Copyright 2001 Federal News Service, Inc.  
Federal News Service
May 17, 2001, Thursday
LENGTH: 17255 words

HEADLINE: PANEL I OF A HEARING OF THE SENATE COMMERCE, SCIENCE & TRANSPORTATION COMMITTEE
 
(NOTE: RESEND TO CORRECT CODING PROBLEM.)
 
SUBJECT: NOMINATION OF MICHAEL POWELL TO BE CHAIRMAN OF THE FEDERAL COMMUNICATIONS COMMISSION
 
CHAIRED BY: SEN. JOHN MCCAIN (R-AZ)

WITNESSES: MICHAEL J. POWELL
 


BODY:
SEN. MCCAIN: Good morning. The Senate Commerce Committee is meeting today for confirmation hearings to examine the qualifications of Mr. Michael Powell, who's been nominated by the president to serve as the chairman of the Federal Communications Commission.

I'd like to welcome Mr. Powell this morning, as well as his family and friends. And I'd like to take this opportunity to congratulate him on his exceptional and distinguished record. As chairman and as a commissioner of the FCC and as an attorney in private practice, he has consistently demonstrated extraordinary talent and leadership abilities.

A recent Washington Post article said it best when they wrote, quote, "Michael Powell is well-liked and respected to a degree not often found in Washington, drawing praise from both sides of the partisan aisle." Such qualities are absolutely essential to an FCC chairman who must lead the FCC into the digital age and the new economy.

Mr. Powell has already devoted much of his career to public service. In addition to being the current chairman and commissioner of the FCC, he served as chief of staff to the anti-trust division at the Department of Justice and had a distinguished military career as an officer in the United States Army. I appreciate his willingness to continue to serve his country, and I thank him for his steadfast commitment and dedication.

Today we are here to review and seek comment from Mr. Powell on his qualifications to be chairman of the FCC and to engage in a dialogue with the members of this committee about what direction the FCC will take under his leadership if he is confirmed.

I'd like to point out that the FCC is an independent agency created by the Congress. As such, its primary responsibility is to implement and enforce the will of Congress, and thereby facilitate Congress's exercise of its responsibilities pursuant to the commerce clause. The Congress enacts the laws governing interstate commerce, including telecommunications. The FCC is an agency created by the Congress and delegated the responsibility to implement the telecommunications laws that Congress enacts.

Again, I'd like to congratulate you for your continued service to your country. Public service is a worthy cause, and it's people such as yourself who embody and demonstrate the type of leadership that inspires young Americans to serve their country and renew their pride in public service. As chairman of the FCC, you will face many pressing issues and difficult decisions, but I am confident that you will confront these in the fair and balanced matter for which you have been justly praised.

Chairman Powell, would you care to introduce members of your family who are with us this morning?

MR. POWELL: Yes, Mr. Chairman. It's an honor to be here, Senator Hollings and distinguished members of the committee. Let me take an opportunity introduce my moral and important family backbone. I have with us here my wife Jane, whose beloved support and unflinching caring for our children gives me some of the ability to do the challenging missions before me, and I'm forever grateful and thankful for her here in public. I'd like to introduce my mother- and father-in-law, Navy Captain Dick Knott (sp) and his wonderful wife Eleanor, some of the best in-laws you could ever hope for.

SEN. MCCAIN: I'm sure that Navy influence was very beneficial.

MR. POWELL: It's not bad. (Laughter.) I also have with us here a woman who's known in this town, my gracious mother, Alma Powell, who I can say, unquestionably, without whose efforts I really wouldn't be here today. (Laughter.) And even though he's not here, I have to publicly thank my father, the secretary of State of the United States, who never pushed me to public service but merely lured me by virtue of his example and his commitment to selfless service and one that I follow with great pride and great honor. And that's the family I have with me today.

SEN. MCCAIN: We want to welcome all the members of the family, and thank you for the influence you have had. Senator Burns demands that you stand. I don't, but we'd like you to stand if you care to. (Laughter.) Thank you. Would you care to stand so that we can all recognize the family members? (Applause.) We welcome you here today and we appreciate your presence and we share your pride in this outstanding American. Thank you for being here.

Senator Hollings.

SEN. ERNEST HOLLINGS (D-SC): Mr. Chairman, let me take the liberty here at this moment to introduce for the record, and ask that it appear at the appropriate time, my friend, Dr. Michael J. Copps, who has been nominated by the president for commissioner of the Federal Communications Commission. The reason for this is we have already commenced at the Subcommittee for State-Justice-Commerce hearing the hearing on the FBI, and that's my major committee and I've got to get over there. So with your indulgence --

SEN. MCCAIN: Without objection.

SEN. HOLLINGS: -- Mr. Chairman, I thank you very much. I'll put an opening statement. Let me congratulate Chairman Powell on his outstanding record and dedication to public service.

With respect to Dr. Copps, he's an honor graduate of Wofford and also at the University of North Carolina in history and Russian, professor of history down at Loyola until 1970, when he came to help our friend Ed Muskie, and Ed Muskie withdrew from the race. So we picked him up, and for 15 years Dr. Copps served as not only legislative assistant, but more particularly chief of staff, and he learned both sides of every question.

I always, in addressing graduating classes at this time of year, call on them as my fellow students. As long as they remain a student, they'll continue to live. And that's the best part of the United States Senate. It's the best post-graduate course I know of.

Dr. Copps has taught me as well as learned here. He went on, of course, in the private sector with the Collins & Aikman (sp) firm as their director of government affairs, then senior vice president of the American (Media?) Institute, served as deputy assistant secretary at the Department of Commerce on the Trade Development Division, and then, of course, in the last few years as the assistant secretary of Commerce in the department's International Trade Administration.

So he's had a distinguished career here in Washington. Most of us know him and really admire him for his objectivity.

And, like I say, more than a balanced budget, we need balanced senators and public servants up here. He is balanced, and I'm confident that he'll bring outstanding service here to the Federal Communications Commission. So I welcome him. And I appreciate, Mr. Chairman, your indulgence.

SEN. MCCAIN: Thank you very much. We have an informal rule on this committee that there be only opening statements by the chairman and the ranking member. But like every rule, there's exceptions to it. And Senator Rockefeller has asked to make a brief statement. Senator Rockefeller.

SEN. JAY ROCKEFELLER (D-WV): Mr. Chairman, I appreciate that, as I appreciate your permission and the permission of the ranking member. And I'd be happy to yield, Mr. Chairman, if you want the two --

SEN. MCCAIN: Would you like for them to make introductions? Fine. We welcome our two colleagues from Virginia here and we appreciate that you're here on his behalf. And Congressman Davis, do you or Senator Allen care -- which would you care to --

REP. TOM DAVIS (R-VA): I have a vote, but the senator has to preside, so I'll yield.

SEN. GEORGE ALLEN (R-VA): I'm supposed to preside at this moment.

SEN. MCCAIN: Senator Allen. Thank you, Senator Allen.

SEN. ALLEN: Thank you, Mr. Chairman, and thank you, members of the committee, of which I'm a member. And it's a pleasure to be here also with my colleague, Tom Davis, congressman from northern Virginia, for a wonderful event, obviously the cross-examination of someone who everyone knows fairly well in this committee, and that's Michael Powell. And it's great to see his wonderful family here. I will not get into all sorts of satirical verse as far as his upbringing and how he had to move around the country. Suffice it to say he, like most people in the military, but particularly Michael, was raised by outstanding parents.

I do think that he does have a lot of good experience in the Department of Defense, working with Mr. Armitage. And years ago I'm sure he had some conversations with the Joint Chiefs of Staff, chairman of the Joint Chiefs of Staff; but also, some of the issues that do have to do with communications, such as the challenges of limited spectrum, a term that we would have laughed at merely a decade ago, now is very important; new technologies, such as the third wave and third generation of wireless communications, wireless Web browsers, the impact of new regulations in foreign countries and what impact they have on our country's businesses as they try to expand.

He's clearly conversant with the issues. He's knowledgeable on the issues. And clearly, when you look at this committee, which has a tremendous amount of jurisdiction, there's probably no federal agency that reports to this committee that's any more important than the Federal Communications Commission. And it is essential that we have someone who has already shown steady leadership on the Federal Communications Commission on difficult issues from reciprocal compensation to increasing fines for Section 251 violations to access rates, to universal service reform. And clearly we will, I think, welcome his insight on issues, of what's the impact of Internet access taxes or discriminatory taxes and what segment of society is most impacted by any of those sort of proposals.

So the decisions made in this committee and with the FCC have a tremendous impact on our schools, on our commerce, and our ability to even interact with our family members. And Mr. Chairman, the president has once again come forward with an outstanding individual, and clearly there is no better person in this entire country, in my estimation, to be chairman of the Federal Communications Commission, whether it's based on integrity, knowledge, experience, or also having that enterprising spirit of innovation and embracing the advances of technology, no one better to meet all those characteristics than Michael Powell. And it's my pleasure to present him to this committee and wholeheartedly endorse his nomination.

SEN. MCCAIN: Thank you, Senator Allen. And we appreciate you being here, and we understand you have to go preside over the Senate. And I thank you very much for your statement.

Congressman Davis, welcome.

REP. DAVIS: Thank you, Senator. Mr. Chairman, it's both an honor and a privilege to appear before you and the members of the committee this morning to present one of my most distinguished constituents, FCC Commissioner Michael Powell, for your consideration as the commission's next chairman.

As you know, the House Subcommittee on Telecommunications and the Internet, on which I serve, had the distinct pleasure of having Chairman Powell testify before us in late March. My colleagues and I on the subcommittee were deeply impressed by the high caliber of his expertise, his responsiveness to members' concerns, and his willingness to tackle the most difficult issues facing the telecommunications industry over the next decade.

