Copyright 2000 Federal News Service, Inc.
Federal News Service
March 29, 2000, Wednesday
SECTION: PREPARED TESTIMONY
LENGTH: 4921 words
HEADLINE:
PREPARED STATEMENT OF WILLIAM E. KENNARD CHAIRMAN FEDERAL COMMUNICATIONS
COMMISSION
BEFORE THE HOUSE COMMITTEE ON
APPROPRIATIONS 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 our plans for the future. I also will discuss the FCC's
release last week of our Report Card on Implementation of our Draft Strategic
Plan - "A New FCC for the 21 st Century."
Forging a Partnership for the
Future Before I begin discussing our budget request for FY 2001, I would like to
thank this Subcommittee for its attention to the FCC's budgetary needs during my
tenure as Chairman. I recognize that all agencies that come before you have
important programs and sometimes competing financial requirements that must be
resolved by you during a very compressed time period. Your work is critical to
the operation of this government and provides us with a yearly forum for
discussing both our achievements and planned improvements. Although we do not
always agree on budget matters related to the FCC, I believe that we share a
common desire to improve the Commission and to finance programs essential to the
development of an even better telecommunications marketplace. I am committed to
working with this Subcommittee to achieve our mutual goals for the FCC. 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 turn to you for your support 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 payraises, 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. I recognize
that you did not approve this authorization, but I would like to take this
opportunity to reemphasize our need for these funds. I do not believe that our
request is frivolous or extravagant. The FCC has done everything within its
power to satisfy this Subcommittee's directive that we make do with less than we
need to pay our rent, while simultaneously carrying out much-needed improvements
to the Commission. We want to begin FY2001 with a fresh fiscal outlook --
without feeling the effects of insufficient resources. I have previously written
to you to discuss the effects of your denial of the use of our excess regulatory
fees. As you know, I have had to implement drastic measures to fund our IT
programs. I hope that you will take a second look at our situation and permit us
to utilize our funds to continue the FCC's efforts to improve as an agency and
better serve you and the public.
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 Congress' 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 ofbroadband 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 turn, 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 North Dakota, to study rural broadband rollout technologies
and encourage their implementation throughout the United States.
We also
convened the Federal-State Joint Conference on AdvancedTelecommunications
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 NextWave case. The Second Circuit
has demonstrated that the application of common sense 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
recognize that this Subcommittee has not supported the use of language in past
CJSJ Appropriations bills to protect the auctions process. I hope that you will
reconsider this position.
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 foram 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 Carder, International, and Mass
Media. All routine common carder 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 two weeks ago, 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 theneed 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 move toward a better future, and our pace will not slacken
during the current year. Last week, I released 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 heatings 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
but wonder about the convergence of the past, present and future in our country.
It is somehow fitting that Lowell, Massachusetts, which saw the advent of the
industrial revolution, will host a field heating to discuss the future of
telecommunications technology in the new millennium.
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. Again, I hope that you reconsider
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 30, 2000