Copyright 1999 Federal News Service, Inc.
Federal News Service
MAY 26, 1999, WEDNESDAY
SECTION: IN THE NEWS
LENGTH:
3845 words
HEADLINE: PREPARED STATEMENT OF
SUSAN
NESS
COMMISSIONER
FEDERAL COMMUNICATIONS COMMISSION
BEFORE THE
SENATE COMMITTEE ON COMMERCE, SCIENCE AND TRANSPORTATION
BODY:
Mr. Chairman and Members of the
Committee, I appreciate the opportunity to appear before you today.
I
welcome a dialogue between the Commission and our authorizing Committee. In
particular, I am pleased to review with you our performance over the past 18
months and our efforts to fulfill our statutory obligations under the
Telecommunications Act of 1996 and other laws. I also welcome your guidance on
the issues that are pending before us, on our efforts to promote competition,
deregulation, and universal service, and on how we can best meet the challenges
ahead.
This interaction between the Commission and our oversight Committee
is especially valuable now, during a period of monumental change. The
telecommunications and information industries are undergoing a transition of
epic proportions. Digitization and Internet technology are splintering the
regulatory structures of the past. Convergence is presenting an abundance of new
opportunities -- and challenges -- as voice, data, audio and video are delivered
over a host of new technologies. Ten years ago, data represented less than five
percent of all telecommunications traffic. Today, data is surpassing voice
traffic and in the near future will represent the lion's share of traffic on our
nation's telecommunications network. The Internet is moving at an astonishing
clip to become integrated into the daily life of consumers, in ways that will
profoundly change commerce in the 21 st Century.
Demand for bandwidth is
burgeoning, and a variety of players, embracing different technologies, are
racing to be the provider of choice. Telephone companies are rolling out digital
subscriber line services, and cable companies are offering cable modems, each
spurring the other to deploy broadband faster and more extensively. Meanwhile,
fixed and mobile wireless, satellites and even broadcast stations, are investing
to expand consumer choices. The potential for consumer benefits is enormous, but
the challenge for traditional regulatory paradigms is also substantial.
MANAGING THE TRANSITION
The changes that are underway are attributable
as much to technology as to law and regulation. They are also a product of the
availability of capital, management skill, and entrepreneurship. But law is
still a critical part of the equation. The right legal framework can stimulate
investment, risk-taking, and competition; the wrong framework can delay and
distort marketplace activity.
Recognizing an historic opportunity, and
desiring to spur increased competition and innovation, Congress passed the
Telecommunications Act of 1996. The full consequences of that law and of the
FCC's efforts to implement it can be measured only over a longer sweep of time
than three years. And any given individual's assessment, at any point in time,
will necessarily find both strengths and weaknesses in the various judgments
that have been made. Still, I believe that the law generally is working
successfully, especially now that most of the judicial challenges have been
resolved. The nature and velocity of the marketplace developments that are now
underway are unprecedented, and I believe that the vast majority of consumers
will reap substantial benefits. Further, these benefits will increase as
remaining market- opening difficulties are overcome, and competition expands its
reach.
Congress has established clear goals, and the means to get there. The
overarching goal is "to accelerate rapidly private sector deployment of advanced
telecommunications and information technologies to all Americans..."The primary
tool is competition, which to varying degrees requires both regulation (see,
e.g., 47 U.S.C. Section 25 l(c) (obligations of incumbent local exchange
carriers) and deregulation (see, e.g., 47 U.S.C. Section 160) (forbearance)).
Thanks to decisions that predate the Telecommunications Act, we are already
well along in the development of fully competitive and unregulated markets for
long distance service, information services, customer-premises equipment, and
wireless services. In these areas, choice is abundant, innovation is rampant,
and prices are declining. Much of this progress has occurred fairly recently.
Consider: just three years ago most residential consumers paid 20 or 25
cents a minute for a long distance call. Today, 1 O-cent-a-minute (or even
lower) rate plans are widely available,and special offers abound, such as
all-you-can-talk pricing for weekends and free calls on Monday nights. (To be
sure, not all consumers are reaping the benefits of lower prices. Some
low-volume long distance consumers have been bombarded with additional charges
and fees that exceed the savings in per-minute rates, which should be explored.)
In commercial mobile radio service, the benefits of competition have been
even more dramatic. A few years ago, a wireless call commonly cost 50 to 75
cents a minute, and customers paid hefty roaming fees. But when the first PCS
providers challenged the cellular incumbents, rates plummeted 25 percent. They
dropped even further as the 4th, 5th, or even 6th operators joined the fray. And
now we have "one-rate" pricing, where consumers are offered big "buckets" of
minutes that equate to as low as 10 cents a minute -- and often with regional
or. national calling and no roaming fees. Now, it is often cheaper to make an
intrastate toll call by wireless phone than over the wired telephone system.
