[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
            YEAR 2000 PROBLEM AND TELECOMMUNICATIONS SYSTEMS

=======================================================================

                                HEARING

                               before the

                       SUBCOMMITTEE ON OVERSIGHT

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 16, 1998

                               __________

                             Serial 105-47

                               __________

         Printed for the use of the Committee on Ways and Means

                               ----------

                     U.S. GOVERNMENT PRINTING OFFICE
51-590 cc                    WASHINGTON : 1998





                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        BARBARA B. KENNELLY, Connecticut
JIM BUNNING, Kentucky                WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
WES WATKINS, Oklahoma
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri

                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                       Subcommittee on Oversight

                NANCY L. JOHNSON, Connecticut, Chairman

ROB PORTMAN, Ohio                    WILLIAM J. COYNE, Pennsylvania
JIM RAMSTAD, Minnesota               GERALD D. KLECZKA, Wisconsin
JENNIFER DUNN, Washington            MICHAEL R. McNULTY, New York
PHILIP S. ENGLISH, Pennsylvania      JOHN S. TANNER, Tennessee
WES WATKINS, Oklahoma                KAREN L. THURMAN, Florida
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri


Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of June 9, 1998, announcing the hearing.................     2

                               WITNESSES

U.S. General Accounting Office, Joel C. Willemssen, Director, 
  Civil Agencies Information Systems, Accounting and Information 
  Management Division............................................     5
Federal Communications Commission, Hon. Michael K. Powell, 
  Commissioner...................................................    15

                                 ______

AT&T Year 2000 Program, A.J. Pasqua..............................    50
GTE, A. Gerard Roth..............................................    43
Lucent Technologies, Inc., Ronnie Lee Bennett....................    53
Schwab Washington Research Group, David E. Baker.................    39
Telco Year 2000 Forum, William O. White..........................    60
TRW, Priscilla E. Guthrie........................................    57


            YEAR 2000 PROBLEM AND TELECOMMUNICATIONS SYSTEMS

                              ----------                              


                         TUESDAY, JUNE 16, 1998

                  House of Representatives,
                       Committee on Ways and Means,
                                 Subcommittee on Oversight,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 3 p.m., in 
room 1100, Longworth House Office Building, Hon. Nancy Johnson 
(Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                       SUBCOMMITTEE ON OVERSIGHT

                                                CONTACT: (202) 225-7601
FOR IMMEDIATE RELEASE

June 9, 1998

No. OV-18

                    Johnson Announces Hearing on the

            Year 2000 Problem and Telecommunications Systems

     Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on 
Oversight of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on the Year 2000 (Y2K) computer 
problems and telecommunications systems. The hearing will take place on 
Tuesday, June 16, 1998, in the main Committee hearing room, 1100 
Longworth House Office Building, beginning at 3:00 p.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. 
Witnesses will include representatives from the U.S. General Accounting 
Office; the President's Council on the Year 2000 Conversion; and the 
telecommunications industry. However, any individual or organization 
not scheduled for an oral appearance may submit a written statement for 
consideration by the Committee and for inclusion in the printed record 
of the hearing.
      

BACKGROUND:

      
    The United States, with almost half of the world's computer 
capacity and 60 percent of the world's Internet assets, is arguably the 
world's most advanced, and most dependent, producer and user of 
information and telecommunications technologies. Telecommunications are 
critical to the operations of nearly every public and private sector 
organization, including the Medicare, Social Security, customs, 
welfare, child support enforcement, and the Internal Revenue Service 
programs within the jurisdiction of the Committee on Ways and Means. 
The telecommunications infrastructure is composed of the public sector 
network (a network of hundreds of local telephone companies and long 
distance carriers), the Internet, and millions of government and 
private sector telecommunications and computer networks.
      
    Although most of the attention concerning the Y2K problem has 
focused on its impact on information technology and computer systems, 
there is a growing recognition of the vulnerability of 
telecommunications. The Y2K problems affect virtually all 
telecommunications network components. Because a single noncompliant 
component could potentially shut down an entire network, rigorous 
testing will be necessary. To minimize the adverse consequences of 
noncompliant telecommunications systems, a massive logistical effort 
will be required--including closely monitoring the status of the Y2K 
readiness programs of the local and long distance carriers. The 
Executive Branch, in response to Congressional concerns, has recently 
begun to address the Y2K telecommunications issues. The key initiatives 
include the creation, in February 1998, of the President's Council on 
the Year 2000 Conversion and in April 1998, the FCC's Year 2000 
Initiatives.
      
    In announcing the hearing, Chairman Johnson stated: ``Given the 
embryonic stage of the Administration's telecommunications initiatives, 
with only 19 months left, I am concerned that this may be too little, 
too late. The telecommunications infrastructure is critical to Social 
Security checks getting to our seniors, our hospitals and doctors being 
paid by Medicare, and our taxpayers being served properly and 
efficiently by the Internal Revenue Service. It is imperative that we 
know the Y2K status of our telecommunications system. We need to assess 
the adequacy of the planning and management for Y2K readiness of the 
telecommunications system to avert a potential disaster for the 
programs within our Committee's jurisdiction.''
      

FOCUS OF THE HEARING:

      
    The hearing will explore the Y2K issues for the Nation's 
telecommunications infrastructure and its impact on the major programs 
within the jurisdiction of the Committee on Ways and Means. In 
particular, the Subcommittee will examine the implications of the Y2K 
risks posed by the telecommunications infrastructure, including those 
posed by critical infrastructure components failures.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Any person or organization wishing to submit a written statement 
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hearing date noted on a label, by the close of business, Tuesday, June 
30, 1998, to A.L. Singleton, Chief of Staff, Committee on Ways and 
Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Oversight office, room 1136 Longworth 
House Office Building, at least one hour before the hearing begins.
      

FORMATTING REQUIREMENTS:

      
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    1. All statements and any accompanying exhibits for printing must 
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submitted for printing. Statements and exhibits or supplementary 
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    Note: All Committee advisories and news releases are available on 
the World Wide Web at `HTTP://WWW.HOUSE.GOV/WAYS__MEANS/'.
      

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      

                                

    Chairman Johnson of Connecticut [presiding]. Good 
afternoon. The United States has almost one-half of the world's 
computer capacity and 60 percent of its Internet assets. We are 
the world's most advanced producer and user of information and 
telecommunications technologies, and the most dependent upon 
them, in both the public and private sector.
    In our May 7 Oversight hearing, we learned much about 
agency officials' efforts to renovate their mission-critical 
systems. While Y2K compliance is proving to be an all-consuming 
job, it is clear that even if the government is successful in 
making their systems Y2K compliant, and that is by no means a 
certainty, they may still not be able to provide continuous 
service to beneficiaries or taxpayers into the next century if 
others they rely upon are not Y2K compliant.
    The agencies within our jurisdiction are particularly 
reliant on telecommunications, both for their own processes and 
those that cross organizational boundaries. Consequently, Y2K 
compliance is a massive technical challenge, a tremendous 
managerial challenge, and a serious logistical public-private 
problem.
    Telecommunications capabilities are critical to the 
operations of nearly every public and private organization. We 
have become reliant on telecommunications for just about 
everything we do. Just the agencies within the jurisdiction of 
this Committee rely on telecommunications for critical 
activities, like Social Security benefit payments to the 
elderly, hospital and doctor payments through Medicare, and 
answering taxpayers' questions, as well as processing their 
refunds.
    The telecommunications infrastructure is highly complex. It 
is made up of a public telecommunications network, millions of 
computer networks and systems for government, defense, 
commercial, and personal use. The public telecommunications 
network includes a web of interconnected networks operated by 
hundreds of local telephone companies and long-distance 
carriers, cellular networks, and satellite services. A growing 
number of private networks have also emerged and are supported 
by the public network. For example, the Treasury Department has 
agencies, including the IRS, rely heavily on their own private 
networks, as well as the public network to conduct mission-
critical business.
    A key feature of the telecommunications infrastructure is 
the seamless connection between a wide range of carriers and 
networks. The route of a Social Security benefit payment 
illustrates this. An electronic payment may move across several 
networks, operated by the Social Security Administration, 
Treasury, Federal Reserve, and the beneficiary's own commercial 
bank. The transaction's travels are not at all apparent to 
sender or recipient.
    We are here today to learn from officials familiar with the 
telecommunications industry about the efforts underway to meet 
the Y2K challenge. We will be hearing from the Federal 
Communications Commissioner and a U.S. General Accounting 
Office Director about the Y2K issues facing the 
telecommunications industry and those relying on its services. 
We will also be hearing from industry analysts and 
representatives of various sectors of the industry about the 
challenge presented by those Y2K issues and how they are being 
managed.
    The more I learn about the Y2K problem, the more I 
understand those who equate it to peeling an onion. It seems 
that peeling a layer of the Y2K problem only produces another 
layer to be peeled. The later we discover new layers, the less 
time we will have to respond to their needs and peel remaining 
ones.
    Our purpose today is to shed more light on the 
telecommunications layer and determine whether more action is 
needed, including legislative or congressional action to help 
insure that beneficiaries and taxpayers are not shedding tears 
at the turn of the century over lost services due to systems 
and network failures.
    Mr. Coyne.
    Mr. Coyne. Thank you, Madam Chairman. The Ways and Means 
Committee Oversight Subcommittee is going to hold its second 
hearing today to review the status of Federal agency efforts to 
address year 2000 systems conversions.
    As we move closer and closer toward the new millennium, it 
is important that this Subcommittee continue to review our 
governmentwide conversion efforts.
    As will be discussed by the witnesses that we have here 
today, just as private sector and government systems need to be 
updated by the end of next year, computer and 
telecommunications systems internationally must reach the same 
high standards of compliance by that date.
    Telecommunications systems throughout the world are 
integrally linked. The interdependence of these systems needs 
to be recognized and thoroughly evaluated by the experts.
    I would like to welcome the witnesses scheduled to appear 
before the Subcommittee today, including the U.S. General 
Accounting Office, the President's Representative on the Year 
2000 Conversion Council, officials from several of the Federal 
agencies, and industry experts in the telecommunications field. 
I thank each of you for appearing today.
    And finally, I thank the Subcommittee Chairman, Mrs. 
Johnson, for scheduling the followup session today. Thank you.
    Chairman Johnson of Connecticut. Thank you, Mr. Coyne.
    It's my pleasure to welcome our first panel. Joel 
Willemssen, the Director of Information Systems, Management 
Accounting, and Information Management of the U.S. General 
Accounting Office, and Hon. Michael Powell, Defense 
Commissioner, Federal Communications Commission.
    Mr. Willemssen.

   STATEMENT OF JOEL C. WILLEMSSEN, DIRECTOR, CIVIL AGENCIES 
  INFORMATION SYSTEMS, ACCOUNTING AND INFORMATION MANAGEMENT 
            DIVISION, U.S. GENERAL ACCOUNTING OFFICE

    Mr. Willemssen. Thank you, Madam Chair. Thank you, Ranking 
Member Coyne. Thank you for inviting us to testify today on a 
critical issue, year 2000 and telecommunications. As requested, 
I'll briefly summarize our statement.
    The consequences of not resolving year 2000 problems for 
telecommunications are potentially disastrous. Without 
compliant telecommunications, Federal agencies would be unable 
to provide basic services to the American public. For example, 
the IRS wouldn't be able to process electronic tax refunds and 
electronic Medicare payments would not be made.
    In light of these types of risks, the Federal Government 
has recently begun to address year 2000 telecommunications 
issues. For example, the President's Council on Year 2000 
Conversion has established a telecommunications working group, 
chaired by Commissioner Powell. The group reports that it's 
developing a strategy and plans to address the key issues 
facing the telecommunications sector.
    In addition, within the past 2 months, FCC has initiated 
other activities, such as sending letters to over 200 
telecommunications service providers and others, asking them to 
share information about their year 2000 compliant status.
    Despite these recent efforts, critical areas remain to be 
addressed. Only 1\1/2\ years remain, but no one currently has 
an overall assessment of where we stand on year 2000 and 
telecommunications risks. It's therefore imperative that the 
executive branch take a more proactive approach in addressing 
this.
    In line with producing a strategy with specific milestones 
and defined accountability, several major areas must be 
addressed. One is that information must be obtained on the 
current readiness status of the telecommunications industry. 
FCC has compiled general information on this, and on the 
various telecommunications segments. However, as of last week, 
the FCC was unable to provide us with information on the 
current status and anticipated readiness dates in areas such as 
satellite, cable, broadcast, wireless services, and long-
distance and local exchange carriers.
    Second, it's essential that FCC obtain this kind of data on 
telecommunications preparedness on a regular basis. Just as OMB 
and the Congress monitor Federal agencies' efforts on year 
2000, FCC would benefit from such a mechanism that would 
provide recurring telecommunications year 2000 information.
    Third, FCC has not yet developed schedules and milestones 
for the various segments of the telecommunications industry to 
achieve year 2000 compliance. Milestones for such activities as 
renovation, validation, and implementation can serve as useful 
benchmarks for evaluating progress in reaching compliance, 
especially as it relates to testing.
    Fourth, it's important that FCC provide information to the 
public on telecommunications preparedness, to give assurance 
that this area is being adequately addressed.
    And fifth, the private and public sectors must work in 
partnership to develop contingency plans to insure a minimum 
level of business continuity in the event that not all 
telecommunications systems are ready by 2000.
    Finally, many major departments and agencies still do not 
yet know the year 2000 compliance status of their own 
telecommunications networks and systems. In fact, many agencies 
are still assessing the readiness of their telecommunications. 
As of last month's quarterly reports, we find that only 11 of 
24 major Federal agencies had reported that they had completed 
inventories and/or assessments of their telecommunications.
    For example, Treasury reported that many of its bureaus are 
still inventorying their telecommunications. Regarding HCFA, 
HHS reported that HCFA had completed its inventory, however it 
was just now starting to develop plans to get its 
telecommunications systems compliant. With relatively little 
time left, this must be done as soon as possible.
    Madam Chair, that concludes the summary of my statement. 
I'd be pleased to address any questions that you or the Members 
may have.
    [The prepared statement follows:]

Statement of Joel C. Willemssen, Director, Civil Agencies Information 
Systems, Accounting and Information Management Division, U.S. General 
Accounting Office

    Madam Chairwoman and Members of the Subcommittee:
    We are pleased to join you today to discuss the computing 
crisis posed by the upcoming change of century, and its 
implications in one critical area: telecommunications. As you 
know, the year 2000 presents a particularly sweeping and urgent 
challenge for entities in this country.\1\ For this reason, in 
February 1997 we designated the Year 2000 problem as a high-
risk area \2\ for the federal government, and have published 
guidance \3\ to help organizations successfully address the 
issue. Since that time we have issued over 45 reports and 
testimony statements detailing specific findings and 
recommendations related to the Year 2000 compliance of a wide 
range of federal agency systems.\4\ The common theme has been 
that serious vulnerabilities remain in addressing the federal 
government's Year 2000 readiness, and that much more action is 
needed to ensure that agencies satisfactorily mitigate Year 
2000 risks to avoid debilitating consequences.
---------------------------------------------------------------------------
    \1\ For the past several decades, automated information systems 
have typically represented the year using two digits rather than four 
in order to conserve electronic data storage space and reduce operating 
costs. In this format, however, 2000 is indistinguishable from 1900 
because both are represented only as 00. As a result, if not modified, 
computer systems or applications that use dates or perform date- or 
time-sensitive calculations may generate incorrect results beyond 1999.
    \2\ High-Risk Series: Information Management and Technology (GAO/
HR-97-9, February 1997).
    \3\ Year 2000 Computing Crisis: An Assessment Guide (GAO/AIMD-
10.1.14, September 1997), which includes the key tasks needed to 
complete each phase of a Year 2000 program (awareness, assessment, 
renovation, validation, and implementation; and Year 2000 Computing 
Crisis: Business Continuity and Contingency Planning (GAO/AIMD-10.1.19, 
March 1998 [exposure draft]), which describes the tasks needed to 
ensure the continuity of agency operations.
    \4\ A listing of our publications is included as an attachment to 
this statement.
---------------------------------------------------------------------------
    We have made many recommendations to the executive branch 
to reduce the risk of Year 2000-induced disruptions of critical 
services. Among these, we recommended that the Chair of the 
President's Council on Year 2000 Conversion develop a 
comprehensive picture of the nation's Year 2000 readiness. This 
effort would include identifying and assessing the risk of the 
nation's key economic sectors, including those posed by 
telecommunications.
    The readiness of the telecommunications sector is one of 
the most crucial concerns. No one--large corporation, small 
business, government agency, family, or individual--is immune 
from the potential disruption of vital telecommunications 
services. The United States, with almost half of the world's 
computer capacity and 60 percent of Internet assets, is the 
world's most advanced--and most dependent--producer and user of 
information and telecommunications technologies.\5\ In 
particular, such technologies have helped fuel the growth of 
the U.S. economy and have enabled major improvements in the 
nation's infrastructure. As a result, telecommunications 
service providers and their public- and private-sector 
customers have a lot at stake; the potential losses and 
disruptions that could accrue from noncompliant 
telecommunications systems could be staggering.
---------------------------------------------------------------------------
    \5\ Critical Foundations: Protecting America's Infrastructures 
(President's Commission on Critical Infrastructure Protection, October 
1997).
---------------------------------------------------------------------------
    My testimony today will (1) describe our nation's 
telecommunications infrastructure; (2) discuss the risks we 
face if critical components of that infrastructure are not Year 
2000 compliant by the turn of the century; (3) describe federal 
government actions relating to national, international, and 
governmental telecommunications infrastructure; and (4) present 
issues that must be addressed.

