speed service, the airwaves, delivered through space are
all vying for the Internet future and a way to provide services
in a more efficient way. These worlds and these systems are
known much less to us. They are in their infancy. We are
struggling with what are the cost characteristics of new
technology that operates substantially different than twisted
copper wire. We are still trying to understand what the
products are and what it is consumers will actually want and,
probably more importantly, be willing to pay for in the new
future. This puts us at an extraordinary crossroads of both
having the responsibility to carry out the will and the wishes
of Congress to facilitate the deregulation and competition of
the legacy world, as well as facing new and unforeseen and
previously questions in the context of the new world. What kind
of policy is needed in the context of that position?
I hope to follow a policy that is built around the notion
of incubation, innovation and investment, and I hope to be
guided by several distinct guideposts. First, I think it is
important to state at the outset that it should be our
objective to facilitate the timely and efficient deployment of
broadband infrastructure and promote a wide variety of
technologies in that deployment, not embracing any one as a
winner or loser, neither any technology or any particular
industry.
I think we need to pursue the ubiquity and affordability of
that infrastructure to all Americans, but to challenge
ourselves to attempt to do so in creative ways and not simply
assume the extension of the methods that worked miraculously in
the context of the phone system.
Third, I think we need to be focused on at innovation and
investment. These are objectives specifically identified in the
Act, but often misunderstood or ignored in policy. If money
will not flow to business plans, if regulatory uncertainty
creates risks for capital investment, things will not be
invented and they will not be deployed and we will not be
talking about divides, we will be talking about only a glimmer
of the bright future that we envision for ourselves. We are
trying to understand those concepts better and facilitate
policies around them.
Fourth, we need to harness competition and market forces to
help drive these changes, and be humble enough to admit that we
don't make the market in our image, or in a vision or a
strawman that I develop, but the one that is developed between
a healthy dialog between consumers and producers so that what
is built and deployed maximizes their value, not the one that I
might have envisioned, sitting in my office.
And it is just as important to also not to attempt to build
an image in the like of any particular competitor.
Increasingly, we find in a period of anxiety and innovation and
change, that competitors are fearful too, and it is often the
case that we are asked and compelled and pushed and cajoled to
develop rules and regulation in order to stem the pace of those
changes, protect regulatory advantage, and we must be reluctant
to do that as well. We owe fairness to all, but allegiance to
none.
Fifth, very critical in an era of convergence, we need to
work to rationalize and harmonize regulations, to the extent
the statute will permit, across technological lines. It has
been historically true that we have regulated industries
fundamentally premised on the technologies they use in
deploying those services. As I have said often, it is as simple
as this: If you use twisted copper wire, you are a Title 2
common carrier most of the time. If you use coaxial cable to
deliver one-way video services, you are what we call a cable
service provider and you live in the bucket of Title 6. And if
you provide something called Internet or information services,
you don't seem to be in anybody's bucket. We are lost to know
what an AT&T is when it provides all of those services over a
single infrastructure, demonstrating each and every one of
those characteristics.
Increasingly, the regulatory challenge is a definitional
challenge--what bucket do you belong in by virtue of your new
and creative services, and is our attempt to label you in a
legacy rearward-looking system distorting the efficient
development of those new markets?
I also believe that deregulation means simply this:
Validate the purpose of a rule in the modern context, or
eliminate it. As simple as that. Resist intervention,
regulatory intervention, absent the evidence of persistent
trends that can be understood, or evidence of clear abuse.
And, finally, as I have heard mentioned a number of times
in opening statements, enforcement becomes more critical than
it has ever been in our period. It is simply a necessity, not
an ideology. Historically, the Agency has operated by what I am
fond of calling ``by the grace of us'' regulation. You want to
do this, get my permission. You want to do that, I will have to
give you my permission. That permission might take several
months, but you still have to obtain it. And, interestingly
enough, 98 percent of the time we give it. That is an
inefficiency we can't afford. But I am also cognizant of the
fact that if you are going to put less emphasis on up-front
prophylactic regulations, you have to have a response to
consumer harm and dangers of marketplace failure. I believe
that response is enforcement.
I might give you a better benefit of the doubt, but when
you cheat, I am going to hurt you and hurt you hard. And that
is what enforcement means. And I think to do that seriously, we
will need the help of Congress. I believe the enforcement tools
made available to us are inadequate with billion-dollar
industries. Our fines are trivial, they are the cost of doing
business to many of these companies. The statute of limitations
conspires to limit our ability to get someone before the clock
runs out. If we are serious about enforcement, we will need to
be serious about the tools to execute it.
A second dimension on which I have placed a great deal of
emphasis, and to which many of you have alluded is operations
and management. I don't want my legacy, if there is any such
thing, to be about this rule or that rule. I want to leave an
institution that has imbedded in it the efficiencies, the
talent, and the abilities of an operation, a management team,
that can take on any challenge, no matter what it might be. We
intend to actively manage the Agency.
To my mind, indecision, inaction and avoidance are
absolutely illegitimate Government policies. We have to reduce
backlog, and we have to do everything in our power to ensure
they don't reoccur. Our anxieties don't justify sitting on
something indefinitely.
We are developing an annual strategic planning process in
which we will integrate the natural cycle of the budget process
and the performance of our institution, the performance of our
individuals, such that our mission is tailored to the
activities and our own measurement of performance, so that I
can stand before you a year from now and proudly march off the
metrics of how we are doing.
One of the first things I discovered is we do measure
productivity. We do it differently in each and every bureau.
That is no help to someone who is trying to make sure that it
works across-the-board, and we are trying to develop those
uniform productivity measures.
Additionally, the Commission needs much work in the area of
its own internal procedures to government its operation.
Remarkably, the Commission has no set, agreed on procedures for
voting or deliberation. It doesn't have internal processes for
security of documentation. It is shocking to me at times what
we don't have when we often reach loggerheads. Rules like that
are not for when we agree, they are for when we disagree, and I
am pushing and urging my colleagues to support efforts to build
those kind of rules to increase our ability to operate. And we
need to modernize our own IT infrastructure.
The third dimension is becoming perhaps the most critical.
The Commission desperately has to have first-rate technological
and economic expertise. It is becoming increasingly a challenge
for the Commission to sit on the other side of tables with
companies like America On Line and Steve Case, or Microsoft and
Bill Gates, and have them provide us on-the-job tutorials at
the same time we are trying to make decisions that affect their
industries. Our capability has to be solid and independent, but
we face a grave situation here.
We, in the last 4 or 5 years, have lost 20 percent of our
engineering talent. In the next 4 years, we will have 40
percent of our engineers who will be eligible for retirement,
and we are competing for them in the same type of labor pool as
America OnLine, and Microsoft. And, by the way, up to now, we
hire them at GS-5 and GS-7 entry levels. That is not going to
work for much longer. It really doesn't work now.
But I am convinced that people come to work for the
Government for reasons other than salary, and we have got to be
prepared to provide them, for we will never match introductory
income. So we have begun an Agency-wide program that we refer
to as ``Excellence in Engineering.'' There will be attempts to
find greater personnel and pay flexibility. We find that
members of the guild need to ensure that they continue to stay
current with their profession. We have not done an adequate job
of providing both the formal internal training so that an
engineer continues to develop, or to provide and subsidize
their participation in professional organizations and
professional development opportunities outside the Commission.
This is often the most principal reason cited by technical
experts as to why they are not interested in a job at the
Commission.
The Government, the FCC, owns a laboratory, where every
piece of electronic equipment is usually type-tested. If you
have a Palm Pilot or a RIM in your hand, if you turn it over, I
assure you you will see our smiling logo facing you.
Increasingly, though, that lab is backing up. It is facing
challenges in being able to get equipment type-certified and
out on the market. Much of that is due to the fact that the lab
itself is in growing disrepair. Increasingly, with advanced
technologies, we don't have the equipment that will even
measure at the levels of some of the new equipment that we have
seen. It is not unusual to understand that in the context of
low-power FM, or ultra-wideband, or many of the areas that many
of the members here have expressed interest in, that one of the
contentious problems is over technical interference that we
increasingly have a great deal of difficulty arbitrating
because we don't have an independent capability to test. This
is something that also needs to be rectified.
And I make this point clear: An agency doing this kind of
work has to drive technical fluency much deeper than its
engineers. Every attorney and every professional, and I
daresay, even every administrative support person needs to
increasingly have basic fluency in technological concepts if we
are to be relevant.
We have begin something we colloquially refer to as the
``FCC University.'' We do have academics in-house that are able
to develop curriculum and formalize training programs, and we
have begun that. We are an Agency that has access to the
world's finest technical talent. We may not be able to hire
them, but we normally can convince them to hold seminars,
courses and programs that would aid the development of our
first-rate and professional staff, and we are working to do
that.
The fourth and final dimension is the one that garners
sometimes most of the attention. It is organizational
restructuring. As I mentioned at the outset and as many of the
members have mentioned, one of the challenges to operating
efficiently is that both the statute and our rules are
generally developed along technological lines. And so are we
organized. We have a Cable Services Bureau for cable, and on
and on and on.
We recognize that this problem creates some great
inefficiencies that could be avoided, so we are undertaking a
very systematic review of the Agency. It will be guided by
three simple principles. We hope to develop an organization
that is designed mostly along market lines, not technological
ones. We hope for a flatter substantive bureau structure and,
third, we hope to more carefully consolidate key support
functions.
We will proceed first by doing a systematic review, which
is underway, of all of our functions and services, to see what
works and what doesn't. After that, we hope to produce a plan
of reorganization that will include two phases: A Phase I that
will be short-term change, and a Phase II that will be longer-
term, more lasting change. These changes will be significant
and they will require a great deal of buy-in support and
interaction with the Congress, who will have a critical role in
this--there will be areas that require legislative change and
approval and it will require buy-in and understanding from the
industry--our client, and the consumers--our client, and the
employees themselves, who rightfully understand the anxieties
of any reorganization and need to understand clearly the
purposes of change and the reasons why they are initiated.
We hope to do much of this in realistic timeframes that are
aggressive. I hope a year from now, or within the year, we have
completed a substantial portion of this effort.
Finally, let me just conclude with this point. I can't
predict the future, no one at the FCC can predict the future,
and the tools of this new market economy are such that very few
people anywhere are able to reasonably predict the future.
So, in many ways, the question of ``what kind of
organization you are'' is best addressed as, how do you manage
against uncertainty, a world that you don't know and can't
predict? The lessons I take from that might be the way an Army
does, or a basketball team does. What you do is you recruit and
assemble first-rate talent. You train them in all the
fundamentals of tactics and strategy. You make sure they are
disciplined and effective, and you make sure they are
innovative and creative. And when you take the court, or you
take the battlefield--no two battles or two games are the
same--but if you are able to adapt and change and redirect and
stay efficient, you will win more of those games than you lose,
and it is that kind of organization I sincerely hope and intend
to build at the Federal Communications Commission.
It is a pleasure to be with you, and I really look forward
to your questions.
[The prepared statement of Hon. Michael K. Powell follows:]
Prepared Statement of Hon. Michael K. Powell, Chairman, Federal
Communications Commission
Good morning, Mr. Chairman and other distinguished members of the
House Subcommittee on Telecommunications and the Internet. Thank you
for inviting me here to discuss the Federal Communications Commission's
agenda for 2001 and the agency's reform effort.
I am honored and humbled to lead the Commission at this time of
unbelievable change in the communications industry. I believe a
critical part of my job is to be a leader and steward of the agency,
and I take this responsibility very seriously. In order to serve the
American public, the FCC, as an institution, must be efficient,
effective, and responsive. The challenges of reaching these goals at
the Commission are complicated by the sweeping, fast-paced changes that
characterize the industries that we regulate. Indeed, the Commission is
experiencing a challenge it has never faced: each industry segment in
our portfolio is in the midst of revolution, and is attempting to adapt
to the most fundamental changes in their history--for example,
competition and deregulation in telephones, DTV transition in
television, modem and interactive services in cable, wireless Internet
and digital services, consumer accessible satellite service, broadband
everywhere, and on and on. Moreover, the changes are blurring the lines
that once separated these industry groupings. There are new markets,
new competitors, and new regulatory challenges. The game has become
three-dimensional chess, where each board is spinning.
These winds of profound and dynamic change, unleashed in part by
the Telecommunications Act of 1996, have buffeted the Commission and
blown it into a position where its decisions have far-reaching impact
on the future of communications, not only in the United States but
throughout the world. We have come a long way from an agency where the
principal focus was the assignment of radio licenses, and its principal
activity was conducting lengthy comparative hearings to assign those
licenses. This new environment is no longer linear, but chaotic and
dynamic. For this agency to fulfill its congressional charge, indeed to
remain relevant at all, it must put together a new business model and
build the type of team that can execute it effectively. That is what we
intend to do.
FCC REFORM: THE NEW BUSINESS PLAN
I conceive of FCC reform as a comprehensive retooling and
redirection of the Commission's entire mission. Our approach is to
write and execute a new business plan built along four dimensions: (1)
a clear substantive policy vision, consistent with the various
communications statutes and rules, that guides our deliberations; (2) a
pointed emphasis on management that builds a strong team, produces a
cohesive and efficient operation, and leads to clear and timely
decisions; (3) an extensive training and development program to ensure
that we possess independent technical and economic expertise; and (4)
organizational restructuring to align our institution with the
realities of a dynamic and converging marketplace.
1. Substantive Vision
The industry, the capital markets, and the government find
themselves navigating between the matured, legacy communications system
and the nascent innovation-driven Internet space of the future. The
legacy world to our back is a proud one. This nation built the finest
voice communication system in the world, as well as top-notch mass
media delivery systems in the form of radio, television, and cable.
These systems have reached maturity though: that is, we understand the
basic technology and architecture; we largely understand the cost
characteristics; and, we understand what the consumer wants and what
the product is. And, government regulation and policy had coalesced
around these understandings, principally in the form of regulated
monopoly and oligopoly.
We now are looking up at a cresting wave of change that we are much
less sure of how to navigate. The digital broadband world is in its
infancy, and its qualities and characteristics are much less clear. The
new advanced architectures and technologies are just beginning to be
understood and deployed, with no clear winning technology or industry.
The cost characteristics may differ substantially from those of
traditional networks to which we are accustomed. Broadband Internet
products are still being developed and we all wait to see what service
offerings consumers will and will not embrace. It is a world of dynamic
and chaotic experimentation in which any prediction of how it turns out
is foolhardy.
I believe government policy needs to migrate steadily toward the
digital broadband future, but remain humble about what it does not
understand and cannot predict. I submit that this digital broadband
migration should be built around incubation, innovation and investment.
At the Commission, our policy direction will focus on this migration
and will have several directional guideposts:
<bullet> We will do everything we can to facilitate the timely and
efficient deployment of broadband infrastructure. In doing so,
we will endeavor to promote the growth of a wide variety of
technologies that can compete with each other for the delivery
of content and will strive not to favor--or uniquely burden--
any particular one.
<bullet> We will pursue the worthy universal service goals of ubiquity
and affordability as new networks are deployed, but will
challenge ourselves to do so in creative ways.
<bullet> We will redirect our focus onto innovation and investment. The
conditions for experimentation and change and the flow of money
to support new ventures have often been misunderstood or
neglected. If the infrastructure is never invented, is never
deployed, or lacks economic viability we will not see even a
glimmer of the bright future we envision.
<bullet> We will harness competition and market forces to drive
efficient change and resist the temptation, as regulators, to
meld markets in our image or the image of any particular
industry player.
<bullet> We will rationalize and harmonize regulations across industry
segments wherever we can and wherever the statute will allow.
