Copyright 2000 Federal News Service, Inc.
Federal News Service
March 21, 2000, Tuesday
SECTION: PREPARED TESTIMONY
LENGTH: 4750 words
HEADLINE:
PREPARED TESTIMONY OF WILLIAM E. KENNARD CHAIRMAN FEDERAL COMMUNICATIONS
COMMISSION
BEFORE THE HOUSE APPROPRIATIONS
COMMITTEE SUBCOMMITTEE ON COMMERCE, JUSTICE, STATE, AND THE JUDICIARY
SUBJECT - FEDERAL COMMUNICATIONS COMMISSION'S FISCAL YEAR 2001 BUDGET
ESTIMATES
BODY:
Mr. Chairman, Ranking Member,
and members of the CJSJ Subcommittee, I appreciate this opportunity to appear
before you today to discuss the Federal Communications Commission's (FCC) Fiscal
Year 2001 Budget. Today I will provide you with a summary of our FY 2001 Budget
Estimates, discuss the ongoing changes initiated by the Telecommunications Act
of 1996, and present you with a clear picture of our accomplishments during the
past year, our agenda for the current year, and outline plans for the future. At
this time, I would also like to announce that the FCC is releasing today our
Report Card on Implementation of our Draft Strategic Plan - "A New FCC for the
21st Century."
Partnership for the Future Before I discuss our budget
and goals with specificity, I would like to take a moment to thank this
Subcommittee for its support during my tenure as Chairman of the FCC. Because of
your efforts and the outstanding work of your staff, the FCC has been able to
forge ahead with its efforts to upgrade its facilities and improve its ability
to serve the public. I recognize that in the past you have supported funding for
the FCC that exceeds even the Administration's requests. Your determination to
provide sufficient funding demonstrates a special commitment to America's
future. Let me emphasize that I share this commitment. We stand together on the
front step of the third millennium -- ready to venture up and swing open the
door to our future. If the past is prologue, this next century will see
accelerating and phenomenal change. Just as our ancestors living at the turn of
the last century could never have imagined zooming along a vast array of super
concrete byways and computer highways, we have not yet begun to imagine the
achievements of our descendants.
We all play a critical role in
determining what new goals will benefit our children and our children's
children. Communications technology is the engine of their century. It is the
basis for fueling the economy, encouraging invention and bringing the world
closer together. We all want our legacy to be one of investment in this future.
We all want to be remembered for giving the next generation an edge in the
future.
The Federal Communications Commission is poised to assume its
role as market facilitator in building the infrastructure of the future. Our
primary mission is to promote competition in communications, protect consumers,
and support access for every American to existing and advanced communications
services.
In five years, we expect the U.S. telecommunications markets
to be characterized predominately by vigorous competition that will greatly
reduce the need for direct regulation. The advent of Internet-based and other
new technology driven communications services will continue to erode the
traditional regulatory distinctions between different sectors of the
telecommunications industry.
Congress gave us the Telecommunications Act
of 1996, and in doing so, cemented a partnership for establishing a new
pro-competitive, deregulatory model for communications policy. Now it is time to
reassess our core policy functions, structure and processes, and fund the
changes that will shape our future. New competitors and technological innovation
currently are transforming telecommunications markets. History has shown that
markets that have been highly monopolistic often do not naturally become fully
competitive. History also has shown that domestic markets that have been
protected from foreign competition do not naturally become open to global
competition.
As I said, the past is prologue. Nevertheless, we can
always alter the remainder of any story and create our own future. We must work
together to promote competition, open markets, and increase technological
innovation. We must continue to protect and empower consumers as they navigate
the new world of telecommunications. Together we can achieve the twin goals of
the 1996 Act: a fully competitive marketplace and access for every American to
current and future advanced communications services.
Pursuing these
strategic objectives will require the identification of clear goals and the
continued execution of our Draft Strategic Plan, "A New FCC for the 21 st
Century." As we accomplish our transition goals, we will set the stage for a
competitive environment in which communications markets look and function like
other competitive industries. We mm to you for your support again this year to
help us continue to transform our agency, adapt to new and emerging
technologies, and ensure that future generations will benefit equally from these
changes.
An Affordable Future: The FY 2001 Budget Request
The
FCC as we know it today will be very different both in structure and mission as
We evolve to meet the challenges of the future. Increased automation and
efficiency will enable the FCC to streamline its licensing activities,
accelerate the decision making process, and allow the public faster and easier
access to information. The FCC will be a "one-stop, digital shop" where form
filing and document-location are easy and instantaneous. The FCC will continue
consolidation along functional lines so that its structure is more consistent
with convergence.
