Copyright 1999 Federal News Service, Inc.
Federal News Service
MAY 26, 1999, WEDNESDAY
SECTION: IN THE NEWS
LENGTH:
7128 words
HEADLINE: PREPARED STATEMENT OF
MICHAEL
K. POWELL
COMMISSIONER
FEDERAL COMMUNICATIONS COMMISSION
BEFORE THE
SENATE COMMITTEE ON COMMERCE, SCIENCE AND TRANSPORTATION
BODY:
INTRODUCTION
Mr. Chairman,
distinguished members of the Senate Committee on Commerce, Science and
Transportation, good morning.
Thank you for inviting my colleagues and I
here today for this important oversight hearing. I am pleased to offer my views
on the Commission's efforts to fulfill the specific statutory responsibilities
delegated to it by Congress, which I believe should be our first and highest
priorities. I will focus my remarks on our progress with respect to a few of the
most important mandates of the 1996 Telecommunications Act. They are:
-
Section 254's Universal Service Provisions - Section 271 Applications for RBOC
entry into Long Distance - Section 706 and Advanced Services - Section 10's
Regulatory Forbearance Mandate I will also briefly address the Commission's
merger review efforts, its continued delay in re-examining the broadcast
ownership rules and the question of restructuring the agency.
UNIVERSAL
SERVICE
Perhaps, the most celebrated aspect of the monopoly phone system
that existed before the 1996 Act was the degree to which it fostered ubiquitous
and affordable phone service. In moving away from state- sanctioned monopoly to
a competitive model, Congress was careful to ensure that "universal service" be
"preserved and advanced." In other words (chosen by Congress), Commission
policies should promote access to telecommunications and information services
that are "reasonably comparable" to those available in urban areas at
"reasonably comparable" rates.
Yet, Congress also well understood that if
the benefits of competition were to be realized, the subsidy mechanisms of
universal service would have to change. Closed monopolies could no longer be
allowed to subsidize high cost or residential customers implicitly through
higher rates on low volume and business customers. The reason was simple: new
competitors would not enter high cost markets where the incumbent alone could
subsidize its rates and would instead enter business and low cost markets, where
the margins were much higher. Such a condition would deny residential rural and
high cost customers the promised rewards of competition. To address this
distortion, Congress commanded that universal service mechanisms be "specific,"
"predictable" and "explicit." By having the subsidy known and portable,
competing carriers would have an incentive to compete for high cost customers,
too, because they could win the subsidy along with the customer.
In addition
to the exercise of making implicit subsidies explicit, Congress required a
number of other measures that would necessarily add costs to serving customers.
Some weremechanisms designed to facilitate competition and its hoped-for
benefits, such as local number portability, and levying the universal service
contribution on a broader class of customers, such as wireless carders. The
Schools and Libraries program, though its purpose is worthy, required
substantial increases in money to fund the program, with no direct benefit to
competition.
Congress tasked the Commission, thus, to develop a universal
service system that was "explicit" and that would produce a "sufficient" amount
of money to "preserve and advance" "reasonably comparable" rates and access to
both rural and urban customers. Congress understood the importance of doing this
quickly, for it set relatively tight implementation requirements on the agency.
Regrettably, I must report that the core of Congress' mandate in this regard
has not yet been achieved. While most would agree that the remnants of the
implicit system continue to provide "reasonably comparable" rates to our
citizens, the competitive distortions of the implicit system remain, leaving
little doubt why CLECs have chosen to enter high volume, low cost business
markets (where the rates are inflated relative to costs) rather than residential
markets.
I am disturbed by this failing. It would be unfair to suggest that
the Commission has not spent time on universal service -- the hours are endless.
However, I believe we have continued to set aside or bump the difficult and
complex issues that would rationalize universal service in a manner that might
actually facilitate competition and its benefits to rural and high cost
customers, such as access reform and pricing flexibility. Yet, at the same time,
we have given high priority to other programs, such as schools, libraries, and
rural health care, that require substantial new funds. We dole out these funds
much as Congress might distribute the benefits of a new federal program. Talk
about access charge reform and cost reductions and rationalization is too often
thrown out, not as part of a sound economic public policy exercise, but as a
political offset to controversial spending programs.