Similarly, many international call prices have plunged as countries
implement their World Trade Organization market-opening commitments, and as the
FCC enforces its accounting rate policies. Virtually everyone who makes a
significant volume of international calls has seen a significant drop in rates.
Competition has been more elusive in the video and local telephone markets,
but even here there are signs of progress. With more than 10 million
subscribers, DBS is becoming a more credible competitor to cable, and
competitive local exchange carriers are making inroads against incumbent local
exchange carriers in business markets and in a small, but growing number of
residential markets as well.
In these markets, the challenge is to manage a
successful transition from regulated monopoly to unregulated competition as we
maintain our commitment to universal service.
This transition is
complicated. New services and technologies are surfacing that do not fit neatly
into discrete regulatory structures. This leads both to creative tensions, and
to certain anomalies.
We need to remember that the development of full
competition takes time. Just as we saw in the long distance market, and more
recently with wireless services, there is often a gestation period of multiple
years between the time when key steps are taken to promote competition and when
robust competition actually emerges. This is particularly true when unnecessary
litigation prolongs uncertainty, and deters investment. As we seek to accelerate
the transition to competition, we need to be willing to trust the market to
work, as we did when we denied state petitions to retain price regulation of
commercial mobile radio services.
But we also need to be careful not to
undermine basic tenets of the Telecommunications Act. Sometimes, when we hear
pleas to restrict or eliminate a particular requirement, the provision in
question is one that Congress carefully chose as a tool to enable competition
(see, e.g., 47 U.S.C. Sections 251(c)(obligations of incumbent local exchange
carders), 271 (Bell entry into long distance), 628 (program access)). It may
even be a provision that Congress specifically told us not to use our
forbearance authority to circumvent (47 U.S.C. Section 160(d) (referencing
Sections251 (c) and 271)).
We also need to think with greater care about the
layers of regulation that can flow from different levels of government. An
incumbent or a new entrant may need to deal not only with the requirements of
the Communications Act and the FCC, but also with state and local laws and
regulations. Each layer of government has its own responsibilities, and its own
legitimacy, but where possible we need to strive for cooperation, consistency
and efficiency, to advance the national goals of competition, universal service,
and deregulation.
We have made considerable progress working with our state
and local government colleagues in a renewed spirit of cooperation. Our
partnership with the state commissioners, in particular, is vastly stronger than
it was when I joined the Commission in 1994. Our local and state government
advisory committee has also made significant progress by identifying practical
solutions to thorny issues such as wireless antenna siting.
GUIDING
PRINCIPLES
As we move forward with our implementation of the
Telecommunications Act, and with an evolution in the philosophy and structure of
the FCC, I am guided by certain principles:
First and foremost, of course, I
take my direction from the law. It is not my place to second-guess the judgments
of Congress, or to be selective in deciding which provisions of the law will be
enforced.
The law, however, leaves us a measure of discretion, and in
exercising that discretion our principal goal should be to foster competition
whenever and wherever possible. And as competition advances, regulation can and
should retreat. Thus, we must more boldly rely on marketplace solutions, rather
than the traditional regulation of entry, exit, and prices; and on surgical
intervention rather than complex rules in the case of marketplace failure. The
forbearance authority which you gave us is an excellent tool, sunset provisions
are another, as is the biennial review process.
Another principle is that we
should minimize regulatory risk. Capital formation is hampered when rule changes
are pending or are uncertain. Rules and decisions should be as clear and as
consistent as possible. Decisions -- whether in resolving rulemakings or
complaints or simply in processing routine applications -- need to be prompt and
predictable. Enforcement should be swift and certain, so that regulatory delay
is not a strategy of choice, a hindrance to market entry, or an impediment to
protecting consumers against inappropriate conduct by service providers.
In
addition, government, often serves best by focusing a spotlight on problems, and
prodding parties to work together to design solutions. Sometimes government can
be a useful catalyst for private sector solutions that serve better than
regulatory prescription to resolve competing needs and speed the introduction of
new technologies.
Another basic tenet is that consumer interests should be
paramount. It is the public, not any particular competitor or group of
competitors, that we must serve. The Commission should not try to pick winners
or losers, either individually or by industry sector. Nor should we be tempted
by short-term "fixes" that impede long-term objectives.