Chairman Powell's list of career accomplishments is as diverse as it is impressive. A long-time resident of the Virginia commonwealth, he's a 1981 graduate of Lake Braddock High School in my district, the College of William & Mary. Chairman Powell has served as a commissioner on the FCC since 1997, and in that capacity he also serves as the FCC's defense commissioner, responsible for the oversight of the commission's national security emergency preparedness functions.

During his previous life, he served as the Department of Justice's chief of staff for the anti-trust division, specializing in litigation and regulatory issues affecting telecommunications, anti- trust and employment law at the law firm of O'Melveny & Myers. After graduating from the Georgetown University Law Center, Chairman Powell clerked for the honorable Harry T. Edwards, chief judge of the U.S. circuit court of appeals for the District of Columbia.

The FCC has entered a critical period that will affect our nation's long-term competitiveness in the overlapping arenas of technology and telecommunications. With issues as diverse as the spectrum management and the widespread deployment of broad band and digital television pressing on the congressional agenda, I'm thankful we have such an exceptionally qualified and articulate individual as Chairman Powell to lead us through this time.

I appreciate your giving me the opportunity to be here today and am just very, very happy to recommend his confirmation. Thank you very much.

SEN. MCCAIN: Thank you very much, Congressman Davis. You are always welcome here, and we thank you for taking the time to speak on behalf of this candidate.

Now, Senator Rockefeller, would you like to --

SEN. ROCKEFELLER: Thank you, Mr. Chairman. And I will eliminate one page from my two-page remarks. I'll get right to the point. I think the FCC is the most important commission in Washington DC. I think it is now, and I think it will be for years and years to come. And therefore, this hearing this morning, which I will come back to in time for questioning, I want to emphasize two points.

The first is the E-Rate. And Chairman Powell, I'm not just speaking to you, but also to your fellow -- your colleagues and fellow nominees. I think the E-Rate has been a great success. We've wired thousands and thousands -- in fact, millions of classrooms and libraries. Demand far exceeds the money available. We have this year about $5 billion of requests for $2.25 billion available from the universal service fund. Together we're bringing technology to teachers and to kids in a way which simply would never have been possible in my state and other places across the country.

I strongly believe, Mr. Chairman, that we should not make risky changes to the E-Rate now, because it's doing its job. I think we have to keep its funding level. I think we have to keep its funding source -- that is, the universal service fund -- rather than turn it over to the appropriations process. I think we have to keep the funding source secure and stable from year to year, and that means keeping the E-Rate at the FCC within the universal service program.

We should not, in my judgment, add new programs and new services beyond those hammered out in very, very tough, lengthy negotiations in 1996. These additions could undermine the program's core mission -- they will undermine the program's core mission, as well as the funding for it, and create opportunities without any doubt for lawsuits. And I will elaborate on that when I return.

We should not subject schools to new formula-based systems. We should keep the current system that, in fact, creates accountability. School planning creates that. It has spurred $500 million in local and educational technology investment. And when I do my questioning, I'm going to need to know if each of you will promise not to use the FCC to undermine the will of the Congress, as passed in the law, and threaten this important program through rules and regulations.

Secondly, and finally, broad-band deployment and rural telecom. I've introduced a bill, along with a lot of folks who are on it on this committee. Those of us from rural states have seen the connection between communications infrastructure and economic development first-hand. It is the future. The Internet is great. Broad band is what counts.

Broad-band deployment, the universal service fund, other infrastructure initiatives, are not subsidizing luxuries. They're subsidizing jobs. They're subsidizing hope and the future of many, many millions of people across our country. All of you must help us figure out how to make sure that the technologies that we all fight to support do not only benefit a small portion or the most profitable portion of America. I think that's a sacred trust that the FCC commission has.

I'll stop here, Mr. Chairman, but I feel passionately about those two subjects and four or five others which I have not mentioned. I respect the chairman greatly. He knows that. We've talked and had many exchanges, and I've talked with the other members, all except one. And I look forward to the hearing. And I particularly thank the chairman for his indulgence.

SEN. MCCAIN: Thank you very much, Senator Rockefeller.

Welcome, Commissioner Powell. Please proceed with your opening statement.

MR. POWELL: Thank you, Mr. Chairman. Thank you, members of this distinguished committee.

It was nearly four years ago that I had an opportunity to sit here and present myself for the advice and consent of the Senate in response to the president's nomination and my selection. And I am deeply honored to do so again. I was humbled then by the challenges that lay before me. And if I was humbled then, I am in awe today.

I have seen, over the course of the four years, how truly tough a job it is, how difficult and complex our decisions are. Despite the desires sometimes of the media and various industry segments to translate communications issues into good versus evil, simple versus simple, our issues are always complex, subtle, intricate and difficult. And I am uniquely aware of those.

And I understand increasingly, in a world driven by technological change, convergence and innovation, we operate in a world more uncertain than ever before. We can't know with the kind of certainty that we ever once had what will be the case in the communication industry, what services consumers will respond to, and the manner in which they will be provided. We have to make our decisions against that backdrop of uncertainty and retain a sufficient amount of flexibility and foresight to make thoughtful ones as we proceed into the bright future.

When I completed my questionnaire that has to be submitted to this committee, there was a question that arrested me as I was looking through the sheet that asked, "Why do you want this job?" Trust me, after four years, I often ask myself that. But put in a nutshell, the opportunity to serve one's country is singularly unique. And I would do it for that purpose alone.

But I am more challenged and driven by the idea of being able to be involved in the great undertakings of my day. The decisions we make will have far-reaching impact, not only on our economy but on our children, on us as human beings. The way that we communicate and relate are all going to resonate from the decisions that we make in conjunction with this committee and the Congress. And I am awed by that responsibility, but I assume it wholeheartedly because I recognize the importance of it.

I look forward to serving not only with the extraordinary staff of the Federal Communications Commission, but should you deem worthy, the members who will follow me for confirmation as we proceed into that future.

As I said, I don't know what the world looks like in five years. Candidly, I don't know what the world looks like in one year. But I can pledge this to the committee and the American public: I will make decisions, and I will make the hard decisions. And at times, many will not agree with them. Members of this committee undoubtedly will disagree with them. But I will assure you this: They will be principled. They will be based on the facts. They will be based on my most sober analysis of the law. And they'll be based on a little bit of instinct and intuition just for good measure. But you will never have any doubt that they are the exercise of my best judgment, as best I know how.

And finally, an important emphasis, they will be independent decisions. This is what I'm paid to do. We are guided by a simple credo: We owe fairness to all and allegiance to none. Everything we do is in the public interest.

And with that, I am honored to sit before you and submit my name for confirmation and for advice and consent of the Senate, and welcome to take your questions.

SEN. MCCAIN: Thank you very much. Five years after the enactment by Congress of the Telecommunications Act of 1996, incumbent local exchange carriers, or ILECs, continue to hold a level of service in our nation's local exchange markets that most would not have anticipated when the act was passed. According to your organization's own numbers, in 1999 ILECs directly served over 92 percent of all local customers and 97 percent of all residential and small-business customers, and in the process, collected over 94 percent of all local exchange telecommunications revenue.

Further, over two-thirds of competitive local exchange carriers, CLEC customers, were served by CLECs using ILEC facilities leased or resold by the CLECs. Only 2.2 percent of all local customers were served by CLECs using CLEC-owned facilities.

The commission's report makes clear that meaningful local competition has not developed in the residential or business local exchange markets. Is this because of the structure of the act, enforcement of the act, or is it some combination?

MR. POWELL: Mr. Chairman, I suspect it's some combination, but I think it's also this. It's hard. And I think it's harder than many people understood or expected. To build a local company with long- term viability is more akin to a construction project than a dot-com. And regrettably, I believe that not only the financial markets, but often even in the regulatory environment, we misapprehended that.

We misapprehended how difficult it would be to build viable business models, how difficult it would be to develop interconnection relationships with incumbents who had extraordinary power, and how long and complex the legal resolution of ambiguities that existed in the legal framework would take to resolve. All of those things have combined six years later to lead to the numbers that you identified.

But I would also like to emphasize that all is not lost. In my view, one has to think about convergence and the communication marketplace as a whole. When I sit down in my home and I --

SEN. MCCAIN: Thanks to technology.

MR. POWELL: Excuse me?

SEN. MCCAIN: Thanks to technology.

MR. POWELL: Thanks to technology, and thanks to a competitive and economic environment that encourages innovation.

I believe that when I sit down to make a decision to communicate with my sister, it might be by e-mail, it might be by instant messenger, it might be by my mobile phone, it might be by the local telephone exchange. But each one of those opportunities is available to me, and I would argue each one of them is a competitor, in essence, to the traditional local form of calling that we're accustomed to. And those are difficult to measure in the way that market share for basic telephony/voice telephony are, but they're nonetheless things that we should learn from and continue to try and encourage the technical differentiation of communication.

SEN. MCCAIN: So has the '96 act failed?

MR. POWELL: I don't believe it's failed, no.

SEN. MCCAIN: With the numbers I just cited to you, 92 percent of all local customers and 97 percent of all residential and small (business) customers in the process collected over 95 percent of all local exchange telecommunication revenue?

MR. POWELL: If the sole purpose of the act was to create market shares that are much higher than that, certainly it has failed. But I think that its purposes were broader and more far-reaching than that. I think it also tried to incent an economic model, commitment to innovation and convergence that allowed other services to flourish, which we're seeing the beginnings of.

We may conclude at some point it didn't achieve these objectives. But I personally believe that we continue to have an environment, even if strained, that provides opportunity for this to continue to be a good deal for consumers. It'll be harder than it was ever imagined, but I do think that we have a chance at realizing it.

SEN. MCCAIN: Several applicants for mobile satellite licenses have asked the FCC for authorization to use their valuable spectrum to provide terrestrial mobile services in urban areas. I would be concerned about any commission action that allowed the mobile satellite providers to substitute terrestrial service for their license services without competitors having a chance to apply for licenses.