                 The Telecommunications Infrastructure

    The telecommunications infrastructure comprises the public 
telecommunications network, the Internet, and the millions of 
computer systems for government, defense, commercial, and 
personal use. The public network includes a complex web of 
interconnected networks operated by local and long distance 
carriers, cellular networks, and satellite services. The 
Internet is a global network of networks interconnected by 
routers \6\ using a common set of protocols.\7\ Significant 
portions of the Internet rely on services provided by the 
public telecommunications networks.
---------------------------------------------------------------------------
    \6\ Routers are devices that direct messages. Routers receive 
packets of information from computers or other routers on the network; 
they then send these packets to their destinations based on 
``addresses'' at the beginning of the packets and a road map of the 
other computers and peripherals on the network.
    \7\ Protocols are a set of procedures for establishing and 
controlling data transmission.
---------------------------------------------------------------------------
    The rich array of reliable telecommunications services is 
made possible by a complex web of highly interconnected 
networks supported by switches \8\ and other telecommunications 
devices. Along with national and local carriers and service 
providers, other important links in the chain are the equipment 
manufacturers and suppliers and customers, some of whom have 
specific telecommunications devices installed on their 
premises, such as private branch exchanges (PBX), \9\ and voice 
mail systems. The key is connectivity: all of the pieces must 
work together.
---------------------------------------------------------------------------
    \8\ Switches are electronic or mechanical devices that allow 
connections to be established as necessary and terminated when there is 
no longer a session to support.
    \9\ A PBX is a telephone switch located on a customer's premises 
that primarily establishes voice-grade circuits between individual 
users and the public switched telephone network. A PBX also provides 
switching within the customer premises local area.
---------------------------------------------------------------------------

  Services Vital to the Nation Depend Upon Reliable Telecommunications

    Telecommunications are critical to the operations of nearly 
every public- and private-sector organization. All other major 
sectors rely on it: banking and finance; health, safety, and 
emergency services; transportation; utilities; and 
manufacturing and small business. For example, it (1) enables 
the electronic transfer of funds; (2) is essential to the 
service economy, manufacturing, and efficient delivery of raw 
materials and finished goods; and (3) is basic to responsive 
emergency services.
    The federal government depends on the telecommunications 
infrastructure to deliver a wide range of services. Many 
agencies, including those in the Department of the Treasury and 
Department of Health and Human Services (HHS), rely on both 
their private networks and on the public telecommunications 
network to conduct mission-critical business. For example, the 
route of an electronic Medicare payment may traverse several 
networks--those operated by the HHS, Treasury's computer 
systems and networks, and the Federal Reserve's Fedwire 
electronic funds transfer system. Seamless connectivity among a 
wide range of networks and carriers is essential nationally and 
internationally.
    Recent nationwide telecommunications failures remind us of 
our dependence on telecommunications--and the fragility of 
complex communications systems. On April 13, 1998, a software 
error in a single switch caused a major carrier to fail 
nationwide. According to press reports, during the 24-hour 
outage, the carrier's corporate customers were unable to 
complete critical network-based business; retailers were unable 
to authorize credit card payments; and financial institutions 
could not complete electronic transactions.
    Another failure occurred on May 19, 1998, when a 
communications satellite went into an uncontrolled spin after 
failure of a control system. The satellite's failure disrupted 
the operations of credit card authorization services, paging 
services for 80 to 90 percent of all pagers in the United 
States, and the distribution of television programs. While 
these failures were not caused by a Year 2000 problem, they 
illustrate the degree to which we depend upon reliable, 
available, interoperable telecommunications.
    Major disruption in the service provided by the public 
telecommunications network can affect millions of users and 
cause massive financial losses. The cost of disruptions and 
outages caused by noncompliant computer or telecommunications 
systems was discussed in a recent study of the potential impact 
of Year 2000-related foreign exchange settlement failures.\10\ 
According to the study, the market costs of a single major 
bank's inability to settle its trades could reach $3.3 billion 
in a single week. Business dependence on the public 
telecommunications infrastructure is particularly evident in 
the retail and financial sectors, where financial transactions 
with a combined value in the billions of dollars are made every 
day. Businesses and financial institutions rely heavily on 
telecommunications networks to participate in the global 
payments system, to exchange information with trading partners 
and regulatory agencies, and to manage their internal control 
systems and sophisticated computer equipment.
---------------------------------------------------------------------------
    \10\ Sustaining Stable Financial Markets Through the Millennium, 
Computer Sciences Corporation.
---------------------------------------------------------------------------
    The consequences of not resolving Year 2000 problems in the 
telecommunications infrastructure are broad-based and 
potentially disastrous. For example, if critical 
telecommunications systems fail:
     The Internal Revenue Service would be unable to 
receive electronic tax returns or process electronic tax 
refunds.
     HHS would be unable to make electronic Medicare 
payments.
     Financial institutions and brokerages would be 
unable to process financial transactions and trades.
     The manufacturing and retail sectors would be 
unable to manage inventories.
     Air travel would have to be severely curtailed 
because air traffic control systems would fail.
     Credit card transactions would be hindered if 
communications links with point-of-sale systems fail.
     Emergency services would suffer if 911 calls were 
not properly routed in a timely manner.
     International voice and data services would be 
disrupted.
    Telecommunications problems can affect virtually all 
network components--switches, routers, PBXs, and Internet 
servers--all of which must be assessed and tested. Compounding 
the risk is the global nature of today's telecommunications, 
which rely on seamless connections among widely scattered and 
widely diverse networks.

      Federal Activity Related to the Year 2000 Readiness of the 
                       Telecommunications Sector

    In light of the potential risks involved, the federal 
government has recently begun to address the Year 2000 
readiness of the telecommunications sector. The government is 
undertaking telecommunications initiatives from three 
perspectives: national, international, and governmental.

National initiatives

    On February 4 of this year, the President's Council on Year 
2000 Conversion was created, with the mandate to cooperate with 
private-sector operators of critical national and local 
systems, including telecommunications, in addressing the Year 
2000 crisis. The council's recently established 
telecommunications working group--chaired by a Federal 
Communications Commission (FCC) commissioner--held its first 
meeting on April 29, 1998; membership includes representatives 
of the Departments of Agriculture, Commerce, Defense, and 
State; FCC; the General Services Administration (GSA); and the 
National Science Foundation. The group reports that it is 
developing a strategy and an action plan to address the key 
issues facing the telecommunications sector. These include 
raising industry awareness of the problem and disseminating 
information on best practices and contingency planning.
    In addition to its role on the council, within the past 2 
months FCC has established a Year 2000 Internet web site, 
formed a task force to coordinate the activities of FCC bureaus 
to provide Year 2000 information for consumers and industry, 
and coordinated an outreach effort to state public utility 
commissions. Its specific national efforts are focusing on 
raising the Year 2000 awareness of companies under its 
jurisdiction, monitoring the status of Year 2000 readiness of 
the telecommunications sector, and helping telecommunications 
users obtain information from individual telecommunications 
service providers needed for testing.
    As part of this campaign, FCC in late April sent letters to 
over 200 telecommunications service providers, industry 
associations, and other interested organizations, advising them 
of the seriousness and potential impact of the Year 2000 
problem and asking them to share information about the Year 
2000-compliance status of their services with FCC and with 
others in the telecommunications industry, and with the 
public--including making such information available on the 
Internet. FCC is also contacting additional service providers 
and equipment manufacturers, and is working with industry 
associations to reach the hundreds of small and mid-sized 
telecommunications service providers.
    The Securities and Exchange Commission also has an 
initiative to gather information on companies' Year 2000 
activities. In October 1997 and January 1998, the Commission 
urged public operating companies (which would include those in 
the telecommunications sector) to disclose their anticipated 
costs, problems, and uncertainties associated with the Year 
2000 issue.

International initiatives

    FCC is also working on the international front, by 
coordinating with the International Telecommunications Union to 
reduce the risk of disruption to international 
telecommunications services. In addition, the Department of 
State has initiated discussions between embassies and public 
telecommunications network providers worldwide to determine the 
potential impact of the Year 2000 problem. In July 1997 the 
department's Diplomatic Telecommunications Services Program 
Office sent a cable to foreign posts asking them to determine 
whether the local telecommunications carriers--the national 
post, telephone, and telegraph companies--are aware of the 
problem and whether they are making plans to ensure the 
availability of telecommunications services on January 1, 2000.

Governmental initiatives

    Year 2000 actions concerning the federal government's 
telecommunications networks have been initiated by the Chief 
Information Officers (CIO) Council's \11\ Year 2000 Committee, 
GSA, and federal agencies. The CIO Council Year 2000 Committee 
has a telecommunications subcommittee to focus on 
telecommunications issues in addressing the Year 2000 problem. 
This subcommittee, chaired by GSA, has adopted a Year 2000 
telecommunications compliance program that lays out a 
framework, including milestones, for agencies to use in 
addressing telecommunications issues. This compliance program 
also focuses on enhancing partnerships with industry to 
identify Year 2000-compliant products and services, develop 
test methodologies and processes, perform collaborative testing 
of network elements/systems, and share compliance information 
and test results. The subcommittee is also addressing 
contingency planning for telecommunications.
---------------------------------------------------------------------------
    \11\ The CIO Council comprises CIOs and Deputy CIOs from 28 large 
federal departments and agencies, 2 CIOs from small federal agencies, 
agency representatives from the Office of Management and Budget (OMB), 
and the Chairs of the Government Information Technology Services Board 
and Information Technology Resources Board.
---------------------------------------------------------------------------
    In addition to its role chairing the Subcommittee on 
Telecommunications, GSA owns, manages, or resells consolidated 
telecommunications services to federal agencies throughout the 
United States; it controls about 25 percent of all federal 
telecommunications services. GSA's Year 2000 program addresses 
three service areas: FTS 2000 \12\ services, other federal 
telecommunications services, and commercial services. In the 
FTS 2000 area, GSA plans to complete assessment of Year 2000 
compliance by this September, renovation by March 1999, and 
validation and testing between April and December 1999. In the 
other federal services area, GSA is supporting agencies in 
hardware testing; is conducting Year 2000 telecommunications 
working group meetings with agency representatives; and is 
managing its Year 2000 web site. In the area of commercial 
services, GSA plans by March 1999 to conduct interoperability 
testing between government systems and network service 
providers.
---------------------------------------------------------------------------
    \12\ The Federal Telecommunications System (FTS 2000) is a 
nationwide telecommunications network providing long-distance voice and 
data services to federal agencies.
---------------------------------------------------------------------------

       Issues Surrounding Year 2000 Telecommunications Readiness

    Key federal initiatives are in their early stages on a 
national, international, and governmental level, and critical 
issues remain to be addressed. Less than 19 months remain, yet 
no one currently has an overall assessment of the degree of 
Year 2000 risk in the telecommunications infrastructure. 
Accordingly, it is imperative that the executive branch, and 
particularly FCC and the Conversion Council's 
telecommunications working group, take a more active approach 
to addressing the Year 2000 issues of the domestic and 
international telecommunications sectors.

National Issues

    The federal government is uniquely positioned to publicize 
the Year 2000 computing crisis as a national priority; take a 
leadership role; and identify, assess, and report on the risks 
and necessary remediation activities associated with the 
nation's key economic sectors, such as telecommunications. 
Accordingly, in an April 1998 report, we recommended that the 
President's Council on Year 2000 Conversion establish public/
private partnership forums composed of representatives of each 
major sector that, in turn, would rely on task forces organized 
along economic sector lines to help (1) gauge the nation's 
preparedness for the Year 2000, (2) periodically report on the 
status and remaining actions of each sector's Year 2000 
remediation efforts, and (3) ensure the development of 
contingency plans to assure the continuing delivery of critical 
public and private services.\13\

    \13\ Year 2000 Computing Crisis: Potential for Widespread 
Disruption Calls for Strong Leadership and Partnerships (GAO/AIMD-98-
85, April 30, 1998).
---------------------------------------------------------------------------
    In disagreeing with this recommendation, the Chair of the 
Conversion Council stated his belief that the council needs to 
be a catalyst, facilitator, and coordinator. He did, however, 
establish five new working groups--telecommunications among 
them; while not providing specific guidelines or expectations, 
the Chair told them to focus on developing a coordinated 
outreach plan and establish communications with public and 
private parties within each sector, and to monitor the Year 
2000 readiness of each sector.
    Given the inarguably critical nature of telecommunications 
services to the functioning of our nation, coordinated 
oversight is essential. In order to gain confidence that our 
telecommunications infrastructure will be ready for the next 
century, accountability must be established; this includes a 
broad strategy as well as specific milestones and defined 
accountability.
    We see several major areas that must be addressed: (1) 
obtaining information on the current readiness status of 
various segments of the telecommunications industry for the 
next century, (2) establishing a mechanism for obtaining such 
readiness information on a regular basis, (3) setting 
milestones for achieving Year 2000 compliance, (4) 
disseminating readiness status information to the public and 
the Congress, and (5) developing--in conjunction with the 
private sector--contingency plans to ensure business 
continuity, albeit at reduced levels, in the event that not all 
telecommunications systems are fully operational on January 1, 
2000.

Current status

    Based on data from industry associations and 
telecommunications companies, FCC has compiled general 
information on the status and activities of various segments of 
this sector. In late April of this year, the agency asked the 
telecommunications industry for Year 2000-compliance 
information; however, as of last week, FCC was unable to 
provide us with information on the current status and 
anticipated readiness dates in areas such as satellite, cable, 
broadcast, and wireless services. As a major example, FCC could 
not provide us with data on when major interexchange (long 
distance) and local exchange carriers were expecting to be Year 
2000 compliant.
    Because FCC did not have such data readily available, we 
attempted to obtain Year 2000 milestone information from the 
major interexchange (long distance) and local exchange 
carriers. We focused on these 12 carriers because they hold key 
positions within the telecommunications sector and account for 
over 90 percent of the market.\14\ We obtained this information 
from the carriers' World Wide Web sites, or through telephone 
interviews with carrier representatives.
---------------------------------------------------------------------------
    \14\ According to FCC, there are over 1,300 companies that provide 
local telephone service in the United States. More than 700 firms buy 
access from these companies.
---------------------------------------------------------------------------
    Table 1 provides a summary of the information we gathered. 
The table shows that most major carriers expect to achieve Year 
2000 compliance of their networks by December 1998, although 
for some it is either later than that date or we were unable to 
obtain this information. The table also shows that most major 
carriers plan to be fully compliant--including support 
systems--by mid-1999.
    In addition to the individual carrier information shown in 
the table, some interoperability testing is planned. This 
laboratory-based testing, sponsored by the Telco Year 2000 
Forum and by the Alliance for Telecommunications Industry 
Solutions (ATIS), is scheduled to begin later this year and 
continue throughout 1999. The forum-sponsored testing will 
focus on interoperability between local exchange carriers, 
while the ATIS-sponsored tests will focus on common equipment 
interoperability between a local exchange carrier and a long-
distance carrier.

Recurring status information

    Not only is it important that FCC know the current status 
of telecommunications preparedness, it is imperative that such 
information be obtained on a regular basis. Just as OMB and the 
Congress monitor individual agency progress through quarterly 
reports on the status of Year 2000 systems compliance, FCC 
would benefit from a mechanism that would provide updated 
status data on a recurring basis. Without this information, FCC 
will find it more difficult to address major problems that may 
occur. FCC's recent letters to the industry are a start, but 
ongoing receipt of information will be essential to effectively 
monitor sector readiness.

    Table 1: Year 2000-Compliance Status of Major Telecommunications
                                Carriers.
------------------------------------------------------------------------
                                       Date expected to be Year 2000
                                                 compliant
        Service providers        ---------------------------------------
                                   Network services    Support services
                                          \1\                 \2\
------------------------------------------------------------------------
Interexchange carriers
     AT&T.......................  December 1998.....  June 1999
     Excel......................  (did not respond).  (did not respond)
     Frontier...................  December 1998.....  December 1998
     MCI........................  December 1998.....  June 1999
     Sprint.....................  December 1998.....  June 1999
     Worldcom...................  April 1999........  April 1999
 Local exchange carriers
     Ameritech..................  January 1999......  January 1999
     Bell Atlantic..............  July 1999.........  (not specified)
     BellSouth..................  December 1998.....  December 1998
     GTE........................  December 1998.....  December 1998
     SBC........................  December 1998.....  December 1998
     Sprint.....................  December 1998.....  June 1999
     US West....................  June 1999.........  June 1999
------------------------------------------------------------------------
\1\ Network services are key systems and network elements affecting
  customer services.
\2\ Support services are services and systems supporting carrier
  operations.
Source: individual carriers. We did not independently verify this
  information.


Milestone setting

    While telecommunications service providers are establishing 
their own Year 2000 schedules, FCC has not developed schedules 
and milestones for the various segments of the 
telecommunications industry to achieve Year 2000 compliance. 
Milestones for activities such as renovation, validation, and 
implementation are important to overall Year 2000 
telecommunications planning and for evaluating progress in 
reaching compliance.

Information dissemination

    Beyond obtaining current and ongoing status information, it 
is important that FCC make such information available to the 
public--including telecommunications customers--and the 
Congress. The dissemination of this information could provide 
continuous information about the preparedness of this essential 
sector for the century change. Potential vehicles for such 
dissemination include regular reports to the Congress.

Contingency planning

    Contingency plans should be formulated to respond to two 
types of failures: predictable (such as repairs or replacements 
that are already far behind schedule) and unforeseen (such as a 
system that fails despite having been certified as Year 2000 
compliant or one that, it is later found, cannot be corrected 
by January 1, 2000, despite appearing to be on schedule today). 
Given the central nature of telecommunications to the ability 
of other sectors to be Year 2000 ready, a public/private 
partnership could be formed to develop and test necessary 
contingency plans, critical to ensuring the continuity of 
service in the event of failures.

                          International Issues

    Little is known about the Year 2000 readiness of foreign 
telecommunications carriers and their ability to continue to 
provide telecommunications services after December 31, 1999. In 
September 1997 the Gartner Group conducted several surveys to 
determine how companies around the world were dealing with the 
Year 2000 problem. The study did not focus on the 
telecommunications sector; however, its findings provide an 
indication of the overall Year 2000 readiness of the various 
geographic regions of the world. According to the study, 
``[t]hirty percent of all companies have not started dealing 
with the year 2000 problem. Small companies, health care 
organizations, educational institutions, and many companies in 
30 percent of the world's countries are at a high risk of 
seeing year 2000 mission-critical failures due to a lack of 
readiness.'' \15\ A more recent survey focusing on foreign 
telecommunications service providers was conducted by the 
International Telecommunication Union; its results are not yet 
available.
---------------------------------------------------------------------------
    \15\ Year 2000-World Status (Gartner Group, Document #M-100-037, 
November 25, 1997).
---------------------------------------------------------------------------
    FCC has also noted that Year 2000 issues have not received 
the same level of attention abroad as in the United States, 
with the exception of the United Kingdom. This was confirmed by 
the results of the State Department's initiative to assess the 
Year 2000 readiness of foreign carriers. As shown in table 2, 
the department received information from 113 countries, updated 
through March 1998. Of those, 25 countries (22 percent) 
expected to be compliant by this December; 26 countries (23 
percent) expected to be compliant by December 1999; 33 
countries (29 percent) stated that they were addressing the 
Year 2000 issue but were having problems; and 29 countries (26 
percent) were unaware of or had not begun to address the 
problem. The State Department is continuing its activities to 
determine the Year 2000 readiness of its foreign posts, and is 
developing contingency plans to ensure continuity of diplomatic 
telecommunications services.

         Table 2: Year 2000-Compliance Status of International Post, Telephone, and Telegraph Companies.
----------------------------------------------------------------------------------------------------------------
                                                            Compliance  Compliance  Addressing
                                                             expected    expected   Year 2000,  Unaware
                           Region                           by the end  by the end  but having   or not   Total
                                                              of 1998     of 1999    problems    begun
----------------------------------------------------------------------------------------------------------------
 Central and South America................................           4           2           4        5       15
 Europe and Canada........................................           8          15           9        9       41
 Africa...................................................           2           1          10        9       22
 East Asia and the Pacific................................           8           6           5        4       23
 Near East and South Asia.................................           3           2           5        2       12
                                                           -----------------------------------------------------
     Total................................................          25          26          33       29      113
                                                           =====================================================
     Percentage...........................................         22%         23%         29%      26%     100%
----------------------------------------------------------------------------------------------------------------
Source: Department of State. We did not independently verify this information.