In order to follow through on this agenda, the FCC
will require a FY 2001 budget of $237,188,000 and a staff
ceiling of 1,975 full-time equivalent (FTEs). This includes FTEs to be funded
from appropriations and auctions resources. These numbers reflect a total
increase of $27,188,000 or approximately 13 percent over the FY
2000 Appropriation. Uncontrollable cost increases to fund proposed
government-wide pay raises, rent increases and other inflationary increases
constitute 47 percent of the total requested increase in funds. Specifically,
our request includes $6.8 million for mandatory salary and
benefit increases, $5.1 million for increases Rent and
Operating Fees, and $.9 million for Consumer Price Index
adjustments in contract services.
Programmatic increases to accomplish
the Commission's comprehensive information technology strategic plan initiatives
comprise the remaining portion of the requested funds for FY 2001. This amounts
to $14.4 million for information technology (IT) enhancements.
Since the automation enhancements will directly benefit the industry served by
the Commission, this increase should be paid for by an increase in regulatory
fees. Approximately 80 percent of the requested IT funding increase will be used
for maintenance and life cycle replacement of our existing systems. The
remaining 20 percent or $3 million dollars will be used to
promote competition through better tracking of consumer issues and complaints
and better manage the use of the nation's airwaves in the public interest.
Without adequate automation funding, the Commission will be unable to carry out
its basic functions of awarding licenses to applicants for communications
services, overseeing the implementation of new services for the public, and
reviewing and updating existing rules and regulations. In view of the importance
of these services to the economy of the United States, this investment in
technology is critical.
The total amount to be collected from regulatory
fees would increase from $185,754,000 in FY 2000 to
$200,146,000 in FY 2001. As you are aware, the FCC also has
requested authorization to use $5.8 million in excess
regulatory fees from previous years to support our FY2000 IT needs.
Past
Accomplishments Build a Successful Future
The telecommunications
industry in the United States is, to date, a great success story. We have worked
hard to implement the 1996 Act and effectuate the changes necessitated by a
continually evolving marketplace. We have promoted competition across converging
technologies and throughout the telecommunications marketplace.
When I
began my tenure as Chairman, we had to finish writing new rules to comply with
the 1996 Act and the Supreme Court still had to pass on major sections of the
law. Reports of the 1996 Act's premature death were rampant. Persistence paid
off. We worked together to properly implement the 1996 Act, and with your
support, we managed to make the telecommunications marketplace more viable and
better equipped to face the future.
As a result, the world is not the
same as it was in 1996. The telecommunications industry has grown since then,
creating 230,000 new jobs and generating $57 billion more
revenues. Revenues in communications services, which include all telephone
services, radio, cable and broadcast television, and certain other services,
have grown by $7 billion from 1996-1998, a growth of 17 percent
in real terms. That figure does not include the rapid growth in sales of
communications equipment - telephone headsets, central office switching
equipment, etc. - where revenues have grown $26 billion, 24
percent, between 1997 and 1999. With the growth in output, employment in the
communications equipment and services industries has grown by
$.2 million during the past four years.
During the past
year, the FCC's staff has strived to implement common sense rules and programs
to enhance the industry's growth, and defend those rules already in place. From
wireless auctions to broadcasting and international, our staff has handled more
applications and more public participation in telecommunications issues than
ever before.
Our aggressive implementation of the 1996 Act is generating
new classes of competitors, new industries and lower prices.
Making a
More Competitive Environment
Our most important work has been in
realizing the goals of the 1996 Act to achieve competition and universal access
to new services. To that end, we adopted rules and initiated rulemakings to
eliminate barriers to entry in domestic telecommunications markets. The FCC
implemented the local competition provisions of the 1996 Act, including: (1)
revised unbundling rules in response to the Supreme Court remand in Iowa
Utilities Board; (2) strengthened collocation rules; and (3) pricing flexibility
which also included a Notice of Proposed Rulemaking on whether competitive local
exchange carrier access rates should be regulated. We also expect to complete
action on two Access Reform Proceedings during the second quarter of this year.
The FCC approved Bell Atlantic's application under section 271 of the
1996 Act to provide long distance service in New York after determining that New
York's local service markets are open to competition. During the past month, the
FCC negotiated a consent decree to address Bell Atlantic's problems processing
its competitors' orders. This enforcement action promotes local competition by
ensuring that consumers will have additional choices and lower rates through
expanded local competition.