There is a grave danger
here. Competitive pressures that were unleashed by the Act and the Commission
continue to put pressures on high cost subscribers and rates. Competitors,
despite their protestations to the contrary, continue to pursue business and low
cost customers to the exclusion of other customers. And, the government
continues to increase rate pressures through actions that demand more and more
money from the system. (Proposed increases in the schools and libraries program
and some proposals for high cost assistance to intrastate common line costs
require literally billions of dollars of new money.)
The result is that
competition languishes, and the distorted, as yet un-reformed universal service
system is partially to blame. If this situation is not mined around, I fear that
rates may stay low, but the levy of subsidy fees on customers could sky rocket
and the benefits of competition could be lost. It will not be long before
policymakers openly suggest greater rate regulation to keep these pressures
(that they helped create) in check. This would be a profound failure to meet the
goals of the Act.
SECTION 271 APPLICATIONS
Another central provision of
the Act, is section 271, which was designed as the vehicle by which a BOC would
win authorization to enter interLATA markets, while opening their local market
to competition. No one seems particularly satisfied with the progress on this
front, except perhaps those competitors that benefit from BOCs being barred from
lucrative long distance and interLATA data markets.
I continue to appreciate
the complaints of the BOCs about the heavy burdens imposed by our interpretation
of the checklist, as well as the failure of our procedures to provide timely and
complete guidance on how to satisfy these burdens. Some of these complaints have
merit, but some of them axe merely strategic. I cannot, for example, give too
much credence to a BOC that complains mightily about our 271 approach, yet has
never filed a section 271 application with the Commission.
This Commission
has only one viable vehicle for concretely and definitely addressing section 271
policy questions and that is in the context of a duly-filed application.
Congress determined that such a proceeding would be adjudicatory in nature and
that we would have only 90 days in which to issue a decision.
The only
way we really have to address the concerns raised by some companies is to get a
viable application before us. Yet, we have not received a 271 application of any
sort since July 1998. In fact, the noise level might lead one to believe we have
rejected 20 or 30 applications, not just five. The only way for the Commission
to successfully implement Congress' will is if the process is given a chance.
That said, I believe that much progress has been made in terms of developing
and providing general guidance on section 271 issues. As I, and others, urged,
the Commission adopted a collaborative process that permitted continued dialogue
with companies to gain a better understanding of what was expected. Some
companies have faithfully participated in that process, and though not
completely satisfied, have added immeasurably to the effort. Perhaps, more
importantly, state commissions have adopted collaborative processes in their
states. Working extensively in this manner with the companies has been extremely
productive. Indeed, their good efforts will likely lead to a number of strong
presentations to the FCC later this year. In that context, the FCC will have
another meaningful opportunity to advance the Congress' section 271 objectives
of promoting competition in both the local and long distance telephone markets.
ADVANCED SERVICES
Recognizing the advent of great technological
achievement in communications, Congress minted section 706, which charged the
Commission with encouraging the deployment of advanced services by removing
regulatory barriers to such deployment. Our initial set of proposals to
implement Section 706 from the 1996 Act are still pending, though our
preliminary reports indicate that broadband deployment while
progressing, is lagging behind innovativeapplications that depend upon it, and
consumers' demand for those services. This is, in part, due to the heretofore
unseen pace of innovation and change. We have watched a technological eternity
go by since Congress passed the Telecom Act in 1996. Convergence,
digitalization, the rise of IP-based networks, and strategic mergers have all
metamorphosed what we now loosely call "the industry." The potential benefits
that lay on the horizon for consumers have grown exponentially from the simple
vision of choice in basic telephone service. So, too, have the risks that we may
stay so focused on local residential voice markets, or short-sighted priorities,
that we fail to unleash the power of competition for advanced services, as
section 706 contemplates. I believe that the FCC and Congress must work
diligently, if not urgently, to understand the developments in this area. All
competitors in this fiercely contested market will attempt to bend the
regulatory and governmental process to their own commercial will. But our duty
is to the public. Our first instinct, therefore, must be to stay committed to
markets and competition, rather than regulation, as the vehicle for disciplining
anticompetitive behavior, as the engine for driving innovation, and as the tool
for maximizing consumer welfare. It is the only system ever devised that has
proven up to the task of giving consumers what they want, allowing private firms
to prosper and spurring innovation, especially at a time of rampant change. Our
historical commitment to this system has fostered a nation where
entrepreneurship and private enterprise thrives.