<bullet> We will validate regulations that constrain market activity
that are necessary to protect consumers, or we will eliminate
them.
<bullet> We will be skeptical of regulatory intervention absent
evidence of persistent trends or clear abuse, but we will be
vigilant in monitoring the evolution of these nascent markets.
<bullet> We will shift from constantly expanding the bevy of permissive
regulations to strong and effective enforcement of truly
necessary ones. We will need Congress' help to put real teeth
into our enforcement efforts.
2. Operations and Management
All the vision in the world is useless if you do not build and
manage an institution that can execute it. We intend to actively manage
the agency. Indecision and avoidance are not legitimate policies and,
thus, we will strive to reduce backlogs and put systems in place that
will prevent them from returning. Managers will be measured, in part,
on this basis.
The Commission will develop an annual strategic planning process
that will be integrated with the federal budget cycle and the review of
our performance as an institution and as individuals. We are working to
establish uniform measures of productivity across the agency to
facilitate this activity.
The Commission is developing a set of internal procedures that will
allow it to function more smoothly. These procedures will cover
subjects such as Commission deliberation, voting procedures and
internal document security.
The Commission should continue to modernize its information
technology infrastructure to ensure productivity gains. We must strive
to be a virtual agency--one in which someone in Connecticut is able to
access us as easily and readily as someone on Connecticut Avenue. We
are working to make this goal a reality through increased electronic
access capability. We are engaged in a time-consuming and expensive
project, but one that is critical to our ability to remain relevant in
this new millennium. We must continue with due speed to use the
advances of technology to our advantage.
We have 18 major information technology systems that incorporate
electronic filing or offer public access to data. The industry can file
most license requests, equipment authorizations, and comments
electronically. Seventy-two percent of our services have electronic
filing capability, but I want to do better. We administered well over
three million licenses last year, so it is critical that we are
efficient in this area. It is also important that citizens all over
America have the ability to contact us easily and from anywhere.
Currently, they are able to do so electronically, by phone or the old
fashioned way--by letter. Last year, we received well over one million
inquiries from consumers. The public must be an active voice in the
communications transformation, for they are the ultimate beneficiaries
of the abundant choices resulting from full and fierce competition.
We are also overlaying this virtual agency concept to the benefit
of FCC staff through an expansive telecommuting program, which is open
to all eligible employees. Virtually 100 percent of the Commission's
employees are eligible for the telecommuting program. Approximately 400
of our eligible employees, about 20 percent, have chosen to telecommute
on either a regular or ad hoc basis. Fewer than one percent of those
who wanted to telecommute have been turned down based on the
Commission's criteria.
3. Technical and Economic Expertise
The communications revolution is being driven by advances in
technology. The Commission must have a strong fluency in technology. We
cannot depend on those we regulate for on-the-job tutorials while we
make decisions. This situation is grave. Over the last six years, our
engineering staff has decreased by more than 20 percent. Within the
next four years, 40 percent of our engineering staff will be eligible
to retire. Conversely, we are not replenishing the coffers at the other
end by bringing in new employees. We, like other governmental
departments and agencies, are competing for this talent in a tight
labor market and are challenged to convince talent to enter government
service. This has been most apparent trying to recruit entry level
engineers at the GS-5 and GS-7 levels.
To address this situation the Commission is developing an agency-
wide ``Excellence in Engineering'' program. We will examine creative
ways to gain greater personnel and pay flexibility to attract technical
talent. Increased salaried alone, however, will not do the trick, nor
is it the sole motivator for anyone entering government service. We
will look at ways to ensure technical workers are able to continue to
develop in their field, through strong training and development
programs and job rotation. Our laboratory facilities in Columbia,
Maryland, need to be upgraded to provide engineers with the tools to
engage in critical and challenging work. Improvement in this area will
be difficult to achieve, but we consider it imperative to our efforts
to improve our workforce.
It also is vital that we train our non-engineering staff in the
areas of engineering and advanced technology. We already have begun to
develop an FCC ``university'' of sorts using our own staff and guest
lecturers, and taking advantage of various programs currently available
through the government and local academic institutions. We can use this
Washington, D.C. location to our advantage and tap into industry and
academia. We can use local scholars and have them participate in an
educational curriculum, to provide lectures, to provide classroom
instruction, to provide counsel and advice. We need to take better
advantage of our access to talent and knowledge.
I am putting similar emphasis on economics and market analysis.
These tools are essential to our agency's mission. We have the
opportunity to take advantage of both internal resources, visiting
experts, and outside educational programs to help not only our
economists improve their skills but to help all the FCC's employees
understand better the impact of our rules on technological innovations,
and competitive markets.
4. Restructuring
In addition to examining our systems and procedures, we need to
look at the organizational structure of the agency. Communications
policy has been written in carefully confined buckets premised on
certain types of technology. The FCC's organizational structure largely
mirrors that premise. But the convergence of technology tears down
those traditional distinctions and makes it evermore difficult to apply
those labels to modern communications providers. In the same way, it
makes it more important than ever for us to examine whether those
organizational buckets still hold water.
About a year ago, we began breaking down the technology-based
divisions with the creation of the Enforcement Bureau and the Consumer
Information Bureau. With those reorganizations, we created two bureaus
aligned along functional responsibility. We created the Enforcement
Bureau to improve the effectiveness of our enforcement activities in an
increasingly competitive and converging market. We created the Consumer
Information Bureau to enhance consumers' ability to obtain quick, clear
and consistent information about communications regulations and
programs. These changes have proven to be quite beneficial. As the
industry moves toward fuller competition, the missions of these bureaus
become even more critical. For consumers to take full advantage of the
choices that competition brings, it is important that they have access
to information that allows them to make an informed choice. Their
ability to easily and quickly convey to us instances where the markets
are not providing useful information to consumers in a particular
circumstance or with a particular business is our early warning system
for market failure or malfeasance on the part of industry players.
While the consolidation of these functions is almost complete, there
are some additional functions that are transferable into or out of
those two bureaus.
We have undertaken a structural reorganization project that builds
on some of the initial efforts of my predecessor, Chairman William E.
Kennard. Our efforts will be guided by a few key objectives: (1) a
functional organization designed along market lines, rather than
technical ones; (2) a flatter substantive bureau structure; and (3)
greater consolidation of key support functions.
Our program will proceed in phases. We have begun by systematically
taking account of the agency's activities and functions to see what is
working well and what is not. From that review we will produce a Phase
I, short term, restructuring plan and a Phase II, longer range plan.
The Phase II plan will consider what wholesale change is necessary and
whether it is timely to move away even more from technology-based
buckets. The question has been asked whether the Commission should be
aligned along functional lines--e.g., enforcement, consumer
information, spectrum management, licensing and competition--given
increased convergence in the industry. This question deserves to be
asked and answered. But first, we must seek additional and substantial
information, and be completely satisfied that it is the right thing to
do, before we move to rearrange substantially the organizational
structure of the agency.
My goal is to improve the agency on all these fronts. An informed
decision, however, is better than one based merely on supposition. I
intend to seek the opinions and thoughts from a wide range of
participants as we proceed down the path of reform. First, I look
forward to working closely with this Subcommittee and other Members of
Congress and their staffs. Second, I intend to hold forums to allow
those that do business before us let us know how we can improve our
processes and procedures. Third, I want to hear from the Commission's
employees. They often know best how we should change and what tools
they need to do their jobs. I want to gather opinions and ideas, but be
swift to make changes. It is our goal to fully complete many of these
changes this year.
I will be turning to you for assistance. With regard to the
organizational restructuring that is likely to be necessary, I hope you
will concur in those changes. Most critically, I look to Congress to
support the Commission's budgetary needs and objectives. Please keep in
mind that we are largely a fee-based agency, where those who come
before us pay for the services we render in the form of licensing and
regulatory fees. We need to have the staff and other resources to
provide those services efficiently, knowledgeably and decisively.
Finally, I will look to this Subcommittee and Congress to help us
expand our authority where necessary to bring about competition and to
more effectively enforce our rules. For example, the authority given to
us in Section 10 of the Communications Act to forbear from regulating
when certain conditions are present has been quite helpful. I would
like to be able to use that ability even more and would welcome the
opportunity to work with you to explore whether that is feasible.
Additionally, we need tougher penalties and longer statute of
limitation periods if enforcement is to be more effective.
CONCLUSION
I cannot predict the future, nor can anyone else at the Commission.
When faced with future challenges that are uncertain, the best approach
is to build a first-class operation, with top talent, that is trained
and disciplined enough to adapt quickly to new and changing situations.
No army, for example, can know in advance what it will find when it
engages on the battlefield. The fog and terror of war never afford the
luxury of predictability. The key to success is to have a force that is
well-trained in tactics, strategy and the weapons it will need. A force
that is disciplined and able to adjust quickly and adapt to fluid
conditions--threats and opportunities both will present themselves
through the haze. I hope to build, along with my colleagues and the
outstanding FCC staff, just such a unit--one well suited to an
uncertain future.
Thank you. I would be happy to answer any questions this
Subcommittee may have.
Mr. Upton. Sounds like the winning attitude of the
Wolverines over B.C.
Mr. Markey. Well, in basketball, Mr. Chairman, our players
weren't tall enough. That is an important consideration.
Mr. Upton. Again, Mr. Chairman, thank you for spending so
much time with us this morning. We are going to have questions
from members, 5-minute segments back and forth.
What are your views on the progress of the transition to
digital TV and what we will be facing by 2006? It is pretty
clear, I think, to all of us, that we are not going to reach
the 85-percent goal by then. So, what do you think specifically
we need to do to put the transition back on-track?
Mr. Powell. I start with the premise that it depends on how
we want to choose to measure success. Candidly, I believe that
the expectations about how rapidly the deployment will occur
are somewhat exaggerated.
It requires the coming together of multiple industry
segments, some of which are competitors, in the context of
cable or DBS delivery, content providers, broadcasting, and the
consumer electronics industry.
And I also think that it requires a dramatic transition on
the part of the people who matter most, which are consumers.
And a rushed transition, in my mind, is one that runs the risk
of pushing consumers before things are ready, dramatic changes
in a service that they value at a very high level.
So, I always feel compelled to start out with, what do we
believe we think is a reasonable timeframe for the transition.
I have made no secret that I believe 2006 has always been an
extremely optimistic assessment of 85-percent penetration. You
would be hard-pressed historically to find any technology, no
matter how ``killer'' in its application, that ever reached
anything like those sorts of penetration numbers on that
timeframe. I am bullish about DTV. I think it is a great
service. I think consumers will embrace it, but I think it will
take longer than we had imagined.
What can we do? The first thing we need to recognize is
that most of the solutions are out with the industries and in
the marketplace, and not in Government. On the margins, there
are things we need to do and have done. The Commission has
engaged in an effort to remove some of the ambiguities and
questions associated with the deployment so that at least those
aren't contributing to the risks and anxiety. For example, we
took a position finally settling the debate over the
transmission standard between 8VSB and COFDM. We made clear,
which was less than it should have been, for reasons I don't
understand, that there is a must-carry right for a digital
signal at least in the final product, when that is the only
signal you are providing.
We have taken a number of other steps that we hope would
facilitate that, and we are constantly examining whether there
will be more. There are tough questions that we believe are
outside our legal authority that the Congress and this
subcommittee may have to examine. I would cite as examples the
possibility of multiplexing on a single channel on cable. It
was our sincere belief that we did not have that flexibility in
the way the statute was written. I will tell you that many of
us believe that it might be a viable way to provide service,
but simply had to remain faithful to the statute.
Mr. Upton. What are your thoughts on the future of 3G
deployment in the U.S., specifically, if the Pentagon is
unwilling to relocate from the 1755-1850 megahertz band and,
second, is it prudent to auction the 1710-1755 megahertz band
in the 2110-2165 megahertz band by September 1902, before we
resolve whether mobile carriers can use the 1755-1850 megahertz
band for 3G?
Mr. Powell. I am one who is bullish about the prospects of
3G, which I hope mean advanced Internet-type services over
wireless devices so that----
Mr. Upton. I saw the arrow go up on CNN.
Mr. Powell. Did they? What power.
I would like to emphasize there are two dimensions to this
problem. One gets most of the attention, understandably, which
is more spectrum, the ability to have a bigger highway if the
highway is congested. But as we know, with highways, that is
not the only dimension to the problem. One of them is the
efficient use of spectrum.
The Commission has tried to emphasize the importance of
continuing to incent the development of technology and handset
solutions and network solutions to get more out of what exists.
Spectrum will always have a certain scarce dimension to it,
just as any economic good does, and there always should be two
efforts--one, to provide more, but also to provide greater,
efficient use of what we do have. And I think that will have to
be, if we are realistic, part of the solution to 3G,
particularly if, as you say, Mr. Chairman, that if DOD
ultimately cannot, for national security reasons, yield, or is
unable. Or we are unable to reform sufficient amount of
spectrum, we will have to look for other solutions.
It is important to remember, it is a little bit of a zero-
sum gain--what is given to one is taken from another--and those
represent conflicting values that we will have to reconcile.
Mr. Upton. As a quick follow-up, though, is it prudent to
do some of that spectrum before we resolve it with DOD?
Mr. Powell. This is an area where I would have to confess
the Commission finds itself between a rock and a hard place,
between statutory mandates. Through the budget process, we have
been commanded to auction spectrum that will nonetheless remain
encumbered through its auction.
From my perspective, I don't take a position as to whether
that is good congressional policy, but it is the one that we
are commanded to follow. We have tried to facilitate, as
greatly as possible, incentives that would cause people to
yield spectrum that is otherwise encumbered. We did so in the
channel 60-69 spectrum proceeding. We are looking at ways in
the channel 52 to 59 context. But, ultimately, we have a legal
obligation to auction the spectrum which, upon dates that were
specified in statute, which was clearly known to be encumbered.
So, I think it is a problem. It will affect the value of
the spectrum at auction. It will affect its effective
deployment in the future, and I think it is just a messy thing
we will have to work through.
Mr. Upton. Thank you. Mr. Markey.
Mr. Markey. Thank you, Mr. Chairman, very much. Recently,
Mr. Chairman, there was an important court decision addressing
the horizontal ownership limits for cable systems. As you know,
the FCC had, pursuant to the Cable Act, established a 30-
percent limit. The court generally said two things of
importance. First, it said they seem to be looking askance at
diversity as an important criteria for establishing a
particular cap. Second, the court indicated that the FCC had
not provided sufficient detail to substantiate setting the cap
where it did.
Now, in the aftermath of this decision, you announced that
the Commission would suspend AT&T's obligation to sell certain
systems in order to meet the requirements in the AT&T merger
order from last year in order to review the court decision and
gauge its relevance to the AT&T merger order.
Now, the AT&T merger order, perhaps in contrast to the
general 30-percent cap, was the result of serious work by FCC
staff and attorneys and represented the collective judgment of
the Commission that concentration was a concern, that the
cross-investments of AT&T--that is, TCI and Media One with Time
Warner--could have negative consequences for competition. That
order, as you know, was quite detailed, in fact, from the
Commission.
Now, you have had a couple of weeks to think about that
court case. What are your thoughts on that decision now, Mr.
Chairman?
Mr. Powell. Sure. There are two parts to it. The court case
clearly is significant. I agree with you, the two bases on
which the court made its decision, which are also inter-
related, are: the court considered our belief that Congress'
intent was both to facilitate diversity and competition and the
concentration policy is in error. That is, in the opinion of
the court, the statute's sole purpose was competitive
considerations and concentration, and any limit we selected had
to be premised on a competition analysis or one that considered
concentration effects, and not one premised solely or
substantially on diversity as a rationale.