All qualified parties for a proposed service should have the chance to apply for licenses. As available spectrum becomes increasingly scarce, it will be increasingly difficult for the FCC to balance competing demands for spectrum. What principles do you think should guide the FCC in its decision-making?

MR. POWELL: I think that's an excellent question. We have a problem with convergence in that, increasingly, innovative producers will attempt to provide services using technologies and frankly regulatory structures that don't necessarily jibe. In the example that you pointed to, we have a satellite regime that has a particular licensing structure. Under congressional statute, you cannot auction licenses for satellite services.

Similarly, you have a terrestrial wireless system that has a very different regulatory process for allocating and assigning licenses in which auctions are mandatory. When innovators try to combine the two into a single service offering, you run into the difficult, complex challenges of two different regimes.

One of the things that we've made a pointed effort to do is in the effort of FCC reform and FCC evaluation of its processes, to look for more aggressive ways to harmonize regulatory structures across technology-differentiated areas. We are constrained in that regard to some degree by virtue of the statute itself; for example, the example I pointed out. I simply don't have the discretion to auction satellite spectrum, nor do I have the discretion not to auction it in the context of mutually exclusive terrestrial applications. But I think there are ways that we're looking at trying to find to make sure that we provide an opportunity for that innovation, but it's still fair under the different licensing regimes.

SEN. MCCAIN: Today one of the news outlets headlined "ITU chief urges U.S. to catch up with the rest of the world on 3-G. The decision still pending on third-generation wireless spectrum. Secretary General Yoshio Utsumi warned in Washington that the U.S. is at this moment left aside from the world trend of 3-G licensing. Unfortunately, the U.S. doesn't have secure frequencies for this service. Development of 3-G in the U.S. market is very, very crucial for the success of these services," et cetera, et cetera. Do you share that view?

MR. POWELL: Parts of it. Parts of it I don't agree with. Let me talk about what I do agree with. I do think that the United States is strained and constrained by the inability to have as cohesive a spectrum management policy as it could, due to the fact that, for historical reasons, spectrum management is divided across the government. And as you're well aware, federal spectrum in the hands of federal governmental users is in the hands of the Commerce Department under the jurisdiction of the secretary of Commerce.

Commercial spectrum and state and public safety spectrum is in the jurisdictional realm of the Federal Communications Commission, an independent agency, not part of the government particularly. And trying to coordinate coherently spectrum policy across those realms has proven difficult. It's proven difficult within our own agency. We have problems between spectrum that is in the mass-market, mass- media realm and spectrum that's in the wireless realm and the satellite realm.

We're working on our little piece within the FCC. We've also reached out to Secretary Evans and the Commerce Department to look for ways to harmonize our decisions in more cohesive ways that allow us to be more efficient, providing spectrum, as the Europeans have done, for these advanced services.

Now, that said, I'm not a fan of national-champion comparisons. I believe that Europe may be ahead, but it depends on what they're headed to. This stuff, to my mind, is a lot like a marathon race. Sometimes the best place to be is in the third slot on the 20th mile, not the first. And we are looking now at European environments that went very fast on third-generation spectrum. The amount of money paid at auction is breathtaking.

And by some estimates, there are venerable companies that may be facing collapse purely as a consequence of getting ahead of themselves on third-generation wireless spectrum. British Telecom may face the grim reaper as a consequence of their decisions and the amount of money they bid at auction for an input that they don't yet know whether consumers are going to respond to. And I think that that example introduces some level of caution that we need to be consistent and persistent in chasing new opportunities for advanced spectrum. But we need not get too far ahead of ourselves, you know, lest we enjoy similar fates in the United States.

SEN. MCCAIN: Well, I'd appreciate it if you and the commission would give us some recommendations as to how to address this issue. I agree with you that perhaps the Europeans have gotten too far ahead of themselves. But with great frequency we are deluged with people who want the spectrum moved one place to another, that want DOD to give up theirs, that want more auctions or not auctions.

I think there's a degree of incoherency on what obviously will become a scarcer and scarcer commodity. It's not a matter of whether; it's a matter of when. So I would hope that you would prepare at least your recommendations for some overall policy as to how we can address this issue.

Senator Wyden.

SEN. RON WYDEN (D-OR): Thank you, Mr. Chairman. And Mr. Powell, welcome. I've enjoyed working with you in the past and look forward to working with you again.

I want to explore with you the question of the major media in this country being owned by fewer and fewer hands. I think we know that the merger trend is on the upswing in a variety of sectors. I happen to think most mergers are just the comings and goings of the modern marketplace. But certainly in a number of sectors they can be very troubling. And I am concerned about media concentration. I want to ask you specifically about it.

As you know, the FCC has imposed limits on ownership of mass- media outlets, including the 35 percent national audience reach cap on TV stations and the newspaper/broadcast cross-ownership rule. You have expressed formally questions, skepticism about the need for such limits. And what concerns me is if I look at all of your inclinations in terms of what I've seen in print, on your watch we could perhaps have the most radical consolidation of media ownership in the country's history.

We could have one company owning 60 percent of all the cable outlets. The same company could buy two TV broadcast networks, NBC and another. The same company could buy at least one-third of all radio stations in the country. The same company could buy newspapers in every town in which it owned radio stations. And most towns already have a monopoly newspaper situation. And I think the first question I'd like to ask is, what are your views formally on this question of media concentration? And are you troubled by the prospect of what I have described? And, if so, what would you do about it?

MR. POWELL: I believe that the concern about media concentration is genuine. I believe that there's a reason to be concerned about consolidation generally. As an anti-trust attorney, I know what the dangers are of monopolization of any producer or any good or services, and I understand the uniqueness of the media in our society as well.

That said, all I've expressed publicly is a commitment to do what Congress ordered me to do, which is to, on a biennial basis, thoughtfully review each and every one of the ownership rules to consider whether they continue to be necessary, given the changes in the environment. That is a legal obligation, and one that I have merely suggested we would pursue.

I also believe that it's healthy to do so. And, one of the reasons is that the goals of many of these rules I would be the first to support -- both the limitation on concentration and the continued importance of diversity in the media. But a good number of these rules have -- date back to their original conception in the '70s, some of them in the '40s, in a world in which nobody can intellectually defend the proposition that the marketplace has not changed dramatically. Maybe these rules will be validated in the context of a fulsome examination of the current media marketplace and environment and will be validated. I'll say publicly, if that case can be demonstrated -- I don't deregulate for its own sake -- and if the rule continues to serve that purpose, then it will be maintained. Moreover, if those goals can be pursued in a more thoughtful and less interventionist way, I would consider that as well. But I do think that part of our obligation, of responsibility, is not to ignore changes in the environment and the market and what's available to consumers and what's not, in the preservation of rules, without examining fulsomely whether those rules continue to serve those purposes in the modern context.

And finally, I would say we have an obligation to do so, because whenever you talk about concentration or issues of diversity in media in the media area, you are talking about an upper constraint in the form of the First Amendment, which I do not believe is some cynical "get out of jail" card for broadcasters, but is one of the most cherished obligations that this country adheres to. Many of these rules have been increasingly threatened in court because of the government's unwillingness to articulate strong and thoughtful defenses of them. And if we have any hope of their goals being continually pursued, I think that we have an obligation to review them and even defend them thoroughly and rigorously or offer alternatives or eliminate them.

SEN. WYDEN: What about the prospect of the scenario that I described? And that is a very real -- real prospect. And in fact, you know, I could go further. I mean, you'd have this one outfit owning almost everything, and then one or two others owning what's left. And I look at the FCC statutory responsibility to regulate in the public interest, which I know you take, you know, very seriously, to promote -- to promote diversity of media sources. And I'd say that responsibility that the commission has doesn't square with the very real prospect of a radical concentration of media in a few hands on your watch. And I'd like --

MR. POWELL: Well, Senator --

SEN. WYDEN: -- I'd like to know if that scenario troubles you and --

MR. POWELL: Well, it troubles me that it's ascribed to me before we've done anything.

SEN. WYDEN: That's why I asked --

MR. POWELL: And that, to me, is -- is a speculation in and of itself that I sort of won't agree with the fundamental premise of. Any rule that's altered or changed in the context of the factual record, that's rigorously evaluated and considered, will be one that includes, you know, consideration of the kinds of prospects that you maintain. And I will always have to yield to whether that result will occur or not until we have the opportunity to have a record and a fulsome examination of it.

The second thing I think we need to say, which is not trivial, is that many of the scenarios you postulate would also violate the anti- trust laws of the United States. And I would certainly hope that if the radical levels of concentration you suggest were to begin to occur, that we would find ourselves in violation of the Sherman and Clayton Act, and that forceful anti-trust would not allow that to occur, just like it would not in the context of oil or automobile concentrations.

SEN. WYDEN: That raises an important point. Do you believe that the goal of media diversity is separate from issues of anti-trust enforcement? I happen to. I happen to think that it is possible that you may not have two major companies coming together violating the anti-trust laws but still undermining in a very significant way important diversity objectives. Do you share that view?

MR. POWELL: I do. I believe that the government could make a judgment about the importance of diversity that fell short of what traditional anti-trust would say is the level of concentration that concerns on traditional anti-competitive effects.

That said, I also think it has been one of the most difficult areas for the government to actually mint constructive and defensible rules in, because diversity, unlike antitrust, where we have the ability to almost mathematically determine the antitrust effects -- we can examine price effects, and we can use HHI indexes. But the problem with diversity, which is difficult, is that it has a certain visceral component to it. When is too much? When is too little? An HHI index for diversity doesn't exist. And we also have the additional constraints that we do not have in concentration analysis of the upper limits of the First Amendment which the courts do not fail to regularly remind us of when we assert diversity as a purpose but don't defend the validity of the rules' furtherance of that objective.

SEN. WYDEN: Mr. Chairman, I know my time is up. Just for the record, Mr. Powell, could you state your views with respect to the matter of limits on ownership of mass media outlets? I think, given the fact that you've been concerned about positions that have been imputed to you, it would be good to have you formally on the record with respect to your views on the question of whether you ought to keep limits on ownership of mass media outlets.