    The World Bank is reporting similar findings. In an 
informal survey of foreign Year 2000 readiness conducted this 
month, only 18 of 127 countries (14 percent) had a national 
Year 2000 program; 28 countries (22 percent) report working on 
the problem; and 16 countries (13 percent) report only 
awareness of the issue. No conclusive data were received from 
the remaining 65 countries surveyed (51 percent). The World 
Bank is now planning to appoint a field Year 2000 
representative for each country.
    The Year 2000 readiness of international telecommunications 
networks and carriers is clearly an area of concern. All 
sectors of the global economy depend upon reliable 
communications networks to handle billions of dollars in 
financial transactions. Current and ongoing information to 
monitor the compliance status of foreign carriers would, 
therefore, allow the federal government and the private sector 
to identify troubled regions and develop contingency plans for 
ensuring the continuity of vital telecommunications services.

                          Governmental Issues

    Without compliant telecommunications, federal agencies will 
be unable to provide basic services to the American public. 
However, many major departments and agencies do not yet know 
the Year 2000 compliance status of their own telecommunications 
networks and services. In fact, many federal agencies are just 
beginning to assess the readiness of their telecommunications. 
As of last month's quarterly reports to OMB, only 11 of 24 
major federal agencies reported that they had completed 
inventories and/or assessments of telecommunications. The 
Department of Agriculture, for example, does not expect to 
complete its telecommunications inventory until next month--a 
critical assessment task that should have been completed last 
summer.
    In closing, let me reiterate that the importance of the 
telecommunications infrastructure in the successful functioning 
of our nation cannot be overemphasized; it is the linchpin of 
our economy and critical citizen services. Yet the 
telecommunications industry faces a massive challenge to make 
sure that it can finish the Year 2000 job in time. While the 
federal government must take a stronger, more active oversight 
role to help ensure that this central sector is prepared, much 
of the responsibility inevitably lies with the industry and 
other countries around the world.
    Madam Chairwoman, this concludes my statement. I would be 
pleased to respond to any questions that you or other members 
of the Subcommittee may have at this time.

       GAO Reports and Testimony Addressing the Year 2000 Crisis

    Year 2000 Computing Crisis: Actions Must Be Taken Now to Address 
Slow Pace of Federal Progress (GAO/T-AIMD-98-205, June 10, 1998)
    Defense Computers: Army Needs to Greatly Strengthen Its Year 2000 
Program (GAO/AIMD-98-53, May 29, 1998)
    Year 2000 Computing Crisis: USDA Faces Tremendous Challenges in 
Ensuring That Vital Public Services Are Not Disrupted (GAO/T-AIMD-98-
167, May 14, 1998)
    Securities Pricing: Actions Needed for Conversion to Decimals (GAO/
T-GGD-98-121, May 8, 1998)
    Year 2000 Computing Crisis: Continuing Risks of Disruption to 
Social Security, Medicare, and Treasury Programs (GAO/T-AIMD-98-161, 
May 7, 1998)
    IRS' Year 2000 Efforts: Status and Risks (GAO/T-GGD-98-123, May 7, 
1998)
    Air Traffic Control: FAA Plans to Replace Its Host Computer System 
Because Future Availability Cannot Be Assured (GAO/AIMD-98-138R, May 1, 
1998)
    Year 2000 Computing Crisis: Potential For Widespread Disruption 
Calls For Strong Leadership and Partnerships (GAO/AIMD-98-85, April 30, 
1998)
    Defense Computers: Year 2000 Computer Problems Threaten DOD 
Operations (GAO/AIMD-98-72, April 30, 1998)
    Department of the Interior: Year 2000 Computing Crisis Presents 
Risk of Disruption to Key Operations (GAO/T-AIMD-98-149, April 22, 
1998)
    Year 2000 Computing Crisis: Business Continuity and Contingency 
Planning (GAO/AIMD-10.1.19, Exposure Draft, March 1998)
    Tax Administration: IRS' Fiscal Year 1999 Budget Request and Fiscal 
Year 1998 Filing Season (GAO/T-GGD/AIMD-98-114, March 31, 1998)
    Year 2000 Computing Crisis: Strong Leadership Needed to Avoid 
Disruption of Essential Services (GAO/T-AIMD-98-117, March 24, 1998)
    Year 2000 Computing Crisis: Federal Regulatory Efforts to Ensure 
Financial Institution Systems Are Year 2000 Compliant (GAO/T-AIMD-98-
116, March 24, 1998)
    Year 2000 Computing Crisis: Office of Thrift Supervision's Efforts 
to Ensure Thrift Systems Are Year 2000 Compliant (GAO/T-AIMD-98-102, 
March 18, 1998)
    Year 2000 Computing Crisis: Strong Leadership and Effective Public/
Private Cooperation Needed to Avoid Major Disruptions (GAO/T-AIMD-98-
101, March 18, 1998)
    Post-Hearing Questions on the Federal Deposit Insurance 
Corporation's Year 2000 (Y2K) Preparedness (AIMD-98-108R, March 18, 
1998)
    SEC Year 2000 Report: Future Reports Could Provide More Detailed 
Information (GAO/GGD/AIMD-98-51, March 6, 1998
    Year 2000 Readiness: NRC's Proposed Approach Regarding Nuclear 
Powerplants (GAO/AIMD-98-90R, March 6, 1998)
    National Weather Service: Budget Events and Continuing Risks of 
Systems Modernization (GAO/T-AIMD-98-97, March 4, 1998)
    Year 2000 Computing Crisis: Federal Deposit Insurance Corporation's 
Efforts to Ensure Bank Systems Are Year 2000 Compliant (GAO/T-AIMD-98-
73, February 10, 1998)
    Year 2000 Computing Crisis: FAA Must Act Quickly to Prevent Systems 
Failures (GAO/T-AIMD-98-63, February 4, 1998)
    FAA Computer Systems: Limited Progress on Year 2000 Issue Increases 
Risk Dramatically (GAO/AIMD-98-45, January 30, 1998)
    Defense Computers: Air Force Needs to Strengthen Year 2000 
Oversight (GAO/AIMD-98-35, January 16, 1998)
    Year 2000 Computing Crisis: Actions Needed to Address Credit Union 
Systems' Year 2000 Problem (GAO/AIMD-98-48, January 7, 1998)
    Veterans Health Administration Facility Systems: Some Progress Made 
In Ensuring Year 2000 Compliance, But Challenges Remain (GAO/AIMD-98-
31R, November 7, 1997)
    Year 2000 Computing Crisis: National Credit Union Administration's 
Efforts to Ensure Credit Union Systems Are Year 2000 Compliant (GAO/T-
AIMD-98-20, October 22, 1997)
    Social Security Administration: Significant Progress Made in Year 
2000 Effort, But Key Risks Remain (GAO/AIMD-98-6, October 22, 1997)
    Defense Computers: Technical Support Is Key to Naval Supply Year 
2000 Success (GAO/AIMD-98-7R, October 21, 1997)
    Defense Computers: LSSC Needs to Confront Significant Year 2000 
Issues (GAO/AIMD-97-149, September 26, 1997)
    Veterans Affairs Computer Systems: Action Underway Yet Much Work 
Remains To Resolve Year 2000 Crisis (GAO/T-AIMD-97-174, September 25, 
1997)
    Year 2000 Computing Crisis: Success Depends Upon Strong Management 
and Structured Approach (GAO/T-AIMD-97-173, September 25, 1997)
    Year 2000 Computing Crisis: An Assessment Guide (GAO/AIMD-10.1.14, 
September 1997)
    Defense Computers: SSG Needs to Sustain Year 2000 Progress (GAO/
AIMD-97-120R, August 19, 1997)
    Defense Computers: Improvements to DOD Systems Inventory Needed for 
Year 2000 Effort (GAO/AIMD-97-112, August 13, 1997)
    Defense Computers: Issues Confronting DLA in Addressing Year 2000 
Problems (GAO/AIMD-97-106, August 12, 1997)
    Defense Computers: DFAS Faces Challenges in Solving the Year 2000 
Problem (GAO/AIMD-97-117, August 11, 1997)
    Year 2000 Computing Crisis: Time is Running Out for Federal 
Agencies to Prepare for the New Millennium (GAO/T-AIMD-97-129, July 10, 
1997)
    Veterans Benefits Computer Systems: Uninterrupted Delivery of 
Benefits Depends on Timely Correction of Year-2000 Problems (GAO/T-
AIMD-97-114, June 26, 1997)
    Veterans Benefits Computers Systems: Risks of VBA's Year-2000 
Efforts (GAO/AIMD-97-79, May 30, 1997)
    Medicare Transaction System: Success Depends Upon Correcting 
Critical Managerial and Technical Weaknesses (GAO/AIMD-97-78, May 16, 
1997)
    Medicare Transaction System: Serious Managerial and Technical 
Weaknesses Threaten Modernization (GAO/T-AIMD-97-91, May 16, 1997)
    USDA Information Management: Extensive Improvements Needed in 
Managing Information Technology Investments (GAO/T-AIMD-97-90, May 14, 
1997)
    Year 2000 Computing Crisis: Risk of Serious Disruption to Essential 
Government Functions Calls for Agency Action Now (GAO/T-AIMD-97-52, 
February 27, 1997)
    Year 2000 Computing Crisis: Strong Leadership Today Needed To 
Prevent Future Disruption of Government Services (GAO/T-AIMD-97-51, 
February 24, 1997)
    High Risk Series: Information Management and Technology (GAO/HR-97-
9, February 1997)
      

                                

    Chairman Johnson of Connecticut. Thank you, Mr. Willemssen.
    Mr. Powell.

  STATEMENT OF HON. MICHAEL K. POWELL, COMMISSIONER, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Mr. Powell. Thank you, Madam Chairman, and Members of the 
Subcommittee. Let me first of all commend you for holding a 
hearing on, to what is in my mind, one of the most pressing 
issues facing our Nation. And in particular, to recognize the 
criticality and the fundamental importance of the 
telecommunication infrastructure, as well as other critical 
infrastructures, such as energy and transportation.
    I thought I would take this opportunity with my comments to 
do a number of things for you in our discussion about this 
important issue. First of all, I'd like to give you a brief 
background about our approach, especially in light of some who 
would suggest a slightly more activist heavy regulatory 
approach than the one that we've chosen.
    Second, I would like to point out some of the unique 
attributes of the telecommunications industry, which provides 
some level of confidence that they are better prepared to deal 
with this problem than a significant number of other industries 
in our economy.
    Third, I'll give you a rough general assessment where 
telecommunications carriers are and how they're progressing. 
And finally, a little bit about our ongoing efforts to assess 
the status.
    I first would say that our approach to this issue is to 
leverage our existing regulatory relationship with industries 
and to encourage and promote a cooperative mission-oriented 
relationship that will allow us to actually get this problem 
licked, rather than set up for regulatory consequences.
    We've elected this approach, rather than a top-down 
regulatory one, for a number of reasons. I think they're 
important to point out. First and foremost among them is that 
there is very little time to get this job done. Only private 
firms can fix these problems, and we must have their 
cooperation and we must have their timely and candid disclosure 
of information to get it done.
    We at the FCC are of the opinion, and our experience shows, 
that a heavy regulatory approach will lead to guarded 
communications, the involvement of lawyers rather than 
technologists and managers, and a huge loss of time while we 
haggle over requests and regulatory demands. Significant time 
to my mind would be lost to developing, issuing, evaluating, 
and compiling lengthy data requests, and such efforts would 
divert both the agency's limited resources and those of 
companies from actually working the problem, which after all, 
is what matters most.
    The FCC has been working this problem for a number of 
years. More importantly, so have most of the major carriers. 
Indeed, I think it would be important to understand that this 
industry is probably better equipped and positioned to address 
this issue than most in our economy. And let me give you a few 
reasons why.
    First and foremost, this industry is dependent upon a 
highly complex technical network that is engineered for near 
unfailing reliability. The Bellcore standard is 99.9999-percent 
uptime. Indeed, the average switch is supposed to be 
operational and only be down for 3 minutes in any given year. 
Thus, these companies have a strong stable of trained experts 
in network reliability issues. They have experience with 
identifying threats to network reliability, planning 
corrections, and executing those corrections. They also have 
experience doing similarly herculean tasks, such as having 
pulled apart the network after the AT&T divestiture, and 
reengineering that network when we changed the area code 
system.
    Second, because of the importance of network reliability 
and interoperability, there are a number of first-class 
technical consortiums that have a long history of developing 
standards and addressing network issues, and then sharing that 
work with its members. Bellcore has served in this role for the 
phone system since days of old. In the area of cable, for 
example, there is CableLabs, a research and development 
consortium of cable television system operators which currently 
represent more than 85 percent of all subscribers in the United 
States.
    Third, the industry has a number of very influential 
umbrella associations that serve as important contact points 
for the FCC, and they are optimized to provide timely 
dissemination of information to its members.
    Fourth, though in the throes of deregulation 
telecommunications has been heavily regulated at both the State 
and Federal level. This means there are well established 
relationships between the industry and the government.
    And fifth and perhaps most importantly, for once the 
industry's own self-interest happens to be congruent with that 
of regulators. They well understand that they potentially face 
financial ruin, diminished good will and brand name, regulatory 
trouble, and perhaps most importantly, legal liability. All at 
a time when the Telecommunications Act of 1996 is ushering in 
new competition.
    Let me offer you a general assessment of the 
telecommunications industry. Given the factors I've just 
discussed and other things we've observed, our general 
assessment of the industry is positive. While there are 
problems and concerns, we are quite confident that the basic 
phone net will be able, in year 2000, to provide phone service 
of similar quality and reliability as that that's being 
provided today.
    Madam Chairman, I see my time is up. Could I briefly 
conclude?
    Chairman Johnson of Connecticut. Thank you both. Are you 
close to conclusion? Did you cut yourself off?
    Mr. Powell. Well, I can either give you a general 
assessment of the telephone industry as part of the opening 
statement, or just in response to your question.
    Chairman Johnson of Connecticut. I would prefer you 
conclude.
    Mr. Powell. Though others and we are concerned about the 
network because of its importance, no one I'm aware of believes 
the telephone network is headed toward catastrophic failure.
    And let me just briefly share with you the partial basis of 
our positive assessment. First, most major carriers anticipate 
completing the mission-critical changes by the end of this 
year, with most others confident they will wrap it up in the 
first half of next year. The time they have dedicated to these 
issues, on average 3 to 4 years; the expenditures for working 
the issue, on average $300 to $400 million; the personnel being 
dedicated; and the strength of the assessment and executive 
plans we have seen, gives us some confidence that these 
timelines are realistic. Moreover, they comport with what we 
hear from State regulatory agency and key users of the system.
    Second, manufacturers of critical equipment, such as 
switches and software, report that they have corrected and 
tested most of their products and have them available for 
customers. Major manufacturers have extensive programs in place 
and are working closely with the carriers. Most have targeted 
the end of this year, the beginning of next, for general 
availability of all their products.
    And finally, there are well organized efforts to conduct 
mission-critical testing. The Telco Y2K Forum, comprised of 
eight major ILECs, including Ameritech, Bell Atlantic, Bell 
South, and the others, is conducting component integration 
testing. The forum allows companies to share resources 
information solutions. The Alliance for Telecommunications 
Industry Solutions, ATIS, is another major forum that is 
conducting critical interoperability testing in January and 
February 1999. ATIS reports that such testing should encompass 
network configurations that serve over 90 percent of the 
Nation. Indeed, we heard recently that wireless carriers are 
planning to test off the ATIS effort.
    These efforts are critical because it is nearly impossible, 
and this must be understood, to conduct end-to-end testing on 
the network, which everyone must understand must run 24 hours a 
day, 7 days a week, and will not have the luxury of being taken 
offline for testing.
    With that, I will conclude, Madam Chairman, and await your 
questions. Thank you.
    [The prepared statement follows:]

Statement of Hon. Michael K. Powell, Commissioner, Federal 
Communications Commission

    Good afternoon, Madam Chairman, and distinguished members 
of the Subcommittee. I commend you for holding a hearing on the 
critical issue of the Year 2000 problem, and I welcome this 
opportunity to discuss the potential impact of the Year 2000 
problem on our nation's telecommunications networks.
    In the seven months that I have been at the Federal 
Communications Commission (FCC), I have been struck by the fact 
that almost every sector of our economy and every part of our 
government depends upon our telecommunications system. Many of 
the critical programs that the Ways and Means Committee 
oversees, such as Social Security and Medicare, also depend 
upon this ubiquitous communications infrastructure and 
consequently could be seriously affected if the Year 2000 
problem interrupts telephone and data networking services.
    Today, I would like to: (1) summarize what we know about 
the Year 2000 problem and how it might affect the nation's 
telecommunications networks; (2) list what we do not know; and 
(3) describe what the FCC has done, and intends to do, to 
ensure that our nation's critical telecommunications 
infrastructure still functions at its full capacity and 
effectiveness on and after January 1, 2000.
    My comments today will focus primarily on wireline 
telecommunications services. However, it is important to note 
that the FCC is engaged in outreach and assessment initiatives 
in each of the different subsectors of the communications 
industry, including terrestrial wireless, radio and television 
broadcast, cable television, international telecommunications 
and satellites. Attached to my testimony is an appendix 
summarizing how each of these different industries may be 
affected by the Year 2000 problem and what industry and the FCC 
are doing to address these problems.

                What We Know About the Year 2000 Problem

    The FCC has been monitoring the telecommunications 
industry's efforts to meet the Year 2000 problem for the past 
several years, and has developed an understanding of the scope 
of problem and how it may affect the nation's 
telecommunications networks. Let me elaborate briefly on some 
of our observations.

The Year 2000 problem is simple to understand.

    The cause of the Year 2000 problem is very simple. It is 
caused by the fact that many computer programs use only two 
digits to store the year (e.g., the program translates ``67'' 
to mean ``1967''). At the turn of the century when the date 
changes from 1999 to 2000, there are concerns that these 
systems will fail to recognize the millennial change, thereby 
erroneously assuming ``00'' to be ``1900,'' not ``2000.''

The Year 2000 problem has complicated consequences.

    While the cause is simple, because so many computer and 
communications systems are interlinked and interdependent, the 
consequences could be complex, unpredictable, and in some cases 
very serious. The recent AT&T frame-relay network outage and 
the failure of PanAmSat's Galaxy IV satellite highlighted how 
many different systems can be affected by the failure of a 
single piece of hardware. Fortunately, telecommunications 
networks are designed to be fault-tolerant and there is no 
reason to believe that one or two Y2K-related failures could 
lead to a chain reaction that could disable large parts of the 
nation's telecommunications networks.

The Year 2000 problem does not affect every computer.

    After reading some articles on the Year 2000 problem, it 
would be understandable that one would conclude that every 
computer chip, every software program, and every computer had a 
Year 2000 problem. That is not the case. Most devices do not 
care what time it is and thus are not affected.

Most Year 2000 glitches will be annoying, not disastrous.

    For those systems that have a Year 2000 problem, it will 
often be the case that the problem will not disrupt the whole 
system, it simply will make some features or functions, which 
are not ``mission-critical,'' difficult or impossible to use.