I will state candidly, I don't particularly and did not
when we promulgated these rules, agree with that interpretation
of that congressional provision, but I am now presently bound
by the interpretation afforded to it by the court.
So, any further justification which we will be required
under the statute to now try to offer for a new rule will have
to be, if faithful to the court, premised on concentration
competitive concerns, which often lead to higher-number caps
than the kind that could have been justified under diversity
grants.
Mr. Markey. Let me follow up on that then, Mr. Chairman.
Let me ask if you think that decision has any relevance to the
35-percent audience-reach cap that the broadcast industry is
subject to?
Mr. Powell. Sure. I think it has relevance, though I don't
believe it is directly on point, which is part of the reason at
the same time we issued the suspension you speak of, we also
rejected a petition by a major broadcasting group to suspend
the obligations of the 35-percent cap on the same basis.
My judgment was, the judgment of the majority, was that the
35-percent national broadcast ownership cap is specifically
stated in the statute. The number is specifically stated in the
statute. Now, while the statute does give the Commission
discretion to modify that provision in the context of its
biennual review, we believe that at least at present the
statutory basis, which was the key underpinning of the court's
decision as to the cable rule, was different.
Mr. Markey. May I ask, what is your intention in terms of
the AT&T case now? How are you going to proceed?
Mr. Powell. Well, we are considering--I would like to
emphasize, as you correctly noted, that it was a suspension of
the condition, and not a limitation.
I believe, as did the majority, that suspension was very
much warranted because while there was a different basis on
which the condition was reached, the analysis just was not
defensibly any different than the one we had just used to
defend the rule and, in fact, specifically imported the rule as
the basis of the number it selected and believed quite
seriously that if we had failed to do so, a court would rightly
say that that was being flaunted in the context of the mandate.
But we have an obligation to return to the question, which
we are looking for a proper vehicle to do, to raise whether the
AT&T condition is, in fact, itself in any way undermined by the
court opinion.
Mr. Markey. Let me ask one final question, and that would
be--I think you should be very careful, by the way, in this
area because, without question, diversity is a proxy that
ensures that there is competition in the marketplaces that took
a long time for Congress and the regulators to break down.
There is a lot of railing that goes on, Mr. Chairman, about
legacy regulations, and people, by definition, don't like the
term. It doesn't sound good--legacy--it is the past whereas
they are looking to do something toward the future. But as soon
as the discussion of legacy regulations is joined with the
subject of legacy subsidies, people start acting up because now
you have to do away with unwarranted, historical subsidies that
go, in large measure, to monopolists. And, of course, that
makes the whole subject so much more complicated.
What I would like you to do, if you could, is just to tell
me what you think we can do for new service, so that we can
save it from legacy subsidy structure, and that is Internet
Telephony. What recommendations would you make to us on what
things can the FCC do to make sure that it is not saddled with
this legacy subsidy system that makes it hard for newer
entrants to get into the traditional telephony business.
Mr. Powell. Sure. Of course, as you would expect, I am not
prepared to commit to the exact regulatory treatment that
should be afforded to IP telephony, but that said, at the
outset, when I listed a number of the substantive principles
that I thought were important when considering the future, one
of them was the commitment to ubiquitous and affordable
service. But I also say in the statement that we should look
for creative ways to do that rather than assume or lightly
advance the regime that works successfully in the context of
the telephone system. I will expand on that briefly.
The key should be the first principles of universal
service, which are ubiquity and affordability, and I think that
as we get into that nascent world where the questions are less
clear, we should be committed to that goal. We should be very
rigorous in looking for ways to ensure that don't come up with
it necessarily the same kind of enormous subsidization or
market intervention that in some ways is characteristic of the
phone system.
One of the things that I think we should all be excited
about is there are certain natural cost characteristic benefits
in a lot of the new technologies that should give us cause for
excitement that it will be deployed widely and it will be
largely affordable.
Now, I expect that there will be market failures, and there
will be parts of the country and populations to which this does
not happen naturally, but I think the Government would be
better served if it attempts to, in this iteration, be very
pointed and focused about where it attempts to provide
governmental assistance as opposed to assume it in a
broadbrushed way.
Mr. Markey. Thank you very much.
Mr. Upton. Thank you. Mr. Tauzin.
Chairman Tauzin. Thank you, Mr. Chairman. Chairman Powell,
I want to follow up on Mr. Markey's question about cable caps
and also the national broadcast ownership caps. Am I to read
from your testimony that you are really going to do biannual
reviews at the Commission now?
Mr. Powell. You bet.
Mr. Upton. And in that biannual review, is there an
opportunity under the law for the Commission to review the 35-
percent national broadcast ownership cap, and to adjust it if
you find it necessary?
Mr. Powell. Yes, I would say it is more than an
opportunity, it is a legal obligation. In many ways, if I
recall correctly, in the biennual last year, I dissented in
part because I believed that we had not been willing to fully
tackle some of the ownership questions, not presupposing the
outcome, but that we had really seriously evaluated their
continuing validity. And I think that that is important and a
legal obligation to do.
Chairman Tauzin. In fact, in a world where there are
increasingly more diverse sources of information and a great
deal more competition, as you point out, isn't it the
obligation of the FCC to continue to review these caps?
Mr. Powell. I think so, and that is at least also my
interpretation of what Congress had in mind by directing an
institution to continually re-evaluate its structural ownership
rules on a biennual basis. I interpret it to be the recognition
that there will be changed circumstances particularly brought
about by the objectives of competitive services and diverse
services that the Congress had in mind in the 1996 Act.
Chairman Tauzin. Yesterday, Mike Armstrong, of AT&T, wrote
an Op-Ed piece in the Wall Street Journal, calling for breaking
up Bells on a wholesale-retail basis. To my thinking, that
would be an extraordinarily overly regulatory approach to
addressing some of the service quality issues brought up by the
C-LEX.
Do you think that this kind of a plan would be wise, or
would it be a step backwards from the 1996 Act of pushing
deregulation and open competition?
Mr. Powell. Well, I think that at a minimum it would
introduce yet another extraordinary period of disruption and
uncertainty that would likely proceed for another multiple of
years, just like the wake of the 1996 Act produced a period of
settlement and uncertainty through litigation and a lack of
clarity about the terms and conditions of the provision, and
there would be a cost to that.
I don't know whether I believe that the benefits would
outweigh the costs, but I do think that we would find ourselves
in another long period of confusion and anxiety that might
further delay----
Chairman Tauzin. Speaking of those periods, you also
recently announced some changes in the rules governing Section
271 processes. Could you walk us through quickly the changes
specifically? Would you describe how an RBOCs would now file
multi-state applications for relief under 271?
Mr. Powell. I think what you are referring to, isn't
specifically our approach, but instead the ones that have been
adopted principally by the Western States through a regional
testing of operational support systems in an attempt to, in a
more efficient way, reach consensus and uniformity so that
those applications could be brought in some combination or
package, and that the regulatory questions and operating
systems questions would be the same in that context. And I
think that we generally supported any effort that tries to
harmonize, streamline and make more efficient the 271.
Chairman Tauzin. Are there other reforms in 271 that you
are contemplating? Let me be specific. One of my concerns with
the 271 process from Day One has been that the Commission has
consistently told State Commission-approved plans that they
were deficient, but never laid down a clear explanation of what
needed to be done to make them sufficient, and that the shell
game of simply saying ``No, you don't meet the standard today,
come back later'', without telling you what you really needed
to do to meet the standard, has unfortunately created a lot of
that confusion and delay in the 271 process. Do you agree with
that, and do you plan any changes in the way the Commission
will approach these applications?
Mr. Powell. I agree with it for some years and a little
less so in other years. I do believe that in the first couple
of years of implementation that was a serious problem, but I
think, in fairness to the Commission, there was a lot of its
own misunderstanding and learning curve as to exactly the nuts
and bolts of the systems and the complexities of the
interactions, and it took us a good bit of time to understand
in our own mind what precisely were the subjects of the focus.
And so I do believe we have gotten better through a number of
things, and I am very optimistic that we will be better in the
coming years.
One thing that we recognize that we should do is to get out
and get on the road and to be actively out there prior to the
filing of applications to try to advise--we can't precommit to
whether this will do it, but we can advise State Commissions,
who particularly are often resource-constrained and expertise-
constrained, to telling them the kinds of ways that they might
want to pursue the matter and develop their application so that
it has a higher probability of success.
In the first year I was at the Commission, we wrote a paper
talking about the ``collaborative'' approach, an attempt to
really be in partnership so that we get a higher probability of
succeeding. And I also think the companies need to bring them
in.
We are constrained in that we have a 90-day window to make
a decision. In many ways, the precedents we set are what guides
the next one. And so I think we also get better, the more we
see and the more we are able to have an opportunity to write
about what we expect. We have only done that now in a handful
of instances, and I think that this year there will probably be
an increased opportunity for that.
Chairman Tauzin. I think my time has expired. I simply want
to piggyback on something former Chairman Dingell said about
the operation of 271, and that is that it is our common
observation that competition in the local market has really
increased dramatically once 271s are approved, and that until
that point I think there is a natural reluctance for
competition because it makes the case for a 271 approval. And
if that is true, if that observation is correct, obviously,
improving, streamlining, expediting a system whereby State
Commissions and RBOCs know precisely what needs to be done in
order to achieve approval, will probably lead to the two things
Mr. Dingell pointed to, which is more competition and lower
prices for local telephone service, which was the game, after
all, in 1996. And I share that observation by Mr. Dingell, as
well as your own observation and his, it is time for us to
functionally regard how we treat services delivered by
different technologies. And I thank you--I almost wanted to
applaud, Chairman Powell, after your statement. Thank you very
much for being here today.
Mr. Upton. Thank you, Mr. Tauzin. Mr. Sawyer.
Mr. Sawyer. Thank you, Mr. Chairman. All of us up here have
listened to a lot of testimony over the course of our time in
the Congress, and I just hope that my colleagues would agree
with me, this has been an absolutely virtuoso performance. It
was superb.
Mr. Powell. Thank you.
Mr. Sawyer. If you carry out your goals with the clarity
with which you have explained them, we are into a new era in
terms of communications regulation.
Let me return to a topic that Mr. Markey touched on in the
abstract, I would like to touch on a little more in the
specific. You talked about you planned to pursue worthy
universal service goals, of ubiquity and affordability as new
networks are deployed, but the challenge is to do it in new and
creative ways.
It seems to me that as telecommunications technologies
merge, that there is a question of how the FCC administers the
universal service charge becomes a question which is now, of
course, just for voice and long distance.
If we took a look at Internet telephony or wireless, would
it be your view that the universal service charge might expand
into that, without regard to technology but rather with regard
to the way in which the service is structured?
Mr. Powell. I think I understand the question. It is
probably the ``$64 billion'' question, literally. Part of the
answer to that depends on a pretty fact-specific evaluation of
whether IP telephony can fairly be evaluated and categorized as
a ``telecommunications service,'' as defined by Congress, such
that the provisions that would be implicated by your question
would be applied to them.
If the factual analysis were to suggest it was something
else--for example, an ``information service'' or as many of the
Internet services have been categorized--it would largely fall
outside of at least the traditional application of those kinds
of subsidy programs.
There is a limited amount of discretion the Commission has
for extending service, but I think you still have a sort of
touchy legal-versus-factual determination to see whether you
can do that.
The point about creativity, IP telephony is potentially a
great example. At present--and there are some big ``ifs'' and I
am cognizant of them--but if you are on the Internet, you are
talking about the ability to communicate right now by utilizing
a piece of software that in many instances is free or
relatively inexpensive, using the public Internet which nobody
owns, to talk to your friend in New York City without any per-
minute or service charges. Now, that is pretty ubiquitous and
pretty affordable.
I think that my only challenge in these areas is to ensure
that we find the exact problem we are attempting to cure before
we talk about the extension of the traditional program to them.
One of the reasons I tend to resist prematurely intervening in
the context of IP telephony is because it is engaged in a
wonderful period of innovation, and experimentation is being
deployed wildly such that it was a critical issue in a major
merger recently, and consumers are really reaping the benefit
of its deployment.
Mr. Sawyer. In the few seconds that I have left, let me
share with you my predisposition on this. I really believe that
the Land Grant Colleges Act at the end of the 19th Century
changed America in critical ways. It took the growth of a
technology in terms of railroad transportation, and used it for
the task of more broadly building that skill level that we
needed as a Nation.
It seems to me that the genius of the E-rate is that it has
the potential, wisely applied, to do many of those same kinds
of things, not just for putting equipment into schools but for
elevating the skill levels of an entire population, something
that we are challenged to do in ways that we probably never
imagined before.
So, with that, I will be revisiting the question with you,
and thank you for your support.
Mr. Upton. Mr. Stearns.
Mr. Stearns. Thank you, Mr. Chairman. Chairman Powell, the
FCC's January decision pertaining to the ``carriage of digital
television broadcast signals'' has led many broadcasters and
cable operators to visit my office on a number of occasions,
and you and I talked about that.
My question is specifically focusing on the multi-cast,
must-carry provision. What impact will the rule have on small,
independent broadcasters, Christian broadcasters, Spanish
language and emerging network broadcasters, who have strong
concerns here about this rulemaking?
Mr. Powell. The decision will probably have a
disproportionate impact, but it will have the same impact it
has on all broadcasters, which is it is going to limit at least
one viable business opportunity to effectuate the transition at
least with the Government right-to-access. It is important to
emphasize that nothing we said precludes any broadcaster from
reaching a negotiated carriage agreement for those kinds of
services. It is only that we can't interpret the must-carry
statute to provide a Government-conferred, absolute right to
that carriage because of the statute's use definitionally of
the idea of a ``principal'' or, I should say, ``primary'' video
signal.
Mr. Stearns. But if the cable network shuts them down and
says, ``We will accept your high-definition signal, but we are
not going to do the multi-casting'', there is no negotiation.
So, how can they negotiate?
Mr. Powell. They might not be able to, and I think that if
that is a critical desire for transition, that statutory change
would be warranted. This was the area I was alluding to
briefly. I sincerely believed our decision was one of those
tough ones that we believe was just compelled by the only
honest reading of the statute.
Mr. Stearns. You are still going under taking comments,
too, as I understand. You are still--I am not saying here you
are going to revise it--but you are in the process of it?
Mr. Powell. Well, I think you are referring to two things.
There is a further notice, and there are two things potentially
implicated there. One is the carriage of both--there is still a
question about whether we would confer or interpret the statute
to allow the carriage of both an analog and a digital signal
simultaneously. That is different than the issue you are
referring, that is teed up in the notice. Though we raised
pretty significant constitutional concerns about dual carriage.
The other issue is whether there is part of the statute that
allows you to carry, in addition to your primary video signal,
program-related material. The statute defines program-related
material, but we provided another round of comment as to what
that might include. And that also has an effect on what a
broadcaster may be able to do over its must-carry signal in the
vertical blanking role and other ways. It is a pretty narrow
statutory provision, but we are seeking comment on whether
there are ways to do more.
Mr. Stearns. Let me follow up on Chairman Tauzin's
question. I introduced legislation easing the duopoly rules and
grandfathering of existing local marketing agreements and
elimination of the one to a market rule. And the Commission's
actions in this respect have been appreciated.
Shouldn't the next step be to perhaps eliminate or at least
relax the national ownership caps on broadcasters as well as
repeal the broadcast cable and broadcast newspaper cross-
ownership rules? Yes or no, if possible.
Mr. Powell. I can't do that. I think it is absolutely----
Mr. Stearns. Maybe we could break it down.