MR. POWELL: I think first and foremost we have a duty to ask, in sort of a critical schematic, first and foremost, is something necessary above and beyond the antitrust laws which should be rigorously enforced? If so, what should it be in a prophylactic way as opposed to case specific way? A rule that prohibited -- prohibits up front certain kinds of combinations, what are we pursuing? Diversity may be a justification for that, but can we demonstrate to the satisfaction of the First Amendment and the satisfaction of the Administrative Procedure Act that the rule in fact promotes that purpose in a defensible way. if all those things can be done, I assure you we will have a rule on it. But I don't think that we should shy from the challenge.

And I would also argue -- and I'm one of them -- for those of us who do believe in diversity, we had better commit ourselves to a more thorough, and intellectual and rigorous defense of those rules lest we'll see them continually eroded by judicial skepticism, as I think we have seen. Now, the greatest threats to these rule recently has been judicial intervention, not regulatory intervention. And I would submit that we have to, if we wish to preserve those goals in a regulatory context, have to examine 30 and 50-year-old rules to see whether they continue to serve those purposes and whether there is a better way.

SEN. WYDEN: Thank you, Mr. Chairman.

SEN. MCCAIN: Senator Stevens.

SEN. TED STEVENS (R-AK): Well, thank you very much. Mr. Powell, I'm delighted to see you here, and I'm sorry I was not here when you introduced your mother. Those of us who have known and loved your father and mother are delighted that you are here and carrying on in the Powell tradition.

Having said that, I do have some specific questions that are related to the rural areas.

What steps do you think the FCC should take to assure consumers in rural and high-cost areas such as Alaska and the rural states receive telecommunications and access to information services that are reasonably comparable in price and quality to those that are received by people in urban areas, where by definition they've much lower costs?

MR. POWELL: I think the first thing to do is the commission can quell the degree of uncertainty that has hung over the continuance of the rural subsidization programs or rural universal service programs that I think have been a drain on investment in rural America.

One of the first things I was committed to doing was ensuring that the rural high-cost proceeding was completed quickly, which we voted last month, which establishes a universal service regime in rural America for at least the next five years, which I will believe will not only provide more money for the subsidization and deployment of new infrastructure, but also will lessen the uncertainty that I think was causing a drain on investment in rural America because of an uncertainty about what that regulatory environment will be. We're going to complete the second half of that this year in the form of access charge reform for rural areas as well, and I think that will be the final shoe in order to create the rationalized environment necessary for investment in rural America.

The other thing I think we need to do is have a pointed and concerted focus on the promotion of new and advanced technologies that are able to bypass the traditional geographic and demographic limitations of rural America because the cost infrastructures are not as critical to those services as they were in the traditional wire form. I am one of those who believe deeply that satellite services and wireless services hold great promise for rural America as well as the lower-developed world. You see this all over the world. On the continent of Africa, for example, that never really had the step of a first-class wired infrastructure, just skipping it all together and moving right to infrastructures that put a premium on wireless technologies. And I think there are policies that can incent investment in that technology and innovation, and we should pursue.

SEN. STEVENS: Well, I hope you're right. We have 161 of our villages and small cities that don't have even dial-up Internet access now. They do have cells, and they've gone directly to those, and they work very well. But, we have a real problem in trying to get deployed the advanced services in the areas that do have voice communication but have really no digital access and really no basic high-speed access to the Internet. What do you think you can do to deploy -- to help in the deployment of full scale communications to rural areas?

MR. POWELL: Well, it's a tough question. The real answer to that will have to be in partnership with the Congress to find new ways to incent the deployment of that technology. One is to protect to the greatest extent possible, the -- as I mentioned, the sort of universal service subsidization that allow for basic infrastructure on top of what which advanced capability is built. For those areas that do not have basic wire line infrastructure to build on, which is what most of the country will do in pursuit of broadband, I think we have to look for ways to lower the cost of some of the wireless advance services. I know that Senator Burns and others have pursued tax credits and other forms of incentives for the deployment of satellite-delivered high-speed infrastructure. Those things hold promise for that kind of development. Three-G, quite candidly, the rigorous pursuit of new spectrum for purposes of high-speed, wireless Internet data hold the possibility of using those wireless infrastructures in remote areas to provide real-time high-speed Internet activity experiences for all Americans.

SEN. STEVENS: I'd like to submit some questions to you, if you would, to answer. That quorum call, I believe, is for me to come make a statement. But, Mr. Powell, I am basically concerned about the survival of the universal service fund. It really was derived from the action that Senator Inouye and I instigated to bring about a basic concept of rate integration, and the industry itself created that fund. They created it in a meaningful way. Those are not taxes that are paid into that fund. But unfortunately, through actions of the Congress, that fund is now being treated as though it was a tax revenue fund and is being allocated by your commission to a whole series of things that have nothing to do with access to rural America. And I really think the burdens on it are so great now that it's really a great problem for us to perceive that it will survive. I don't think those people paying into the fund who are getting long distance service are going to keep up and go along with a constant increase in the rate they pay in order to subsidize rural America. It has to be done by everybody, so I hope you will find a way to do that.

And Mr. Chairman, if I may, if you'll pardon me, Mr. Powell, I told an old friend of mine that I would do this. Jim Cuello (sp) was so much a member of the Alaska side of the commission that we gave him an honorary citizenship. Kathleen Quinn Abernathy worked with my great friend, a graduate of Marquette University and Catholic University School of Law. She came to the CBO in 1980. She's been with several well-known law firms here in the area, and she has worked in various capacities in the telecom business. Above all, she was a legal advisor to Commission Jim Cuello (sp). I think that that says that this young lady is eminently qualified to be one of your colleagues. But beyond that, she's had a series of involvements in the industry, for Bells, such as USWest and Qwest for the broadband industry. She's practiced, representing wireless companies and Votaphones. She's going to bring a new perspective to the commission, but above all, her reputation as one of Jim Cuello's (sp) great advisors, it really is -- it qualifies her eminently to be a member of the commission.

She has one major defect. She's never been to Alaska, but she's promised me she'll come. (Laughter.) Thank you, Mr. Chairman.

SEN. MCCAIN: They all get to come. (Laughter.) Senator Carnahan.

SEN. STEVENS: It's a basic requirement.

SEN. MCCAIN: Sure.

SEN. JEAN CARNAHAN (D-MO): Thank you, Mr. Chairman. Mr. Powell, thank you for being here this morning. I share Senator Stevens' interest in broadband deployment in rural and low-income America, and we appreciate any concern you could have for that as well.

There's been a great deal of speculation about the concern about the future of the e-rate program, and I am a strong supporter of the e-rate program, and I fear that any changes could have a detrimental effect on our schools and libraries in Missouri and across the country. So, I was wondering if you could discuss your thoughts about this program, and what, if any, changes you envision for the future.

MR. POWELL: Well, thank you, Senator. I first would say I think the program has been an extraordinary success, as well as other programs that have contributed toward the universal goal of trying to make sure our children have access to the technology in their schools and in their libraries. I think at last count, 95 percent of all public schools had access to the Internet. I think at last count, 63 percent of all classrooms, public classrooms in America had access to Internet services. And I think that it's fair to say that the e-rate program was a substantial engine that fueled that development.

My responsibilities are to administer the program as written by Congress. We, at the commission, have no independent intention of doing anything but. It will continue to be administered, I think thoughtfully and carefully to assure its preservation and ensure its adequate funding, while simultaneously balancing the interest of consumers who pay the cost of the universal service fund and make sure we don't both jeopardize the fund by, as Senator Stevens pointed out, increases in bills that are more than consumers are prepared to sustain.

The debate over where it belongs and what it should include, I'm happy to say are above my pay grade. These are proposals that had been at one time floated by the president. I think that it's legitimate for the president and the Congress to have that discussion, but I just stand ready to administer the program as you all see fit to deliver it to me. And in its current form, I think it's a success and it's going to continue to be.

SEN. CARNAHAN: I had one other question. I'm very concerned about the state of competition in our local phone markets, and I was wondering if you could give me your thoughts on the state of the industry now, five years after passage of the telecom act, and tell me what you see as the FCC's role in fostering competition.

MR. POWELL: The act did a lot of things, but we sometimes forget what it couldn't do. It could not eliminate business cycles.

It could not eliminate economic downturn. And it could not prevent irrational exuberance, to use Alan Greenspan's phrase, in the financing of business models. I think we enjoyed five years of frenetic activity, much of which unfortunately pursued, in my opinion, unsound business models, short-term revenue collection, growth that was too fast and too quick for the networks' ability to deliver, or to market and adequately serve consumers at the quality levels that were demanded, and it broke. And I think it broke principally because the financial markets, I think, are just as capable of irrational disinterest as they are irrational exuberance, and they quickly recognized, in some ways, the error of their ways, and had extended financing far beyond what those business models should have predicted, and they pulled back, and they pulled back hard.

Regrettably, what's happened is that they have pulled back not only on the carriers that are probably deserving of it -- that is, those who did not come up with solid plans, who pursued regulatory arbitrage, who did not invest in serious long-term viable options. They also, sadly, have turned away from companies that I think are outstanding, that are viable, who still are pursuing fundamentals that are healthy. And I think there are more than a few of them. And I hope, and I firmly believe that many of them are going to rise again. They are going to restructure and reorient it to a healthier model. I think the consumers still want those services, and there will be people prepared to provide them.

But, many of them will have to do it through the pain of bankruptcy reorganization. Many of them will have to weather capital markets who don't seem willing, sadly, to look, given their exposure and their losses from their first round. We need to do everything we can to try to encourage the financial markets to see the long-term viability of this option for our consumers and hope that the cash comes back.