            What We Know About Fixing the Year 2000 Problem

    As part of the FCC's outreach and assessment initiatives, 
the Commission's Bureaus and Offices have been communicating 
with the various industry players who are individually 
responsible for ensuring that their networks and systems are 
Year 2000 compliant. We are reminded daily of the fact that 
carriers, manufacturers, licensees, and users of 
telecommunications services--many of whom are assembled here 
today--have been working on the problem for many years and have 
invested substantial capital and manpower.
    We are also reminded of the many technical and management-
oriented challenges that lie ahead. First, the 
telecommunications network is a tremendously complicated thing 
and consists of millions of interconnected parts. When you make 
a phone call from here to New York, every element along the 
established circuit has to work: the telephone itself, the 
Private Branch Exchange (i.e., switchboard) in your building, 
the central office switch, the computers that connect your call 
to its destination, the long-distance trunk lines, as well as 
the central switch and the telephone on the other end. If any 
one of those components is affected by the Year 2000 problem, 
your call might be disrupted.
    Second, there are literally thousands of companies to 
engage in the wireline telecommunications industry. Simply put, 
there are the major telecommunications carriers like the Bell 
Operating Companies, GTE, AT&T, MCI and Sprint. But there are 
also 1,400 small to mid-size telephone companies that serve 
many rural, insular and underserved parts of the country as 
well as the U.S. territories and possessions. 
Telecommunications carriers alone, however, cannot solve the 
whole problem. For example, manufacturers of central office 
switches and other customer premises equipment are vital 
participants in the collective Year 2000 effort. And, finally, 
we cannot forget about the telecommunications users who have to 
take action to ensure that their telecommunications equipment--
their telephones, their voice mail systems, their Private 
Branch Exchanges (PBXs), their local area computer networks--
are all Year 2000 compliant. It will not do much good if all 
the telephone companies fix all their networks, but then major 
corporations and governmental organizations cannot call out of 
their buildings because their internal systems do not work.
    Third, it will be long and hard work to fix the Year 2000 
problem. There are no magic bullets that will automatically fix 
software affected by the Year 2000 problem, and it is 
unrealistic to expect that one will be invented between now and 
the year 2000. There will also be a profound management 
challenge to deploy technical solutions in a timely fashion 
without affecting the quality and level of communications 
service.
    Fourth, testing is (and will continue to be) the hardest 
part. Most telecommunications companies estimate that testing 
comprises 50 to 70 percent or more of their Year 2000 efforts. 
And, testing often uncovers more problems that need to be 
fixed.
    Fifth, we cannot get an extension on this deadline. Time is 
of the essence with only 564 days left till January 1, 2000.

       What We Know About Telecommunications Industry Y2K Efforts

    In the last few weeks, public attention has started to 
focus on the Year 2000 problem. There have been illustrative 
examples of non-Year 2000 related network failures, such as the 
AT&T data network incident and the Galaxy IV satellite 
incident, that have been prominently featured in the general 
media. These events have hastened public concern about the 
telecommunications industry's readiness and capacity to 
implement Year 2000 compliance remedies. Unfortunately, we hear 
more Year 2000 horror stories than Year 2000 success stories. 
Horror stories get repeated and reprinted, success stories get 
filed away and forgotten.
    The subcommittee should know (and it is my understanding) 
that U.S. telecommunications carriers are very motivated to fix 
the problem. However, this is a dynamic process. 
Simultaneously, the equipment manufacturers have to develop 
upgrades and patches for their products, telecommunications 
carriers have to assess and prepare their systems for change 
and when technical ``fixes'' arrive they must install and test 
the equipment in their networks, and they also have to conduct 
interoperability tests with other carriers and with their 
customers.
    I have been told that U.S. equipment manufacturers have 
already tested and fixed most of their products. The major 
manufacturers have had extensive Year 2000 programs in place 
for some time, and have been working closely with both local 
and long distance carriers to develop strategies for Year 2000 
readiness. Manufacturers report that most of their software and 
hardware products are already Year 2000-ready and have been 
made available to customers. They have targeted end-of-year 
1998 or first quarter 1999 for general availability for all 
Year 2000-ready products.
    The carriers report that the manufacturers' schedules will 
enable them to meet their compliance objectives. According to 
information submitted by the carriers to the FCC, the major 
local and long distance carriers have been working on the Year 
2000 problem since 1995 or 1996 and generally plan by late 1998 
or early 1999 to have completed internal testing of all systems 
that are critical to the passage of telecommunications traffic.
    The carriers are also cooperating on interoperability and 
end-to-end testing. The Telco Year 2000 Forum, which is 
comprised of eight large regional local exchange carriers, is 
performing integration testing on Year 2000-ready equipment 
throughout 1998. The Alliance for Telecommunications Industry 
Solutions (ATIS), which is an industry-funded organization 
whose mission is to advance new telecommunications 
technologies, will conduct inter-network interoperability 
testing in January and February 1999. According to ATIS, the 
interoperability tests should encompass network configurations 
that serve over 90 percent of the country. This type of 
cooperative industry testing is very important because it is 
nearly impossible to conduct interoperability and end-to-end 
tests on the public-switched telephone network. The nation's 
phone network has to be up and running 24 hours a day, 7 days a 
week and it involves millions of different elements. The 
telephone companies cannot disconnect their network and turn 
the clock ahead to the year 2000 to do a test.
    Of course, there are areas of concern to the FCC. For 
example, although the largest 20 phone companies provide 98% of 
U.S. phone lines, there are over 1,400 telephone companies, and 
each one needs to address the Year 2000 problem. The small to 
mid-size telecommunications carriers have further to go, and 
the FCC is working with the various trade associations to 
ensure that these smaller carriers also meet the challenge.
    There is also the international dimension to the Year 2000 
problem. The United States, Canada, and the United Kingdom are 
ahead of the rest of the world, but the FCC is concerned that 
some international telecommunications carriers, especially 
those in developing countries, are just realizing the 
seriousness of the problem and have not yet taken the necessary 
steps to prevent system failures. Because global 
telecommunications rely upon seamless interconnection of 
networks, the international dimensions of the Year 2000 problem 
are especially significant.
    On the international front, the FCC is taking an active 
role in the International Telecommunication Union's (``ITU'') 
Year 2000 Task Force to promote international awareness and 
provide guidance on Year 2000 readiness. The ITU Year 2000 Task 
Force is establishing ``Y2000 Ambassadors'' who will serve as 
regional coordinators for assistance on Year 2000 problems and 
activities, and the FCC will assist in the region of the 
Americas.

                What We Know About the Government's Role

    The FCC's role is important, but our power to force 
carriers, manufacturers, and telecommunications users to 
address the Year 2000 problem is limited. Consequently, we are 
working to promote an effective public-private partnership.
    We believe that the FCC can play an important role by 
encouraging companies to share information with each other and 
with their customers. This will increase the sharing of 
solutions, avoid duplicative testing, help companies spot 
undetected problems, and reduce customer uncertainty and 
anxiety. Fortunately, the World Wide Web provides a very 
powerful tool for information sharing. We have discovered over 
2000 Year 2000 Web sites, including the FCC's own Web site at 
http://www.fcc.gov/year2000/, which has received over 10,000 
hits to date.
    There may also be a significant role to be played by the 
Administration and Congress with regard to the legal liability 
issue which has slowed the information flow. Some companies 
have been reluctant to divulge information due to concerns 
about liability. Several companies and organizations have 
developed very useful Web sites and databases, which are not 
available to the general public because of liability concerns. 
In addition, antitrust concerns have discouraged some 
cooperative efforts. I understand that the Justice Department 
recently released a letter designed to allay antitrust 
concerns, but uncertainty still exists.

                        What We Do Not Know Yet

    The real problem with the Year 2000 problem is what we do 
not know.

How serious are the cascade effects?

    At this point, we just do not know all the ways that the 
failure of one piece of the network could trigger failures 
elsewhere in the system.

Can we make sure that all the fixed systems work together 
properly?

    It is essential that companies do interoperability testing 
to make sure that their systems will function on January 1, 
2000. But unfortunately, such tests cannot be done until all 
the individual pieces of the system are fixed.

How long will it take to fix problems that occur in January 
2000?

    If too many problems are overlooked or ignored, there just 
will not be enough technicians and equipment to fix everything. 
Unless companies are willing to be off-line for months, they 
cannot wait until the Year 2000 to fix their problems.

                         What the FCC has Done

    The FCC has been aware of the Year 2000 problem for many 
years. In 1995, we started to examine and fix our internal 
computer systems. In early 1997, the FCC made a coordinated 
effort to find out what industry was doing about the problem. 
At that time the responses were: (1) ``It is not that serious. 
. .'' (2) ``We are taking care of it. . .'' and (3) ``There is 
not much the FCC can or should do. . .'' Prior to 1997, the 
FCC's individual Bureaus and Offices were following the issue.
    By late 1997, we were starting to hear increased concern as 
more companies did more tests and discovered just how pervasive 
the problem is and realized that they could be vulnerable if 
their partners, suppliers, and customers were adversely 
affected by the Year 2000 problem. Earlier this year, many 
telecommunications users came to the FCC seeking more 
information on the seriousness of the problem and what the 
telecommunications companies were doing about it. We determined 
we could play a valuable role by promoting information 
dissemination.
    In mid-March, the Commission created its Year 2000 Working 
Group. In mid-April, at the request of FCC Chairman William 
Kennard, I agreed to oversee the FCC's Year 2000 efforts and 
represent the agency on the President's Council on Year 2000 
Conversion, which was established on February 4, 1998. I also 
co-chair with Dennis Fischer of the General Services 
Administration (GSA) the Council's Working Group on 
Telecommunications, which met for the first time on April 30, 
1998.
    We have been encouraged because telecommunications 
companies have been providing more information on how the Year 
2000 problem could affect their systems and services and what 
they are doing to ensure they are Year 2000 compliant. This is 
partly in response to pressure from customers, the FCC and the 
Securities and Exchange Commission, but primarily due to the 
fact that the companies are making good progress, and are more 
willing to share the good news.

                       What the FCC Intends To Do

    I want to emphasize that the FCC takes very seriously its 
responsibility to work closely with the communications industry 
to ensure that the Y2K challenge is successfully met. As part 
of the Commission's sector outreach initiative, the FCC is 
engaged in activities divided into three distinct but 
interrelated operational modes: (1) outreach and advocacy; (2) 
monitoring and assessment; and (3) regulatory actions and 
contingency planning.
    The FCC's first operational mode is to encourage private 
sector compliance efforts and to foster information sharing. 
Accordingly, we will continue efforts to ensure all companies 
understand the seriousness of the problem. We have set up a Web 
site and sent over 200 letters to major companies and 
organizations in all sectors of the telecommunications 
industry. Chairman Kennard, myself, the other commissioners, 
and FCC staff are all mentioning this problem in speeches and 
in meetings with leaders in the telecommunications industry.
    Our second mode is to monitor industry Year 2000 compliance 
efforts and to assess the pace and extent of the implementation 
of remedial actions. In June alone, we organized five 
roundtables with representatives of different sectors of the 
telecommunications industry to facilitate information sharing 
and see how the FCC can assist industry efforts to tackle the 
Year 2000 problem. The Commission is asking the National 
Reliability and Interoperability Council, a private-sector 
committee that advises the FCC on technical issues, to take 
steps to foster industry cooperation on Y2K compliance testing 
and other related problems.
    Finally, if we learn in coming months that some companies 
are not making enough progress in addressing the Year 2000 
problem, we may decide to use our regulatory authority to 
gather additional information or to accelerate Year 2000 
compliance efforts. We have done a thorough review of how we 
might use our regulatory authority to ensure that companies in 
all sectors of the telecommunications industry are adequately 
addressing the Y2K problem and are fully informing their 
customers about their efforts. Of course, we view regulation as 
a last resort.
    Because we know that not every problem will be fixed and 
because we cannot anticipate all the consequences of Murphy's 
Law, we intend to encourage contingency planning by service 
providers and customers.

                               Conclusion

    Without a doubt, it is critical that the U.S. 
telecommunications community take prompt, comprehensive and 
effective action to address the Year 2000 problem. Our national 
well-being is dependent upon the reliability of all the 
nation's telecommunications networks, and government and 
industry must work together to ensure that whatever disruptions 
occur do not lead to widespread outages and failures. To that 
end, the FCC is committed to taking whatever actions it can to 
facilitate information sharing and industry compliance efforts.
    Once again, I commend the committee for holding this 
hearing and focusing attention on this critical issue. I would 
be happy to answer any questions you might have.
      

                                

Attachment

Overview of the Year 2000 Problem in the Communications Sector: 
Concerns and Actions

                         Common Carrier Bureau

Biggest concerns:

     Upgrading network switches (although manufacturers are on 
schedule to provide fixes).
     Upgrading Customer Premises Equipment (CPE), voice mail 
systems, Private Branch Exchanges (PBXs), ensuring interoperability 
with the network.
     Ensuring telephone companies (telcos) cooperate fully with 
major customers and each other to facilitate Year 2000 interoperability 
testing.
     Ensuring small telcos have the resources and expertise 
needed to fix the problem.
     Dealing with billing and other internal systems.

What the FCC is doing:

     Meeting with large and small telcos, telephone trade 
associations, switch manufacturers, financial interests (banks and 
clearing houses), and other major users.
     Requesting information from telcos, equipment 
manufacturers, trade associations, and Bellcore, and encouraging the 
sharing of Year 2000 information among industry participants.
     Planning interindustry roundtables to facilitate the 
sharing of solutions to Year 2000 problems and identify barriers to 
solving Year 2000 problems. Telcos, equipment manufacturers, and users 
have been invited to participate.
     Assessing possible regulatory actions to facilitate Year 
2000 readiness, including requiring detailed information on Year 2000 
compliance, if necessary.
     Sharing information with other Federal agencies, and 
improving the FCC Year 2000 website with updated information and links 
to other Year 2000 websites.
     Analyzing responses to detailed information requests sent 
to all local exchange carriers and interexchange carriers, as well as 
to some smaller carriers and to the major telephone equipment 
manufacturers, on their Year 2000 efforts. Responses have begun 
arriving. As of June 11, 1998, nineteen companies had filed responses. 
These efforts will help develop a clearer picture of the Year 2000-
readiness of the telecom sector.
     Meeting with Year 2000 project managers from manufacturers 
and telcos to impart the Commission's concern and to obtain additional 
information about their Year 2000 programs.
     Encouraging companies and industry trade associations to 
make more information about their Year 2000 efforts available to the 
public through their websites.
     Planning an interindustry roundtable forum for late-June 
1998 to facilitate dialogue among manufacturers, carriers and major 
users on Year 2000 issues.
     Continuing outreach efforts to ensure that all companies 
understand the seriousness of the problem, as well as monitoring to 
obtain as much information as possible.
     Assessing regulatory actions that could be taken, if 
necessary, to gather additional information and/or accelerate Year 2000 
compliance efforts.

What industry is doing:

     Major telephone companies have been devoting significant 
resources to ensuring that primary telecommunications networks continue 
to function on and after January 1, 2000.
     Eight regional telcos have formed the Telco Year 2000 
Forum to share information and facilitate intranetwork testing of 
remediated systems.
     The Alliance for Telecommunications Industry Solutions 
(ATIS), funded by exchange and interexchange carriers, is undertaking 
the development of laboratory tests (now scheduled for January-February 
1999) of inter-network interoperability of remediated systems.
     Bellcore is providing expertise, leadership, testing 
facilities, and technical standards for Year 2000 compliance.
     U.S. Telephone Association sent out an advisory to its 
members in mid-1997.

                         Cable Services Bureau

Biggest concerns:

     Power system failures could disrupt cable service, 
including the cable system's emergency alerting system 
messages.
     Billing systems could generate faulty data.
     Satellite telecommunications links could be 
disabled.

What the FCC is doing:

     Sent inquiries to major cable television 
companies, cable equipment manufacturers and cable trade 
associations regarding Y2K.
     Posted questions on the Internet regarding Year 
2000 problems in cable systems to more than 1500 cable 
engineers and technicians.
     Conferred with CableLabs, the research arm of a 
consortium of cable companies, which has established an 
industry task force to address Y2K issues. Will continue this 
dialogue.
     Trained Cable Services Bureau telephone contact 
representatives to answer questions from the public and 
operators regarding Y2K problems and compliance.
     Continued dialogue with cable operators and 
equipment manufacturers, including informal sessions with 
multiple system operators (MSOs).
     Scheduled to hold an open forum for the public and 
the cable industry.

What industry is doing:

     CableLabs has formed a Year 2000 working group 
that consists of the major cable multiple system operators. 
These MSOs encompass a significant number of cable subscribers 
and a large majority of the nation's cable systems. Cable 
operators who are not members of the Year 2000 Working Group 
will still benefit from the group's efforts because CableLabs 
is conducting a nationwide assessment and will share 
information with all cable operators.
     To our knowledge, the CableLabs group intends to 
meet every two months to monitor the progress of the industry 
and to provide the industry with CableLabs' research. In 
addition, CableLabs will monitor the equipment of cable 
suppliers to determine Y2K compliance. In September, 1998 in 
Denver, CableLabs plans to hold a cable vendors conference at 
which cable equipment suppliers, cable billing systems vendors, 
and vendors of television commercial insertion equipment are 
invited to attend and confer on their progress in achieving Y2K 
compliance.

                           Mass Media Bureau

Biggest concerns:

     Emergency Alert System may fail just when it is 
needed most.
     Lack of broadcast news may result in 
misinformation and mass panic.
     Old transmitters and other systems may be hard to 
test or fix.

What the FCC is doing:

     Speaking out on Year 2000 issues at National 
Association of Broadcasters (NAB) convention and other forums.
     Writing to broadcasters and trade associations.
     Meeting with broadcasters and equipment 
manufacturers.

What industry is doing:

     NAB has created a Web site on Year 2000 issues and 
assigned a Senior Vice President to work on the issue.

                   Wireless Telecommunications Bureau

Biggest concerns:

     Radios for police, fire, and other emergency 
services could fail due to Year 2000 problems. Many of these 
systems are quite old and manufacturers may not be able to 
provide fixes for all of them.
     Wireless systems could fail, just when they might 
be needed as backup to wireline telephones.

What the FCC is doing:

     Writing the major wireless companies, equipment 
manufacturers, and trade associations.
     Meeting with representatives of different part of 
the wireless industry to assess their efforts.
     Planning future forums on the Year 2000 problem 
and the wireless industry. The FCC has already held three of 
these forums.
     Considering options to condition licenses, 
renewals, and auctions on Year 2000 compliance.

What industry is doing:

     The public response of the wireless industry to 
the Year 2000 problem has been uneven.
     Major manufacturers and large companies have 
tested almost all of their products and intend to have fixes 
available by the end of the year.
     Many users of wireless devices, most notably 
police and fire departments, are just starting to assess their 
Year 2000 problems.

                          International Bureau

Biggest concerns:

     Whether foreign telecommunications companies, 
especially large segments of the developing world, will be able 
to provide service on January 1, 2000. This could have a huge 
impact on international trade, foreign investment, the global 
economy, and even national security.
     Whether satellite links are Year 2000 compliant.
     In many foreign countries, particularly in Asia 
and Africa, telecommunications companies are only now becoming 
aware of the Year 2000 problem, and they lack the resources to 
fully address it.