Mr. Powell. My effort is to always go back to my
substantive points: validate or eliminate. The 35-percent
national ownership rule, if I remember correctly, was
promulgated in the 1970's with an entirely different media
environment than the present environment, and should be
validated, if it has any merit at all, in the current context.
The biannual review will provide the vehicle for that.
The newspaper cross-ownership is similar. We already have
directed that we will have an item to examine that question
very shortly, in the next month or so.
Mr. Stearns. So the repeal or relaxing of the broadcast
cable and broadcast newspaper cross-ownership rules are to be
decided, when?
Mr. Powell. There will be a proceeding that initiates the
examination of those rules in the next month or 2. It is being
slated for May.
Mr. Stearns. Let me talk about ownership caps in this
respect. The Commission generally seems to set ownership cap-
type rules well below the kind of threshold that might be
expected if the affected industries were simply governed by the
antitrust laws. In cases where you lack a clear direction from
Congress as to where to set a cap, just give me an idea of the
principles that you might use with respect to matters of
ownership or concentration, maybe just some principles.
Mr. Powell. Communication policy has always been infected
with two principles, and they are not always consistent. One of
the principles is competition or concentration concerns, the
anti-competitive effects of concentration of market. That is
also the historical gravamen of antitrust policy.
The trick here, is the notion of diversity of program
voices that may or may not bear direct resemblance to
concentration levels that are impermissible. The horizontal
cable are a perfect example, that the 30 percent, in all
likelihood, couldn't be justified as a national cap for purely
competitive purposes. That number would probably, in all
likelihood, be lower than what antitrust would suggest to the
typical HHI kind of economic analysis would suggest.
Diversity is a harder thing to decide whether you believe
this limit or that limit is too much or too little, and I think
that is where the problem is most difficult to address. They
are worthy policies, but very difficult to articulate and
promulgate rules for because it is very easy to be subject to
the accusation that, you know, why not this number, why not
that number, and that is a very difficult thing to do.
It is also difficult because when it involves diversity, it
usually means it involves media, which usually means you have
to defend the rule against First Amendment scrutiny, which is
higher than our rules would be defended in concentration
context. So, the Time Warner case was hard, in part, because
the court said ``You have to pass constitutional scrutiny in
defending the selections that you made''. And so, the long and
short of it, those are the objectives.
I am not the biggest fan of prophylactic caps generally
just because I believe, as I learned in law school, rules tend
to be almost always over-inclusive and under-inclusive at the
same time. People you wish you got get away, people you don't
want to get get caught. And I think a lot of times those
judgments are very case- or fact-specific, and it is very
difficult to pronounce that a level is too little or too much.
But I think if they are warranted at all, they are probably
more warranted if you are convinced by diversity concerns than
they are usually by competition concerns, and it is many of the
reasons why antitrust policy is a case-specific doctrine, it is
not a prophylactic one.
Mr. Stearns. Thank you, Mr. Chairman.
Mr. Upton. Thank you. Ms. Harman.
Ms. Harman. Thank you, Mr. Chairman. I apologize for being
slightly distracted, but I have just learned from Mr. Boucher
that our colleague, Norman Sisisky, passed away this morning,
which I find truly upsetting. He was a wonderful and decent man
with whom I served on the Armed Services and Intelligence
committees for many years. Marvelous sense of humor. It reminds
us all how fleeting life is.
Pulling myself back together a bit, I would like to join
Mr. Sawyer in his comments about your testimony, Chairman
Powell. I thought it was extraordinary. And if you bring those
skills to reforming the FCC, the rest of the Federal Government
should come next.
Let me associate myself particularly with your comments on
enforcement and need to enforce the law. As one who threaded
her way through the difficult votes on the Telecom Act of 1996,
it is my personal bias that we should let that law work and we
should enforce its provisions.
I would like to just ask you a few questions, first, to
bring to your attention two disputes involving the Los Angeles
region, and to hope that your Agency will intervene to resolve
them short of litigation and rulemaking.
One involves something I just learned about, which is your
approval for the construction of a new broadcast tower on Mt.
Wilson, in Burbank, California. That broadcast tower is
beginning to be built by Unavision, and it is extremely close
to another broadcast tower which exists, that was built by ABC.
And the issue is, how high will the Unavision tower go because,
if it is too high, it will block the signal from the ABC tower.
This should be a resolvable issue. People are talking to the
Agency. I just wanted to be sure you personally knew about it,
and hopefully there will be a satisfactory resolution soon.
That is one.
The second one involves the allocation of emergency radio
frequencies which are the lifeline of effective police and fire
services. El Segundo, California, another city in my district,
was part of something called the South Bay Regional Public
Communications Authority, which owns a number of frequencies,
some of which are unused. El Segundo is no longer part of this
group, and would like to reclaim some of these frequencies it
previously owned. I am, again, hopeful--I will be writing you
about this--that your Agency will try to intervene, work this
out short of some prolonged dispute that is avoidable and that
will disrupt police-emergency services.
My question is on a different issue. We started out joking
about basketball and football teams and so forth. One of the
other things that local areas get incensed about is changes in
zip codes and area codes for telephone numbers. And, of course,
there is a dispute in Los Angeles about this.
There is an answer that could alleviate a lot of this
regional tension that I hope you will consider as you move your
Agency toward one that operates across technologies, and that
answer is called ``technology-based overlays''. A bill passed
in California, SB-1741, which requires California's public
utilities to adopt technology-based overlays. And this
legislation cannot be implemented without your approval, your
Agency's approval.
What it would do is require that the new technologies--data
lines, ATM machines, pay-point machines, and possibly pager and
cellular phones--move to new area codes so that the businesses
and homeowners wouldn't have to change theirs. This seems to me
to be a logical idea. It would sure help neighbor-to-neighbor
relations in the Los Angeles area and all over California, and
probably in other States, and I would just like to know your
view of this concept.
Mr. Powell. Sure. The numbering issues are becoming quite
serious. The explosion, the revolution, has created an
extraordinary demand for unique identifiers to reach devices
and new services, and that is leading to the big exhaustion of
a numbering system that was principally designed around--this
is one of those legacies--historically around the common-
carriage system.
The Commission's prior rules were opposed to service-
specific overlays principally because they evolved from the
fear, once upon a time, that if you had them, they would
benefit the monopoly incumbent, who would deny the availability
of numbers to new innovative entrants. Oddly enough, now we
almost have the reverse of that problem, as new technologies
come into the market.
The Commission recently undertook a proceeding to re-
examine and to look again at whether service-specific overlays
make sense. And so I think we are at least convinced that it is
an idea that requires pretty serious attention, and maybe the
original rationales for the prohibition are no longer
justified. And we have worked very well with California and
other States trying to provide as much relief--we know how
sensitive it is to consumers in States. We know how sensitive
it is politically in States, and we have really been trying to
increasingly do everything we can to give States the
flexibility they need to better deal with that problem.
Ms. Harman. I thank you for that comment and just conclude
on the point that California needs your attention to the three
issues I mentioned, and you can be very helpful to us, and
speaking for me, I am very excited about the fact that you are
bringing to this job the enormous energy and vision that you
obviously are bringing to it. Thank you, Mr. Chairman.
Mr. Upton. Mr. Deal.
Mr. Deal. Thank you, Mr. Chairman. I want to thank you for
being with us today, and one of the themes you will probably
hear from many of us who represent rural areas is our concern
about universal service. And I would like to revisit that just
briefly with you.
I have recently introduced a bill that would remove the
caps on the high-cost rural areas that have been imposed, I
believe, since 1994 under FCC rule, and some would estimate
that that has cost these high-service providers some $350
million over the course of that timeframe.
I would just like to ask briefly what your opinion is about
the possibility of removing those caps to those service
providers that are in those high-cost rural areas.
Mr. Powell. Sure. The caps have a convoluted history as to
what their purposes were, but there are actually two or three
dimensions to which they go. The cost of the actual loop or
line infrastructure which we call the high loop costs, is one
example to which their caps run. There are also caps on sort of
corporate general expenditures includes discretionary costs
such as travel and lodging associated with the operation of the
telephone company, and another one which I won't even pretend
to remember.
So, I think that I don't know the answer to the question at
present, other than this is ripe and teed up in the context of
our rural access reform and rural high-cost proceeding that is
presently underway and to which we hope to have final decision
by May, so that changes can be implemented in the July 1
timeframe.
The rural task force that worked to develop a
recommendation to the Commission has filed some proposals that
include modifications of the cap in a way that the rural
companies believe would be beneficial to them, and those are
very much alive and on the table for examination.
The problem in my job always about subsidies is that they
are not cost-free. That is, they do have a reverberating impact
on other consumers who will have bill increases as a
consequence. Removing the cap, we estimate, just on the high
loop, is probably $198 million addition to the system. The
corporate cap would be another $40 million addition to the
system--not that they might not be justified, but that money
comes from somewhere, and it comes from consumers who will then
have line charges.
So, it is not always easy to reconcile, but I think we are
committed to making sure that rural America, rural companies
have the subsidy that is critical to continued provision of the
service, and this is just where we get paid, or we don't, the
big bucks to balance those.
Mr. Deal. Well, we look forward to working with you on
that. Let me change subjects just slightly with you, and that
is DBS.
My district is one of those unique ones that borders four
other States, and because of the current rules as to service
provider areas, many of my constituents that are close to the
borders are considered within the range only of television
stations that are outside of our State and therefore DBS is not
allowed to provide them as the local channels that they would
prefer.
I would simply ask if you would look at that issue because
it is certainly one that affects many of our constituents. They
would prefer to have, for example, the television stations
broadcast from Atlanta, Georgia, the capital of our State,
rather than from Chattanooga, Tennessee on the western side of
my area, or from Greenville, South Carolina on the eastern
side.
It is a concern for those DBS subscribers in some of those
rural areas, and I would look forward to working with you as we
could try to solve that problem.
Mr. Powell. Absolutely.
Mr. Deal. Thank you. Thank you, Mr. Chairman.
Mr. Upton. Mr. Green.
Mr. Green. Thank you, Mr. Chairman. It has been a long
morning, Mr. Chairman, but I have really two questions if I
could do it in the 5 minutes. One of them is a local situation
in Texas. NorthPoint Communications has had a pending
application to offer digital television services and high-speed
Internet access in direct competition with cable and DBS
providers. I want to see more competition in cable and DBS, and
we are talking both in terms of price and service, and
innovative wireless technology developed in the State of Texas
by NorthPoint technology could provide a real competitive boost
to the marketplace, and their service, which would include 96
channels including local stations could be marketed to
consumers for just about $20 a month. Not only could they
deploy it in Houston, but also in other television markets in
the country.
I understand NorthPoint first came to the Commission in
1994, and that a license application has been pending for over
2 years. The Commission concluded NorthPoint's signal would not
cause harmful interference, so I wonder why the licenses
haven't been granted. I know you may not be familiar with this
particular one, but if you could get back with us.
And do you believe the satellite broadcasters can meet
their looming requirement to meet local communities, to provide
local communities with a full set of local signals, and also
whether it is NorthPoint's technology or someone else's
technology, is there a solution to that particular problem?
Mr. Powell. Yes. Actually, this is a perfect set of issues
that highlight the problems of lack of harmony in different
regimes. The NorthPoint service, which technically is a
terrestrially delivered use of wireless technology but will be
competing principally with direct broadcast satellite which is
delivered by satellite are regulated, arguably, in two
different ways, one is as a wireless terrestrial provider and
one is as a satellite provider.
In the satellite provider context, for example, under the
ORBIT statute, we are prohibited from auctioning spectrum, but
in terrestrial wireless we are specifically required to auction
spectrum. NorthPoint quite innovatively filed for a license in
a satellite window, and it has an innovative and interesting
and hopeful technology, but it has presented a number of
challenges to the policy of reconciling a spectrum that is in
the satellite window that has specific process of licensing and
service rules that are very different from terrestrial and in
which we work to eliminate mutual exclusivity by trying to
balance interference concerns.
It has been too long. We are working hard on it. We
recently have been directed by Congress to conduct independent
tests to determine the interference issues. That has been
somewhat challenging because not everyone is always happy with
who you choose to do the testing, but that is underway and we
are very hopeful that pretty shortly we will have an
aggregation of the results and be able to proceed.
Mr. Green. Do you have any kind of timeframe?
Mr. Powell. I can get that to you. I don't feel comfortable
advancing one right now.
Mr. Green. Appreciate that. After reading your testimony, I
get the feeling that you favor an industry solution to the HDTV
transition. Do you believe we ought to wait for the industry to
come together on the issue, no matter how long it takes?
Mr. Powell. Well, not necessarily. It depends on what you
believe to be an impediment of the condition. The Government,
for the entire history of the transition, has been very
involved in that process and, to the extent it continues to
take responsibility for the transition, I suppose there are
issues of Government focus. We have talked about must-carry
regimes. If people are convinced that those are critical to
transition, it is an issue that would require a governmental
act, I suspect. Similarly, there are issues about copyright and
intellectual property protections that are rights conferred and
granted by the Government. If that was a serious and continuing
obstacle, one might not be prepared to wait forever for them to
reach mutual agreement on those terms and conditions.
I would point out that most of those issues are outside the
specific jurisdictional context of the Commission. But I
suppose that my only caution is it sort of depends on which
specific issue and whether it has a natural Government
component. But there are a lot of issues here about finding a
sweet-spot for consumers. I don't know what specifically to do
about the development of high-definition creative content so
that they have something to see when the TV turns on, or the
natural product cycles associated with driving $3,000 sets down
to levels that average Americans, can afford. Much of that
takes product cycle time.
The average family in America owns three to four television
sets. That is a lot of swapping to go on for an 85 percent of
the population. So, usually my challenge is, let us identify
specifically where the rubs are. Let us see which ones involve
what institutions, and let us get those institutions focused on
those problems.
Mr. Green. Thank you, Mr. Chairman, and one of the
questions we will submit is an update on reciprocal
compensation, and I know that is an issue our committee has
dealt with, but also the FCC.
Chairman Tauzin. Mr. Chairman.
Mr. Upton. Mr. Tauzin.
Chairman Tauzin. I have just had staff check out the
announcement about Norm Sisisky, and the announcement is
correct. Norm Sisisky passed away today. The information we
have is that he was recovering very successfully from surgery
yesterday, and the report we had was that he was expected to
make a full and complete recovery, but obviously it didn't work
out that way, and maybe we could all join in a moment of
silence as we remember a dear friend and extraordinary servant
of the American people, Norm Sisisky.
[Silence.]
Chairman Tauzin. Thank you, Mr. Chairman.
Mr. Upton. Thank you. Mr. Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman. Mr. Chairman,
welcome. I think many of us, the Members of Congress,
especially on this committee, if we ran for the Presidential
office, would get the same type of results that Senator McCain
did when someone said, ``You wrote a letter to the FCC asking
them to rule on an issue''. All of us have probably written at
least one letter to that, and so it is probably--I know that
you, in your short amount of time, have really moved the
Commission to get stuff out the door, and we would encourage
you to continue. I think most people I deal with, who ask me to
intervene or at least address the FCC, they just want some
legal certainty--I think that is my buzzword of this Congress--
legal certainty. Whether it is Superfund or whether it is small
business liability protections, or actually results and
decisions made by the FCC, we just need some legal certainty--
win or lose, up or down--and then we can move on, and I would
just throw that out as a comment.
I don't have any pamphlets for NorthPoint technology. Maybe
my colleague, Gene Green, can give me some of the pamphlets,
and I could add to his advertising, but I am a supporter of
it----
Mr. Green. Mr. Chairman, would the gentleman yield? If you
teach him how to shoot a basketball shot, I will share it with
him.