Finally, we should
continually review our progress. It is important to evaluate, regularly and
periodically, what is working and what is not -- especially in such a rapidly
changing environment -- and then take steps to fix it. I do not advocate another
major rewrite of the Communications Act at this time, for such a reopening of
the statute would reintroduce uncertainty and deter investment.
With this as
backdrop, I want to elaborate on Commission activity over the past 18 months in
five areas.
Digital Television
Effectuating a successful transition to
digital television for the benefit of consumers is an important Commission goal.
Notwithstanding the growth of other media delivery systems, such as cable, DBS
and the Internet, free, over-the-air television remains unparalleled in its
pervasiveness and influence. Local broadcasters have been given the opportunity
to participate in the digital revolution that is affecting every other segment
of the communications and information industries. By the same token, consumers
should have the opportunity to enjoy the numerous benefits -- HDTV,
multi-channel standard definition TV, and a host of ancillary and supplemental
services -- that DTV broadcasting can bring.
The transition to digital is no
simple matter, and no one should expect an overnight success. While I am
encouraged by the progress that has been made to date, much remains to be done.
The good news is that 75 stations are already on the air, which is ahead of the
FCC prescribed implementation schedule. But many problems -- both technical and
regulatory -remain which are hindering a successful transition for industry and
for consumers. We still need a greater quantity of innovative programming that
will attract DTV viewers, and more affordable DTV receivers to attract more DTV
programming (the "chicken-and-the-egg problem"). We need the industry to resolve
its knotty digital copyright issues so that compelling programming can be shown.
We need better compatibility between digital cable service and DTV receivers.
And we need even greater accommodation between cable operators and television
broadcasters.
My strong preference is for market-driven solutions to these
problems, whenever possible. The Commission's role is primarily to highlight
obstacles, facilitate dialogue among the stakeholders, and to guide, prod,
shepherd, cajole, jawbone, and otherwise stimulate the development of solutions.
Regulation is the tool of last resort, and any prescriptive (or proscriptive)
intervention should be carefully thought through and proportionate to the
circumstances.
Universal Service
Another high priority is universal
service. Again there is good news, and again there is much unfinished business.
The Telecommunications Act of 1996 strengthened our nation's commitment to
an inclusive vision in which communications services are available to all
Americans. The new law reaffirmed long-standing policies of assisting low-income
consumers, and those in high-cost areas, in obtaining access to high-quality,
affordable telephone service. The new law also extended the concept of universal
service by providing for targeted assistance to elementary and secondary
schools, libraries, and rural health care providers. I am deeply committed to
all of our universal service goals.
The good news here is that the
low-income support mechanism has been maintained and expanded, that consumers in
high-cost areas are continuing to obtain high-quality services at affordable
rates, and that we have launched the schools and libraries anhealth care support
mechanisms. Each of these elements of universal service is important; all of
them, collectively, will help to build stronger communities, a stronger economy,
and a brighter future for our nation.
The high-cost issues are
extraordinarily complex and require special care. The Telecommunications Act is
clear that we should not disrupt the ability of rural telephone companies --
some 1300 strong -- to serve their communities. We have followed that guidance
and largely left rural telcos "off the table" for purposes of pending
proceedings. In addition, the Federal-State Joint Board on Universal Service has
appointed a Rural Task Force that is studying these issues. But as you know, we
are proceeding with caution, consistent with your guidance.
Even with the
larger telephone companies, where more of the subsidies that keep rural rates
affordable are implicit and therefore potentially vulnerable to erosion by
competition, we are moving ahead with care. The risk of introducing unintended
consequences is great. The challenge is to reform high-cost support mechanisms
in a way that ensures that consumers will continue to have access to affordable,
quality telecommunications services while being economically efficient,
compatible with competition, and fair to both high-cost and low-cost states.
We want to avoid unnecessary complexity or artificiality. We want to
target support to the areas where costs are truly high. We want to avoid
treading on the toes of state regulators, who (in the case of the larger
telephone companies) are the ones that manage most of the implicit subsidies
that keep rural phone rates affordable today. We want to avoid locking in legacy
systems or hindering the emergence of new technologies and new competition. We
want to avoid creating both the reality and the appearance of rate increases.
And candidly, it is not clear how best to effectuate all of these goals
simultaneously. Provided that consumers in high cost areas are continuing to
enjoy access to telecommunications services at affordable and reasonably
comparable rates, we can and should incrementally make explicit the implicit
subsidies between carriers.
Obviously, high cost mechanisms will continue to
require a great deal of time and effort within the Commission, working closely
with the Joint Board. But in the meantime, it is important for you to know that
we are not reducing the support that is currently provided by the interstate
jurisdiction; indeed, we are actively exploring ways to target additional
federal support where it is needed. Further, the Joint Board has found that
preexisting sources of implicit subsidy are not at this time being eroded. It
helps a great deal that communications is a declining cost business and that
demand for communications services is soaring, so despite some inroads made by
competitors, the incumbents are continuing to grow and prosper.