We also initiated proceedings to gather
information on (1) the status of deployment of advanced telecommunications
capabilities; and (2) the deployment of broadband facilities and the development
of local competition. The FCC's staff forged ahead with determined speed to
complete rulemakings on advanced services in the areas of loops, LATAs,
DSL resale, and line sharing.
Benefits to consumers in
the long distance and local phone markets are an important achievement and
priority. Domestic long-distance rates dropped nearly 56 percent in real terms
since 1984, saving consumers about $200 billion. Some companies
are offering services for as low as five cents per minute.
On the
international front, we are less than two years into the implementation of the
WTO Agreement and the FCC's August 1997 Benchmarks Order and we have already
started to see dramatic results. These policies have increased liberalization,
privatization, and competition, which have led to significantly lower
international accounting rates. In mm, that has led to lower international
calling rates. In 1996, the year just prior to Benchmarks and the WTO, the
average price of an international long distance call originating from the United
States was 74 cents per minute. By 1998, it fell by 25 percent to 55 cents per
minute, and finally to the current average of less than 55 cents per minute. By
the time that Benchmarks is fully implemented in 2003, we expect to see much
deeper reductions in international calling rates. Moreover, prices on
competitive routes have fallen even more dramatically. For example, rates on the
U.S.U.K. route are as low as 10 cents per minute.
Sometimes success is
measured not so much by what we do, as what we decide not to do. The FCC's
"hands-off' policy toward the Internet has helped fuel tremendous growth in this
industry. Over 40 percent of American households have Internet access. In 1998,
the U.S. Internet economy was a $633 billion market, accounting
for nearly 8 percent of the nation's economy and 4.8 million jobs. Electronic
commerce, which will be 90 percent business-to-business, is projected to be a
trillion-dollar activity in the next three to five years.
Accessible
Services for All Americans
We want everyone to have a piece of the
Internet's potential, which is why we have established a framework and funding
mechanism for ensuring that all of our country's schools and libraries are
connected and that rural health care has access to information technology. We
also have worked to ensure that those individuals living on Native American
lands will likewise reap the benefits of this new technology.
When the
FCC's staff was not busy passing and implementing rules that would enhance the
delivery of telecommunications services to the public or upgrading our systems
and eliminating backlogs, we were working with Congress to study cutting edge
issues like rural broadband rollout. We participated with rural Senators in two
special hearings, here in Washington and in South Dakota, to study rural
broadband rollout technologies and encourage their implementation throughout the
United States.
We also convened the Federal-State Joint Conference on
Advanced TeleCommunications Services (Joint Conference) on October 8, 1999, to
further the vision of section 706 of the Telecommunications Act of 1996.
Patterned on a resolution by the National Association of Regulatory Utility
Commissioners (NARUC), the Joint Conference joins federal and state forces to
encourage the deployment of advanced telecommunications services to all
Americans.
Safeguarding the Integrity of the Auctions Process
One of our most important accomplishments during the past year is the
judicial recognition of the integrity of the auctions process in the Next Wave
case. The Second Circuit has demonstrated that the application of common sense -
the very same common sense displayed by this Subcommittee and the Senate Budget
Committee - ensures that the auctions process will be a workable method for
licensing the spectrum in the future.I cannot emphasize enough the importance of
the Second Circuit's holding in this case. Auctions will play an especially
critical role in ensuring that sufficient spectrum is available to meet the
needs of the growing digital economy. We have witnessed an explosion of
telecommunications services since auctions began. In 1993, there were 15 million
wireless phones in America. Today, there are 80 million. We have seen
subscribership increase four-fold and the average wireless bill drop by 40
percent during this period. Moreover, wireless is taking over parts of the
Internet. Already we are able to use portable devices like laptops and Palm
Pilots to accomplish tasks that once required us to remain hooked to a hard line
tether. Wireless represents mobility and access for new groups of people.
Over the past six years we have completed 24 auctions with over 1,800
qualified bidders participating. Most of these bidders were qualified and worked
hard to bring service to the public.
Unfortunately, there are those who
tried to obtain the spectrum and then not pay a fair price for it. If we want to
build upon our past auctions successes; we have to ensure that the system is
fair and predictable. That is why I support using the legislative process to
prevent future abuses of the auctions system. I commend this Subcommittee for
its past efforts in this regard and I respectfully request that you again
consider language that would prevent bankrupt licenses from using the bankruptcy
court to shirk their obligations to the American taxpayer.