Regulation from our
"Commanding Heights" has its time and place, but it must be the exception in
this incredibly fast-paced, technology- driven environment. The regulators' rush
to lend a helping hand at the first sign of anxiety has proven, so often, to be
more disruptive and counter-productive than the converse. I am of the view that
anyone advocating the extension or intrusion of regulation into such a vibrant
market bears a heavy burden of proving that the public, as opposed to firms with
a particular business plan, will likely be harmed, absent doing so. Proffered
arguments should be eyed skeptically and critically. Speculation of future
anticompetitive behavior should be viewed with suspicion, especially in nascent
markets where supposed would-be monopolists in fact lack market power. We must
have enough courage to test and cross-examine rhetorical appeals. "Digital
divide," "light touch," etc., are great sound bites, but are they truly
meritorious arguments, or just clever window dressing for new regulation or
purely short-term political or economic self-interests?
Before regulating in
new areas such as advanced services (including the pursuit of social
objectives), we should first attempt to unshackle the full flurry of all
potential competitors. I do believe, for example, that potentially important
gladiators in the broadband battle are the LECs, who have yet to fully join the
data-driven fight due to government regulations targeted at a different set of
issues. But, they are not the only ones. Electric utilities hold a lot of
promise. Wireless carders do not intend to sit out this battle. Satellite
providers are charging headlong into the fray. One need only read the daily
headlines reporting the latest strategic partnerships. A positive,
un-regulatory, national policy for advanced services (as embodied in Section 706
and other statutory provisions, if implemented correctly) will push to get these
forces into the battle and save us the consequence of a futile regulatory,
industrial policy.
REGULATORY FORBEARANCE
Speaking of un-regulating, an
important tool that I believe has been under-utilized so far is the FCC's
forbearance authority under Section 10 of the Communications Act. I have
criticized some of our recent decisions in which the Commission declined to
forbear from our rules or certain statutory provisions. The merits of those
forbearance petitions have been less my concern, for reasonable minds can
differ. My dissatisfaction has been generally with the standard we apply and our
analysis, which seems to place the entire burden of forbearance on the moving
party. I believe Congress expected the Commission to accept more responsibility
for demonstrating a continued need for regulation in the presence of a healthy,
competitive market or where forbearance would promote competition.
Indeed, I
believe the Commission ought to employ a burden-shifting device in forbearance
cases. In operation, once a petitioner demonstrates that the market in which it
operates is competitive (i.e., no competitive finn or entity enjoys market
power, price trends are checked or downward, innovation is occurring) the burden
would shift to the FCC and the opponents of forbearance to demonstrate why
regulation is still necessary. And, in making that judgment, the Commission
should not be able to simply rest on the grounds that the rule served a public
purpose and petitioners have failed to prove that purpose is no longer worthy.
The question should be whether the rule at issue is in fact superior to
competition for serving that purpose.
We should undertake a substantive and
factual examination of the rule and its effects to determine if its purpose
truly must be achieved through regulation instead of market forces. This
approach presumes that healthy competition will normally maximize consumer
welfare better than any regulation would, a presumption that we all must embrace
to even get out of the starting block. Where competition has not quite "arrived"
to a market, we need to develop a greater faith that the deregulation embodied
in Section 10 can serve to promote competition in most instances. We need to
carefully analyze and understand what other mechanisms (competition, other types
of less burdensome regulation, other regulatory bodies such as the States) make
a certain regulation unnecessary so that we can chip away the layer upon layer
of regulatory requirements as we transition to a competitive marketplace.