Mr. Shimkus. That is right. We do work together on a lot of
issues. But I do also want to echo and support from an issue
which is small broadcast companies, particularly KHQA in
Quincy, Illinois, and this whole direct satellite local into
local. And many of us feel--and there is a letter that
mentioned the rulemaking--the reality is, if--we see this as
the only way to get local-to-local in the competitive markets
in many of the unserved areas. And if rulemaking is delayed, we
fear it could be years before this new service is deployed. In
your estimation, timeframe, when do you think a decision could
be rendered?
Mr. Powell. Congressman, I am not sure I am clear on what
specific rulemaking you are referring to.
Mr. Shimkus. Well, I guess, really, how quickly can you all
make a determination of this NorthPoint with all the things you
had mentioned, my colleague, Mr. Green from Texas, is a
suitable transmitter of the digital signal that would be in the
satellite spectrum. That is pretty good for someone who is
still having trouble taking care of the vocabulary here.
Mr. Powell. The only reason I am hesitant to say exactly
the timeframe is because it requires the submission of the
completed evaluation of the technical requirements from an
independent tester that we were required by statute to
undertake. I just am not sufficiently confident to know how
much is involved there before I put my engineers in hell
suggesting it will be next week.
Mr. Shimkus. And that is fine. Again, it just speaks to the
whole legal certainty, not just from this company's ability but
also the small local broadcasters who are in areas that they
don't really see local-to-local going without--I mean, there
are a lot of people waiting patiently.
Let me skip to another issue because of time. We passed our
E-911 bill that initially was a lot of people have a piece of
the action on, and Chairman Tauzin allowed me to carry it in
the last cycle, and we are excited about it.
What is your perception of the status of the E-911
implementation, you know, throughout the whole industry,
through the folks who are making the equipment, the handset and
network solutions, and what about the Phase II requirements
that kick in on the E-911, where do you think we stand on the
implementation of that law?
Mr. Powell. I think the Phase II requirements require a
greater degree of granularity in identification and require
handset identification technology. It is set for this fall, and
we continue to believe that that date should be, and are
hopeful that will be, met by the vast majority of providers.
That said, there are a lot of issues starting to creep in
that are creating some churn and anxiety that are implicated by
location-specific technology, not the least of which is growing
concern about handset privacy and whether we are ensuring that
location-specific challenges don't create the kinds of privacy
quagmire that are associated with some forms of Internet
services.
The other thing I am less concerned about, there is also a
lot of churn in the industry as it changes and adapts standards
in preparation for advanced services, and whether any of those
things--I am not sure, but whether any of those network re-
engineerings will have an impact, I think, is less clear. But
the privacy issue may be one that the Congress would be
concerned about in time.
Mr. Shimkus. I am glad you addressed that because that was
a follow-up, what are the privacy concerns, we are hearing the
same thing, and there has got to be a way, and technology can
master a lot of the difficulties, or if there is an emergency
and a person has access to turn it on--I mean, that addresses
the privacy implication information.
Mr. Powell. And that is where a lot of them are going. I
just got back from the wireless show, and a lot of the
solutions do have technology which are activated only when you
dial 911 and are turned off, or the phone is defaulted to not
ever--but the wireless industry also filed petitions with us
recently to examine certain self-determined rules about privacy
that we will consider in the context of this as well.
Mr. Shimkus. Thank you very much. Mr. Chairman, I yield
back. Thank you.
Mr. Upton. Thank you. Mr. Stupak.
Mr. Stupak. Thank you, Mr. Chairman. I apologize, I have
been in and out between two different hearings here.
Mr. Chairman, as I said, I come from a very rural area,
with a lot of different telephone companies, small telephone
companies, and things like that. But the question I would like
to get your thoughts on is local residential competition. It
seems to be working in some States and not others. Maybe in the
Midwest we might--at least I believe we may be a little better
with competition in Michigan and Illinois and Pennsylvania, but
what decisions that were made, or weren't made, where you don't
see the same type of competition from State-to-State?
Mr. Powell. I think there are a whole lot of explanations
for it, but all driven by the same recognition, which is
companies enter markets when there is a viable economic base-
case to be made for entering those markets. And even when they
believe there is a viable economic base-case, there is a
limited amount of capital and resources so that they prioritize
where they go first, even if they have an intention of going
elsewhere or everywhere eventually. That is, it is not
uncustomary that carriers enter markets where they get the
largest economic return for their investment in the beginning,
even if ultimately their plans will include, or should include
or even if there are good economic cases for entering other
markets, regrettably, that often is in many of the areas that
you are talking about. And I think, in some ways, the capital
crunches over the last year make that even more challenging in
some regard.
The other thing I think that in all candor is a matter of
policy, which is a tradeoff of some tension, is local rates are
set by regulation. They are subsidized by Government policy.
They do not naturally reflect--as we wouldn't want them to in
some States, I suppose--don't naturally reflect the economic
costs associated with them.
So, many carriers look at the economic case for entering a
high-cost market and believe that the retail prices they will
be able to offer will not be sufficient to recoup investment
and to operate viably because those rates are not only
sometimes below-cost, but are also subsidized. So, in many
ways, the companies look at the decision as a huge capital
investment to compete for below-cost rates and hope the
Government keeps subsidizing consumers, which comes up short to
a lot of companies and a lot of markets. I think it is the
tradeoff Congressman Markey was talking about, there is tension
between a competitive model that is genuinely economic-based
and universal service or Federal subsidies. And so I think that
is part of our problem in America across-the-board, and I would
say principally in the residential market. It is even more
acute in a geographical, area like those that you represent.
Mr. Stupak. Well, certainly, Michigan and Illinois were
Bell Companies, and when you take a look at the Bell Companies,
they will insist that their markets are open even to their
competitors, but yet we haven't seen where there has been
competition in each other's turf except where it has been
required under a merger condition. Is it the policy, or
shouldn't the FCC also consider whether the out-of-the-region
Bells have entered into the local market when determining
whether to permit 271 relief?
Mr. Powell. I would submit that we are constrained in that
regard as to the way Section 271 is written.
Mr. Stupak. Constrained in what way?
Mr. Powell. For example, the prerequisite to 271 is
something referred to as ``Track A'' and ``Track B.'' It is
legally possible that someone could gain long distance entry
without any local competitors, if you accept that Track A
provides that someone could have what we call an S-gap, which
is essentially a local tariff filing that suggests what the
prices of interconnection would be. The statute contemplates
that a company could satisfy that track, and nonetheless gain
271 relief.
Similarly, the second track, Track B, which requires an
interconnecting carrier, only requires at a minimum one to
technically satisfy the prerequisite for at least going through
the examination. So, in many ways, there are many alternatives
to the way you could grant long distance entry through local
market opening measures. It could have been required there be a
certain percentage of local competition before obtaining
approval, a proposal which was rejected in the Congress.
So, we feel somewhat constrained about the degree to which
we can import additional factors, particularly when the end of
the checklist has a provision that states squarely the
Commission shall not add in any way to the checklist.
So, we try our best, but I do believe, to be faithful to
the statute we are limited in some of those.
Mr. Stupak. One more, if I may, Mr. Chairman. The
telecommunications industry, more than any other business,
continues to be dominated by companies that pretty much all but
enjoy impregnable monopolies in key markets. If the FCC steps
back in certain cases, or in certain areas, won't State
regulatory agencies be forced to then step in, leading to not
less regulation, but rather more of a hodge-podge of
regulations and different rules that will ultimately benefit no
one, especially the consumers?
Mr. Powell. I certainly don't submit that we are stepping
back. I don't think the statute lets us step back. I think the
statute carefully lays out respective roles for both State and
Federal authorities. I think there is always a debate over the
degree, and the extent to which the statute inures to a more
intrusive approach and a less intrusive approach. But I do
believe that we sometimes--well, I do believe that it is
relatively cabinet within the statute language, and there is
some variation and flexibility, but we wouldn't, even if we
wanted to, be able to walk away from that level of involvement
and, indeed, Section 271 specifically says the Commission is
not permitted to forebear.
Mr. Stupak. Thank you. Thank you, Mr. Chairman. Thank you,
Chairman Powell.
Mr. Upton. Mrs. Cubin.
Mrs. Cubin. Thank you, Mr. Chairman, and thank you, Mr.
Chairman. It is delightful, it is refreshing to hear your view
of where the Commission can go, and I am sure that even the
problems that we face with technical shortcomings and personnel
can be solved when we work together to do that.
I am primarily interested, as you know, in rural issues. We
just passed out of this committee and off the floor, H.R. 496,
which helps to cut regulations on small and mid-size telephone
companies. The FCC notified the CBO that when deregulatory
efforts are made that it costs money, and in the case of H.R.
496, the FCC advised CBO that it will cost $3 million in the
first year, $2 million in the second year, and then costs would
be incurred thereafter. Why is that?
Mr. Powell. I honestly don't know. I am not familiar with
the assessment that you are speaking of. My only educated guess
would be that some aspect of the relief would result in
potentially greater universal service subsidy costs that have a
net increase in cost to either other consumers or to the
Government fund. Other than that, I am not so sure at all what
those numbers refer to. I will check.
Mrs. Cubin. Thank you. And, you know, I just have to laugh
because Chairman Tauzin and I just exchanged a few comments a
minute ago, and he said--I had remarked about how pleased I am
with your presentation and the future, and he said, ``There
isn't anybody on this panel that can ask him a question he
can't answer''. So, I apologize for that.
I do want to get into some other rural issues. Rural
carriers have indicated a willingness----
Mr. Powell. Does it count if I answer late?
Mrs. Cubin. That would make the Chairman exactly correct.
The Chairman is always correct.
Rural carriers have indicated a willingness to make
significant investments in the delivery of competitive rural
exchange services in under-served areas, but rural carriers
also have indicated to me that they have postponed new
competitive projects because of the uncertainty and the delay
in FCC decisionmaking issues surrounding changes for
competitive carriers.
Under your chairmanship, when do you think we can expect a
decision on the access charge issue?
Mr. Powell. Our goal, because of the annual tariff cycle,
is to be able to have these provisions voted and implemented in
time for the July 1 start of the tariff filing change, which
would, as a practical matter, really require the Commission to
be finished by May or June.
Mrs. Cubin. Thank you. Again, going back to dealing with
the impact that regulation has on small and medium-size
carriers, are there any other measures that you might have
under consideration to expedite deployment of services in rural
America, that can be weighed against the responsibility for
filling out forms and the cost of regulation on small
companies?
Mr. Powell. Well, I believe that--and I wouldn't enumerate
them now--but that the Commission has started to become quite
aggressive about the streamlining of regulatory processes and
procedures, and with particular attention to small and rural
carriers, understanding the greater burden that they face as
opposed to some of the major incumbent carriers, and we
continue to do that. We think that those represent significant
cost to their operations, but the challenge is that a lot of it
is for naught if States don't engage in a similar concomitant
effort because the real bulk of regulation, candidly, on local
phone companies comes from State regulatory authority and State
telecom statutes, and not the Federal component of their
operation. I mean, if we walked away from all of them tomorrow,
they would not be unregulated in any way, shape or form. And so
I think it is important to make your concerns equally aware to
the State authorities because I think that is where most of the
most significant obligations come from.
Mrs. Cubin. You are absolutely correct, and lots of times I
think those folks like to punt the responsibility or the blame,
if you will, to us. So, I absolutely agree with you on that.
One last question. The Rural Independent Competitive
Alliance filed an emergency petition in February 2000 regarding
the nonpayment of access charges. It is now 14 months later so,
the word ``emergency'' becomes an oxymoron at this point. But
can you give the status of that petition?
Mr. Powell. The petition implicates the access charge
regime with CLEX, and we have an item on just that subject that
will be, we hope, in parentis with the reciprocal compensation
item, both of which will be on the floor for voting this week.
The reciprocal compensation item--I hope I am not lying--is on
the floor, as we speak, for voting, and as my colleagues make
their decisions, we will be finished.
Mrs. Cubin. Thank you very much, Mr. Chairman, and you, Mr.
Chairman.
Mr. Upton. Ms. Eshoo.
Ms. Eshoo. Thank you, Mr. Chairman, and to Chairman Powell,
welcome back. I believe this is your maiden voyage here at the
committee. I welcome you and congratulate you on your
appointment by the President to this prestigious position, and
I look forward to working with you, and I think that you are
off to a great start today before our committee.
I have three questions and I am going to ask them and leave
the rest of the time for you to answer.
I know that you have been very supportive of new broadband
wireless technologies, particularly those that have the promise
of being low-cost and therefore being widely available to
consumers, to educators, to health care professionals, amongst
others.
One such technology is ultra-wideband, which I think really
holds great promise. Based on recent reports from the NTIA and
some ultra-wideband technology, saying that some ultra-wideband
technologies may interfere with GPS-based public safety
services and while there are other UWB technologies that
present less of a concern on this interference, I would like to
know what your view on the potential of the technology is, and
also how we can best bring its benefits to the marketplace.
That is my first question.
And very quickly, on the E-rate, I think that the committee
heard testimony very recently--I thought it was an excellent
hearing--on the benefits. It was really quite a panel of people
that came from different parts of the country to talk about how
so much of this has reached out into the community. And I would
like to know how you plan to build on the successes of that
program.
My congressional district is the home to Silicon Valley,
and no matter what community I go into, they are eager to build
on what we have already put in place, so I would like to hear
some of your ideas about that.
And, also, I had offered a bill on E-911, after making the
determination of some of really the horror cases that had taken
place in our country. And as a result of that legislation and
my continuing to remind Commissioners and the previous Chairman
about that, it was taken up at the FCC, and I know that you are
in Phase II. Is there a Phase III? Do you think Phase II is on
time? Do you think that it can come in under time, you know,
the time that is set?
I think that there are still too many people in the country
that are waiting for the full promise. In fact, I think that
the promise was made and kept a long time ago. So, if you could
comment on those questions. Again, thank you for being here,
and I look forward to working with you on behalf of the
magnificent people I represent, but in a broader sense that we,
in this new century, move telecommunication and all that we are
jointly responsible for to truly make it shine, make America
shine, and you will be key in that.
Mr. Powell. Thank you. I would be happy to address your
questions in turn. Ultra-wideband technology, we think, is
exciting and promising. It is a truly unique technology that is
able to operate over the top of other radio frequencies, but
therein lies also its challenge. There is an enormous amount of
significant anxiety about the degree to which it interferes
with other services, particularly some critical services like
GPS, which even implicates some of the things you, too, are
concerned about like the use of those GPS frequencies for
navigation and public safety purposes.
So, it is one of those classic technical questions, which
is that I don't think there is any lack of enthusiasm for the
technology, it has to do with the nitty-gritties of the
technical interference.
We presently have before us many technical studies that
attempt to reconcile UWB interference both with GPS and, as you
mentioned, with other services, and from very reputable
sources. We are in the midst of digesting those studies and
evaluating what our next steps might be. We would love to
proceed expeditiously with the next step, which would likely be
a Report and Order, unless--which is an important caveat--as we
finish sorting through data, we find reasons to be of
significant concern.
I think your question about whether you could split from
GPS concerns about other frequencies if they had different
characteristics might be possible depending on what the data
actually reveal, whether that proposition is correct. But we
will keep you informed, and I think that we will probably be
moving pretty soon on some of those questions.
The E-rate program, which is set out in congressional
statute, has been, as measured, truly successful. The last time
I saw statistics, some 95 percent of public schools in America
had some form of Internet access, and we have reached close to
the 63-67 percent range for actual individual classrooms across
the country. Certainly, if that alone is the objective, it has
been tremendously successful.