What can regulators do? It's limited. But the regulators can, number one, be vigilant to the opportunities for regulatory arbitrage. We too can inadvertently provide opportunities to chase short-term opportunities. I think that's what reciprocal compensation was. I think that's the problem with certain parts of access charge reform. Companies entered the market to cream skim at times. They entered the market to take super economic profits as a consequence of regulator distortion. I think it's taken the commission a little too long to jump in and rationalize those things. That's painful medicine. Those are some of the toughest items I work on. They're sometimes wrongly interpreted as being anti-CLEC. Well, they're only anti-CLEC because we won't let you drink indefinitely from revenues that are unsustainable based on economics. We hope that in the end what happens is a consequence of market correction. And I think it's important to point out that markets don't just reward people, they also punish them for inefficient activity.

I think what I hope for, and I am confident about, is that the market will produce longer range competitors with much more viable models, with much more sustained growth levels, and consumers will see the benefits.

I also think it will take longer than we tend to talk about in political Washington. I think it's a long-term process. I don't think it's a year, a two-year thing. I think we're, after 100 years of monopoly, it's going to take more than a few years to see the benefits of the changes.

SEN. CARNAHAN: Thank you very much. Thank you, Mr. Chairman.

SEN. MCCAIN: Senator Burns.

SEN. CONRAD BURNS (R-MT): Thank you, Mr. Chairman. Chairman Powell, congratulations on your opening statement. And I -- after our visit in our office and everything, understanding the challenge that you have to make and under circumstance of which you've got to do it, and also in this 17 square miles of logic-free environment, I want to congratulate you for doing that.

I also want to congratulate of your leadership and grasping what is in front of us as we talk before the future of wireless, and your organization's ability to deal with some of the challenges that you will have in front of you and requesting some money to upgrade your laboratories. We know that's a very, very important part of what you do. And also your hiring practices, attracting good engineers to the FCC.

As you know, the way technology is moving, and the speed it is moving, we cannot afford to be behind in making some decisions that are either -- that are very important to the success of any new idea or innovative thing that we might want to deploy. And so I congratulate you on that.

Let's -- and also, as you know, Senator Kerry and Senator Hollings and I have requested a study of spectrum, and as you've heard from the rest of the members on this committee that spectrum is of a concern, and the way we manage it and the way we allot it. And so, I -- realizing this, last year -- and of course, I was in the middle of a campaign -- but also understanding that I think it's time that working with the commission, and you working with us, that we should start investigating and turning out thoughts to the way we manage our spectrum and look to some reforms. As you know, we are fragmented. In some cases, that's why maybe we regard the Europeans as a foot-and- a-half in front of us on 3G, third generation. But nonetheless, I think this country will always be the international leader in communications because of the way that we can respond to new technologies, and the way look at them, and the way we -- our sorting process, or our thought process to deploying those new technologies. So, we have great challenges ahead.

I want to shift just a little bit from the discussion of the -- of 271, so to speak. And the FCC has initiated a notice of inquiry regarding interactive television. I'm concerned that without continued action by the FCC, consumers will not have access to all the creative and innovative interactive television offerings that are currently being deployed, will you -- will you support the continued rulemaking in this area?

MR. POWELL: I voted for the notice of inquiry that was initiated, and I see no reason why it won't proceed. I think there's a lot we can learn from that inquiry and examination of what the status of the market is, and what the technologies are, and what kind of regulatory problems are going to presented by them, if any.

SEN. BURNS: Also, in the areas of universal service, I'd like your opinion. Is it time for Congress to look at universal service for some reform there, working with the commission?

MR. POWELL: I think universal service is the kind of thing that should be looked at constantly because I think the goals of ubiquity and affordability are unassailable. But I do believe that the foundation of how to achieve that is constantly shifting, and it's shifting, and it's shifting -- it's probably about to undergo some of the most dramatic shifts ever as it moves to advance technology infrastructures to deliver data centrical services, and whether the historical approach, the ubiquity and affordability will translate well into the new infrastructures is a real question that I -- I think is not yet ripe for dramatic change, but I do think begins to peek through the clouds and is something we're going to have to start thinking about early and often as networks move more out of the traditional copper-switched environment into packet-based IP protocol environments.

SEN. BURNS: Well, I think, you know, it's incumbent on us that serve on this committee to keep the rest of the Congress apprised on what's going on because there's a lot of -- there's a lot of activities that are very fast-moving, and I think two of these area, spectrum management and reform and also on universal service, are things that we're going to have take a look at. And they will create quite a lot of interest as we take a look at those. And they also have international impact with our friends in Canada, Mexico, on a hemisphere, but also around the world. So, I'm very supportive of your nomination and your permanency to the chairmanship. I look forward in working with you and the commission on those -- on those challenges that we have ahead of us.

Thank you, Mr. Chairman.

SEN. MCCAIN: Senator Edwards.

SENATOR JOHN EDWARDS (D-NC): Thank you, Mr. Chairman. Good morning, Mr. Powell.

MR. POWELL: Good morning, Senator.

SEN. EDWARDS: I want to talk to you about privacy, on a couple of different aspects of privacy.

You know, there are a lot of new technologies that allow people to determine the location of people, including cell phones and these technologies that they put in automobiles now that allow you to figure out where you need to go. It also allows them to figure out where you are.

Senator Dorgan and I have been working on a bill to address this issue. But I just wanted to get some sense from you about what you're feelings are about the privacy aspects of that information, because, you know, if lot of people would believe that their location is something that they wouldn't want to the world to know -- and I can imagine a situation where that information, if gathered, could be sold to third parties and it could be used for marketing purposes. For example, Starbucks figures out you're in the area, so they give you information about something that they've got going on, or a retail store, whatever. And, my belief is that that information is information that the consumers should have control over and that's what our bill is addressed -- is dealing with.

But tell me, give me your sense of that and what your feelings are about the privacy aspects of this location information.

MR. POWELL: I would love to. And I'm going to throw my mandatory caveats first.

SEN. EDWARDS: Okay.

MR. POWELL: First, the commission only lightly touches on privacy issues, and some of the ones you mentioned are generally outside of our expertise or jurisdiction. It's not going to stop me from talking about it, but I just wanted that caveat. And I'm not that familiar with your bill, so I apologize about the -- I can't comment as to the specifics.

I think privacy's a very, very important issue, but a very, very difficult one. It will prove to be a critical component of how the new economy in Internet-based services evolves. If you think about it, in many ways the real beauty and curse of the modern technology is it's ultimate diversity, it's ultimate tailored services. That is, this is the sort of my generation, my Yahoo, my Amazon, my this, my that. You are increasingly able to use the technology to customize services for you -- not regions of people like you, but actually you. And I think it's what consumers are partly responding to and liking Internet-based services, and other advanced services. It's also where producers are excited about the opportunities. If Nordstrom's knows it's you, it can be much more efficient in tailoring things for you that you like. When Amazon picks up on your habits, your book-buying interests, it begins to aggregate that information and every time you come on tells you a little bit about what you might like. Some of us like that -- like the fact that I see things that I might not otherwise stumble into.

Consumers are funny about privacy. They all care immensely about it, as they should. But it's also something people seem to want the right to trade for something of value, within limits; that is, you'll see companies that offer free PCs if you'll tell them everything about you. They ran out of those PCs before you could count to three.

What you find is that you have to ensure that consumers are well aware of what can be made use of their private information and that if any of it is going to be used, that it's done with their full knowledge and acquiescence. But on the other hand, I think that there'll probably be a difficulty making sure that consumers have the right to make judgments about how intrusive they're willing to allow a provider to be, as long as it's been exchanged for value.

When I was in law school, we wrestled with the Fourth Amendment, and it's because the expectation of privacy is a critical sub- component to the constitutional provisions, and expectations evolve and migrate and change for different consumers. And so this is going to be a fundamental question on how the Internet evolves, whether its promises are realized and whether consumers are adequately protected. And I can't think of anyone more central to the government's consideration and debate over.

SEN. EDWARDS: Well, specifically to the question I will ask you, this location kind of information. From your perspective, does that sound like the kind of information that consumers ought to have some control over?

MR. POWELL: Oh, sure, up to a point. I and friends have GPS receivers that we use to tell us where we're going in our cars. I own a small boat. We use it to know where we are in the water. That's location-specific technology. That GPS receiver knows where I am.

SEN. EDWARDS: Sure.

MR. POWELL: I would like to be able to control who knows that I know where I am, but I also might want the right to provide it. For example, I may be in a strange city with my 3-G wireless phone and would like it to tell me what the closest coffee shop is or where Starbucks is.

SEN. EDWARDS: Sure.

MR. POWELL: I may want to authorize that my location-specific information is released to some service that will then be able to, given where I am, identify options for me locally. But I think, as you point out rightly, the critical issue is to make sure that I have a legitimate amount of control over that choice, as opposed to someone's misuse of it.

SEN. EDWARDS: Good. Mr. Chairman, if I could ask briefly about one other area. Are you familiar with the 10th circuit decision in U.S. West versus FCC case?

MR. POWELL: Yes.

SEN. EDWARDS: In the 1996 Telecom Act, Congress talked about telephone companies getting, and I'm quoting, "approval" -- that's the term they used -- prior to selling confidential or private telephone records to any third party. The FCC issued regulations to support that language. The 10th circuit said -- basically struck it down, struck down the FCC regulation, but invited us -- us being the Congress -- to come back and define exactly what we mean by approval and didn't deal with the constitutional argument that was raised in that case.

We are going forward with some legislation, me specifically, to define what approval means, and to define it basically exactly as the FCC had defined it, which is that approval means that a customer gives prior approval before the telephone company can sell their personal records to third parties. I wanted to get your view about that subject.

MR. POWELL: I think it's a legitimate way to go. I mean, I think basically this is two options. You either opt in or you opt out. And our attempt to proffer an opt-in regime was struck down by the circuit, as you pointed out. I think part of it was statutory. Also I think part of it was a sense of whether we had been able to adequately justify why that level of affirmance was required.