What the FCC is doing:

     Writing to international telecommunications 
companies and satellite and HF service providers.
     Publishing letters in industry publications and 
ITU publications.
     Working with the International Telecommunications 
Union to educate and motivate foreign telephone companies as 
well as with the Department of State.
     Planning roundtable discussions to raise 
awareness, seek solutions, and informally survey progress of 
industry's efforts to ensure that industry is doing all it can 
to avoid any disruptions in service. A roundtable with 
international telecommunications carriers will occur June 29. A 
roundtable with the satellite industry will be July 14.
     Raising issues with foreign delegates, in tandem 
with these roundtables, in the context of the FCC's Visitor's 
Program and Foreign Regulator Workshop.
     Speaking out about the Year 2000 problem at 
international telecommunications meetings.
     Increasing international awareness through the ITU 
Year 2000 Task Force and providing direction on Year 2000 
readiness by hosting workshops. FCC is participating in these.

What industry is doing:

     Telecommunications companies are working hard to 
fix Year 2000 problems.
     Satellite companies have set up ``war rooms'' to 
deal with the Year 2000 problems.
     Most, if not all, U.S. telecommunications 
companies have established an office for Year 2000 compliance.
     Several countries, including the United Kingdom, 
Canada, and Australia have high-profile efforts under way to 
tackle the Year 2000 bug, and their telecommunications 
companies (e.g., British Telecom) are working with foreign 
partners on the problem.

                   Compliance and Information Bureau

Biggest concerns:

     Ensuring that internal database systems and 
equipment used by the Bureau for enforcement purposes is Year 
2000 compliant.
     Preparing the National Call Center to collect data 
and respond to inquiries relating to Year 2000.

What the FCC is doing:

     Checking CIB database software and computers used 
in the enforcement program, such as mobile and fixed direction 
finding systems, Global Positioning System (GPS) receivers and 
the software used to operate these systems.
     Preparing to collect data regarding calls received 
by the National Call Center and to provide information to the 
Call Center personnel from other Bureaus and Offices to use in 
responding to incoming Year 2000 calls.

                  Office of Engineering and Technology

Biggest concerns:

     Telecommunications equipment testing labs may 
close down or generate faulty data due to Year 2000 problems

What the FCC is doing:

     Sending letters to testing labs.
     Directing the Network Reliability and 
Interoperability Council to focus on Year 2000 issues and 
facilitate Year 2000 testing of telecommunications networks.
     Coordinating construction of the FCC's new Year 
2000 Web site.

                     Office of the General Counsel

What the FCC is doing:

     Reaching out to the Communications Bar to increase 
their awareness of Year 2000 issues and urge them to press 
telcos to increase their efforts to address the problem.

                       Office of Plans and Policy

What the FCC is doing:

     Coordinating the FCC's efforts to work with 
industry on Year 2000 issues.
     Examining whether the Internet will be affected by 
Year 2000 problems.
     Contacting Internet organizations and Internet 
equipment vendors.

                      Office of Inspector General

Biggest concern:

     The possibility that the Commission's mission-
critical systems will not be Year 2000 compliant.

What the FCC is doing:

     Participating on a Year 2000 task force addressing 
the Commission's mission-critical information systems and 
Information Technology infrastructure.
     Participating on a Year 2000 task force monitoring 
the telecommunications industry.
     Monitoring the activities of other Inspectors 
General, the Office of Management and Budget, and the General 
Accounting Office.
      

                                

    Chairman Johnson of Connecticut. I thank you very much, 
both of you, for your testimony this morning. I do think an 
interesting aspect of private sector compliance is the enormous 
motivation that every private sector company has to make sure 
that they are compliant. On the other hand, I don't think that 
the problems of interconnectedness and the enormous complexity 
of the interactive systems can be underestimated.
    Let me ask both of you whether or not it's your opinion--
this is in followup from our hearing in May--when you look at 
what the Federal agencies are doing, do you think they have 
sufficient in-house expertise in the telecommunications area to 
be able to both assess and correct the problems?
    Mr. Willemssen. I'd say, Madam Chair, the answer is very 
mixed. We see varying degrees of strength at different 
agencies. An example of one of the strongest information 
technology organizations among the civilian agencies would be 
the Social Security Administration. They've got generally quite 
a bit of talent in this area. They've taken a lot of 
initiative, not just on telecommunications, but on year 2000 in 
general.
    In other areas, that strength is not always so apparent in-
house, and therefore it's obviously critical to get additional 
contractor and consultant help to address the issue.
    Chairman Johnson of Connecticut. How effective is OMB in 
supporting the agencies in getting the quality contractor that 
they need and in coordinating the inventory and movement toward 
solution?
    Mr. Willemssen. I think we've seen very recently more 
efforts on the part of the administration, centrally led by Mr. 
Koskinen's group, to get the necessary support, especially in 
the personnel area. There has been some movement in this area. 
For example, OPM has recently allowed waivers of recent 
retirees to come back to work for the Federal Government 
without financial penalties, if they have the capabilities to 
help on the year 2000 issue. So I think we're seeing more 
movement on that. If you'd asked me that question 6 months ago, 
I would have been more pessimistic.
    Chairman Johnson of Connecticut. Do you think it's 
sufficient to meet the challenge?
    Mr. Willemssen. Not in all cases at this point. We still 
have major challenges at several agencies. But I think there's 
a much greater degree of attention to those challenges and 
responsiveness to take the action that's necessary. I'll hold 
in suspense my judgment until I see that action--but at least 
we're seeing more of a willingness to move in that direction.
    Chairman Johnson of Connecticut. Mr. Powell.
    Mr. Powell. Based on my responsibilities and my position, I 
have very little information about how individual agencies are 
doing with respect to their own telecommunications systems.
    I do think that what I can add to your question, which you 
rightly recognize, is that in the telecommunications network 
it's going to be critical to understand that while even if we 
were able to ensure the reliability of the basic network, there 
are critical gateways to that network that are in the 
possession of private parties within their own internal 
systems.
    Whether it be a government agency or a major end user, like 
the bank, the average large institution has a pretty 
sophisticated internal network that's solely their property and 
their possession, and indeed their responsibility. PBX systems, 
internal networks and connections, phone systems, phone 
equipment all must be compliant and able to properly access the 
network as well.
    So, AT&T or your local phone company may do all that it 
needs to do, or is capable of doing, in terms of the network, 
but you still may not be able to communicate or use that 
network because of equipment within your possession.
    Unfortunately, the FCC doesn't have much regulatory 
authority with respect to that kind of equipment. But, what 
we've been trying to do is to sort of use the bully pulpit and 
urge the service providers to make its major customers aware 
that it needs to do inventory and assessments of those systems 
and needs to bring them into compliance if they have hope of 
communicating effectively, and to get the equipment 
manufacturers to play a critical role of making sure a lot of 
these customers understand that a serious amount of the 
equipment is within their own possession. Some of which hasn't 
been upgraded in a very, very long time, and is unlikely to be 
compliant.
    Chairman Johnson of Connecticut. Is it--you say in your 
testimony that you've been told that U.S. equipment 
manufacturers have already tested and fixed most of their 
products. How confident are you that they'll be able to produce 
the volume of product needed, when all of these inventories and 
assessments are complete?
    Mr. Powell. I would say that we have some guarded optimism 
in that respect for a number of reasons. I think first and 
foremost, largely what we're talking about in many cases is 
software patches and fixes, which has the benefit of being able 
to be distributed in some cases electronically. We also have a 
community of pretty sophisticated operation folks who are very 
accustomed to doing such network upgrades, and sophisticated 
operations like this, so I'm confident that they can execute it 
efficiently.
    There will be a number who actually need real equipment in 
the sense that you and I would understand it. That is, a big 
box, a big switch, a big computer. I think that's a much 
smaller number of carriers and private companies, but 
nonetheless, that will be a much more significant logistical 
and capital challenge.
    Chairman Johnson of Connecticut. Is the FCC working with 
the International Telecommunications Union?
    Mr. Powell. Yes, indeed we are. I think as Congressman 
Coyne pointed out, one of the areas we are most profoundly 
concerned about is the network in the international sense. It 
will be a significant blow to the economy if AT&T is not able 
to terminate traffic in significant capitals around the world. 
It will be a very significant blow to the financial system if 
monetary payments are inhibited because of the international 
telecommunications systems.
    Chairman Johnson of Connecticut. Certainly given the 
seriousness of the consequences of inability to communicate 
internationally, is this organization developing or moving 
toward the development of international standards so that there 
will be broad compliance?
    Mr. Powell. My evaluation would be that the international 
forums are moving, but moving very slowly. Significantly slower 
than domestic efforts in the United States and progressive 
countries such as Canada and the United Kingdom. What we see in 
the ITU, International Telecommunications Union, is at least a 
serious acknowledgment now of the issue. They've created the 
appropriate forums, they had deputized what they call, I 
believe, Y2K ambassadors, whose mission and role it is to begin 
to push international telecommunications companies toward doing 
this.
    We work very hard with those companies we do regulate to 
push them in their business and commercial relationships with 
foreign carriers to try to press this issue. But it's difficult 
to underestimate how serious it is, because there are many 
challenges facing some of the key parts of the world that are 
distracting from this problem.
    As the president of Deutsche Telecom recently said to me, 
we have two year 2000 problems--one is this, and one is the 
Euro. These are things that are really diverting energy and 
efforts from this issue, and we're going to have to find every 
forum possible to push that.
    Chairman Johnson of Connecticut. Is the EC pushing it, 
along with Euro? I mean, what's happening? You mentioned the 
United Kingdom, but----
    Mr. Powell. Madam Chairman, I don't have specific 
information about the EU specifically, but I will say that this 
issue has begun to be put on the agenda of major multilateral 
and bilateral forums.
    Indeed, while I don't speak for the administration, it's my 
understanding that this issue was placed on the agenda at the 
recent G8 Summit. It's my understanding that the State 
Department has been working to provide communiques and make 
contacts with foreign government ambassadors in order to raise 
and place the issue at the height of the foreign policy agenda.
    I know Secretary Albright has spoken out about the issue. I 
think we are in the heavy awareness stage, and again, that's 
important. But where we're not, from my general assessment, 
we're not yet in the significant implementation phases in key 
parts of the world.
    Chairman Johnson of Connecticut. Just one last question. In 
preparing for this hearing, the Congressional Research Service 
did some background work for us. They say, based on currently 
observed measures, the telecommunications and networking 
infrastructure of small companies would have an 80-percent 
probability of experiencing a failure, compared to a 50-percent 
probability of large companies.
    Now the disturbing thing about this--these are pretty 
strong numbers--80 percent--but their definition of a small 
company is an employer under 2,000. And I can name on one hand, 
the number of employers I have in my district who have more 
than 2,000 employees. So, by far, the majority of American 
employers and by far the majority of the American workers work 
for companies that are in the 80-percent probability range, 
rather than the 50-percent probability range.
    I found that startling, and you, in a sense, government 
people who follow this issue and who are directly involved in 
our trying to meet this as a society, would you comment on that 
figure. Mr. Willemssen.
    Mr. Willemssen. Yes, I'll comment on that figure. That's 
one of the reasons that we'd like to see more information on 
exactly the status of key sectors within the telecommunications 
area. And not to say that we want FCC to be overly burdensome, 
but to collect the kind of information that should already be 
readily available by telcos that are doing the year 2000 job 
that should be done. And it's just a matter of sharing that 
information which should already be readily available with 
other parties, so that an assessment can be made of where we 
stand on risks and we can make some conclusions about the 
probability of failures, along the lines of what you just 
mentioned.
    Chairman Johnson of Connecticut. Mr. Powell.
    Mr. Powell. If I understand the figure correctly, it was 
companies as a whole as opposed to specifically 
telecommunications companies.
    Chairman Johnson of Connecticut. Right.
    Mr. Powell. I guess my response to that would be that I 
think there's a tendency to try to oversimplify how complex Y2K 
is in order to give snapshot pictures of the problem. Problems 
can range from being serious and catastrophic to relatively 
minor nuisances.
    The questions I would have when we think about statistics 
like that is curiously, what are we talking about. What kinds 
of experiences we're talking about. How mission-critical are 
they. Because I think what's going to be really critical is 
that with 19 months to go, here's the sober truth to my mind.
    Everything isn't going to make it, and there's a limited 
amount of resources, money, time, people, and effort available, 
and how are we going to prioritize those things. How are we 
going to make sure that we are using our time productively?
    Chairman Johnson of Connecticut. I guess a follow-on 
question, or perhaps one that would focus the issue a little 
bit more specifically, is beyond your work with the big 
telephone companies, what do you know about the smaller 
telephone companies? What do you know about local compliance, 
and is anybody that you know of in government talking with, in 
a sense, the chambers of commerce across the country about what 
kind of program they're implementing, and whether it complies 
with what you think they ought to be doing in order to assure 
that all of these telecommunications users in remote areas are 
going to be compliant.
    Because, I don't think, at least I gather from the 
information I've read, we really don't know what is going to be 
the impact of noncompliant companies on the system as a whole, 
and whether there will be ramifications for the system that 
would be hostile to the interests of the compliers and even a 
complying communication system. So, certainly given that, we 
ought to pay, I think, a good deal of attention to both local 
telecommunications networks and small users, and the educators 
of the small users.
    Mr. Powell. No, it's an absolutely valid concern and indeed 
one of the things I had originally hoped to say in the outset 
of my comments, that we have much more significant concerns 
with respect to the small- and medium-sized telephone 
companies. Indeed, once you get past the majors there's still 
some 1,400 telephone companies in America serving the areas 
that you described.
    We are working in our own efforts, I would say, just as 
diligently to try to bring solutions to them as well, or bring 
assistance to them as well. We're trying to work--there are a 
number of critical umbrella organizations, trade associations, 
and forums with which we're able to communicate and work 
through them. They too are heavily regulated, just like large 
companies are, and have ongoing regulatory relationships with 
the Federal Government, but more importantly, with the State 
government regulatory agencies.
    One of the things we've done since I began working on this 
problem several weeks ago, is at our request, we've asked the 
National Association of Regulatory and Utility Commissioners, 
NARUC, to form a companion Y2K operation in order for us to 
interface with--that would allow us to work through them to 
help deal with the problem of smaller and local companies that 
are better known say in Texas, to the Texas PUC, Public 
Utilities Commission, than they are to the Federal 
Communications Commission. We're pretty hopeful that we will be 
able to set up mechanisms to allow us to work as effectively 
with them as we do the large companies.
    I believe--it's my understanding that through Mr. Koskinen 
and the council's effort, there's an attempt to try to get 
Governors involved in order to get some sort of top-down 
pressure within States, if you will, for every level of State 
and local government assistance to be working on these problems 
as well.
    But there's no question it's a very complex 
multidimensional problem, and we will have to try to hit every 
spot that we can.
    Chairman Johnson of Connecticut. I thank you.
    Mr. Coyne.
    Mr. Coyne. Thank you, Madam Chairman. Director Willemssen, 
we've heard predictions of the year 2000 disaster predicated on 
the assumption that computer glitches will shut down the 
country's electric utilities. I think we've all heard those 
predictions. And I wonder if you could give us your assessment 
of how likely that is.
    Mr. Willemssen. I'm not in a position to give an assessment 
on the utility sector, because we've not completed any work on 
that. We have some recently initiated work that we're going to 
embark on with the Bureau of Reclamation, and the Department of 
Interior, some of the hydroelectric power in the Western United 
States, and some of the power marketing administrations.
    But I think my assessments here should be based on the work 
we've done, and we just haven't done that work yet. And we're 
now going to embark on that very quickly, so that we can have a 
better assessment of where we're at with the utilities area.
    Mr. Coyne. Do you think there's enough time left?
    Mr. Willemssen. I think that the most important thing we 
can remember, and the Commissioner touched on this, whether 
it's the utilities or telecommunications, we've got to set 
priorities. With the amount of time left, priority setting has 
to be primarily based on the level and severity of adverse 
impact that would happen, and we've got to put our resources in 
those areas where the impact would be most severe.
    So I think it's a bit problematic to put percentages on 
futuristic events, where we still have an opportunity to shape 
those events by making priorities and acknowledging that, as 
the Commissioner said, there's no way everything is going to 
get done in time.
    Mr. Coyne. How many of the Federal Government's most 
critical systems still need to be repaired?
    Mr. Willemssen. What we've seen over the last year is the 
first quarterly reports that came in from the 24 major Federal 
departments and agencies--about 21 percent of the total 
mission-critical systems were compliant at that point. One year 
later, as of last month, we were at 40 percent. So, you can see 
in a year, we've gone from about 21 to 40. At that rate, for 
mission-critical systems, we're obviously not going to make it 
in time.
    It again reinforces the point that we've got to set 
priorities--priorities based on factors such as health, safety, 
national defense, and adverse economic repercussions. The 
administration has not done that yet, and we're hoping that Mr. 
Koskinen will eventually move in that direction.
    Mr. Coyne. Commissioner Powell, to what extent does the 
Federal Government have control or lack of control over our 
telecommunications systems conversions, recognizing that the 
systems are privately owned?
    Mr. Powell. If I understand the question, there is a huge 
range of what we would categorize as customer premises 
equipment and internal network configuration that are purely 
privately owned. And as a pure regulatory matter, we have 
absolutely no authority whatsoever over those systems.
    That said, I don't think that we would responsibly stop 
trying. That is, we do have some oversight and some ongoing 
relationships with many people who do interact with those users 
on a daily basis, whether they be your major service provider, 
AT&T, Sprint, Bell Atlantic, Nynex, or any of the many small 
companies that would actually be providing service to these end 
users who could help convey information or point out the 
urgency of having internal systems.
    I think something really important to remember is, while 
there is this huge layer of complexity on top of it, there are 
some very critical key systems that are in the control of a 
few. The heart and soul of the telephone network is the switch, 
and there really are not that many major manufacturers of 
central office switches. And if Lucent, and Nortel, and Siemens 
do a yeoman's job in having their systems upgraded and they're 
able to distribute those upgrades, through those actors alone, 
you can reach a lot of people.
    And we're also trying to use our bully pulpit to get them 
to be active in providing through Web pages or other 
distribution channels, detailed information about it. If you 
have the following switch, 5EES, model number whatever--v.2--
you're not compliant and here's the steps we would recommend 
you taking, or here's who you should contact to get that done.
    Mr. Coyne. Thank you.
    Chairman Johnson of Connecticut. Mr. Portman.
    Mr. Portman. I thank the Chair and commend her for having 
this hearing. I'm sorry I was late. I was held up by bad 
weather in Cincinnati. I'd like to announce that at 3 today 
when this hearing began and I was dodging thunderstorms, we had 
563 days and 10 hours left until January 1, 2000. Clearly, time 
is running short. Just over 500 days.
    My concerns, Mr. Willemssen, have mostly been focused on 
the IRS, as you know. And you've testified before us before, 
and I know you looked at a lot of the different agencies. Let 
me ask you whether you think my assessment is correct or not. 
But, as I've looked at this more over the last year or so, 
mostly in relationship to the IRS, it seems to me that what I 
initially thought, that this is a technology problem, really is 
not so. It's more of a management problem. Would you agree with 
that?
    Mr. Willemssen. It is predominantly a management problem 
from our perspective. Not to say that there aren't significant 
technological challenges to surmount, especially in the sector 
we're discussing here on telecommunications. But it is 
primarily a management issue.
    Mr. Portman. Now the other thing that I'm seeming to find, 
and not just at the IRS, but in our agencies and in a lot of 
the private sectors, is that I find that managers tend to be 
quite optimistic. And that perhaps a bunch of managers in the 
room here are probably working on this, but are too optimistic. 
I just wonder if you, as a general matter, would find that you 
think managers' assessments of the ability of their 
organizations to meet the Y2K problem are too optimistic?
    Mr. Willemssen. We have seen some level of optimism that 
later did not bear out, even in our work over the last 18 
months. That's why one of the things that we think is important 
in making those assessments is having the necessary data in 
hand--data that should already be available as part of 
management practice to understand what's going on. Not putting 
an extra burden on folks in taking them away from the work they 
should be doing.
    Mr. Portman. And that concerns me. I guess the one issue 
that I think we haven't focused on maybe as much as we could 
have up here, is the importance of not just compliance in the 
eyes of the managers--and I'm talking about the Federal 
agencies here--but also to have independent verification and 
independent validation of Y2K compliance. Could you tell the 
Subcommittee if you think that is important to have that kind 
of independent verification as part of the critical steps?
    Mr. Willemssen. Yes, sir. We definitely do think that's 
important. We've made the recommendation to Mr. Koskinen, the 
Chair of the Council, in our April 30 report, to put together a 
strategy to have independent verification and validation 
strategies. And on a positive note, we are seeing much more of 
that in the Federal agencies, just in the last couple of 
months--of getting additional support to assist them in that 
area.
    Mr. Portman. The IRS--again, to focus on that for a moment, 
Commissioner Powell, has major telecommunications problems, as 
you know. Cincinnati has a service center, for instance, and 
once we get the Cincinnati computers Y2K compliant and the 
mainframes are compliant in West Virginia or here in 
Washington, DC, then the issue is how do you test it. Well, the 
only way you can test it is to have the two work together. And 
that involves the telecommunications link being Y2K compliant. 
Again, I think that's an area where I applaud the Chair for 
having the hearing today, because we haven't focused enough on 
the key linkage.
    Also with regard to the IRS, all these service centers then 
didn't feed into the mainframe, and that often is a three step 
process--from the district office or service center to the 
mainframe, and this is all really linked by telecommunications.
    And so the other thing I would ask both of you is whether 
you're satisfied that our Federal agencies have looked into 
that step. Not just independent verification, but really a 
third step in the process of having computers in two places Y2K 
compliant, but then in the third step, making sure that 
telecommunications systems are compliant. As a general matter, 
are you satisfied that that is being done? The question is for 
either.
    Mr. Willemssen. Congressman, I would say the results at 
this point are mixed. Again, one of the areas of emphasis that 
we've had on this year 2000 issue is the need to perform such 
end-to-end testing, to make sure that all of the necessary 
systems are in place. It's not like we can take down the public 
switch network totally and test it. We've got to rely a lot on 
lab-based testing, but we still have opportunities, in some 
cases, to take components and segments of the network down and 
fully test those.
    Mr. Powell. I would just echo those comments, which I think 
are completely correct. I can't really offer an assessment 
about particular independent agencies, but I will say that the 
complexity of the network is that sometimes it is only as good 
as the nodes that are on it, and you are recognizing that fact, 
and it's very important to do some level of interconnectivity 
and interoperability testing. Within the telecommunications 
industry itself they have established forums in order to do 
that for their key functionalities and their own 
interoperability, but what is more of a challenge is to try to 
provide some sort of interoperability exercises that provide 
confidence to key end users or key agencies, like the IRS, like 
the banking or financial community, that when their systems 
hook into all of this it still works. Even in the best of 
circumstances on that day we are all going to hold our breath, 
but I think, from what I hear from some of these key 
telecommunications industry forums, they are getting their own 
stuff taken care of but they are beginning to examine ways in 
which they can sort of expand the envelope on their operability 
testing to sort of increase their confidence. And that may, at 
some point, include selective, smart interoperability testing 
with very, very key sectors, key client sectors or key 
government agencies. I certainly am encouraging that effort to 
see if there aren't ways that that can be done.
    Mr. Portman. My time is up, but we're not very good up here 
in Congress at programming or at testing telecommunications 
networks so maybe we can't help too much, but you need to tell 
us, perhaps you've done that already earlier before I got here, 
but specifically where you think we can be more helpful in this 
to be able to meet this challenge in the next 563 days and 10 
hours. And I think my time is up. Perhaps I should ask that you 
give me that in writing.
    Mr. Willemssen. I can comment if you'd like, sir.
    Chairman Johnson of Connecticut. Briefly?
    Mr. Willemssen. I would say having hearings such as this 
can serve an especially useful purpose in raising the issues 
and, in many cases, getting actions done that would otherwise 
not have been taken.
    Chairman Johnson of Connecticut. Thank you.
    Congresswoman Thurman----
    Ms. Thurman. Thank you, Madam Chairman.
    Chairman Johnson of Connecticut [continuing]. A very 
diligent Member of this Subcommittee, I might add.
    Ms. Thurman. Commissioner, you mentioned that you would 
suggest to them toward the time that they think they have come 
into compliance that you should do some of this testing. What 
kind of response have you gotten from industry in trying to set 
that up?
    Mr. Willemssen. The process of testing?
    Ms. Thurman. Right. From once they say they are in 
compliance and being able to network throughout some of the 
governmental agencies or other folks that they may need to have 
their services for. Have they been reluctant? Have they come 
forth? I mean, what kind of an attitude are we seeing?
    Mr. Powell. I think to use the word of the day is mixed. 
First of all I think they are doing a pretty decent job with 
recognizing the importance of interoperability testing within 
their own networks and their interconnectivity and 
compatibility with adjacent networks, that is, say, an AT&T 
being able to terminate traffic with a local exchange carrier. 
I think the more difficult issue that still needs some work is 
the idea of being able to provide the public switch telephone 
network for testing with key customers. One worry, and you can 
ask them themselves when they come up----
    Ms. Thurman. I will.
    Mr. Powell [continuing]. Is that there are just, there 
would be trillions of people who would want to do that. I mean, 
everybody uses the phone system and so if you start going down 
that road, I think you have to be very, very selective and 
thoughtful about how and who you do that kind of testing with. 
I think the second component is the concern and reluctance 
that, you know, we still do have a live network that has to be 
working, unlike, say, Wall Street, who might on the weekend be 
able to take the whole system down and exercise it, you can't 
really do that with the fundamental switch phone network, and I 
think that's another problem.
    And, I think a third problem, which I think we would be 
remiss if the hearing didn't go by and we talk to, is the 
really serious concerns about legal liabilities as barriers to 
information. Companies, I think in part rightfully, and 
sometimes overstated, are very, very worried about legal and 
regulatory consequences of compliance and we have seen a very, 
you know, that be a very significant barrier to providing 
candid, detailed information about testing and compliance. We, 
from our small part, have been doing everything we can to try 
to eliminate some of those fears. For example, we pursued with 
the antitrust division the issuance of a business advisory 
letter that would say you can cooperate on Y2K compliance and 
you won't be in violation of antitrust laws. Hopefully, that 
will help. Some have suggested at some point Congress may have 
to be prepared to provide some levels of indemnification. I 
don't offer an opinion on that, but that's a demonstration 
about how worried people are about that as an obstacle to those 
things. So I think that also has been getting in the way of the 
comfort of opening up to your critical customers and the 
competitive consequences, your weaknesses, and strengths. And 
so we just have to work that process to the end I think.
    Ms. Thurman. Mr. Willemssen, let me ask you a question that 
has somewhat bothered me over the last couple of months as 
we've gotten involved in this and as we've heard from different 
agencies and particularly because you have made recommendations 
to the administration. In your recommendations, the 
Commissioner probably needs some money to also do his own shop, 
let alone worry about all the rest of the world that's out 
there, but have you made any recommendations, as we get ready 
to go into appropriations, for these agencies and departments 
to be able to get additional dollars other than the dollars 
that they already have in their agency for just running their 
computer systems?
    Mr. Willemssen. We have not made any recommendation 
specific to an agency on particular dollar amounts. What we 
have seen is in selected instances where agencies have said 
they've needed more. Their particular authorizing and 
appropriations committees have asked them, Please tell us now 
if you need more. We don't want to hear about it later, please 
tell us now. And I think in many cases that has occurred.
    Ms. Thurman. Commissioner, you made a comment and I don't 
know what's happening in other States, but I can tell you in 
Florida, in this past legislative session, there were several 
millions of dollars put forth for this project to help both our 
State agencies. One last question that I have, and this is also 
very troubling. This is a new era, this is a time when 
everybody wants to come into compliance. What are we doing to 
ensure that those folks that say they can, you know, do 2000, 
what kind of criteria is being used to pick these vendors? Or 
is there just this list? You said something to the effect that 
if you don't have that switch, this is who you should call, or 
this is who you should use. What criteria are we using for 
vendors? Is it just come here and sign up, put your name on, 
and that's it, without any--I mean, I'm just kind of curious.
    Mr. Powell. It's an excellent question; unfortunately, 
there's no easy answer, at least with respect to the 
telecommunications industry. It's a phenomenally large and 
complex network and if I began to recite to you the number of 
components we would call critical we would be in the thousands 
very quickly. You also have telephone companies, let's say, for 
example, that have very, very different business models and 
have very, very different priorities about components within 
their system. They might emphasize certain features and 
functionalities that another company doesn't; they may do it a 
different way. You know, you take one phone company, I mean, 
I'd take, say, GTE as an example. It has 25.2 million digitally 
switched access lines, 658 unique systems, 2,400 central office 
switches--that's one company. And, you know, they all have 
different components and different emphasis.
    But the benefit we have, as I mentioned at the outset of my 
testimony, with telecommunications is there have always been 
historically some critical-clearing forums. Bellcore is just a 
tremendous institution that has always provided standards and 
technical interoperability components and they are very heavily 
involved. The companies naturally come together because they 
have a self-interest in being interconnected with each other, 
so there has to be a degree of standardization for it to all 
work, and it's a sort of live by the sword, die by the sword. 
You can't exactly cut off your competitors, or you cut off your 
own nose. So I think we have some benefits in that regard, and 
so I think that that's one way.
    What I would be remiss if I didn't say is what we can't do, 
at least the FCC can't do. You heard the numbers for one phone 
company. We have no ability to go out and audit systems or 
evaluate systems in any meaningful way. Not only do we not have 
resources, or time to do that, we don't have the expertise to 
do that. I mean, while we regulate them, we are not the experts 
on how a network works. We do not have someone in the 
Commission who could walk up, there may be an exception, who 
would walk up to a switch and start sort of testing it. And so 
what we've had to do is, in a sense, we bracket what we hear. 
That is, we try to find independent verifications of whether 
the rosy assessments we're hearing track with reality.
    For example, if a local phone company says it's ready, you 
know, one good place to talk to is the long-distance companies 
who have a very serious interest in making sure their traffic 
can be terminated locally. So if they're saying, we don't buy 
it, we have a real problem, then that makes us more doubtful.
    State commissions can be incredibly helpful in giving us a 
sense of whether this optimism is justified. And key end users, 
like the financial community, are critical in that regard.
    Ms. Thurman. Thank you.
    Chairman Johnson of Connecticut. Just a couple of brief 
followup questions. Mr. Willemssen, do you, are you aware, or 
do you have any reason to believe that OMB is not willing to 
back the amount of the requests from the agencies? I've heard 
some sort of miscellaneous comment about agencies having a hard 
time getting OBM, OMB, to really support them in the amount of 
money they think they'll need.
    Mr. Willemssen. I don't have strong evidence of that, but I 
have anecdotal evidence, folks in agencies coming up to me and 
saying so forth and so on. But my recommendation, my suggestion 
is that they need to get Mr. Koskinen involved. And I can 
assure you that if Mr. Koskinen believes that somebody needs 
more resources, I think at this point in time he is going to 
make a case for it, given how little time is left and the major 
challenge that we face.
    Chairman Johnson of Connecticut. Thank you. The other 
question that I just want to ask you is that Treasury--
Treasury, IRS, and TRW have formed a slightly different 
partnership or a really pretty new partnership since our last 
hearing to ensure that managing the telecommunications 
compliance program will work better. In your estimation, is 
that going to make a difference?
    Mr. Willemssen. I think the level of attention that has 
recently been paid to telecommunications at Treasury will make 
a very positive difference. They've made a number of changes in 
approach and management and we're encouraged that it is a major 
priority and that they plan to pay the necessary attention to 
it. I just hope that we have enough time to get every critical 
thing done that we have to get done.
    Chairman Johnson of Connecticut. And, Mr. Powell, I just 
wanted to ask you briefly. The FCC sent out 200 letters to 
major companies and organizations in all sectors of the 
telecommunications industry. Could you just briefly share your 
analysis with us and then there's more provided for the record, 
the responses to those letters.
    Mr. Powell. Well it's fair to say that we are sort of in 
the early- to mid-phase of the assessment so it is difficult to 
give a total comprehensive picture, but I would say that we're 
generally satisfied that we're getting a fair amount of useful 
information giving us some sense of where we think the industry 
as a whole is. Again, with respect to wire line telephone 
companies, we're pretty confident, and when I say that I mean 
to be defined as in light of what we see in terms of their 
efforts, the amount of money they're spending, the seriousness 
and strengths of their plans, how long they've been working on 
the problem, and their stated deadlines, we're relatively 
confident that they will more likely than not be complying.
    Chairman Johnson of Connecticut. But, when you conclude 
your analysis of these responses, will you share it with the 
Committee please?
    Mr. Powell. Yes, we'll be happy to try to provide that to 
you.
    [The following was subsequently received:]
                                                    27 October 1998
The Honorable Nancy L. Johnson
United States House of Representatives
343 Cannon House Office Building
Washington, D.C. 20515