MERGERS
The debate over the value of FCC merger review in addition to
review by one of the antitrust agencies is well-worn. Clearly, as the keepers of
the Communications Act and its policies, the FCC has some unique expertise that
it can bring to telecommunications merger review that probably advances the
public interest. Our review, however, is not generally limited to those areas in
which we can claim primary expertise. Very often, we undertake a classic
antitrust analysis, applying the same principles, precedents and guidelines as
those employed by the antitrust authorities and rarely, if ever, does it produce
different results.Such reviews can be quite burdensome on the parties and time
consuming. For example, the FCC often requires voluminous filings that are
duplicative of those made to the Department of Justice or the Federal Trade
Commission. They often must incur the expense of outside counsel to prove their
case to both agencies. I have come to doubt whether the marginal value of full-
blown merger review by the Commission is justified by its cost in time and
resources. Moreover, with all due respect to our hard working staff, we do not
really possess enough personnel schooled in antitrust and competitive economics
to do the job well consistently. The antitrust authorities do. I believe that
there is room to preserve a more limited, complementary role for the FCC in the
review of mergers, while limiting its involvement to its areas of expertise.
If the Commission engaged in a simultaneous review with the antitrust
authorities, this could improve efficiency. Under such a scheme, the parties
would be required to file most documents only once and to one agency.
The Commission would weigh in on issues such as whether the merger would
violate an express provision of the Communications Act, or would otherwise
undermine the congressional scheme. Furthermore, the FCC would consider the
merger's impact on other communications policies such as media diversity and
universal service that are not appropriately considered by antitrust
authorities. But the Commission would defer to the antitrust authority's
competitive analysis.
BROADCAST OWNERSHIP
Section 202 of the 1996
Telecom Act directed the FCC to make a number of specific changes to its
broadcast ownership rules. Where the Act gave specific direction, the Commission
has changed its rules as directed. Section 202 also more generally directed the
Commission to "conduct a rulemaking proceeding to determine whether to retain,
modify, or eliminate its imitations on the number of television stations that a
person or entity may own, operate, or control, or have a cognizable interest in,
within the same television market." This is the so-called "TV-Duopoly" rule.
While technically the Commission is in compliance with the statute, since it
initiated a rulemaking in November 1996, there is reason to be concerned about
its slow progress. The Commission has a backlog of cases that it has been unable
to resolve, pending the rulemaking's completion. The lack of closure is impeding
business operations and complicating business planning.
Another provision of
Section 202, the biennial review provision, directs the Commission to "review
its rules adopted pursuant to the section and all of its ownership rules
biennially as part of its regulatory reform under section 11 (of the
Communications Act)." The Commission issued a Notice of Inquiry in March 1998,
yet nothing further has been done on this matter.
I share the concern that
the Commission has not fully examined its broadcast ownership rules as directed
in the 1996 Telecom Act. Congress realized that many of the
assumptionsunderlying these rules were formed decades ago, when the media
landscape was quite different. For my part, I have serious doubt that these
rules can be defended on the basis of the justifications given when they were
adopted. These rules rest on antiquated moorings devised at a time when the
broadcast industry looked very different than it does today. They deserve
rigorous examination. Such examination should take into account the full
competitive environment in which broadcasting operates - we should look at the
impact of competition from cable, satellite and Internet services, for example.
The Commission does need to assess the dynamic changes in technology and
media markets to determine what limited rules are necessary to promote our
public objectives, and sections 11 and 202 afford us the opportunity.
Part
of the difficulty of reaching consensus on new ownership rules, is that they are
infected with myriad goals and objectives that may not always be reconcilable.
The competitive benefits of looser rules, may undermine (to some) our diversity
goals. Indeed, I believe that continued anxiety about the effects of greater
liberalization of ownership rules on diversity of ownership, voices and
programming is the single greatest impediment to reaching a consensus on these
structural rules.
The Commission has straggled to develop a clear consensus
on acceptable diversity principles that not only promote the public good, but
that can withstand strict judicial scrutiny. This straggle, as much as anything,
has contributed to the lack of progress on these rules.
For this reason, I
urge this Committee to take up the ownership diversity question and contribute
to developing a sustainable consensus, so that we might move forward on
ownership rules. I applaud Chairman McCain's stated commitment to exploring
ownership diversity and his willingness to lead a legislative effort that
promotes our cherished national commitment to meaningful opportunity in our most
robust and critical industry. I stand ready to assist the Committee and Congress
in formulating a sound, principle-based diversity initiative that will allow us
to move forward.