You know, when we were doing this, we made some effort to examine how it works in a lot of other areas of the economy; credit cards. There are many things in the economy that make use of your information, and a lot of that use is opt-out, to be candid. So, you know, I think that it's a legitimate judgment on the part of the Congress or anyone else that we would prefer to have affirmance. But there is a welfare loss, which is you will get much less incidental subscription or advice or information. You know, there are a lot of things that if I had pre-selected not to know about, that I'll never have the opportunity to trip on. And I think that's just a balancing judgment, and I don't have a strong view of which is superior. But I think that -- you know, I think that either will potentially work.

SEN. EDWARDS: But do you continue to support the notion that the customer ought to have control over that decision, number one, and number two, that they ought to be able to affirmatively -- they ought to have control over affirmatively giving the telephone company permission before it can go to third parties?

MR. POWELL: I would agree, but I would probably move slightly further than maybe you would. That is, I believe that they should have absolute clear knowledge of the choice. I also believe they should act affirmatively. But I also believe that it's possible you could have an opt-out regime that satisfied those objectives.

That is, many Internet sites, for example, that subscribe to the Trust e-privacy regime make sure that you're given an identification at a Web site of what will be done with your information, and you are boldly, clearly and given the opportunity to check not to be included, to opt out; otherwise you will receive this. I would consider that to be at least an example potentially of "I had knowledge; I took an affirmative act. But my affirmative act was passive; that is, I elected not to check the box."

SEN. EDWARDS: My time is up, but my concern about that, in the context of telephone companies, is there's a difference, of course, in the way people interact with a Web page --

MR. POWELL: Correct.

SEN. EDWARDS: -- and receiving something in the mail --

MR. POWELL: That's correct.

SEN. EDWARDS: -- which they throw in the garbage with everything else. I just want to be sure that people actually have noticed and have control over -- (inaudible).

MR. POWELL: And that's absolutely correct. There are different environments.

SEN. EDWARDS: Thank you, Mr. Chairman.

SEN. MCCAIN: Senator Cleland.

SEN. MAX CLELAND (D-GA): Thank you very much, Mr. Chairman. Mr. Powell, welcome. And we want to thank you for your years of public service. I know your father and have the utmost respect for him, and I know the apple doesn't fall too far from the tree. So, welcome. And you have my unqualified support in your nomination, and we think you're going to be an outstanding leader there in the FCC.

May I just follow on to Senator Edwards' point? I am, as I look at this question of privacy, more and more pro-choice here in terms of the consumer or the individual, that I think that's where the question of privacy really lies is who has the power to choose whether to opt in, opt out, choose to be found or not found, disclosed or non- disclosed, and that the real question is who chooses.

And I think there's no question but what, with our values and our society and our democratic society, we leave that decision to the consumer. Then the consumer has the confidence, then, to enter the marketplace and make other choices. And I think that will facilitate the continued growth of the Internet. I just thought I'd mention that. But we appreciate your leadership, your guidance on these issues as they come along.

May I just say, in a parochial way, that Georgia has been a big beneficiary of the e-rate funding for schools and libraries, allowing youngsters to be connected to the Worldwide Web and to the Internet. I think we're fifth in the country in terms of receiving e-rate funding, which is why I'd just like to make a point here.

The FCC has apparently proposed to change its rules for distributing e-rate funding to schools and libraries when the requests for funding exceed the available funds. Specifically, the FCC has proposed to exclude from funding this year -- this is year four of the e-rate program -- any school or library that received a commitment for internal connections last year. This proposal was just made April 30th.

I see two problems with this proposal. First, the FCC would be changing its rules after the applications have already been filed, potentially causing disruption and delay in the funding. Second, there are likely to be a number of unintended consequences of these new rules. For example, even a school that received a small amount of funding last year could be excluded this year. Also, any school that received funds for its internal connections last year could be barred from receiving the maintenance funds needed to keep its network running. There are over 40 schools that could be affected in my own home state alone.

I'd just like to ask you, what consideration would you give to the potential problems that could result from changing these e-rate rules?

MR. POWELL: Well, just to be clear, that's only one proposal among several to be considered about how to deal with priority funding when funds fall short of demand. And I can honestly say that I don't think that the commission has expressed any particular bias yet as to how that should come out. And we will consider that. That is, frankly, being currently considered, along with other evaluations of the priority funding system.

But to be clear, that is not the process that's in place now and it is not, as best as I understand it, the one that is currently going to be used for the allocation of shortfalls, less the commission -- and maybe that will be the three behind me, in addition, to make a decision to change that.

There are some complaints from states, which is why we had to and wanted to consider it, who are unable to get access to funds, claiming that certain applicants seem to get repetitive funding where they have gotten none. I think that's something we have an obligation to examine, to ensure that it's widely distributed. But I'll assure you, we are just in the beginnings of looking at that question. And I personally have reached no judgment.

SEN. CLELAND: Thank you very much. Now, you were with the Justice Department, particularly the anti-trust division. Now you're up for head of the FCC. You've been on the FCC for a number of years now. I'd like to have your view of the FCC role in this whole world of quick-silver mergers and acquisitions in the telecom world. I mean, what role does the FCC play here, in your opinion, to protect the public interest?

MR. POWELL: Well, first of all, it plays the role that is articulated in the statute, which is if a merging party owns a license -- it's important to know, only if it owns a license -- and that license will have to be transferred to the new entity, (new co ?) or the merging party, then that license transfer has to be examined by the commission and the commission has to affirmatively approve as in the public interest the transfer of that license.

That is a different standard than that employed by anti-trust authorities, which administer the standards of the Clayton Act principally and the Sherman Anti-Trust Act. But as a practical matter, more often than not, it also involves, on the part of the commission, a review of traditional horizontal and vertical merger concentration analysis and the examination of that transfer.

I will admit to have been critical of the way the commission has administered this process in the past. I think the government has a real desire to ask itself whether we are value-adding as to that -- and I want to be particular about this -- value-adding as to that concentration analysis, or are we simply duplicating the activity of the Federal Trade Commission or the anti-trust division? If we are, I think it's legitimate to ask whether that additional duplication is warranted.

That said, there are other things that we do in the context of a public interest analysis which I think are warranted. For example, it is important to make sure that the merging parties would comply with all the provisions of the Communication Act and the federal communications rules. That is not something the anti-trust division will do.

I also think, as Senator Wyden was alluding to, to the degree that we have a good analytical basis for doing so, diversity is a component that the anti-trust authorities will never consider. This is not a legitimate consideration under the statute.

SEN. CLELAND: My time is up. But where are we going here? Are we going to wind up with just three or four major global telecom companies in this country and then just everybody else?

MR. POWELL: I don't think so. I think that the mistake we make in some sense on that discussion is the idea that local isn't valuable. Local is an extremely valuable service. I mean, if anything, I see a trend toward increased parochial provision of service. We just talked about the Internet. Talk about penultimate diversity -- service providers attempting to provide the programming content that you want, not even people in your community, not even all those who like history on the History Channel, but you personally.

I think that the trends are very powerful toward being able to provide diversity in local content to consumers, and I think that it's not only valuable as a public-interest policy, which it's always been talked about as, but I think we sometimes underestimate about how valuable it is as an economic matter. A local television station's most valuable content, its highest rate card, will always be local news if it provides it. It'll be the programming it draws the greatest advertising for and it'll be the programming that is most watched on most local television stations.

That is not an argument, by the way, for who cares, laissez- faire. But there can be threats to those values that we should be vigilant about. But I do think that we sometimes underappreciate that people do live in communities. We are a diverse nation with different interests. And as long as there's a value component in that, we can incent people to serve those interests.

SEN. CLELAND: Thank you, Mr. Powell. Thank you, Mr. Chairman.

SEN. MCCAIN: Senator Brownback.

SEN. SAM BROWNBACK (R-KS): Thank you, Mr. Chairman. And welcome, Chairman Powell; delighted to have you here. I think your service on the commission has already shown you're well up to the task. I look forward to supporting you in that role as chairman. Your tenure there on the commission has been rewarded and rewarding for those looking for a little bit of common sense and courage in dealing with some tough issues of the day.

I want to focus you, if I could, on two question areas. One is the deployment of high-speed Internet access in the rural areas, and the second is the role of the FCC in addressing television content under its public-interest test. Those are the two areas I'd like to inquire with you for a minute.

We still are having a great deal of difficulty getting any high- speed Internet access into many rural areas of the country. The distance, the ability to get to customers that they want and the concentration of customers has been difficult. I've got an example, though, of one place in Kansas where we do have some high-speed Internet access, and I'd just like to put this in front of you and pose a question to you.

There's a small cable company, Sumner Cable, located in Wellington, Kansas. Wellington has about 8700 people. Sumner is deploying cable-modem services in Wellington, yet the major Bell company that offers local telephone service is not. Do you believe that the different treatment that these two have in a regulatory regime has any bearing on whether or not one deploys and the other one does not for high-speed Internet access?

MR. POWELL: Well, that's a good question. I think it varies dramatically from market to market as to the choice to invest in that infrastructure. One thing I would say, which I think is hopeful both for rural America and America generally about broad band, is, unlike the original telephone system, it will not have to be laid across our public rights of way and land from scratch like telephone or rural electrical service was, but is basically a functionality of going to be built on top of networks that already reach a substantial number of Americans, whether it be 94 or 95 percent of the telephone network, 96 percent of cable networks' path, 96 percent of American households. So we have a real opportunity to try to incent investment in the upgrading of existing infrastructure rather than laying the first infrastructure.

The cable incentives are sometimes similar, sometimes different. I think that the biggest reason we've seen cable lead the way on this technology is not just, as some would suggest, the regulatory freedom, which is a real part of it, but because cable was very committed to expanding video programming capacity by digitizing the systems. And, if anything, I worry to make sure that cable companies continue to have incentive focused on the data side as much as they do on what their traditional biases have been, which is more capacity, more television. And I think that they really were driven, first and foremost, to increase the capacity of video product available.