    Dear Congresswoman Johnson:

    At the House Ways and Means Subcommittee Hearing on June 16, 1998, 
you expressed your interest in the responses the FCC received to the 
over 200 letters sent to various industry members regarding Year 2000 
preparedness. In this letter I will summarize what we learned from 
those responses. Please be aware that this summary represents a 
snapshot of what we learned from the responses to our letters, and is 
not representative of all that we have learned since those responses 
were received.

                              Methodology

    The FCC has adopted a standard lifecycle model for Year 
2000 remediation. This model consists of five steps:
    1) Inventorying computer and telecommunication systems,
    2) Assessing these systems and determining whether they 
need repair, replacement or no change,
    3) Remediating as required,
    4) Performing individual tests (unit test phase), and
    5) Integration and Systems Testing.
    Once the first step is completed, the others proceed in 
parallel. We are carefully tracking industry progress by 
meauring the percentage completion and estimated completion 
dates in each phase of the lifecycle model.

                             Common Carrier

    With respect to the wireline telephone industry we queried 
over 20 companies that account for more than 97% of the access 
lines in the United States. Letters were also sent to major 
equipment manufacturers. Responses to these letters were 
mandatory, and we received a 100% response rate. Overall, we 
are relatively confident that this segment of the 
Telecommunications industry is seriously addressing Year 2000 
conversion issues. (We have also sent an informational letter 
to the more than 1300 smaller carriers).
    According to the responses, the carriers have completed the 
inventory and assessment phases of their Y2K conversion 
efforts, and set completion dates for remediation, testing and 
integration by the second-quarter of 1999. One carrier states 
that remediation will be completed in the 1st quarter of 1999, 
and two carriers will finish this phase during the 2nd quarter 
of 1999. Carriers are already engaged in, or are in the process 
of planning, their unit test phases. Most are targeting late 
this calendar year, or early next year for the completion of 
their unit tests. The Telco Year 2000 Forum, which is comprised 
of eight large regional local exchange carriers, has contracted 
with Bellcore and is presently performing integration testing 
on Year 2000 ready equipment; intial results from this testing 
will be available in the first quarter of 1999. ATIS, which is 
an industry-funded organization whose mission is to advance new 
telecommunications technologies, will conduct interoperability 
testing in January and February 1999, and is also working with 
Bellcore.

                                 Cable

    The Cable Services Bureau sent 25 letters to the 10 largest 
multiple systems operators (``MSOs''), 6 manufacturers, 5 cable 
network programmers, and 4 trade associations. These letters 
asked companies to share information on a voluntary basis. We 
received a healthy 68% response rate.
    All respondents have initiated an inventory phase, with the 
majority of the MSOs far along towards completing the review of 
their inventories. Cooperative efforts among members of a Y2K 
group set up by Cablelabs should help provide a common 
framework and should expedite the development of common 
solutions to Y2K remediation efforts.
    Based on the responses that have been received, there 
appears to have been less progress on remediation, unit 
testing, or integration (based upon data as of the date of 
those responses). However, several respondants state that they 
will achieve Year 2000 compliance well ahead of the century 
date rollover.

                                Wireless

    The Wireless Telecommunications Bureau sent a letter to 
licensees, associations, and other entities involved with 
wireless communications. The letter shared Y2K information and 
made a voluntary request for information. The response to this 
voluntary inquiry has been insufficient to do an analysis of 
the responses. The Bureau is engaged in active follow up which 
has produced additional responses. The current response rate is 
at 78% and we are in the process of completing our assessment.

                               Mass Media

    According to the responses received by the Mass Media 
Bureau, the major broadcasting networks have been addressing 
the Year 2000 problem for some time, with the earliest reported 
effort beginning in 1996. These and other broadcasting networks 
responded that they are well aware of the Y2K problem and have 
formed teams and reporting structures to insure adequate 
project monitoring and risk assessment. Networks have been 
communicating the importance of being Y2K ready to their 
affiliates. Most of the broadcasters who responded provided 
information that suggests that they are taking the Year 2000 
problem seriously, and are devoting resources, systematically, 
to insure that they will be Y2K ready. Most respondants 
indicated that they are working closely with equipment and 
software vendors to ensure Y2K readiness and/or ascertain the 
need for fixes or new products.
    Broadcasters have found that their entire equipment 
inventory must be thoroughly checked. For example, transmitters 
were described as essentially ``dumb'' devices that should not 
cause a problem. However, remote control, cooling and other 
systems that may be computer controlled could render the 
transmitter inoperative should they fail as a result of Y2K 
problems. Thus, it was widely agreed that every piece of the 
broadcasting process must be working and must be tested in an 
integrated fashion to best assure compliance.
    FCC is also concerned about the Emergency Alert System 
(EAS). Under 47 CFR Part 11, all broadcast stations (14,000+) 
had to have FCC certified EAS equipment on January 1, 1997. 
Cable systems with 10,000 or more subscribers (1,200+) must 
have the equipment by December 31, 1998. All seven EAS 
equipment manufacturers have stated that their systems will 
correctly process dates; in some cases, equipment will have to 
be upgraded to current versions.