FCC REAUTHORIZATION
With all of the crucial substantive
tasks on our plate, we must still be able to step back and take a look at this
agency and assess its structure and operation so that we can do the highest
quality job that this Congress commands. I support Chairman Kennard's effort to
develop a strategic plan for restructuring and streamlining FCC functions and
management. I am hopeful that we will be able to move forward quickly under this
plan to make needed changes. In my testimony at a House reauthorization hearing
in March (which is attached), I offered some specific suggestions for
consideration during the FCC reauthorization process.
Specifically, I
believe that before beginning any exercise to fix or restructure the Agency, I
think it prudent to first consider what we think is broken or is not working
particularly well atthe FCC. I would submit five areas for exploration: (1) the
need to more clearly define the Commission% annual priorities and focus; (2) the
need to operate efficiently enough to meet the demands of an innovation driven
market; (3) how to structure the Agency to better align with market trends and
demands, (4) whether to continue the administration of functions that are
largely duplicated elsewhere in government; and (5) the breadth of the
Commission's quasilegislative authority. I explore these issues more fully in my
attached testimony before the House Subcommittee.
CONCLUSION
Let me
close by saying that I look forward to continuing to work with members of this
Committee, other members of Congress, and with my colleagues on the many
challenges that await us in implementing our statutory mandates. Thank you for
your attention and I look forward to your questions.
*****
Attachment
OPENING STATEMENT of MICHAEL K. POWELL Commissioner Federal Communications
Commission
Before the Subcommittee on Telecommunications, Trade and Consumer
Protection of the House Committee on Commerce
Good morning, Mr. Chairman and
other distinguished members of the House Subcommittee on Telecommunications,
Trade and Consumer Protection. Thank you for inviting me here to assist you as
the Subcommittee deliberates the statutory reauthorization of the Federal
Communications Commission (FCC).
Initially, let me state that I support
Chairman Kennard's effort to develop a strategic plan for restructuring and
streamlining FCC functions and management. I am hopeful that we will be able to
move forward quickly under this plan to make needed changes. In my testimony
however, as the Subcommittee's invitation letter suggests, I will attempt to
provide some specific suggestions for consideration during your deliberation on
FCC reauthorization.
Before beginning any exercise to fix (or to use
Chairman Tauzin's phrase "remission") the Agency, I think it prudent to first
consider what we think is broken or is not working particularly well at the FCC.
I would submit five areas for exploration: (1) the need to more clearly define
the Commission's annual priorities and focus; (2) the need to operate
efficiently enough to meet the demands of an innovation driven market; (3) how
to structure the Agency to better align with market trends and demands; (4)
whether to continue the administration of functions that are largely duplicated
elsewhere in government; and (5) the breadth of the Commission's
quasi-legislative authority. I. The Commission Needs To More Clearly Define Its
Annual Priorities
I believe that the key to any well-run organization is the
enumeration of a clearly understood and widely communicated set of priorities. A
common complaint I often hear is that outside parties have no solid sense of the
Commission's priorities or direction. The Chairman often does share his view of
the coming year in speeches, press releases and in daily conversation, as do
other Commissioners, but there is no structured process by which the Commission
formally develops and publicly reports its priorities.
One way to address
this problem would be the development of an annual, full Commission statement of
priorities.
Congress could require the Commission to set out a list of
its priorities in the annual report it currently files pursuant to section 4(k)
of the Communications Act of 1934. 47 U.S.C. 154(k) (West 1998). Such a
compilation of priorities would help focus the work of the Commission and create
greater regulatory certainty.
II. The FCC Is Not Efficient Enough To Meet
The Demands Of Its Customers
The extent and pace of change in the
telecommunications industry is mind-boggling. It is driven by exponential
advancements in microprocessing power, digitalization, Internet protocol-based
network models and bandwidth. As Royce Holland, Chairman and Chief Executive
Officer of Allegiance Telecom, Inc. recently remarked, the pace of change in the
industry is like Moore's Law on Viagra. Market opportunities in this environment
are lucrative but fleeting. As in the days of old, however, the Agency still
labors endlessly for many months and even years on policy issues and ultimately
implements its judgments in the form of newly-minted rules and regulations. The
relevancy of the new rules fades rapidly with time. Some are out rightobsolete
the very moment they are passed. In this environment, the FCC must become a
dramatically more efficient place. A decision that comes too late, might as well
not have been made at all.