Coincidentally, the upgrades that were required to do that were similar to the upgrades necessary to do high-speed Internet, and it became a real possibility to create a value-added product being driven by the possible revenues of both of those things combined. And I think that's part of why cable jumped out fast.

I also think that cable's quick actions have led principally to the competitive threat to the telephone companies. And, by the way, I don't think it's just because of the possibility of cable telephony. I think people now get it, which is data-centric communications is, without question, the future. We may not know exactly what it looks like, but if you're sitting on a horse that can't do this, you're going to lose. And everyone understands that they need to be able to start converting networks and drive revenue toward data-centric capability. And the phone companies are starting to respond, and are responding, interestingly enough, having lagged, at a much faster rate of growth than cable-modem service at the moment.

Any given specific market, any given specific phone company, I don't know for sure. Part of the problem with phone companies have been the problem that's often true of large entrenched interests who make a lot of money from their legacy (stuff?). It's hard to move boldly. It's easy to continue to draw revenue from incremental changes. A lot of phone companies have had DSL technology for 15 years. They also have other technologies they make a lot of money on, like T-1, that they don't want to cannibalize in rolling out a cheaper service. And I think the competitive threat of cable started to spur them to do that.

SEN. BROWNBACK: I'm still concerned about the disparity in access between rural and urban and suburban areas for high-speed Internet. And I hope you'll continue to look at that and to see ways, if there are, that we can incentivize or have a regulatory regime or reduce the regulatory regime that could incentivize more of this to take place, that we don't get in a big digital divide.

The second question -- and this committee has held a lot of hearings about television content, particularly violent content, particularly that during the family viewing hour. There have been some letters sent to the FCC regarding the public-interest test on this. And I just wanted to get, if I could, your views on that public-interest test relative to the issue of highly violent, violence outside of any context, being presented on over-the-air broadcast during the family hour and if you think the FCC has any role or need to not regulate the industry but to press it to move to a higher standard if they could and to review what the industry is doing in putting out this sort of programming, particularly during the family hour.

MR. POWELL: I'll try to be brief. Candidly, we have a right to be outraged, both as consumers of television, watchers of television, listeners to radio, about outrageous conduct or content that offends us. I wholly subscribe to that and often am disappointed myself.

What I think we've seen increasingly in the media space is, to use a sine wave, we've seen greater amplitude; that, as I would argue, we see some of the finest television products that we've ever seen in the history of television at the same time we've seen some of the darkest. And we really have dramatically expanded the range of what is available to consumers and what they have access to in the consumer space. And many of those troughs are truly deep. But I do want to point out that I think many of those, the crests of those waves are very high as well.

I think it's a difficult issue, not so much because of the desire but because of the challenge in definition and the crafting of actual rules. I, for one, as the father of two children, get very concerned about violent content. I get concerned about it a lot more in the video games I see them play, to be candid, than I do in some of the things they see on television. But I often sit there in front of it and think, "Okay, hot shot, write the rule. Distinguish between the inappropriate violent content and appropriate."

You know, what about "Private Ryan" is art, and what about, you know, something else isn't? And that's where I think it becomes very difficult. And it becomes very difficult, given the fact that it's layered over, no matter what anyone wants to debate about parameters, a First Amendment limitation. So you have, only to mean, not that you can't do it, but that you have to do it at a higher level of rigor you do all your other rules. And so I have always been frustrated. It's very difficult for me to imagine at times how to do that.

The second quick thing I would say is we're a diverse country and we all make different value judgments about what is acceptable.

I'm always amazed about what my neighbors think it's okay for their kids to see where we don't want them to, and vice-versa. And what I'm very uncomfortable with is the commission -- we're not elected individuals. We operate by a three-of-five majority. And I'm not always comfortable that we impose our value preferences on society as a whole.

I am happy, though, and indeed willing, to administer those judgments of the Congress, because there, I think, that all of the public of all those diverse interests have an opportunity, through their representatives, to debate and arrive at, through that deliberative process, a value judgment that we're prepared to impose on the medium of the country at whole.

That's not to say I don't think there's anything that the commission could or would do independently, but I'm a lot more comfortable when we're given a statutory basis to pursue this, because I feel like then the people, through their representatives, have made some deliberative judgment about these value choices, as opposed to a commission, who may answer to the Congress but doesn't have any direct answering to the public.

SEN. BROWNBACK: Thank you for your response.

SEN. HOLLINGS: The chairman indicated it's my turn. Mr. Chairman, I'm looking at a statement you made relative to enforcement. And we all come with a hard experience. All of these Bell companies operate as former Ma Bell dissemblers, artful dodgers and everything else that you know of. In fact, Judge Green, after 12 years and 12 decisions made by your Federal Communications Commission, none of them could be enforced because they outlawyered them. They just kept with motions and everything else like that. So not the Congress and not the commission, but the courts had to finally move in and break up that monopoly.

Now we see a monopolistic conduct that our distinguished chairman was just referring to with the CLECs and so forth trying to get in and survive, and otherwise trying to open up the local Bells. The local Bells told us advisedly again and again and again they wanted to open up; they'd get into long distance. In fact, I've got two of their statements I'll provide for the record that they'd be in within six months of the signing of the bill and that kind of thing.

They've got no idea of doing that. They hold on to their monopoly. And they play these tricks on each other. AT&T has lost $100 million up there in the New York market. SBC has already said, "We've got to get back out of Atlanta." I think Verizon lost another with (GEC?) over at another $100 million. They try and they try. And we've got a hard experience. And evidently you've experienced it also, so you make the statement, "I might give you a better benefit of the doubt, but when you cheat, I'm going to hurt you, and hurt you hard." Do you really believe that?

MR. POWELL: (Laughs.) Absolutely, if I can get more power to do it.

SEN. HOLLINGS: More power? I mean, what power would you ask the Congress to give you that you don't have?

MR. POWELL: Well, as I submitted to the Congress several weeks ago a letter expressing my concern that, under the statute, the penalties that are within our authority to impose are wholly inadequate to give meaning to a statement as bold as that. When you have --

SEN. HOLLINGS: Inadequate in what way? Not a sufficient amount, or what?

MR. POWELL: Not a sufficient amount. A billion-dollar company who can face at times the maximum of a million-dollar fine, that's the cost of doing business, in particular when the cost of compliance is not trivial. If you look at the amount of money that Bell operating companies have to spend in order to bring OSS systems to allow CLECs to interconnect pursuant to the standards that we've established, it's in the billions.

And if you're the CEO of a company and you're faced with a simple economic decision of whether to spend a billion to comply or to write a check for a million not to, it doesn't get too difficult a decision to make at times. And I think we have tried to increase our aggressiveness within the limits of what we had. My best judgment is that we don't have enough to provide the deterrent value that I think is required if it's going to really work.

SEN. HOLLINGS: And your request is that the limit be removed so that you can make a $10 million fine, I think, according to your letter?

MR. POWELL: Our letter was at least $10 million, as well as some other modifications that would give us investigatory authority.

SEN. HOLLINGS: Well, I'm looking at the record, which I could (pick?) -- and I've got all of them here -- Bellsouth, Qwest and so forth; just, for example, SBC in the last -- well, since July of last year, they've had 21 violations; a $8,750,000 fine in Ohio, a $13,750,000 fine in Wisconsin, $19 million in Michigan, $1,800,000 in Illinois, another $1,750,000 in Wisconsin, these last two in March of this year. That doesn't seem to affect them. You've got Verizon with eight violations since March of last year for a total for Verizon, $233 million. You think the directors pay that?

MR. POWELL: I'm sorry, do the what?

SEN. HOLLINGS: Do you think the directors of Verizon pay that $233 million?

MR. POWELL: No, I suspect not. The shareholders do.

SEN. HOLLINGS: Do you think that the rate-payers ought to pay it?

MR. POWELL: No, I think the shareholders and the company leadership ought to pay it.

SEN. HOLLINGS: You think the shareholders ought to pay it?

MR. POWELL: As investors in that company, for a company whose behavior is irresponsible, yes.

SEN. HOLLINGS: And as between the shareholders and the users, the rate-payers, who do you think really is paying it?

MR. POWELL: I have no idea how the -- of where the checking accounts come from for Verizon.

SEN. HOLLINGS: Come on. You've got a guaranteed monopoly, and they're passing it on in the rates. They're guaranteed a profit. It's just like them hiring their Washington reps around here that's chasing us any and everywhere. They just write it off. I've been through, on one company, 11 of them. They haven't found out yet how to get me. (Laughter.) All good friends and everything else, but I believe, as the chairman, I want to see them compete. I want to see them open up.

What about structural separation? The Pennsylvania commission, they experienced the same thing you and I are talking about. The fines mean nothing, whether it's $10 million or $233 million in a year's time. Verizon is going like great guns. They just pass it on, either to the rate-payers or to the stockholders, but more or less to the rate-payers. They don't worry about it. They're just, like you say, a billion-dollar company. They don't mind these things at all. So it's not the authority; it's the approach you and I are using, which is not responsive at all. We've got to have some kind of structural separation. We did that for as a matter of fact when we wrote the '96 act, and it's worked. Why not separate out wholesale and retail, so we can really audit today, and just look at it and make sure that it's selling to the competition at the same time they sell to their former monopoly? Because you and I organized these monopolies. I've been paying the rates and everything in my back yard and everything else, ad it's outstanding service and outstanding company -- nothing -- not trying to reflect on them, but I mean it's just the nature of having a monopoly, and the directors saying, We shall not be moved -- We shall not be moved. And they've still got 98 percent of that last line into the home and into the business. And that's what's frustrating. Us here at the Congressional level, they're coming to ask for more fines that mean absolutely nothing. A duck or water off a duck's back, as I see it. Why not go for structural separation?