Addressing
the Influx of Transactions
The increasing number of licensees and
changing market forces have dramatically increased the number of
transfer/assignment applications processed at the Commission. Some bureaus have
experienced extreme growth in the number of applications processed during the
past four years and most of the bureaus saw a significant increase in the number
of applications processed. The Wireless Telecommunications Bureau approved
23,889 license transfers in 1996. In 1999, this number jumped to 40,879. The
Mass Media Bureau's Audio Division processed 3,869 license transfer applications
in 1996 and 4,951 in 1999. In the last year prior to passage of the 1996 Act,
Audio Services only processed 1,866 transfer and assignments.
Most of
these transfers have been processed quickly and efficiently, with little
fanfare. Recently, the FCC has been faced with the challenge of how to
facilitate the review of major transactions while ensuring that the public
interest is met in an era of increasing consolidation and convergence. Some have
been more complex and deserving of a hard look to protect the interests of the
American consumer -- SBC/Ameritech, MCI/Worldcom, Airtouch/Vodafone, Direct
TV/Primestar - all of these mergers consumed Commission resources, but were
worth the careful study. In the end, our job is to protect the consumer and
under the 1996 Act that you passed, promote competition. We would be remiss in
our duty to you and the American public if we did not expend the time and effort
that it takes to ensure that these mergers comply with our statutes and
rules.Responding to congressional calls for improving the system for handling
mergers, I directed FCC General Counsel Christopher Wright to assess the
Commission's merger review process, and hire appropriate staff for addressing
concerns raised by the crush of applications and their growing complexity. The
result is a Transactions Team, which has already initiated the process for
improving the way that we handle mergers. The Transaction Team has moved fast to
address the concerns of the public, licensees and Members of the House and
Senate. Already, the Transactions Team has identified areas of concern and moved
to find workable policy solutions. They are working to ensure that our merger
review process is transparent, efficient and predictable. They have established
a web page and held a public forum on March 1, 2000.
Improving licensing
processing - whether for transfers and assignments or applications for service
-- has been a key ingredient of our work during the past year. We are nearing
completion on the implementation of a Universal Licensing System that provides
streamlined electronic filing capabilities for most wireless services. Now
potential licensees can obtain their applications and a wide range of other
forms over the Internet, and file them back within minutes.
Electronic
filing capabilities also are available in the other bureaus as well: Common
Carrier, International, and Mass Media. All routine common carrier Local Access
Transport Area modifications are now immediately placed on public notice and are
accessible electronically through the Commission's Digital Index. We also
implemented an electronic tariff filing system that permits incumbent ILECs to
submit federal tariffs and associated documents via the Internet.
Meeting Daily Challenges with Innovative Solutions
The need for
a fast response to increased use of telecommunications services means that the
FCC must find new and innovative solutions to a broad range of problems. For
instance, just last week, the Commission released new rules to confront the
issue of the rapid telephone number consumption by allocating telephone numbers
in a more efficient, predictable and orderly fashion. Competition in
telecommunications markets is partially dependent upon fair and impartial access
by all telecommunications carriers to telephone numbers. After careful study, we
adopted new policies to reduce the need for new area codes, avoiding the
inconvenience, costs and confusion associated with changes in area codes for
consumers and businesses.
While our work during the past year is too
voluminous to print here in detail, I would like to highlight a few special
projects. In the past year, the FCC has: Technology Advisory Council.
Established as a means by which a diverse array of recognized technical experts
selected from a variety of interests such as industry, academia, government,
citizens groups, etc. can provide advice to the FCC on innovation in the
communications industry.- Public Safety: National Coordinating Committee, CALEA,
and E911: ensured that our public safety and law enforcement bodies had the
tools necessary to ensure our safety throughout the country. Assistance to other
Nations. Set out in great detail the way our country's telecommunications system
is regulated and made this available to other countries that are in the process
of establishing independent telecommunications systems. Helped Disabled
Americans. Adopted rules to ensure access for persons with disabilities under
Section 255, and increased access to the communications network by the 54
million Americans with disabilities. Restructuring of FCC. Redesigned the
Commission to establish two new "one-stopshopping" bureaus
- Enforcement
and Consumer Information Bureaus -- rather than having their responsibilities
spread throughout the Commission. Y2K. With the determined coordination of
Commissioner Michael K. Powell, the FCC assisted the rest of the country in
ringing in the new millennium free of computer glitches and ready to correct any
that did occur.