A. Deregulation
The most obvious way to
improve efficiency at the Agency is to have fewer rules to administer. This
highlights the importance of deregulation where the cost of a rule is not
justified by its benefits. There are a number of vehicles Congress has provided
for deregulating and I believe that they must be employed with greater rigor
than they have to date. Congress wisely commanded the FCC to conduct a biennial
review of its regulations and to shed those that it determines are no longer
necessary. While we have made some progress in this area, I believe we can be
muchmore aggressive.
A second vehicle that I believe has been under-utilized
is our forbearance authority under Section 10 of the Communications Act. 47
U.S.C. 160 (West 1998). I have criticized many of our recent decisions in which
the Commission declined to forbear from our rules. The merits of those
forbearance petitions have been less my concern, for reasonable minds can
differ. My dissatisfaction is with the standard we apply and our analysis, which
seems to place the entire burden of forbearance on the moving party. I believe
Congress expected the Commission to accept more responsibility for demonstrating
a continued need for regulation in the presence of a healthy, competitive
market. Indeed, I believe the Commission ought to employ a burden-shifting
device similar to that employed in civil rights cases.In operation, once a
petitioner demonstrates that the market in which it operates is competitive
(i.e., no competitive firm or entity enjoys market power, price trends are
checked or downward, innovation is occurring) the burden would shift to the FCC
to demonstrate why regulation is still necessary. And, in making that judgment,
the Commission should not be able to simply rest on the grounds that the rule
served a public purpose and petitioners have failed to prove that purpose is no
longer worthy. The question should be whether the rule at issue is in fact
superior to competition for serving that purpose. We should have to undertake a
substantive and factual examination of the rule and its effects to determine if
its purpose truly must be achieved through regulation instead of market forces.
This approach presumes that healthy competition will normally maximize consumer
welfare. Congress could explicitly adopt such a burden-shifting approach to
forbearance.
B. Shift To Enforcement
A second way for the Commission to
become more efficient is by shifting away from pre-approval, "by-the-grace of
us" regulation and toward enforcement. Telecommunications regulation has
traditionally developed along the lines of the broadcast model. That is, parties
need advance approval for initial operation, changes and deployment of new
innovations. This has become a real impediment to timely decisions. A regime in
which there are more presumptions of good faith on the part of competitors,
backed up with strong enforcement by the Agency, would greatly enhance our
efficiency.In this regard, I applaud the Chairman's initiative to assemble under
one bureau the Commission's enforcement functions. Similarly, the initiative to
create an expedited complaint resolution process, dubbed "the rocket docket," is
a positive step in this direction. The shift to enforcement, however, needs to
be more than a consolidated bureau. It needs to be a shift in thinking as well.
The FCC, as a whole, must become more comfortable with enforcement as a means of
regulation and must address our speculative fears about deregulation through
enforcement, rather than let those fears paralyze our willingness to deregulate.
C. Need For Better Internal Process
The Commission structure is
inherently inefficient. Because it is a deliberative body with independent
Commissioners who each have a vote, it is very difficult to keep things moving
along at a pace demanded by the market. In contrast, organizations that are more
hierarchical generally have better success with moving more quickly.
Nonetheless, for the Commission to keep pace, it needs the benefit of management
professionals dedicated to managing our agenda and keeping our substantive items
on track. I would urge the Congress to consider creating a professional
management directorate to accomplish this purpose. There are examples of similar
activities in other government institutions. The court system has long employed
a clerk's office that keeps the caseload moving, rather than leave this
responsibility to the sitting Judges. Similarly,many divisions of the Department
of Justice (such as the Antitrust Division) have a Directorate of Operations,
headed by a substantive professional who helps keep the pipeline to the
decision- makers flowing. These functions at the FCC are presently managed by
the Chairman's personal office.
III. The FCC Is Not Aligned Structurally
With Market Trends
It is regularly observed that the Commission is organized
around industry segments that increasingly are less relevant as convergence
strains and eliminates their unique technical distinctions. Many commentators
have urged that Congress consider consolidating bureaus along competitive lines.
I agree that it would be useful to consider such structural changes, though I
believe there are limits to how much can be gained by such an effort.