MR. POWELL: Well, I will tell you that many years ago I too thought that theory wasn't given sufficient consideration in the context of what you might have done at the first inception of this statute.

Now, that said, I would have to be candid and say that doing it now would be possible, but at great cost to the stability of the market, and would likely be an extraordinary period of disruption, and maybe it would work. But maybe it wouldn't. I also think that it would take -- it would be a very complex undertaking and one that would require many, many years, just like the divestiture of AT&T did, to achieve a complete separation. And once it was achieved, maybe it would improve the efficiency of interconnection.

SEN. HOLLINGS: What instability to the market now comes -- what we are looking out is for the consumers. And it's easy to keep -- they've got more auditors, recordkeeping of any groups you'll ever find. They just got to get another column and put it down there, and here's the wholesale price that we sold to ourselves, and we sold to everybody -- the same price. Here are the records. What's destabilizing to the market as that?

MR. POWELL: Well, I think we have had experience with structural separation. We merely have to examine them and see what it took to do it effectively. I only -- I don't take a position whether the Congress should or shouldn't do that. But I will say that I think that any suggestion that it's a light or easy thing to do I don't subscribe to. I think it would be a very difficult thing to do, and it would be certainly some periods of years of working through it.

That said, it may be in the judgment of the Congress the best option. My job is to say that given each year you'll probably have to administer such change, and I think that it will involve a very substantial amount of effort and work, and we'll probably have a fairly unsettled environment for quite some period. Again, that's not to take away from the merits of the theory and whether in the long term that's the better answer for consumers, but just that it will be very difficult to do.

SEN. HOLLINGS: That's your task and mine on behalf of the public's interest, is to unsettle the environment. We're not to stabilize it. We are supposed to unsettle it and get all the market forces of competition in play. And what's easy -- it's obviously very easy to give these fines, because nobody cares. They write a little story about it or a statement is made -- I'm going to hurt you, and hurt you hard -- there is no way to hurt them by fines. You cannot hurt them. I know if I was on the board of directors, I'd go on back out to the club and have another drink. (Laughter.) I mean, come on. He's puffed and blowed and acting like he's doing something for Congress, but I mean nothing's happening.

Thank you, Mr. Chairman.

SEN. MCCAIN: Senator Rockefeller.

SEN. ROCKEFELLER: Thank you, Mr. Chairman. Chairman Powell, I am, as you know, am passionate about the e-raid, and I just am not letting loose of this subject, even though I know that Jean Carnahan has some very good questions on it. I feel equally impassioned about the digital divide. I want to get to in a moment to the statement that you made to Senator Brownback about -- when he was referring to broadband and small corporations and corporations, and you said, you know, If you are not on the right horse you are -- that won't make it -- they won't make it. And my point will be I think that also occurs to people and groups of people. And I want you to comment on that in a minute.

But very specifically the whole 1966 Telecom Act workout and the -- what followed within the FCC, with the joint board and the FCC on setting up the e-rate and making it work, was an extraordinarily complex, painstaking, difficult process. And there was a lot of going back and forth, the courts ruled this and that, and people said they weren't going to sue, and did, you know. And now it's settled down. As I indicated, it's $5 billion in search of $2.25 billion -- one of the five great things that has happened in education in this century, in my judgment.

So you talked about this being higher than my pay grade, so to speak, and the whole question of does the FCC make changes in this. And you say that your instruction needs to come from Congress, and I respect that very much. The president, however, wants to make some changes, or at least I believe he does, and I don't know where that stands at the present time. But one of those is -- whereas the statute is very clear about what can be done and what can't be done with the e-rate, what the money can be spent for, he has added on software, teacher training, things of this sort, which would clearly dilute the universal service fund if the FCC were to do that. So "higher than my pay grade" can refer to Congress, which confirms you, as I certainly plan to. But it also can relate to who appointed you in the first place, and that's another form of it. And I think that you are deeply moral and very strong, and very bright, and very firm in your views. But I just want to get on record that you are going to, as chairman, that you are going to stick with the e-rate as a discount program.

MR. POWELL: Absolutely, and I have no other alternative, even if I was inclined, which I am not. "Above my pay grade" -- I personally meant the president and the Congress. Unless it is written in a statute that instructs me to administer the program differently than it is currently administered, there is no discretion on my part to make the kinds of changes that you are concerned about, whatever the merits of them are, even if I personally agree with those changes as a citizen debating how the program should be, as a regulator and administrator of Section 254 and the provisions specific to universal service for schools and libraries. It's unsalable.

SEN. ROCKEFELLER: And I respect that. But I -- Senator Carnahan didn't actually ask these specific questions, and I just want to do it as I will with those that follow, also ensuring that all groups continue to have fair and equal access to the e-rate, including private and parochial schools and libraries, as well as the public schools -- you will support that?

MR. POWELL: Sure, absolutely.

SEN. ROCKEFELLER: Ensuring that the e-rate is predictable for the telecommunications companies that both contribute and collect from universal service?

MR. POWELL: Yes.

SEN. ROCKEFELLER: The telecommunications folks have been very good partners with the e-rate, and the demand for telecommunications and Internet is growing partly because through all these internal connections that are being set up we are building exactly the network that we hoped that we would, and that creates more demand. Above all, I want to hear Chairman Powell say that he will protect the universal service fund and that where teacher training is important and software is important and hardware is important, and none of those are included in the statute, then so there is that problem, but that nevertheless the nature of the universal service fund and what the money is spent on will not change?

MR. POWELL: I don't see any reason to even consider changing them. They cover information services, Internet services, telecommunications services, and internal connection. And that's what --

SEN. ROCKEFELLER: All very clear, isn't it?

MR. POWELL: And that's what we distribute and that's what as far as I am concerned we'll continue to distribute.

SEN. ROCKEFELLER: I respect that, appreciate that, and am greatly relieved by that, by your answer, sir.

The other is just a general question with respect to the point I raised about broadband access, because K through 12 is absolutely the essential building block. But you know in the state I come from, as we have discussed privately, there are only 36 percent of homes that have computers; 28 percent have access to the Internet on those computers. That's a lot of computers that aren't there. So if one is moving -- is one assumes that what you learn in school is buttressed fourfold by what happens at home, and then adds on to that the question of broadband and what broadband implies, for data, video and voice, that's a daunting prospect for rural areas, and hence the digital divide.

I take this even farther. I mean, I think --

SEN. MCCAIN: Senator Rockefeller, your time has expired.

SEN. ROCKEFELLER: Then I would simply ask for your comments, sir.

MR. POWELL: Let me make sure I understand -- just generally about the importance of pursuing it in rural areas I take it to be the question? Of course the Telecom Act in its preamble talks about services for all Americans.

That's always been understood and interpreted to try to aggressively pursue ubiquitous and affordable service. I think that the modifications of Section 254 that talk about an evolving level of service means we continually try to ensure that service is deployed broadly, including the areas that can be historically difficult. My only caveat is that we should be challenged to always look for creative ways to do it, innovative new ways to do it. Don't always assume that you have to do it the same way you did it before, but never lose sight of the principle -- the sub-principles of ubiquity and affordability, and pursue those pretty rigorously. I think the Congress set that vision out in 254 pretty clearly, and I think the commission is on a course to continue it.

SEN. ROCKEFELLER: Thank you, Mr. Chairman.

SEN. MCCAIN: Senator Wyden has an additional question, which is going to be brief. (Laughter.)

SEN. WYDEN: Thank you, Mr. Chairman, and it will. Mr. Powell, you said this morning that markets punish inefficiency. But that is not usually the case when it comes to allocating a spectrum. As you know, the spectrum rules determine not just who can use it, but exactly what services they can use it for. So the incumbents sort of cling to these licenses like fleas to a dog, and in effect they just hold themselves hostage in order to drive up the value of what they have. Now, the FTC has broad powers to change this and to put some real marketplace forces into allocating spectrum. I'd like to ask you to just respond to whether you think that is something you would like to see, whether we ought to create trading rights for example in spectrum. I'm working on legislation in this area, because I think we have got a mess on our hands. And that's the beach front property, and it is not right now responding to marketplace forces.

MR. POWELL: If I think -- if I understand your inquiry, I think I'd agree with you very much so. I think that if you read most economic literature about spectrum policy, economists are nearly unanimous in the idea that we don't create a sufficient amount of market incentive by allowing licenses to have greater flexibility in the alienability of licenses, mixed used. And frankly this is an area where the commission has been steadily moving toward in many ways. We have created greater incentives for secondary markets. We increasingly issue licenses with much more flexibility as to what can be done with them and what can't be done. We have started to be a little more ruthless in the return of spectrum when it isn't being used by milestones and benchmarks in the satellite context. We certainly, with some blood on the floor, have fought for the return of CNF (ph) block licensees that went into bankruptcy.

I think that there is a lot that government needs to be thinking about in terms of increases flexible use of spectrum and greater property like rights if you will -- and I don't mean that in a conservative ideological sense. But when we talk about not being able to keep up with Europe or the challenges of spectrum, part of the reason is the government has got to go through a thousand steps before it can even get spectrum back and then allocate it again. And we don't have the ability to let players in the marketplace -- It ought to be more like a driver's license: here's your license -- here is what you cannot do for interference purposes, and then you can do almost whatever else you wanted to, and let the market and consumers figure out what those highest and best uses are.

SEN. WYDEN: A very constructive answer. I'll be back.

SEN. MCCAIN: We thank you very much, Senator Wyden, for your questions.,

Commissioner Powell, thank you, and we look forward to many visits with you before the committee. As one of the members of the committee said, we believe that the FCC is perhaps the most important and impactful bureaucracy in the federal government today, given the scope of your responsibilities and its effect on information technology, which is the basis of our economic future.

We thank you for your testimony today. We will try to markup your nomination next week at the markup and get you and the other commissioners confirmed as rapidly as possible. Thank you very much.

MR. POWELL: Thank you, Mr. Chairman.

END

LOAD-DATE: May 18, 2001