I consider the Commission principally the steward and
administer of Congress' program, and we will continue to
administer it effectively so that it continues to have those
results.
I also think we have a duty and obligation to be its
diligent watcher for abuse, which I think could endanger the
program. I mean, like with any large program, you will
customarily run into incidents of people making abusive use of
it, and we have, on occasion, and have treated those intrusions
seriously and significantly. And I think it will be important
to do so if we hope to continue to protect its purpose and its
validity in any real measure.
Ms. Eshoo. I hope you will be a champion and not just a
steward. It is important as the steward is and enforcer is, I
think a champion--nothing takes the place of a champ.
Mr. Powell. Well, I don't know if I'm a champ, but I will
do my best.
Ms. Eshoo. I am inviting you to.
Mr. Powell. E-911, I think, similar to the question that
came up earlier, I think that we continue to be optimistic
about meeting Phase II. We will very soon start to have a more
appreciable understanding of whether that is true, as we get
closer and industry more thoroughly reveals where they are,
where they aren't. But I think for the moment we are pretty
hopeful and optimistic that we will substantially get there
with some of the caveats I alluded to earlier, which is there
may rise public policy questions around privacy and around
other issues that may have to be balanced against that
objective as well. But I think we can certainly expect that
Americans will very soon start to see and appreciate the
benefits of those wonderful hand-held devices actually coming
to their aid in a time of need.
Ms. Eshoo. Thank you, Mr. Chairman.
Mr. Upton. Mrs. Wilson.
Mrs. Wilson. Thank you, Mr. Chairman. I want to join my
colleagues in saying that I thought your testimony was
refreshing and I think it will make a big change. I have to say
that I think it was particularly thoughtful for a former Army
officer, so I was very impressed.
Mr. Powell. We are not so bad.
Mrs. Wilson. A few questions on some things that I think
are kind of important to New Mexicans as well as to the
country. I have been kind of watching local competition and
thinking about why things work in some places and why they
don't work in others. And I would be interested in your
thoughts about why local residential competition seems to be
working in a handful of States, like Michigan, Illinois,
Pennsylvania, and what decisions were made there that weren't
made in most other States?
Mr. Powell. It is a very hard question mostly because there
are certainly two regulatory environments that can affect that
decision. In the context of, say, Michigan, of the regulatory
environment and the telecommunications statutory environment in
that jurisdiction may have a lot to do with the ease of entry
or the regulatory cost. Or the rights of everything from
rights-of-way, to whether you are able to dig up streets
without opposition, to whether you are able to access incumbent
networks at different prices. States have varying prices on
which many services can be offered by a competing incumbent.
Some States are more aggressive about that than others. And so
there is a real difference in the regulatory and political
environments in different locations.
There is also what I was alluding to before, real
differences in the economic viability of certain models.
Residential customers are always going to be the hardest, and
the simple reason is their rates across the country, due to our
historical commitment to universal service and the
subsidization of local rates, are largely at or below cost in
many parts of the country. And so an entrant who has to make
major capital investments is often wary or last to offer a
competitive alternative to compete for mostly high-volume, low-
margin service. You have to have a whole lot of customers to
make low-margin individual customers work for you economically.
And when you are going up against an incumbent--and that is a
lot of growth to achieve--it is either a slow process or, in
some instances, probably difficult or impossible process. So,
those are some of the reasons.
It is also why I think that we ought to be very thoughtful
and creative about universal service going forward. Not because
the goals are unassailable but because we should understand
that if we can achieve ubiquity and affordability without
similar intervention, or at least the same sort of thing, we
might preserve more economic rationality in advanced services
so that they stay competitive.
If $10 a month flat service can be achieved in a
competitive market without subsidization, or you might achieve
a $7 price with subsidization and below-cost aid, you might
take the former as better maximizing the welfare of both those
consumers, and consumers across the country, because people
will be able to viably compete for those services.
There is an interesting example in the Internet Space
National Research Council recently reported that 90 percent of
Americans now have at least access to narrow-band Internet
service, with 10 competing ISPs or more. There are some
indirect benefits that ISPs have that could be called
subsidies, but they have not yet received any direct
subsidization, yet we have a very aggressive ISP competitive
environment. For most of us, ISP service is an enormous deal as
compared to the cost of even my local phone bill.
And so I am always cautious and careful about, yes, let us
pursue the goals, but let us try to do it this time, as much as
we can, by preserving competitive and economic rationality so
we won't have to do this 30 years from now--arguing why local
broadband competition didn't work in your State either.
Mrs. Wilson. Let me follow up on that, if I can, and you
have said it a couple of times in answers to questions, and you
also say it in your testimony, about the importance of ubiquity
and affordability as principles in pursuing universal service,
and that we should do that in creative ways.
Color outside the lines with me here a little bit. What are
the creative ways that you are thinking about? Does that mean
just no regulation? I mean, what does it mean?
Mr. Powell. Not necessarily. I mean, I am still creating,
so I don't have my Crayola with me.
Mrs. Wilson. You can borrow mine.
Mr. Powell. I would say, we have very significant
differences as we move to advance infrastructures in broadband
than we did from the original phone experience. Broadband is
going to be built on top of infrastructures that are largely
already deployed. That is, telephone service reaches over 90
percent of homes in America, or 94 percent. Cable is even
higher in its reach of homes in America. Those are the leading
broadband infrastructures. We will not start from scratch in
laying out those infrastructures, we will overlay on top of
them to provide advance services. That provides a huge cost
advantage.
So, you might look at policies designed to incent
systematic upgrade, as opposed to the advancement of policies
that were originally designed for the building from scratch and
preservation of that model.
Technology also is our huge friend in this regard. As I
think members from rural States have already realized, the
challenge of the phone system was that it was a ground-based
wire infrastructure that required enormous geographic
sensitivity and demographic sensitivity. If you are in a rural
area of Montana 600 miles apart, that is a lot of wire for a
relatively few number of customers. But we are starting to see
technological solutions that may be agnostic about some of
those things, which is why I think that there is reason to be
excited about satellite-delivered services, and we should, at a
minimum, be looking for policies that incent the continued
innovation deployment of those services as a universal service
policy.
I also think it is not unusual why on the Continent of
Africa there are no wired phones in many parts of it, but there
are substantial numbers of wireless systems. They are solutions
that are very applicable to environments in which wired
infrastructure would be difficult. And as those technologies
reach speeds that provide advance services, they may be very
good tailored solutions for other environments.
And I guess my creative notion is that it is a desire to be
careful about what we want to incent as opposed to just rotely
assume that universal service means what it meant in the public
switch telephone context.
Mrs. Wilson. Thank you. One final question, since I didn't
use my opening statement time.
I know that you have been very supportive of new broadband
wireless technologies, particularly those that have the promise
of being low-cost and therefore being widely available to
consumers, to educators, to health care professionals, amongst
others.
One such technology is ultra-wideband, which I think really
holds great promise. Based on recent reports from the NTIA and
some ultra-wideband technology, saying that some ultra-wideband
technologies may interfere with GPS-based public safety
services and while there are other UWB technologies that
present less of a concern on this interference, I would like to
know what your view on the potential of the technology is, and
also how we can best bring its benefits to the marketplace.
That is my first question.
And very quickly, on the E-rate, I think that the committee
heard testimony very recently--I thought it was an excellent
hearing--on the benefits. It was really quite a panel of people
that came from different parts of the country to talk about how
so much of this has reached out into the community. And I would
like to know how you plan to build on the successes of that
program.
My congressional district is the home to Silicon Valley,
and no matter what community I go into, they are eager to build
on what we have already put in place, so I would like to hear
some of your ideas about that.
And, also, I had offered a bill on E-911, after making the
determination of some of really the horror cases that had taken
place in our country. And as a result of that legislation and
my continuing to remind Commissioners and the previous Chairman
about that, it was taken up at the FCC, and I know that you are
in Phase II. Is there a Phase III? Do you think Phase II is on
time? Do you think that it can come in under time, you know,
the time that is set?
I think that there are still too many people in the country
that are waiting for the full promise. In fact, I think that
the promise was made and kept a long time ago. So, if you could
comment on those questions. Again, thank you for being here,
and I look forward to working with you on behalf of the
magnificent people I represent, but in a broader sense that we,
in this new century, move telecommunication and all that we are
jointly responsible for to truly make it shine, make America
shine, and you will be key in that.
Mr. Powell. Thank you. Be happy to address your questions
in turn. Ultra-wideband technology, we think, is exciting and
promising. It is a truly unique technology that is able to
operate over top of other radio frequencies, but therein lies
also its challenges, which creates an enormous amount of
significant anxiety about the degree to which it interferes
with other services, particularly some critical services like
GPS, which even implicates some of the things you, too, are
concerned about, about the use of those GPS frequencies for
navigation and public safety purposes.
So, it is one of those classic technical questions, which
is that I don't think there is any lack of enthusiasm for the
technology, it has to do with the nitty-gritty of the technical
interference.
We presently have before us many--maybe too many--technical
studies that attempt to reconcile UWB interference both with
GPS and, as you mentioned, with other services, and from very
reputable sources. We are in sort of midst of digesting and
evaluating what our next steps might be. We would love to
proceed expeditiously with the next step, which would likely be
a Report and Order, unless--which is an important caveat--as we
finish sorting through data, we find reasons to be of
significant concern.
I think your question about whether you could split from
GPS concerns about other frequencies if they had different
characteristics might be possible depending on what the data
actually reveal, whether that proposition is correct. But we
will keep you informed, and I think that we will probably be
moving pretty soon on some of those questions.
The E-rate program, which is set out in congressional
statute, has been as measured truly successful. The last time I
saw statistics, some 95 percent of public schools in America
had some form of Internet access, and we have reached close to
the 63-67 percent range for actual individual classrooms across
the country. Certainly, if that alone is the objective, it has
been tremendously successful.
I consider ourselves principally the steward and administer
of your program, and we will continue to administer it
effectively so that it continues to have those results.
I also think we have a duty and obligation to sort of be
its diligent watcher for abuse, which I think could endanger
the program. I mean, like with any large program, you will
customarily run into incidents of people making abusive use of
it, and we have, on occasion, and have treated those intrusions
seriously and significantly, and I think it will be important
to do so if we hope to continue to protect its purpose and its
validity in any real measure.
Ms. Eshoo. I hope you will be a champion and not just a
steward. It is important as the steward is and enforcer is, I
think a champion--nothing takes the place of a champ.
Mr. Powell. Well, I don't know if I'm a champ, but I will
do my best.
Ms. Eshoo. I am inviting you to.
Mr. Powell. E-911, I think, similar to the question that
came up earlier, I think that we continue to be optimistic
about meeting Phase II E-911. We will very soon start to have a
more appreciable understanding of whether that is true, as we
get closer and industry more thoroughly reveals where they are,
where they aren't. But I think for the moment we are pretty
hopeful and optimistic that we will substantially get there
with some of the caveats I alluded to earlier, which is there
may rise public policy questions around privacy and around
other issues that may have to be sort of balanced against that
objective as well. But I think we can certainly expect that
Americans will very soon start to see and appreciate the
benefits of those wonderful hand-held devices actually coming
to their aid in a time of need.
Ms. Eshoo. Thank you, Mr. Chairman.
Mr. Upton. Mrs. Wilson.
Mrs. Wilson. Thank you, Mr. Chairman. I want to join my
colleagues in saying that I thought your testimony was
refreshing and I think it will make a big change. I have to say
that I think it was particularly thoughtful for a former Army
officer, so I was very impressed.
Mr. Powell. We are not so bad.
Mrs. Wilson. A few questions on some things that I think
are kind of important to New Mexicans as well as to the
country. I have been kind of watching local competition and
thinking about why things work in some places and why they
don't work in others. And I would be interested in your
thoughts about why local residential competition seems to be
working in a handful of States, like Michigan, Illinois,
Pennsylvania, and what decisions were made there that weren't
made in most other States?
Mr. Powell. It is a very hard question mostly because there
are certainly two regulatory environments that can affect that
decision. In the context of, say, Michigan, many of the
regulatory environment and the telecommunications statutory
environment in that jurisdiction may have a lot to do with the
ease of entry, or the regulatory cost, or the rights of
everything from rights-of-way, to whether you are able to dig
up streets without opposition, to whether you are able to
access incumbent networks at different prices. States have
varying prices on which many services can be offered by a
competing incumbent. Some States are most aggressive about that
than others. And so there is a real difference in regulatory
and political environment in different locations.
There is also what I was alluding to before, real
differences in the economic viability of certain models.
Residential customers are always going to be the hardest, and
the simple reason is, their rates across the country, due to
our historical commitment to universal service and the
subsidization of local rates, those rates are largely at or
below cost in lots of parts of the country. And so an entrant
who has to make major capital investments is often wary or last
to offer a competitive alternative to compete for relatively
low return, low volume--it is mostly high-volume, low-margin
service. You have to have a whole lot of customers to make low-
margin individual customers work for you economically. And when
you are going up against an incumbent--and that is a lot of
growth to achieve--it is either a slow process or, in some
instances, probably difficult or impossible process. So, those
are some of the reasons.
It is also why I think that we ought to be very thoughtful
and creative about universal service going forward, not because
the goals are unassailable as an American society, but because
we should understand that if we can achieve ubiquity and
affordability without similar intervention, or at least the
same sort of thing, we might preserve more economic rationality
in advance services so that they stay competitive.
If $10 a month flat service can be achieved in a
competitive market without subsidization, or you might achieve
$7 price with subsidization and below-cost aid, you might take
the former as more maximizing the welfare of both those
consumers and consumers across the country because people will
be able to viably compete for those services.
An interesting example in Internet, National Academy of
Sciences recently reported that 90 percent of Americans now
have at least access to narrow-band Internet service, with ten
competing ISPs or more. Nobody has yet offered a specific--
there are some indirect benefits ISPs have that could be called
subsidies, but they have not yet received any direct
subsidization, yet we have a very aggressive ISP competitive
environment and, for most of us, ISP service is an enormous
deal as compared to the cost of even my local phone bill.
And so I am always cautious and careful about, yes, let us
pursue the goals, but let us try to do it this time, as much as
we can, by preserving competitive and economic rationality so
we won't have to do this 30 years from now, arguing why local
broadband competition didn't work in your State either.
Mrs. Wilson. Let me follow up on that, if I can, and you
have said it a couple of times in answers to questions, and you
also say it in your testimony, about the importance of ubiquity
and affordability as principles in pursuing universal service,
and that we should do that in creative ways.
Color outside the lines with me here a little bit. What are
the creative ways that you are thinking about? Does that mean
just no regulation? I mean, what does it mean?
Mr. Powell. Not necessarily. I mean, I am still creating,
so I have my Crayola with me.
Mrs. Wilson. You can borrow mine.
Mr. Powell. The first principle, I would say, is, we have
very significant differences as we move to advance
infrastructures in broadband than we did from the original
phone experience. Example one: Broadband is going to be built
on top of infrastructures that are largely already deployed.
That is, telephone service reaches over 90 percent of homes in
America, 94 percent. Cable is even higher in its reach of homes
in America. Those are the leading broadband infrastructures. We
will not start from scratch in laying out those
infrastructures, we will overlay on them to provide advance
services. That provides a huge cost advantage.
So, you might look at policies designed to incent
systematic upgrade as opposed to the advancement of policies
that were originally designed for the building from scratch and
preservation of that model.