Broadband Deployment
I am personally committed to
enabling all Americans to benefit in the communications revolution. As advanced
services are rolled out, I want to ensure that rural America is included.
Broadband services are more than just a means of enabling people to
communicate more productively. They may provide the means by which to stem the
tide of migration from the farms to the cities. They may enable entrepreneurs to
remain in rural areas and develop prosperous businesses, boosting local
economies. To this end, it is important that existing wireline carriers, cable
companies, and new wireless and satellite ventures alike have the opportunity to
bring new services, new choices, and new life to rural communities.We are still
at an early stage in the rollout of broadband services, but early indications
are that investment and innovation are strong, and that rural areas are not
being neglected. We will, of course, keep a close eye as events continue to
unfold.
International Issues
Over the past eighteen months, the FCC has
played a major role in expanding access to global communications at affordable
rates. We have achieved some real successes in our efforts to drive
international accounting rates closer to costs (and in winning a major judicial
victory on this issue), and in opening global markets to competition under the
WTO framework. Many countries have emulated the U.S. model by establishing
independent regulators patterned after the FCC.
Unfinished work includes
continued enforcement of our accounting rate policies as we press for an
acceptable multilateral resolution of this issue. We must also continue to be
proactive with our trading partners to achieve full WTO compliance where U.S.
companies are encountering market-access difficulties. And we must deploy the
resources necessary both to complete WRC 2000 preparation process and to engage
in meaningful and frequent negotiations with our trading partners sufficiently
in advance of the Conference on the full range of spectrum issues that will be
addressed. I am encouraged that regional bodies charged with developing spectrum
management policies are opening up their processes. More regular bilateral
discussions with our trading partners on spectrum management issues could serve
to facilitate cooperative and timely resolutions of many of these
issues.Spectrum Management
Surging demand for commercial use of the finite
spectrum resource, both internationally and in the U.S., coupled with the
technical complexities inherent in sharing spectrum, are propelling us to take a
fresh look at our spectrum management policies. As global communications systems
and terrestrial wireless networks proliferate, they often are competing for use
of the same spectrum. Where feasible, there may be value in harmonizing spectrum
allocation and assignment policies with our trading partners, particularly to
implement global systems.
As the demand for spectrum grows, the supply of
useable spectrum shrinks. Consequently, we need to review our spectrum
management policies to ensure that they provide incentives for private sector
development of efficient spectrum use technologies. I am intrigued by the
discussion at our recent en banc on spectrum management of software-defined
radios as one way to increase both flexibility and efficiency of use.
"REINVENTING" THE FCC
AS the marketplace changes, so too must the FCC.
The Commission must continue to evaluate ways in which we can be more efficient
and responsive. A process to do that is currently underway, and a dialogue with
our authorizing Committees is obviously vital to the decisions that must be
made.Two months ago, Chairman Kennard released his draft report, "A New Federal
Communications Commission for the 21 st Century." This report provides an
excellent starting point for any discussion of FCC organization and mission. The
Chairman has also sought public discussion by arranging three forums (the first
of which was held on May 20). Each of my colleagues has proffered thoughtful
suggestions for streamlining and improving FCC performance.
In the meantime,
we must not permit ourselves to be diverted from the matters at hand. We do have
unfinished business, and many market participants need to have timely resolution
of issues that are pending before us. In this context, I am most grateful for
the recent statements of the Majority Leader that "Congress should start
empowering the FCC rather than criticizing its individual decisions" and of my
colleague, Commissioner Michael Powell, who accurately observed, "The agency
cannot fight its ship if stakeholders spend most of their time rocking the
boat."
CONCLUSION
Consumers are already reaping many benefits from
competition fostered by past decisions of Congress and the FCC. The
Telecommunications Act and its implementation by the FCC and the state
commissions are expanding the realm of competition, and expanding the potential
for consumer benefits. Yet the pace of change in communications markets is still
accelerating, and care must be taken to ensure that national goals remain in
focus.The FCC's main challenges during this historic transition are to know when
to intervene and when not; to use creatively and judiciously the wide assortment
of tools available as we move from monopoly to competition; and, at all times,
to keep the interest of consumers paramount. Only then will we be fulfilling
Congress' vision of competition and deregulation for the benefit of all
Americans.
Thank you very much for inviting me to testify before you today.
I am happy to answer your questions.
END
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