The
balkanized structure of the Commission makes it difficult to re- deploy
employees to address urgent tasks. Attorneys currently analyzing policy issues
for the Mass Media Bureau, for example, cannot easily be moved to work on issues
in other bureaus, even though the subject area may be similar. Thus, even though
there is a need for attorneys in the Cable Services Bureau, separation of these
bureaus prevents ready reassignment of personnel. Within larger bureaus, the
Commission would have the opportunity to maximize its use of employees. It
could, for example, cross-train the workforce through rotations and training. In
this way, the Commission could maximize employee flexibility and enhance its
ability to reallocate resources to match priorities.Though I do not take a
strong position on any particular proposal, I would recommend considering
consolidation in a few areas. The first would be the formation of a
multi-channel competition bureau. Such a bureau would administer our rules with
regard to what are currently the mass media, cable television and direct
broadcast satellite (DBS) industries. Regulation of each of these mediums
presently rests in a separate bureau. A single leadership structure overseeing
these fields would allow for greater harmonization of rules and decisions in
furtherance of a merged and increasingly competitive industry segment. With the
elimination of some cable rate regulation at the end of this month, and
increased attention being given to the inter-relationship between broadcast and
DBS, the time may be ripe for considering such a proposal.
A second area
worthy of some thought is complete or partial consolidation of the Common
Carrier and Wireless Telecommunications bureaus. There has been a great deal of
discussion about wireless technologies competing with and serving as a
substitute for traditional wireline service. Indeed, some have suggested that
over time most voice communications will be carried by wireless carriers, while
the wireline infrastructure will be used more for data. These trends may argue
for a single bureau dedicated to these currently separate industries.
I do
note, however, that there is a limit to the value of this functional
realignment. Because the statute is organized along industry lines our rules
necessarily do as well and functional consolidation may be more form than
substance. Additionally, manyindustries support industry organization because
they enjoy having a "champion" to tussle over policy.
IV. Administration Of
Duplicative Functions
A fifth area on which Congress may choose to focus is
where Commission authority overlaps with that of other government agencies.
Because communications is so fundamental to virtually all human
activity, there is almost always some connection to FCC authority (no matter how
tangential). Yet, the core expertise of the FCC should truly be considered in
assigning to it, rather than some other agency, a central role on a given issue.
While such governmental overlaps may be desirable, they at least should be
complementary (or supplementary) rather than simply duplicative. A few suggested
areas of inquiry are outlined below.
A. Merger Review
The debate over
the value of FCC merger review in addition to review by one of the antitrust
agencies is well-worn. Clearly, as the keepers of the Communications Act and its
policies, the FCC has some unique expertise that it can bring to
telecommunications merger review that probably advances the public interest.
Our review, however, is not generally limited to those areas in which we can
claim primary expertise. Very often, we undertake a classic antitrust analysis,
applying the same principles, precedents and guidelines as those employed by the
antitrust authorities and rarely does it produce different results. Such reviews
can be quiteburdensome on the parties. For example, the FCC often requires
voluminous filings that are duplicative of those made to the Department of
Justice or the Federal Trade Commission. They often must incur the expense of
outside counsel to prove their case to both agencies. I have come to doubt
whether the marginal value of full blown merger review by the Commission is
justified by its cost in time and resources. Moreover, with all due respect to
our hard working staff, we do not really possess enough personnel schooled in
antitrust and competitive economics to do the job well consistently. The
antitrust authorities do.
I believe that there is room to preserve a
complementary role for the FCC in the review of mergers, while limiting it to
its areas of expertise. Perhaps, consideration of the legislation recently
introduced by Senators DeWine and Kohl would be a good place to start.
The
Commission engaging in simultaneous review with the antitrust authorities could
improve efficiency. Under such a scheme, the parties would be required to file
most documents only once and to one agency. The Commission would consider issues
such as whether the merger would violate an express provision of the Act, or
would otherwise undermine the congressional scheme. Furthermore, it would
consider the merger's impact on other communications policies such as media
diversity and universal service that are not appropriately considered by
antitrust authorities. But the Commission would defer (either substantially or
completely) to the antitrust authority's competitive analysis.