Technology also is our huge friend in this regard. As I
think members from rural States have already realized, the
challenge of the phone system was that it was a ground-based
wire infrastructure that required enormous geographic
sensitivity and demographic sensitivity. If you were in a rural
area of Montana 600 miles apart, that is a lot of wire for two
customers. But we are starting to see technological solutions
that may be agnostic about some of those things, which is why I
think that there is reason to be excited about satellite-
delivered services, and we should, at a minimum, be looking for
policies that incent the continued innovation deployment of
those services, as a universal service policy.
I also think it is not unusual why on the Continent of
Africa there are no wired phones in many parts of it, but there
are wireless systems all over the place. They are solutions
that are very applicable to environments in which wired
infrastructure would be difficult. And as those technologies
reach speeds that provide advance services, they may be very
good tailored solutions for other environments.
And I guess my creative notion is that it is a desire to be
skeptical in dynamic about what we want to incent as opposed to
just rotely assume that universal service means what it meant
in the public switch telephone context.
Mrs. Wilson. Thank you. One final question, since I didn't
use my opening statement time. You talked about the efficient
use of spectrum, and that is very important in rural New
Mexico, particularly the east side where places like the Lee
County telephone system is in the mobile market for Dallas,
Texas. They can't compete to get any part of that spectrum for
their some very, very rural customers, but they can't get them
to subdivide it either. And you can put a lot more in the bowl
if the marbles that you are putting in are smaller, if you see
what I mean.
Do you envision any kind of effort to yield on encumbered
spectrum, or to kind of use-it-or-lose-it with respect to
spectrum in different parts of the western geography?
Mr. Powell. I don't know if I have examples specifically
for the western geography, but we do have any number of
policies and licensing requirements that are designed to ensure
that you use--it-or-lose-it. We often have build-out
benchmarks. We have payment obligations. We have other service
rules that say, you know, if certain things don't happen by a
certain time, other things will happen. For example,
particularly in the satellite context, there is a whole series
of buildout and construction milestones and, when they are not
met, you have often forfeited your license so that we can
auction it again.
The point you are making is one that we have started to
realize is an absolutely critical one, which is the Government
has to have a way to quickly recover and get back out the
spectrum that gets encumbered or fails for a given reason. And
it is one of the reasons the Commission is being quite
aggressive about protecting its right to revoke rights to use
spectrum when we believe that it is no longer being used
productively and we can make better use of it. I think we are
going to have to start looking at that a lot harder, or we are
going to have to look at ways to create a very different kind
of allocation scheme that provides free or floating flexibility
so that uses can be adapted and changed easier than they are
now.
Mrs. Wilson. Thank you, and thank you, Mr. Chairman, for
your endurance.
Mr. Powell. That is quite all right. That is the Army
officer part.
Mr. Upton. Mr. Rush.
Mr. Rush. Thank you, Mr. Chairman.
Chairman Powell, first of all, I congratulate you on your
recent appointment as Chairman of the FCC. I look forward to
working with you on issues as relates to telecommunications
during this tenure. And I am also pleased to hear that you
envision a Federal Communications Commission that will operate
in an efficient and expeditious manner and faithfully that it
will implement the Telecommunications Act of 1996.
As you know, one of the issues that I am critically
concerned about is the E-rate and, under the administration of
your predecessor, this came under some pretty vicious attack by
individuals both inside of the House of Representatives and
outside of the House of Representatives, and I have noted you
have stated--well, let me just ask the question, if you would
restate it here. You might have stated it in previous
testimony. What is your position on the E-rate?
Mr. Powell. Interestingly enough, my position as a
regulator is to do exactly what Congress has instructed me to
do with regard to it, and I intend to, and have always
attempted to faithfully apply it as robustly as it is set out
in the statute. And whether my view as a citizen is for it or
against it, candidly, in my own mind, is absolutely irrelevant.
Now, even that said, I will offer it partially.
I think there are enormous benefits of technology to our
children and to our schools, and that is a legitimate focus of
Government attention. We can debate honestly and above-board
how much, how fast, which pieces and which parts, which I think
we do and probably will continue to do. But I think the
objective and the purpose is absolutely worthy. And I believe
that my role as a Government official is not what my social
view is about the legitimacy of that kind of activity versus
another, rather it is to administer Section 254, which
carefully instructs me. The program is in place, it is
operating, it will continue to operate, and any debates or
decisions about where it belongs or doesn't belong are way
above my pay grade to which I don't really participate.
Mr. Rush. You have made a lot of headlines recently in your
comments referring to a ``Mercedes divide'' as opposed to a
``digital divide''. Can you explain, what is a Mercedes divide?
Mr. Powell. I am glad someone asked this question finally.
It gives me an opportunity to correct what I think is a widely
held misperception of what I said and didn't say. If you will
indulge me, it will take a second.
The first thing, in response to a question about the
digital divide, you have to worry about when you are in my
position is, ``what do you mean by it?'' The term is
extraordinarily broad. It involves everything from notions of
social justice to gaps in computer deployment to infrastructure
to educational curriculum.
One of the first points I was making is that it involves
many of those components, only a handful of them directly
implicate my responsibilities, and I need to be careful about
what you are referring to here.
The second point I was making is that we need to recognize
that any new technology, any new product or service, in its
infancy will tend to be adopted earlier by some communities
than others. For example, it wouldn't be surprising to find
that as we go through the digital TV transition that as we
speak $3,000 television sets are only being purchased by people
I would call ``the Haves''. They are also buying probably the
more inferior product, but those early purchases help drive
down the cost-of-service and increase the reliability of the
sets so that as it becomes a mass market product it is actually
cheaper and more reliable than it was at its early adoption.
My only caution was that many of the broadband and advanced
technological products are in that early phase, and that
``snapshotting'' and telling me there is a gap or a divide
isn't, in and of itself, in my opinion, an answer or even a
basis on which I need to understand what needs to be done
because the gap itself is not particularly remarkable.
Now, that is not to express a lack of empathy or commitment
to the objective. My view is to be rigorous about it, which is
to say, ``Don't tell me about gaps, but let us push through and
specifically focus on what you are talking about, what are the
problems. And then discuss whether there is an efficient
solution to it, first, by market forces and, alternatively, by
Government forces.'' I will be the first person to implement
and execute a program that is carefully focused to market
failure or an unacceptable level of lack of ubiquity and
affordability, but my caution was that, in my experience with
product service and economics, that the gap itself isn't a good
basis on which to build a solution. You have to pierce through
that and find out where the breakdowns are.
The regrettable comment about Mercedes--because I think it
wrongly implies that I was suggesting luxury--was not that at
all. My point merely was that many technologies, in their early
period, were perceived as going to dramatically damage or
create inequities, including the automobile at the turn of the
century. And my point was that, over time, the automobile would
be deployed in a manner such that the critical functionality of
the automobile i.e., mobility is widely available to Americans.
Not everyone will own the highest and best version of that
product in a capital economy. I mean, there are people who
drive the best models, and some of us will drive less expensive
cars, but the functionality of transportation and the critical
way that it reorders and helps our lives, is pretty widely
available. And my only view was don't count markets out too
early in their ability to incent ubiquitous and affordable
deployment.
And, finally, I said there was a danger that worries me
just as much as the digital divide, which is making sure it is
built at all--that is, as the patent laws recognize, and other
intellectual property and copyright laws recognize, a
capitalist is not going to invest heavy in infrastructure,
build and deploy services, if he believes the minute he does so
he will be required to deploy immediately in a ubiquitous way
that is not economically viable. And I said, I want to make
sure that we are all not ``Have-nots,'' so that we preserve
enough of the incentives to invent and deploy so that these
exciting products and services will actually come into the
homes of Americans.
It really is important to note that most of us are ``Have-
nots'' in broadband world. And we should absolutely be driving
to closing any divides that persist. But I do think--it is back
to my Crayola creative point--we should be very rigorous and
focused on where our attention is needed as opposed to just
kind of lingering around the idea of the gap.
Mr. Rush. Do you agree that technology, information
technology is changing so rapidly that if we waited for the
markets necessary to correct the problems, that some people
would just be so far behind that they would not be able to
catch up because the technology changes so rapidly?
Mr. Powell. Well, the technology does change rapidly, but
speed and rapidity are also one of the reasons for being
hopeful about what we all want to achieve. If you compare the
deployment of narrow-band Internet first and broadband Internet
second, it is one of the most remarkable paces of distribution
in the history of any technology. I have looked at the figures
on telephone, television, electricity, many of the services
which are considered indispensable today, and none of them are
even close to the pace of penetration that we are finding with
narrow-band and broadband technology. Broadband in terms of
advanced speeds really didn't even arrive until 1998. Six
percent of the entire country today is subscribing to this
service. If you look at phones, it took 27 years to reach 10
percent penetration, 70 years to reach 50 percent, and I could
tell a similar story about television broadcasting. This is all
not to pooh-pooh--and I really want to emphasize the
criticality that these services may play in our lives--only to
suggest that we are riding a tiger that is exhibiting a lot of
extraordinary characteristics, one of which that I am hopeful
about is that it is racing its way around the country.
Now, you are right, I don't deny the existence of gaps
along economic conditions, and you will find some correlations
in urban and rural areas, but, surprisingly, many of the
inequities that are assumed aren't actually accurate. But if we
identify incumbencies or breakdowns in its natural evolution, I
would be the first there to execute a tailored solution to
fixing that.
Mr. Rush. Thank you, Mr. Chairman.
Mr. Upton. Thank you.
Mr. Terry.
Mr. Terry. Thank you, Chairman Upton. Chairman Powell, your
statement focused on, I think, a philosophy of reform, where
you talk about vision statements, structural reforms,
enforcement type reforms. Can you present to us today how much
of the elements of reform that you envision are a matter of
legislation--and I mean it in both the positive and negative
way--legislation that would be required to enable your vision
of reforms, in current legislation, that perhaps blocks,
prevents, or perhaps makes difficult some of the reforms where
you allow apples to compete against apples, where the current
regulation and laws are barriers to that, as opposed to other
elements of reform that are strictly management or dollars?
Mr. Powell. Yes.
Mr. Terry. You have 5 minutes.
Mr. Powell. I will need an hour for that. In the
development of our approach, we will absolutely and
specifically identify where that is the case. I can tell you
that in almost each of those dimensions I outlined, there will
probably be a legislative component. For example, if you talk
about the enforcement, if we are serious about the ability to
really make a difference to enforcement, then we need to look
at our penalty regime penalties--our penalties are set by
statute and probably haven't been revised since 1934. If you
are talking about the statute of limitations, that is a statute
that we couldn't modify without congressional action. There are
probably other substantive policy areas where there is some
dimension of internal reform, but there also are dimensions of
legislative reform because things that are curtailed in the
statute are implicated. All of it takes money, which only comes
from the Congress. And the organizational changes and
structures often have to, by law, be approved congressionally
both through the appropriation process and other processes.
So, there is no way you are off the hook, I don't think----
Mr. Terry. Don't want to be.
Mr. Powell. [continuing] and we will try to, in working
with you, carefully try to align the mutual objectives and,
candidly, I will try to assume as much of the problem and
responsibility as I can consistent with the statute, and if
there are areas where that is not going to work but I think the
goal is still worthy, I will have to come back to this
subcommittee and the Congress.
Mr. Terry. I think, for consumer sake, we need to reform
especially structural regulatory aspects, so I will be glad to
work with you in that respect.
One area the gentleman from Illinois, Mr. Shimkus, had
brought up a point, obviously, differences of opinions amongst
them, but one theme that is consistent is a backlog. As you
said during your statement, if you want that, you need the
approval, if you want this, you need the approval, but yet it
is taking an extraordinarily long time and there is a backup.
Is there an immediate plan that you have thought of or written
to clear this backlog and to assure the finality? Is there a
plan in place, and what is it?
Mr. Powell. There is a plan and directive in place, one
which was in place the minute we arrived. The backlog
situations vary from bureau-to-bureau. The reasons vary from
issue-to-issue. But I think my bureaus would back me up, that
they have been pointedly and aggressively directed to attack
the backlog and from very early on work on a plan of operations
to eliminate them.
This issue became serious over a year ago, and I think many
of the most heinous ones were eliminated, like the backlogs in
the Wireless Telecommunication Bureau and others, and we have
already begun to take actions on them. There were a substantial
number of radio license transfer applications that had been
sitting, many of which for 2 and 3 years, and we challenged
ourselves that we either had a policy and a process for their
disposition that was able to effectuate the purpose, or they
were out of here. And I think we released 75 percent of them on
the same day. We are rapidly working through the remainder
consistent with our policy obligations. But one of my favorite
phrases is, ``inaction and avoidance are not legitimate
government policies,'' I don't care what the original reason
for hesitation was, and I take moral responsibility that if I
can't figure out what to do, then you are done. I need a
reasonable amount of time to figure out if I don't know what to
do, but we really have to be guided by that fundamental
principle, and we do have very strict management guidelines
that we are working under and that are in place for backlog.
Mr. Upton. Thank you, Mr. Terry. Mr. Dingell.
Mr. Dingell. Thank you, Mr. Chairman. Welcome, Mr.
Chairman. I note only four States have been approved so far for
Section 271 entry. The Act is in place for 5 years. Is it
possible, Mr. Chairman, that local markets in every other State
are not open to competitors who choose to enter?
Mr. Powell. I doubt that is possible. We certainly are
prepared to receive 271 applications from any State, from any
company that is prepared to make the case that its markets are
open. As you are well aware, we can act only when we are given
an application, but I am excited at the prospects that we will
see an increase in that this year.
Mr. Dingell. I think your presence in the chair might have
a useful impact on that set of events. However, is it possible,
though, that companies choose not to enter, or have chosen not
to enter up until now?
Mr. Powell. Well, certainly.
Mr. Dingell. Would that reason be the conditions that have
been imposed by the Commission on entry, which go well beyond
the authority of the Commission in connection with those
matters, and is it possible that the companies chose not to
enter because of the enormous profusion of paper that they had
to submit to the Commission--in some instance, stacks this high
from the floor--and the fact that it took so long and so much
money for those events to come to ripeness? Is that a
possibility, Mr. Chairman?
Mr. Powell. I think it is fair to say it is possible that
those things would have dissuaded decisions to apply for entry,
sure.
Mr. Dingell. It would have most assuredly dissuaded me. I
am not going to ask you to tell me whether it would have
dissuaded you, but you are a very sensible fellow, too, Mr.
Chairman.
Is there something in the offing that the Commission could
do to streamline the 271 process--for example, dealing more
expeditiously with the application, addressing the questions
that might be raised by the State Commissions, or that are
raised by the Department of Justice, which have led to some
rather prolonged and prolix discussions between those Agencies
and the Commission and the applicants?
Mr. Powell. Yes, I think there are certainly any number of
things that could be done, one of which I will just put under
the banner of ``collaborative approach,'' which we were talking
about earlier. That is prior to the filing of application we
try to be available and be out in the States and with companies
to make sure that they are preparing applications in a manner
that would increase their probability of succeeding, but being
careful not to commit to prejudge the merits of their
submission, which we have started to do significantly more than
we have in the past.
I do think that we are constrained by a 90-day clock, which
means we need to have ranges of reasonableness in which we
can't completely and totally de novo review certain specifics,
but can start to review more carefully whether the fundamentals
of the provision are provided for and that there is a range of
reasonableness that if you are within we won't necessarily
second-guess the absolute specifics of the representation.
And I also think, finally, there is always an issue of data
timeliness, which has been a problem with the 90-day clock.
Candidly, in my own view, I would have preferred a provision
that would have allowed me to extend the 90 days by maybe----
Mr. Dingell. I was about to ask is there something this
committee could do, and perhaps, for the record, you could
submit to us something that we could do on that matter. I don't
want to make you do that at this particular time, Mr. Chairman.