Back to the Future
We have worked hard in the
past year to bring the Commission into the present, and our pace will not
slacken during the current year. I am releasing today a Report on the
Implementation of the Draft Strategic Plan that we submitted to Congress in
August 1999. Our goals were to create a model agency for the digital age,
promote competition in all communications markets, promote opportunities for all
Americans to benefit from the communications revolution, and manage the
electromagnetic spectrum in the public interest. Since introducing the plan, we
have met with a wide range of interested parties to effectively gauge the
response to our goals. We spoke with experts from academia, consumers, industry
representatives, state and local government representatives and many of your
staffs to discuss the future and our mutual goals. My first priority in the
coming year is to continue keeping the promises outlined in the Strategic Plan.
Be assured that we will continue to move toward a digital agency - a
user-friendly and electronic environment where consumers and licensees alike
feel comfortable communicating directly with the agency via online services or
old-fashioned phone calls. This goal is our first one in our Implementation
Report Card, and I know that success in this area is a certain sign that we are
using our funding wisely and appropriately.
Our aspirations for the
future do not end there, because we are, after all, an agency dedicated to
serving the public in a variety of ways. We have a wide range of futuristic
goals in our Report Card, and I intend to work hard to follow through on the
report's promises. Let me plot out what I call the ABC's of our current goals
for the year.
First, "access." The E-Rate program is bringing its second
successful year to a close, and now provides connectivity for one million public
school classrooms. This program is a down payment on our children's futures, and
on the skills needed to keep our high-tech economy going. One of my highest
priorities is to funding E-rate program to wire the nation's rural and urban
schools and libraries to the Internet. I want to continue promoting access to
the digital tools and services for the 54 million Americans with disabilities
(video description, TTY Access, TRS). This year, the Commission adopted EO rules
to help shatter glass ceilings and pave the way for the employment of more women
and minorities at radio and television stations. The Commission also has issued
a Notice of Inquiry on the public interest obligations of digital television
licensees. We hope that this Notice will initiate a national dialogue on how
America's broadcasters can best serve the public in the transition to digital
television.
Second, "broadband rollout.
" The Commission will
continue its active role in speeding the delivery of high-speed Internet access
to every business and home in America. We will take all necessary steps to keep
the nation's broadband infrastructure open to competition. We will track the
deployment of broadband in the marketplace to maximize the use of this new
technology. We will auction new spectrum to bring innovative services to the
marketplace and the wireless web to consumers.
As part of the broadband
rollout, The 706 Joint Conference is holding six field hearings in coming months
to gather information on the status of deployment of advanced telecommunications
capability to all Americans. These field hearings will focus on two goals in
particular. First, the Joint Conference will seek information on to what extent
data is available at the state level on the status of deployment of advanced
services. Second, the Joint Conference will seek examples of "best practices" of
successful deployment in communities. Some communities have found creative ways
to bring high speed Internet access to areas that were previously underserved.
For example, a community may speed deployment by bringing many potential users
of advanced services together, thereby aggregating demand to increase their
buying power. A compilation of creative efforts, or best practices, will provide
guidance to communities in other states to speed deployment of advanced
services.
We have set up Federal-State Joint Conference field hearings
in a variety of locations: Anchorage Alaska on April 12, 2000; South Sioux City,
Nebraska on April 19, 2000; Lowell, Massachusetts on May 22, 2000; Miami,
Florida on June 9, 2000; and Cheyenne, Wyoming on June 23, 2000. When I think
about these locations, I cannot somehow think about the convergence of the past,
present and future of our country. It is somehow fitting that Lowell,
Massachusetts, which saw the advent of the industrial revolution, will host a
field hearing to discuss the future of telecommunications technology.
Finally, let me address the "C" in my ABC's, "competition." This
Subcommittee has my commitment to continue working toward full and open
competition. I will encourage the protection of consumers by giving them the
information they need to navigate an increasingly complex telecommunications
marketplace. I personally will review the findings of the Transaction Team to
ensure that all mergers now pending and filed in the future will receive fast,
efficient and flexible handling. We will make DTV compatible with the nation's
cable networks. We will reform access charges to make more equitable phone
billing and pricing practices. We will promote competition in local and
long-distance markets that will give consumers lower rates, better services, and
more choices.
Conclusion
Together, and with full funding of our
request, we will work toward implementing the Strategic Plan -- "A New FCC for
the 21 st Century" to create a faster, flatter, more functional agency in an era
of convergence. I appreciate your support for making this plan a reality, and
also for supporting our request to use excess regulatory fees from past years to
meet this year's IT needs. It is time to transform the FCC into a paperless,
electronic agency. More importantly, it is time to ensure that the future
includes providing access to communications services to all Americans. I believe
that we share the same concerns and goals about the future. Together, we can
ensure that our third millennium telecommunications infrastructure is a proud
legacy.
END
LOAD-DATE: March 22, 2000