                             International

    The following information regarding the international arena 
stems mostly from forums that were conducted earlier this 
summer, and is included for your information only. Developing a 
comprehensive understanding of international telecommunications 
readiness for Year 2000 is a difficult task. The wide range of 
companies and countries involved creates difficult logistic 
problems, not only in collecting data but also in developing 
and integrating solutions across disparate networks.
    Some governments were characterized by forum participants 
as being apathetic with respect to Year 2000 assessment, 
remediation, and testing. The ITU, however, is taking a strong 
leadership position. The ITU has a Y2K task force that has sent 
a mailing to more than 5,000 members--governments, telecom 
carriers, and operators--to which there has been a low number 
of responses.
    Regarding satellite carriers, there is little concern with 
the satellites themselves which do not, according to the 
industry, have much, if any, date sensitive information in 
them. However, ground equipment needs to be carefully checked 
because antenna controls are date and time dependent and ground 
stations contain complex electronics and larger computers. 
Companies are confident they will complete conversion in time, 
but cite interoperability testing as difficult.
    We hope you find this information helpful. If you would 
like a briefing on these issues or any other information 
regarding the telecommunications industry and Y2K, please do 
not hesitate to call me.

            Sincerely,
                                          Michael K. Powell
                                                       Commissioner
      

                                

    Chairman Johnson of Connecticut. And then second, you note 
in your testimony that the FCC has adopted a three-prong year 
2000 strategy, including awareness and outreach, monitoring and 
assessment, and regulatory action and contingency planning. Is 
the FCC going to publish an outline of the plan, of its plan to 
carry out this strategy? Will there be milestones in that plan? 
Will it be published soon?
    Mr. Powell. I think that's to be determined. I mean, we 
balance what we release publicly again with this concern about 
stifling the flow of candid information to be perfectly honest. 
We are happy to publish the general outlines of all that you 
just described, but I think I would have to be responsible and 
reserve some judgment with respect to some of the details, lest 
we sort of inhibit the ability to continue to get good 
information.
    Chairman Johnson of Connecticut. Thank you, and I thank 
this panel very much. I appreciate your input today.
    Mr. Powell. Thank you very much.
    Mr. Willemssen. Thank you very much.
    Chairman Johnson of Connecticut. It is my pleasure to 
welcome the second panel. David Baker, managing director of 
Schwab Washington Research Group; A. Gerard Roth, vice 
president of technology programs, GTE; A. John Pasqua, program 
management vice president of AT&T Year 2000 Program; Ronnie Lee 
Bennett, program management vice president for Lucent 
Technologies; Priscilla Guthrie, vice president and general 
manager, TRW Business Enterprise Solutions and 
Telecommunications; William O. White, member of Telco Year 2000 
Forum.
    We appreciate your joining us this afternoon and look 
forward to your testimony.
    Mr. Baker.

    STATEMENT OF DAVID E. BAKER, MANAGING DIRECTOR, SCHWAB 
                   WASHINGTON RESEARCH GROUP

    Mr. Baker. Madam Chairman, good afternoon; distinguished 
Members and guests. Thank you for the opportunity to discuss 
the challenges facing the telecommunications industry in 
solving the year 2000 computer problem. While Schwab never says 
buy, sell, or hold on a stock, Madam Chairman, the Washington 
Research Group does cover the year 2000 problem and its impact 
on the industry.
    My area of expertise is global information operations and I 
first became involved with the millennium bug about 4 years ago 
while serving on the Joint Staff as a Deputy Director for 
Operations, National Systems Support. In that capacity I was 
aware early on of the absolute requirement for the computer 
systems that operate and fly our national constellation of 
intelligence satellites to be totally year 2000 compliant.
    Since retiring the Air Force and joining the Schwab 
Washington Research Group, one of the areas I cover is Y2K from 
a global perspective, as well as an industry perspective. It is 
beyond question that the telecommunications capability of this 
country is critical to our economic health and security. Each 
day billions of dollars flow across State and national borders. 
The massive increase in electronic commerce underscores the 
radical shift in how Americans conduct business. The future 
will ride on the digital bits traveling through high bandwidth 
facilities being built throughout the world.
    Public safety, of course, is even more critical. Fire, 
police, and ambulance services depend on satellite 
infrastructure to reach individuals in need of assistance. With 
the year 2000, as was pointed out, just 563 days away, 
telecommunications companies and the FCC have been focusing on 
the potential disruption that could result if mission-critical 
systems are noncompliant.
    In the communications sector a number of critical, social, 
and regulatory goals could be derailed or at least suffer 
severe setbacks if computer systems tying together the world's 
networks are not ready to handle the year 2000. With the 
passage of the 1996 Telecommunications Act, Congress commenced 
the process of shifting our communications industry from a 
monopoly environment to a competitive and deregulated one.
    Competition in telecommunications services promises to 
bring innovation, improve service quality, and lower prices to 
consumers and businesses. If healthy competition in the 
telecommunications industry is a long-term goal of this 
country, a seamless transition to the year 2000 is mandatory. A 
colleague of mine at MetaGroup points out that the year 2000 
compliance in this industry is about a lot more than just 
switching gear and billing systems.
    Year 2000 compliance in the telecommunications sector 
requires companies to also be sure they take a hard look at the 
provisioning systems, network management, and intelligence, as 
well as their physical facilities and IT, information 
technology, infrastructure. If any one of these elements is 
neglected in the process of upgrading and fixing year 2000 
problems, the entire network may be slowed down or negatively 
effected due to a lack of interoperability.
    Most of us are aware of what happened when the Galaxy 4 
satellite turned away from the Earth on May 19 of this year. 
Businesses suffered significant disruptions as paging 
operations, Internet access, and wire service news 
transmissions were shut down. We live in a high-tech world 
depending on computers and high bandwidth transmission 
technologies. The economic consequences of a disruption will be 
even more substantial by the year 2000. Internet retailing, for 
example, generated about $3 billion in sales last year. By 2000 
some estimates project that to reach $16 billion.
    I would like to briefly comment on some observations from a 
global perspective on Y2K. I recently published a special 
report for the Research Group on the progress of different 
countries and regions in preparing their computer systems for 
the year 2000. As a general statement, my research shows that 
the United States is way ahead of other countries in addressing 
this problem. Many will soon find themselves well behind where 
they should be and scrambling to catch up. Much of the 
expertise available to fix noncompliant computer systems is 
already actively employed working on other computer programs, 
and will not be available when the call for help is made. Those 
who have elevated awareness of this problem to the senior level 
of their organizations and countries and have taken action to 
develop a roadmap to compliance with adequate time for testing 
will have a definite advantage in the global market as we 
approach the year 2000.
    An exception to the negative progress reports by foreign 
countries are in the efforts of our neighbors to the north, the 
Canadians. Last fall, at the invitation of their Industry 
Minister, they formed a Year 2000 Task Force. The members of 
this organization are chief executive officers from a number of 
key Canadian economic sectors. Banking, insurance, 
transportation, manufacturing, and telecommunications, are all 
represented.
    They recently came to a very early conclusion and I'd like 
to share that today. No business is immune from the year 2000 
problem. Every firm is affected either directly in its own 
operations or indirectly by the actions of others. I make note 
of these efforts by the Canadians because they really are 
making some great progress in increasing both the awareness of 
and action taken on squashing the millennium bug.
    As a technology analyst at the Research Group, I receive a 
lot of questions about the status of publicly owned companies. 
An OMB official told me its what they call ``an absolute 
silence from corporate America'' on this issue. Panels such as 
this one will start to eradicate the enormous uncertainty about 
the status of different sectors of our economy and promote both 
the sharing of relative information and an undertaking of 
remedial action.
    We have to act now, Madam Chairman; this is the last year 
to do something about it.
    Thank you very much for the opportunity to discuss the year 
2000. I look forward to questions. Thank you.
    [The prepared statement follows:]

Statement of David E. Baker, Managing Director, Schwab Washington 
Research Group

    Chairman Johnson, distinguished members and guests. Thank 
you for an opportunity to discuss the challenges facing the 
telecommunications industry in solving the Year 2000 computer 
problem. While it is a Charles Schwab corporate policy to never 
give a buy or sell recommendation on a stock, the Schwab 
Washington Research Group does cover the Year 2000 computer 
problem and its impacts on industry. My area of expertise is 
global information operations and I first became involved with 
the Millennium Bug about four years ago while serving in the 
Pentagon on the Joint Staff as the Deputy Director for 
Operations (J3), National Systems Support. I was also the 
Deputy Director Military Support at the National Reconnaissance 
Office and in that capacity was aware early on of the absolute 
requirement for the computer systems that operate and fly our 
national constellation of intelligence satellites to be year 
2000 compliant. Since retiring from the Air Force and joining 
the Schwab Washington Research Group, one of the areas I cover 
is Y2K, from a global, macro perspective, as well as an 
industry perspective.
    It is beyond question that the telecommunications 
capability of this country is critical to our economic health 
and security. Each day, billions of dollars flow across state 
and national borders. The massive increase in electronic 
commerce underscores that a radical shift in how Americans 
conduct business will ride with the digital bits traveling 
through high bandwidth facilities being built throughout the 
world. Public safety, of course, is even more critical. Fire, 
police and ambulance services depend on a reliable 
telecommunications infrastructure to reach individuals in need 
of assistance.
    With the Year 2000 only 563 days away, telecommunications 
companies and the FCC have been focusing on the potential 
disruption that could result if mission critical systems are 
non-compliant. In the communications sector, a number of 
critical social and regulatory goals could be derailed or at 
least suffer severe setbacks if computer systems tying together 
the world's networks are not ready to handle the Year 2000.
    With the passage of the 1996 Telecommunications Act, 
Congress commenced the process of shifting our communications 
industry from a monopoly environment to a competitive and 
deregulated one. Competition in telecommunications services 
promises to bring innovation, improved service quality, and 
lower prices to consumers and businesses. Critical to this 
process is the opening of telecommunications infrastructure 
controlled by incumbent phone carriers to new competitors 
seeking to enter the market. By leasing parts of existing phone 
networks, competitors hope to build sufficient scale to justify 
the additional capital investments essential to the 
construction of independent and advanced facilities.
    To accomplish this, back office systems, often referred to 
as operation support systems, must be capable of transferring 
customer lines, billing information and other account data to 
new competitors struggling to gain market share. Ultimately, 
the systems of competitors must be capable of accomplishing the 
same tasks, as customers switch carriers in what is hoped to be 
a vibrant competitive market in the years ahead. Obviously, the 
failure of these computer systems would have a chilling effect 
on the progress of creating a competitive environment. Although 
new computer systems should be Year 2000-compliant, disruptions 
or other publicized failures could seriously impact the growth 
of competition.
    If healthy competition in the telecommunications industry 
is a long-term goal of this country, a seamless transition to 
the year 2000 is mandatory. In order for that to happen 
carriers must ensure they are compliant in several distinct 
areas. A colleague of mine at META Group points out that year 
2000 compliance in this industry is about more than just 
switching gear and billing systems. Year 2000 compliance in the 
telecommunications sector requires companies to also be sure 
they take a hard look at provisioning systems, network 
management and intelligence, as well as their physical 
facilities and information technology (IT) infrastructure. If 
any one of these elements is neglected in the process of 
upgrading and fixing year 2000 problems the entire network may 
be slowed down or negatively affected due to a lack of 
interoperability.
    Similarly, the massive increase in electronic commerce 
underscores our economic dependence on a reliable system of 
interconnected telecommunications networks. As noted by FCC 
Chairman Bill Kennard, the recent failure of an advanced data 
network offered a glimpse of what a network failure could mean. 
Stores were unable to process credit card transactions and the 
Red Cross encountered difficulty processing blood donations.
    Of course, we are all aware of the recent failure of the 
Galaxy 4 satellite on May 19th of this year. Businesses 
suffered significant disruptions as paging operations, Internet 
access, and wire service news transmissions were shut down. We 
live in a high-tech world dependent on computers and high-
bandwidth transmission technologies. The economic consequences 
of a disruption will be even more substantial by the year 2000. 
Internet retailing, for example, generated about $3 billion in 
sales last year. By the year 2000, some estimates project sales 
to reach $16 billion.
    As we approach 1999, it becomes more and more apparent that 
this country and the rest of the world will experience computer 
system disruptions with the new millennium. It is vital that we 
minimize these disruptions in the communications area. Our 
investments in newer and faster telecom technologies, and the 
promotion of policies that foster new carriers with their own 
networks, render us increasingly vulnerable to the consequences 
of a Year 2000 breakdown.
    I would like to briefly comment on some observations from a 
global perspective on Y2K. I recently published a special 
report for the Schwab Washington Research Group on the progress 
of different countries and regions in preparing their computer 
systems for the year 2000. As a general statement, my research 
shows that the US is well ahead of other countries in 
addressing this problem. Many countries and foreign companies 
will soon find themselves well behind where they should be and 
scrambling to catch up. Much of the expertise available to fix 
non-compliant computer systems is already actively employed 
working on other computer programs and will not be available 
when the call for help is made. Those that have elevated 
awareness of this problem to the senior levels of their 
organizations and countries and have taken action to develop a 
road map to compliance with adequate time for testing will have 
a definite advantage in the global market as we approach the 
year 2000.
    An exception to negative progress reports by foreign 
countries are the efforts of our neighbors to the north, the 
Canadians. Last fall, at the invitation of Industry Minister 
John Manley, an organization called Task Force Year 2000 was 
formed. The members of this organization are CEOs from a number 
of key Canadian economic sectors. This includes representatives 
from banking, insurance, transportation, manufacturing, 
information technology, resource-based, retail and service, 
small and medium-sized businesses, and telecommunications. A 
recent letter from this group to business executives and 
business owners across Canada explains the seriousness of Y2K 
and the fact that they have come to an early conclusion. No 
business is immune from the Year 2000 problem; every firm is 
affected--either directly in its own operations, or indirectly, 
by the action or inaction of others. In addition, the Task 
Force's reports and recommendations are brought to the 
attention of Prime Minister Jean Chretien and the provincial 
premiers. I make note of these Year 2000 efforts by business 
leaders in Canada because they are making great progress in 
increasing both awareness of and action taken on squashing the 
Millennium Bug.
    As a research analyst at the Schwab Washington Research 
Group I receive many questions regarding the status of publicly 
owned companies in preparing their computer systems for the 
year 2000. Visibility into this area is limited in many cases 
and I believe liability is the issue. A staff member at the OMB 
described this to me as ``an absolute silence from Corporate 
America on Year 2000 preparations.'' I expect this will change 
and soon because of shareholder demands as well as 
Congressional help. Panels such as this one will start to 
eradicate the enormous uncertainty about the true status of the 
different sectors of our economy and promote both the sharing 
of relevant information, and the undertaking of remedial 
action. We have to act now, as this is the last year to do 
something about it.
    Thank you again for the opportunity to discuss the Year 
2000 Problem and its challenges to the telecommunications 
industry. I look forward to answering any questions you might 
have.
      

                                

    Chairman Johnson of Connecticut. I'm very impressed with 
getting through that many pages almost on time, I'd have to 
say, Mr. Baker.
    Mr. Roth.

    STATEMENT OF A. GERARD ROTH, VICE PRESIDENT, TECHNOLOGY 
             PROGRAMS, TECHNOLOGY AND SYSTEMS, GTE

    Mr. Roth. Thank you, Chairman Johnson, Members of the 
Subcommittee.
    My name is Gerard Roth, vice president for Technology 
Programs, responsible for GTE's Year 2000 Program. I'd like to 
commend you for having this hearing to open up the awareness 
issue.
    While GTE has a variety of interests here, it has 
represented itself principally as a local exchange carrier in 
the context of this hearing. We've prepared written testimony, 
but I'd like to, in the interest of time, summarize if I may.
    As properly stated in the background you provided for this 
hearing, the public switched network is truly comprised of 
smaller networks supplied by hundreds of local exchange 
carriers and several long-distance companies. These networks, 
in turn, connect millions of government and private sector 
telecommunications computer networks. The Y2K compliance of 
each of these pieces is exclusively the responsibility of its 
owner. As you will see in my testimony today, network 
functionality provided by the major telephone companies and 
their suppliers is progressing well, with first network testing 
beginning as early as July 1998.
    My presentation today focuses on the simple question that I 
was asked to address by your staff: Why can't you simply 
certify the public switch network for the year 2000 and tell us 
by what date it will be compliant? I believe the answer to this 
is that it is not possible for three principle reasons.
    First is ownership. There is no one owner as we all have 
stated earlier. There are only pieces of this network all 
individually owned. The second is mathematics. The 
transactions, the events, the potential routing paths are too 
numerous to validate with 100-percent testing.
    And last, which you've heard earlier, is the limitations on 
testing in a live network. We cannot perform Y2K clock advance 
testing in a live network without corrupting or disrupting the 
operations of the current network itself. This does not mean 
that the public switch network will not work in the year 2000; 
it simply means that each of us must do our portions and then 
verify them through operability testing.
    Work has been underway for several years throughout the 
telecommunications industry. That work is thorough, well-
thought-through, cooperative with interactive involvement with 
the industry, being accomplished at an exceptional rate, and 
represents the best known solution to the year 2000 and the 
public switch network.
    As requested by your Subcommittee staff, I would like to 
depict the complexity, interdependency, and interoperability 
issues affecting the public switch network and, in doing so, I 
will attempt to ``build the onion'' from the inside out.
    First, the core of the basic physical system, and I have a 
chart here to my right, your left, to address this. Chart one 
represents the basic, generic system. As you can see this 
hierarchy starts at the bottom with the computer hardware and 
moves up through individual operating systems all the way 
through to communications protocols. The physical computer-
based system is best described as the combination of hardware, 
firmware, software products and applications.
    Each element of each system must be, in turn, verified by 
each company involved. Whether this is a telephone switch or a 
customer contact system, this is the basic structure of all of 
our systems which first need to be year 2000 compliant. A 
typical company or agency will have hundreds of these. GTE's 
current plan, by way of example, is for year 2000 compliance of 
all of our systems at this level by December 1998.
    Chart two depicts the functional thread. In looking at this 
chart, its complexity precludes my trying to explain it; but 
each of those circles could be an individual system as I 
described in chart one. To provide major functions, several 
systems must work together both logically and physically in a 
continuously reliable fashion. It should be noted that these 
threads or clusters must also be verified Y2K compliant after 
their individual components have been certified.
    Chart two in this example is a real customer service thread 
comprised of 17 separate systems, 26 formal communications 
channels, and 10 separate data bases. A typical company or 
agency will have hundreds, if not thousands, of these threads.
    The third chart depicts the logical local exchange carrier. 
There are actually three parts to this diagram: The first, at 
the bottom is the legacy, the business, and back office support 
system. The middle layer consists of the network management 
systems: The controls for the public switch network itself. The 
top layer are the fully integrated, network elements which do 
not stand alone.
    Using the logic of this chart, GTE processes thousands of 
calls per minute on 21.5 million access lines in the United 
States alone. To accomplish this, we have several hundred 
systems, a few thousand central office switches, thousands of 
supplier products, tens of thousands of client server desktops, 
and extensive local and wide-area networks. GTE's present plan 
for fully tested compliance at this level of the network is by 
the end of June 1999.
    Our last chart is the logical public switch network. This 
expands to include all of the local exchange carriers, 
interexchange carriers, and private networks into one logical 
picture. There are hundreds of local exchange carriers in the 
United States alone; plus several interexchange carriers, 
millions of pieces of customer premise equipment and private 
network emplacements and gateway connectivity to international 
telephone companies. This network processes millions of 
transactions per minute; its complex, realtime, dynamic call 
routing prohibits us from knowing in advance where any 
particular component will play.
    I'd just like to point out parenthetically that the largest 
external dependency on this is the ubiquitous power cord coming 
off of the end of this network.
    In conclusion, I would like to say year 2000 compliance is 
a gigantic ongoing task. In the last Securities and Exchange 
Commission disclosures, seven telephone companies projected 
more than $2 billion for year 2000 expenditures. More than 50 
percent of that effort is expected to be testing of all types. 
We need to keep in mind year 2000 must occur simultaneously 
with operations and maintenance of the public switch network, 
without degradation of quality of service or the variety of 
features we've all come to take for granted.
    Today's testimony will show that we are dealing with this 
in a responsible fashion, targeted for a mid-1999 completion. 
If I may continue, I have just a few more statements for 
conclusion.
    Collectively and individually, the telephone companies 
understand the year 2000 challenge they face. They have plans 
in place to address these issues in a timely fashion as you 
will hear today. Our testing strategies provide verification 
for the public switch network year 2000 compliance to the 
maximum extent possible, and the work remaining is hard, it is 
complex, and it is of significant volume. However, based on the 
status to date, we have reasonable expectations that we will be 
successfully completing our essential systems on time.
    Chairman Johnson, I thank you for the opportunity to 
testify.
    [The prepared statement follows:]

Statement of A. Gerard Roth, Vice President, Technology Programs, 
Technology and Systems, GTE

    Chairwoman Johnson and members of the Subcommittee. Good 
afternoon, my name is A. Gerard Roth. I am Vice President, 
Technology Programs, GTE, responsible for GTE's Corporate Year 
2000 Program Management Office (PMO). I am here to discuss Year 
2000 (Y2K) as it relates to telecommunications 
interdependencies and interoperability. I commend the 
Subcommittee on Oversight for conducting hearings focused on 
the telecommunications industry interdependency and ask that a 
copy of my written remarks be entered into the record.