I am curious about this situation. The law requires you to
consult with the State agencies. The law requires you to
consult with the Department of Justice--and I emphasize the
word ``consult.'' I am curious, what broad, sweeping powers
does this confer either on the Department of Justice or upon
the State agencies? In your view, what does ``consultation''
mean? Your predecessor had the quaint idea that it afforded
them the right to literally dictate terms to the Commission. I
always thought that was a rather curious interpretation of the
word ``consultation.''
Mr. Powell. My view is that ``consultation'' means,
principally, that those two institutions are afforded the
opportunity to file in the proceeding and offer their learned
recommendation as to the outcome. I would have to note, to be
fair, that the Department of Justice and in their view, at
least in statute, is supposed to be afforded substantial
weight.
Mr. Dingell. And I applaud that, but that doesn't give them
the power to dictate or to prolong the process, does it?
Mr. Powell. No, it certainly doesn't, and we have recently
often taken directions contrary to their recommendation.
Mr. Dingell. And I am delighted to hear that. I would hope
that there is somebody here from the Department of Justice so
that they can hear this more sensible interpretation of the
statute, and it bodes, I would observe, Mr. Chairman, a great
deal of good.
Now, I note that the statute makes it clear that the FCC
has the responsibility to avoid mutual exclusivity in licensing
and thereby avoid auctions when possible through the use of
spectrum-sharing and other engineering methods. Am I correct in
my interpretation of that matter?
Mr. Powell. I believe so, under 309.
Mr. Dingell. I would note, however, that Congress has
expressed a preference for non-exclusive uses of the spectrum.
I would not also that in many instances the FCC has taken an
opposite course. It has actually sought to create mutual
exclusivity so that applicants would be forced to go to
auction. I feel this is an unwise thing. Do you have a comment
that you would feel would be appropriate on this matter?
Mr. Powell. Congressman, I am not sure of the specifics,
but I certainly would, as a principle, say that it shouldn't be
our business to create a situation that would command an
auction if it wasn't otherwise presented.
Mr. Dingell. Perhaps, Mr. Chairman, you would like to give
us a comment on the matter after you have had a chance to
review it in greater detail.
Mr. Powell. Certainly.
Mr. Dingell. I would note that mutual exclusivity in the
use of the spectrum hardly confers confidence, on me at least,
that the best and the highest use, and the wisest and the
broadest use of the spectrum is being done under the leadership
of the FCC. Am I correct or incorrect in that appreciation?
Mr. Powell. I am not so sure I follow, can you state it
again?
Mr. Dingell. I will tell you, it was so involved that I am
afraid I can't do it again. I think we will submit you a little
letter on that and, if, Mr. Chairman, you would allow that to
go in the record, I would appreciate it.
Mr. Upton. We are going to allow all members to do that.
Mr. Dingell. One further thought. I note that on two
occasions, the FCC has proceeded to complete Section 271
applications, and in those 271 applications in Texas and New
York--and our Chairman has commented on this matter--the result
was that AT&T has moved to enter the long distance market--
rather, to enter the local market, and that we now have
increased competition both in long distance and in the local
market, and the costs have fallen in both places. Am I correct
in that appreciation, does there appear to be some connection
between those events?
Mr. Powell. I would think that there is a connection. The
ability to respond competitively into your core service
certainly is a very powerful incentive to own competing on that
competitor's home turf. I think that was the fundamental
congressional design, and I hope that the mutual competitive
obligations would create incentives for each to be in each
other's market. I don't think it is particularly surprising
that the most prominent competitive entry are places where
those competitors have either entered or are prepared to file
for entry.
Mr. Dingell. I am delighted to hear your comment, Mr.
Chairman. I would like to address, in continuation of some
earlier questions, the NorthPoint case. This is a matter now
pending before the Commission, and I am going to respect your
desire to comment or not comment, as the proprieties might
dictate to you.
I would observe that if mutual exclusivity enters into this
matter, would that be an important consideration for the
Commission because, very truthfully, we need to be sure that
interference testing is done and that all of these things take
place, but that we also see that the matter moves speedily and
that there is a need both to assure that we are not going to
have a wave of new interference put into the spectrum, but at
the same time we are not going to try to have exclusive use of
the spectrum where none is required.
Now, again, Mr. Chairman, I am not trying to place you into
a bad spot to comment on something that you feel you should
not, but to the degree you can, would you give me your thoughts
on this matter, please?
Mr. Powell. Yes. I am limited in what I can say, but I
would say that certainly mutual exclusivity is a very important
component of what will happen next because, if it fairly is
said that, as you have mentioned, that the situation creates
one of mutual exclusivity, the statute compels auctioning of
the spectrum as opposed to any other alternative. So we do have
to be careful with respect to how that question comes out.
Mr. Dingell. Mr. Chairman, just one more question--I thank
you for your kindness to me. I would note that the statute does
discourage mutual exclusivity. It says the Commission ``shall
seek to avoid'' that, and I would assume that accompanied with
that would also be an effort to ensure that there would be
minimal interference. Am I correct in those interpretations?
Mr. Powell. I believe you are, yes.
Mr. Dingell. Mr. Chairman, you have been most gracious,
thank you.
Mr. Upton. Mr. Fossella.
Mr. Fossella. Thank you, Mr. Chairman. Mr. Chairman,
welcome. Congratulations and best of luck.
Following up on all the talk about reform--and I guess a
better word would probably be ``improvement''--how would you
see--let us call it the ``cultural change''--that would need to
occur at the FCC, given since its creation and the basis for
its creation was to regulate, for the most part, monopolies.
Now we are in an environment--hopefully a more pro-competitive
environment--to shift the focus overall--not to take anything
away from the good, hardworking individuals at the FCC, but how
do you shift that focus to one of a regulating monopoly
approach to one of establishing parameters to allow competition
to flourish along service and along--instead of the way the
current law applies?
Mr. Powell. I think that is a good question. Cultural
change, in any organization, is a challenge. I would submit our
challenge is similar to those being faced by many incumbent
carriers who also find themselves dealing with the cultural
challenges of becoming more entrepreneurial innovative,
responsive, and effective. So, our challenge is similar.
I think it starts with leadership. It is what I am trying
to do at a personal level, in those people in whom I entrust
leadership responsibilities and in the personnel that we hire.
I also think that you don't push cultural change on people, you
demonstrate the rightness of the changes you are suggesting.
And I think that our efforts at training and development and
giving employees and professionals an opportunity to see the
dimensions of their decisions, to have an opportunity to learn
from what has been developed both in scholarship and out in the
real world of companies and markets, that people will begin to
see the impact of their decisions and have a better feel for
and understanding what is different and what is not just the
same.
I think it is a natural human impulse to go with what you
know until you know something else. And I think that the whole
emphasis on training, development, technology, interaction, and
customer focus, all of those things are designed to lay out
before our talented staff of employees (a) the impact of their
decisions, and (b) the learning that can influence how they are
made. And ultimately they will be willing to get with the
program. I am also a person who understands some people, will
never get with the program, and they will not continue to have
those responsibilities if they can't.
Mr. Fossella. Good luck on that front. Finally, you
mentioned in your statement you will be shifting again the
Agency focus from ``permissive regulations to strong and
effective enforcement of truly necessary ones''. And you state
that Congress' assistance in putting real teeth in your
enforcement efforts is necessary. Could you elaborate on the
point, and does the current law provide you with enough
enforcement authority, in your opinion?
Mr. Powell. Yes, I think we mentioned a couple of times, I
think that we have a sufficient amount of authority that was
used last year to create the Enforcement Bureau. I think that
we have people in place, I think we have policies in place, but
I do think that we probably will need a greater focus on what
are the full range of tools we will need, and many of those
tools, in my opinion, are going to have to be developed in
conjunction with Congress. And I have already mentioned the
need for reassessing the penalties that we are able to impose.
If you impose a $75,000 fine on a company that has net revenues
in the millions and billions, that fine is just a cost of doing
business. They will pay that, as opposed to actually be
deterred of the activity.
I also believe that if you are believer in markets and you
are a believer in less prophylactic regulation, you can't throw
the public interest in the toilet for laissez-faire purposes.
You have to be prepared to demonstrate that you are sincere
that in allowing the additional flexibility in markets, that
you will also try to act effectively and efficiently and
swiftly to police them when the very rules that are in place
are flaunted. And I think that that is absolutely critical to
an integrated policy. And I would love to come back and talk to
the subcommittee, formally or informally, about a more
comprehensive program and what we might need to do it.
Mr. Fossella. Thank you. I yield back. Best of luck.
Mr. Upton. Thank you. As you know, we have votes on now. We
are going to take a brief recess. Mr. Pickering has gone over
to vote. He is going to come back. He is going to take the
gavel. He will do his questions, and I will come back and
probably close because we will have another vote after this
one, in about 15 minutes. So, we will take about a 7-minute
break before Mr. Pickering is back.
[Brief recess.]
Mr. Upton. We will get started again, as we are expecting a
vote in about 10 minutes. It could be a little bit less than
that.
I would just note, before I yield to my friend and
colleague, Mr. Pickering, that despite giving him about a 4- or
5-minute head start to the floor, the Big Ten beats the SEC
again. So, with that, I yield to my friend from Mississippi,
Mr. Pickering.
Mr. Pickering. Mr. Chairman, thank you. We are looking for
redemption for the SEC as well as all other things as we
approach Easter, a time of renewal.
Mr. Chairman, speaking of renewal, I believe, under your
leadership, the FCC will experience that, and I just have a few
questions. I appreciate you being patient as we broke for a
vote.
A number of things that are before you that are of interest
to me--I know many of these questions have already been
covered, so I will be as quick as possible. One in which I have
an individual and particular interest is the FCC rulemaking
process and implementation of the Children's Internet
Protection Act that was a part of the Appropriation Bill last
year.
Tell me, what is the status of that and the Commission's
plans of implementation? Do you expect any delays? If so, why?
Mr. Powell. I at present don't expect any delays. I think
we are in the process of implementation. I regret that I don't
have, as I sit here, specific timeframes for it. We would
certainly be happy to get back with you on that, but I think
that--they are handing me a note--April 20.
Mr. Pickering. That will be when the rulemaking will be
final and implementation will begin, April 20?
Mr. Powell. Well, let us ask the note-hander.
Implementation by April 20.
Mr. Pickering. Thank you very much. And may the record show
that the FCC is meeting its statutory deadline in a very
efficient and effective way.
As you also know, I have a merger bill that I introduced in
the last Congress, and hope to do again this Congress, and I
look forward to your comments and input as we go forward in
that process. FCC reform is going to be important to this
committee and to the Commission, and look forward to working
with you on that.
I know others have mentioned 3G spectrum, and I know that
you are between a rock and a hard place, between the choices
that we have--or maybe it is better said that Congress is
between a rock and a hard place in giving the policy direction
as to where we go with 3G between the various options--but your
technical counsel and advice and help will be greatly
appreciated as we go forward in that debate.
Let me, finally, conclude with some questions about where
we are now in telecommunications policy in the 1996 Act and
your sense of what should or could be done to accomplish the
objectives that we all wanted and tried to achieve in the 1996
Act.
As you know, it was with the intent of having full
competition in every market, and the full convergence of voice/
video/data services and applications. Five years after the Act,
both sides would say that there is not enough competition in
the local market. The other side would say that the 271 process
for entry into long distance and other services has been too
cumbersome or too long. But much of that battle over 5 years
was in the regulatory process and then before the courts, and
now that the FCC is poised to implement the Act and to see a
number of 271s come in this year as more and more States see
the competition coming, would you counsel or advise revisiting,
revising, reforming the 1996 Act, or in this time of economic
uncertainty, especially in the tech sector, is this the time to
stay the course and to have the regulatory certainty and
stability?
Mr. Powell. I think my advice, such that it is worth
anything, is that I think that any sort of wholesale rewriting,
to my mind, is ill-advised unless you are very clear as to what
it is you think you are going to replace it with.
The legal environment, which includes the statute and
regulatory environment, are critical components of the
stabilization of evolving markets, and we are as much a
contributor to risk and capital risk as anybody else. And I
believe that it has taken us a long time to get where we are,
longer than any of us wanted. On the other hand, I think some
of that might have been more fully anticipated--the legal
challenges, uncertainty, ambiguity and all of the new things we
learn in the marketplace as we go along--but for the most part
we have become comfortable--we sort of know the rules of the
game. And, yes, there are rough spots. There are things that
were unanticipated, but I do believe that most of those things
are things that can be worked on incrementally as opposed to
the idea that we know what we would replace the 1996 statute
with.
Personally I am one who chalks it as a success. I mean, I
think it has unleashed more than we are prepared to credit it
with, and I think that the success of what it undertook is
measured much more than, say, the 271 in-or-out question, the
statute is much bigger and broader than that. And I think many
of the incentives it introduced have had farther-reaching
implications than simply that question.
So, certainly, it is the prerogative of Congress to want a
different regime, but I would only advise that it would want to
be awfully clear about what it was it was intending to replace
it with. Otherwise, I think it is the same open, bizarre battle
of trying to gain competitive advantage through law. It is very
difficult to harness and control once you sort of open up the
box again.
I think there probably will come a day when the technology
just will not neatly fit within the context of the statute and
the rules, and more wholesale changes will probably be made. I
guess, in my own personal opinion, that day isn't today.
Mr. Pickering. Let me just have one other follow-up
question. Given the context of the market and the capital flows
right now in the tech and telecom sector, and especially with
the emerging competitors, would dramatic policy change possibly
further destabilize and possibly harm emerging competition?
Mr. Powell. You know, there is a little bit of a
hypothetical in your question. I think that, again, if you
focus on capital markets particularly, you would have to say it
could. I think a big part of the focus would depend on how the
capital markets viewed your decision to do so. They will
handicap anything you do, and make judgments about who they
think are the winners and losers and, depending on how they
perceive it, you certainly could tip the balance, at least for
the time being, in one favor or the other, or in ways that
might have unintended consequences.
One of the things that is fascinating about the telecom
policy is it has for so long been built around monopolies and
oligopolies, many of which we sanctioned. When we introduce
competition, we also need to advance our understanding of the
things that go into the entry of markets, including capital
flows and investments. Many of these things were not a
paramount consideration when a monopoly could just slush it
from one financial bucket to the other. Now it has very serious
competitive consequences. And as so many members today have
said, there is something worse than the wrong answer, it is no
answer of uncertainty. And I think the time and process of
establishing a completely new regulatory environment or
completely new statute creates that kind of worry and ambiguity
that you would want to very seriously address.
Mr. Pickering. Thank you, Mr. Chairman, and I also want to
thank you for earlier in the hearing saying that you plan to
move forward with recip comp. I believe that is a needed action
as well. Thank you for the new spirit that you bring to the
Commission, and we look forward to working with you. Mr.
Chairman, thank you.
Mr. Upton. Thank you. Chairman Powell, I have talked to a
couple of members on that last vote. We are all in agreement,
bipartisan. I don't think we have had a more impressive--I know
we haven't had a more impressive witness this year, and will
probably not for sometime to come. We appreciate all the
homework that you have done, your wonderful grasp of the
issues, and certainly I look toward our cooperating in every
which way to make sure that, in fact, we move this country
forward to eliminate barriers and ensure affordability and
access for all Americans, working with the cutting edge
technologies that we know are before us.
I do know that for those members who are not here now, a
number of us would like to submit further questions. We will do
that within a couple of days, and if you can respond in
appropriate fashion at some point in the near future, that
would be terrific. We look forward to working with you as we
move ahead. Thank you very much.
We stand adjourned.
[Whereupon, at 2 p.m., the subcommittee was adjourned.]
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