B. Consumer
Affairs
An important function of any branch of government is to safeguard
consumers. Undoubtedly, because of our regulatory authority over certain
industries and our intimate understanding of the industry, we are uniquely
positioned to administer certain consumer affairs. Nonetheless, there are other
agencies that have similar authority and some judgment might be made as to which
is best positioned to administer certain issues. For example, the FCC has
occasionally jumped into issues that relate to advertising under its public
interest authority. The Federal Trade Commission, however, has specific
authority in these areas. The same is true of other issues such as consumer
fraud (e.g., "cramming" and "slamming.") Congress should evaluate the benefits
of such overlapping jurisdiction.
C. Equal Employment Opportunity
I
personally support narrowly tailored Equal Employment Opportunity (EEO) rules.
The Commission has administered its own EEO program in certain industries for
some time. Yet, in most other industries there is not an EEO authority separate
from the Equal Employment Opportunity Commission and the federal, state and
local civil rights authorities. I believe that there is some advantage to having
the FCC involved because of its unique relationship with certain industries,
particularly those that operate pursuant to a government-conferred license.
However, I would be remiss if I did not point out there is some overlap that
should be examined to ensure that the respective roles are complementary and not
duplicative. By eliminating duplication, such an examination, inmy view, would
bolster support for the government's role in promoting opportunity in
communications.
D. Political Rules
Finally, I would point out that the
FCC has historically administered a number of rules that are designed to affect
the quality of elections. These rules are focused on the obligations of the
licensee and not the candidates, but they undoubtedly are intended to shape the
quality and tenor of elections. Greater involvement in this area would require a
more comprehensive understanding of campaigns and existing election laws than I
believe this Agency possesses. Furthermore, any extension of such authority
should be weighed against the role of the Federal Election Commission. I am
uncomfortable, personally, as an un- elected regulator initiating policies and
rules that affect the electoral process without specific congressional direction
to do so.
V. The Breadth Of The FCC's Quasi-Legislative Authority A
phenomenal amount of time is consumed in this industry in fights over the FCC's
jurisdiction. One major source of this ongoing battle is the tension between the
statutory regime that reigned under the 1927 and 1934 Acts and that
predominantly adopted by Congress in the 1996 Act. The former's hallmark is that
it conferred sweeping authority in the Commission to act to ensure "the public
interest, convenience and necessity." The 1996 Act, however, attempted to craft,
in many respects, a detailed blueprint for the industry and the Agency. In many
places, it provides highly detailedstatutory provisions and instructions. There
is a real tension between these two regimes, elements of which are scattered
throughout the Act.
The venerable public interest standard has much to
commend it. It provides a great deal of flexibility and punctuates a consumer
focus. However, this standard does allow the Agency to self-initiate a broad
range of government action without specific statutory direction. That is, it
serves as a basis for quasi-legislative action by the Commission.
The
quasi-legislative authority of the Commission has its merits, but if read too
broadly, it serves to invite industry, consumer groups and special interest to
seek both redress and advantage from the Agency, rather than Congress. This can
lead to the Agency initiating action that Congress subsequently disapproves of,
or believes conflicts with a more specific mandate in the statute.
I am not
suggesting elimination of the public interest standard. I do believe, however,
that Congress might consider certain limiting principles with respect to its
employment as a jurisdictional basis in certain areas.
VI. Conclusion
I
would like to conclude with one caution. As long as the 1996 Act is the basis
for telecommunications law, Congress would be ill-advised to hollow or unduly
wound the Commission. There are undoubtedly areas in which we tinker where we
should not.There are certainly ways to improve our processes and our decisions.
But, even controlling for all that, the FCC will remain a very important
institution for dealing with the telecommunications sector and its transition to
competition and its transformation in response to innovation.
Congress has
the power to cut employees and even Commissioners if it chooses. But if not done
carefully, rather than harm the Agency, the industry and consumers will be
harmed. It is the industry that will still have to come to the Commission to get
its licenses approved or have a section 271 application approved. It will still
be states and local schools that have to file for universal service. Consumers
will still need somewhere to have their complaints acted upon. Such redress will
not be enhanced by a diminished Agency.
I look forward to continuing to work
with Members of Congress and with my colleagues on the many challenges, and
tremendous opportunities, that await us in implementing the 1996 Act. I trust
that, by working collaboratively and by having faith in free markets, we will
bring the benefits of competition, choice, and service to American consumers.
Thank you for your attention.
END
LOAD-DATE: May 27, 1999 