                              Introduction

    The focus of this testimony is to bring perspective from 
GTE's considerable Y2K experience and apply it to this 
important discussion of telecommunications interdependency. 
GTE, and other telecommunications providers, are continually 
being asked, ``Why can't you simply certify your network and 
tell us when it will be compliant?'' The following discussion 
will describe the complexity and interdependencies that make 
that question so difficult to answer. Three principal issues 
come into play in addressing this question:
    1. Ownership--There is no one owner of the whole network.
    2. Mathematics--The permutations and combinations of 
calling events, service requests and routing possibilities 
exceed the industry's ability to do 100% testing of Y2K.
    3. Testing cannot be done on the live network--Out of 
cycle--clock roll-ahead testing would disrupt current 
operations, create unacceptable outages.
    Nevertheless, the work being done to remediate and test the 
Public Switched Telephone Network (PSTN) is well thought 
through, is being accomplished at an acceptable rate, and 
represents the best known solution to Y2K we are able to 
accomplish. I believe you will be reassured today that the 
telecommunications industry understands the importance of the 
Y2K challenge and is working aggressively to meet it.

                             Y2K Background

    Year 2000 is unique in the history of this the 
telecommunications and information technology industries. Left 
unattended, it could simultaneously undermine the operation and 
reliability of the computer and network infrastructure at a 
specific, known, future point in time. However, it is also true 
that the precise impact on our information-based economy and 
society cannot be predicted in part due to the complexity and 
interdependency of systems. Nor can we accurately predict the 
full extent of successful remediation of Y2K due to the 
interoperable, multi-path nature of the PSTN.
    We can, however, significantly reduce the likelihood of the 
apocalyptic scenarios sometimes predicted for January 1, 2000. 
You will hear from me and my collegues at this hearing some of 
the measures underway to address your Year 2000 concerns.
    Let me quickly summarize some of the major lessons of Y2K 
that contribute to the complexity:
     Schedule is not just important; it is the only 
thing.
     Y2K is truly a ``weakest link'' problem--the 
single system or date conversion we miss may be the undoing of 
the 99% we did find.
     Normally, development and maintenance activities 
introduce incremental change into an otherwise stable 
environment; however, in Y2K, modified systems are reintroduced 
into an environment which has been universally and 
simultaneously de-stabilized.
     Since it is impossible to recreate an ``off-line'' 
PSTN for testing, complex Year 2000 interoperability must be 
tested in pieces by various companies separately and can be 
actually proven compliant only once those pieces are in 
operation together on January 1, 2000.
     There is an increasing recognition of the need to 
devote more time and effort to enterprise and interoperability 
testing than was previously planned.
     Testing of all types constitutes greater consumes 
more than 50% of required cost and effort; actual conversion of 
applications or products is relatively minor.
     Completion of conversion prior to the end of 1998 
should be a priority. This allows for validation of year-end 
close transactions in the operational environment, and provides 
up to 12 months of Y2K verification testing.
     Test everything you can.

                     Complexity and Interdependency

    In discussing the complexity and interdependency of the 
PSTN, I intend to gradually ``build the onion'' from the center 
using four models. To demonstrate an increasing complexity and 
interdependency, each model builds upon the one before like the 
currently popular ``nesting dolls.'' The end result points to 
the conclusion that the PSTN is not readily certifiable due not 
only to ownership issues but also to mathematical complexity 
and test scenario limitations.

1. The Basic System

    Telecommunications complexity begins with the essential, 
computer-based systems used in telecommunications. Chart 1 
depicts a representative, physical system, best described as a 
combination of hardware, firmware, software products and 
applications. A typical company will have hundreds of these. 
Each component in Chart 1 must be assessed for Y2K impact; 
remediated, if required, and tested and verified compliant at 
the system level.
[GRAPHIC] [TIFF OMITTED] T1590.001


2. The Functional Thread

    To perform a ``function'' (such as customer contact, 
service provisioning, call routing), these physical systems 
must work with others. Chart 2 depicts a real customer service 
provisioning cluster as an example of system interdependencies. 
This example portrays the relationships of among 17 separate 
systems or users, 26 formal communications channels, and more 
than 10 separate data bases needed to provide a basic service. 
This also includes the actual linkage of support functions to 
the physical PSTN and to other companies.
[GRAPHIC] [TIFF OMITTED] T1590.002


    Each of the elements depicted here can also be represented 
in some version of Chart 1. As such, assuring that each of the 
core components is Y2K compliant precedes the verification of 
this functional thread. A medium-sized company will have 
hundreds of these threads.

3. The Core Interoperability of the PSTN-Logical Topology

    Chart 3 expands the interdependency model to include 
network elements of the PSTN.
[GRAPHIC] [TIFF OMITTED] T1590.003


    Logically, each component on this chart can be described 
functionally as a thread or cluster. This schematic simply 
integrates the elements of the legacy software systems. The 
systems manage the Network, the signaling, data and voice 
components of the switched network. This complex hierarchy of 
systems and interaction of function provides an example of a 
single company's network interdependency. The actual LEC 
portion of the Public Switched Telephone Network provides for 
random, multi-path, real-time interaction of these elements, 
simultaneously processing thousands of calls each minute of 
each day.
    By way of example, a typical local exchange carrier may 
have several million digitally switched access lines in the 
U.S. Depending upon the LEC, it may have also hundreds of 
unique systems worldwide, representing millions lines of 
computer code (LOC), all of which must be Y2K tested in 
thousands of functional test clusters. In addition, to verify 
Y2K readiness, the typical LEC must assess and test perhaps a 
couple of thousand of central office (e.g., end office) and, 
possibly, international gateway switches and associated support 
systems in not only domestically but, depending upon the 
company, in overseas locations as well.

4. The Expanded PSTN

    The final illustration, (the outside of the ``onion'') 
depicted in Chart 4, captures the logic of the Public Switched 
Telephone Network overall by incorporating the essential logic 
of Chart 3 for each of several Local Exchange Carriers (LECs), 
Inter-exchange Carriers (IXCs), International PTT Interfaces, 
Customer Premise Equipment (CPE), and Private Network 
installations. Within the U.S. alone there are hundreds of 
local exchange carriers, several inter-exchange carriers; and 
perhaps millions of private networks or customer premise 
emplacements. The obvious interconnectivity potential of these 
network relationships points to the mathematical limitations on 
100% test. It should not go unnoticed that the largest external 
risk to the operational integrity of the PSTN is the continued 
availability of electric power across the national power grid 
on January 1, 2000.
[GRAPHIC] [TIFF OMITTED] T1590.004

                   The Call/Virtual Network Circuits

    The Nationwide PSTN processes millions of calls per minute. 
In order to complete a telecommunications transaction beyond a 
local exchange, ``calls'' are spontaneously routed in advance 
to take advantage of the most efficient call-processing path. 
Furthermore, in addition to routine voice/data traffic and 
wireless access, the PSTN provides a myriad of additional 
services including call waiting, directory assistance, 800-
number look-up, and 911 emergency support. Because of this 
complexity, a ``virtual'' network circuit is dynamically 
defined for each transaction such that advance prediction of 
specific circuit connectivity is impossible to determine. The 
process creates a continuously changing pattern within and 
between LECs and IXCs. Consequently, it is impossible for any 
one company to verify the whole network Y2K compliant.
    Nonetheless, the worldwide telecommunications Year 2000 
remediation effort is proceeding, with LEC's, IXC's and others 
actively and cooperatively working to implement Y2K readiness 
at all levels of this model. You will hear more today from my 
colleagues on this panel on what the industry is doing to 
respond to Y2K.

                                  Cost

    It is useful in closing to give this technical issue a 
context or grounding with respect to cost. GTE currently 
expects to spend about $350 million on Y2K compliance;--more 
than 50% of which is focused on the testing of these products, 
applications, or and the interoperability test of the functions 
they provide.
    As of March 1998, a sample of SEC filings indicates seven 
(7) telecommunications companies (LECs and IXCs) have estimated 
a combined expenditure in excess of $2 billion for Year 2000 
remediation. This is a gigantic task; one that I fear is often 
trivialized by the casual media and unfairly criticized by 
otherwise well-intentioned Y2K experts. Nothing is to be gained 
by public chanting of doomsday scenarios formed out of 
ignorance.
    It should be noted that this massive Year 2000 remediation 
activity is occurring at the same time as we continue operating 
the live PSTN and maintaining it with the quality of service 
and variety of features we have all come to take for granted.
    Chairwoman Johnson, I thank you for the opportunity to 
present this testimony.
      

                                

    Chairman Johnson of Connecticut. Thank you very much, Mr. 
Roth.
    Mr. Pasqua.

 STATEMENT OF A.J. PASQUA, PROGRAM MANAGEMENT VICE PRESIDENT, 
           AT&T YEAR 2000 PROGRAM, WARREN, NEW JERSEY

    Mr. Pasqua. Madam Chairman, Members of the Oversight 
Subcommittee, my name is John Pasqua and I am the program 
management vice president of the AT&T Year 2000 Program. I'm 
pleased to be here with you to share the approach AT&T is 
taking to meet this global challenge and I'll try to summarize 
my submission.
    There are no competitors when it comes to Y2K. We all need 
to be working collaboratively on the issues. AT&T launched its 
Y2K program in 1996 with the establishment of a corporate Y2K 
program office answerable to AT&T senior leadership team, 
including chairman and chief executive officer, Michael 
Armstrong, and Frank Ianna, executive vice president of Network 
and Computing Services.
    The overall process framework for our program is based on 
proven and accepted industry models. We monitor and track 
progress of the Y2K program through a series of metric 
scorecards. Program status is reviewed monthly at all 
management levels in our corporation. AT&T has an embedded base 
of more than 3,000 internally developed applications. I am 
pleased to report that through May of this year, we have 
assessed 91 percent of our application lines of code, repaired 
72 percent of those that needed modification, and application-
certified over 40 percent.
    AT&T is committed to a target of December 31, 1998, for the 
completion of assessment, revision and testing of all customer-
affecting systems, and has reinforced that commitment with 
associated funding of approximately half-a-billion dollars 
through 1998.
    Relative to the AT&T networks, our overarching goal is to 
avoid any degradation to network reliability due to the 
millennium change. Our year 2000 program addresses not only the 
core public switched network but also the AT&T wireless 
network, our data networks, the AT&T government networks, 
including FTS 2000, and all other AT&T-branded networks.
    In addition to internally developed applications that 
support our networks, we have inventoried over 800 externally 
purchased network elements, including switches, network control 
processors, and signal transfer points. Approximately 97 
percent of the network elements have been assessed, and more 
than 80 percent are already Y2K-compliant or planned for 
retirement.
    AT&T is on target to complete network element certification 
by yearend 1998, with full deployment in the first half of 
1999.
    A comprehensive testing strategy is a key component of our 
program. Our overall approach is to test any claims of Y2K-
compliance from suppliers and partners. We are also 
independently validating the testing programs using peer 
reviews, internal audit reviews, program office reviews which I 
lead, and external audits.
    We are leveraging AT&T's participation in a variety of 
industry forums and standards-setting bodies as a framework for 
external interface and testing agreements.
    Within North America, AT&T is partnering with the Alliance 
for Telecommunications Industry Solutions, or ATIS, to plan and 
conduct necessary Y2K signaling interoperability tests. For 
international bilateral relations, we will use the 
International Telecommunications Union, or the ITU, to develop 
international standards regarding network planning activities 
and as a sponsor for interoperability testing.
    In addition, we plan to perform end-to-end call tests 
across our network and selected domestic and international 
access and egress provider networks, using a sample of call 
types, access configurations and geographical dispersions. AT&T 
has also proposed the reestablishment of the NRIC, the Network 
Reliability and Interoperability Council, as an advisory 
committee to the FCC to assess the impact of year 2000 on our 
Nation's networks and to encourage sharing of information 
solutions.
    To further mitigate risk, contingency plans will be 
established well in advance of the millennium.
    In summary, we are confident that AT&T will be successful 
in meeting the year 2000 challenge. At the most fundamental 
level, our year 2000 initiative is dedicated to ensuring 
business continuity, providing our customers with services that 
will work at the requisite level of performance in the year 
2000 and beyond. AT&T's Y2K program is designed to achieve that 
goal.
    But it's also about helping others--our network partners, 
our suppliers, and indeed, our customers--to prepare for year 
2000. We believe our approach encompasses that broader view, 
too.
    I want to thank you for inviting AT&T to participate in 
this hearing. We think your interest in this area will increase 
cooperation and openness within the telecommunications 
industry. We have been meeting with representatives of the FCC 
and other government agencies, and are committed to work with 
our industry colleagues on the year 2000 opportunity.
    AT&T is aggressively attacking this logistically complex 
situation and we won't let you down. Thank you very much.
    [The prepared statement follows:]

Statement of A.J. Pasqua, Program Management Vice President, AT&T Year 
2000 Program, Warren, New Jersey

    Madame Chairwoman, Members of the Oversight Subcommittee,
    My name is John Pasqua, and I am the Program Management 
Vice President of the AT&T Year 2000 Program. I'm pleased to be 
here with you to share the approach AT&T is taking to meet this 
global challenge.
    The Year 2000 issue is possibly the most critical problem 
we have ever faced at AT&T. It spans all aspects of our 
business and goes well beyond the boundaries of any one company 
...; and, for that matter, beyond the boundaries of any one 
country. However, I believe it is a challenge we will deal with 
successfully.
    There are no ``competitors'' when it comes to Y2K. Today, 
many businesses and industries are so interdependent that the 
failure of any one can cause serious problems for the others. 
We all need to be working collaboratively on the issue and I 
welcome this opportunity to share some of our AT&T Y2K 
experiences with you.
    AT&T launched its Y2K Program in the fall of 1996 with the 
establishment of a Corporate Y2K Program Office answerable to 
AT&T's senior leadership team, including Chairman and CEO 
Michael Armstrong, and Frank Ianna, Executive Vice-President of 
Network and Computing Services.
    We established several fundamental operating principles as 
the framework for the program:
     A governance and oversight model with enterprise-
wide program management;
     Responsibility for ``fixing'' the problem 
distributed to our operating units; and
     Outsourcing some of the Y2K work to vendors who 
have demonstrated the required core competencies.
    Our Y2K Program is focused on four inter-related areas:
     Internally-developed applications, which support 
business functions such as ordering, provisioning and billing;
     AT&T's information technology infrastructure, 
which includes the hardware, software and communications 
platforms and components that support these applications;
     AT&T's voice and data networks; and
     Building automation components and embedded 
systems.
    The overall process framework for AT&T's program is based 
on accepted industry models. The key milestones include: 
assessment, repair, application-certification, integration 
testing, deployment and environment-certification.
    We monitor and track progress of the Y2K program through a 
series of metric scorecards. Program status is reviewed monthly 
at all management levels in our corporation.
    AT&T has an embedded base of more than 3,000 internally 
developed applications, of which:
     Approximately 400 directly support AT&T's voice 
and data services;
     800 are critical to the provisioning, 
administration, maintenance and customer service; and
     The balance represent applications supporting 
AT&T's sales and marketing organizations and internal 
administrative functions.
    I'm pleased to report that--through May of this year--we 
have assessed 91% of our application lines of code, repaired 
72% of those that needed modification, and application-
certified over 40%.
    AT&T is committed to a target of December 31, 1998 for the 
completion of assessment, revision and testing of all customer-
affecting systems, and has reinforced that commitment with 
associated funding of approximately half-a-billion dollars 
through 1998.
    Relative to the AT&T Networks, our overarching goal is to 
avoid any degradation to network reliability due to the 
millennium change. Our Year 2000 Program addresses not only the 
core public-switched network but also the AT&T wireless 
network, our data networks, the AT&T government networks and 
all other AT&T-branded networks.
    In addition to the AT&T-developed applications that support 
our networks, we have inventoried over 800 externally-purchased 
network elements, including switches, network control points 
and signal transfer points. Approximately 97% of the network 
elements have been assessed, and more than 80% are already Y2K-
compliant or planned for retirement.
    AT&T is on target to complete network element certification 
by year-end 1998, with full deployment no later than June 1999.
    A comprehensive testing strategy is a key component of our 
program. AT&T's overall approach is to test any claims of Y2K-
compliance from suppliers and partners. Each AT&T organization 
that supports a system is accountable for prioritizing and 
certifying all components of that system to ensure the most 
important components are addressed first.
    We are also independently validating the testing programs 
using peer reviews, internal audit reviews, program office 
reviews, and external audits.
    We are currently defining the requirements for inter-system 
testing and certification for our critical business processes, 
focusing on two phases of validation:
     Business process testing, which involves 
applications and components that comprise a business function 
to insure the integrity of the business process; and
     End-to-end product and service testing, which 
includes all systems and network elements involved in offering 
the service to our customers.
    These phases of testing will start in mid-1998 and continue 
into 1999.
    We are also leveraging AT&T's participation in a variety of 
industry forums and standards-setting bodies as a framework for 
external interface and testing agreements. I'd like to 
highlight some examples in this area.
    Within North America, AT&T is partnering with the Alliance 
for Telecommunications Industry Solutions, or ATIS, to plan and 
conduct necessary Y2K signaling interoperability tests. The 
ATIS Network Testing Committee has proposed a series of tests 
during which each test network advances the network clock 
relative to different time zones and critical Y2K-related 
dates.
    For international bilateral relations, AT&T will use the 
International Telecommunications Union, or the ITU, to develop 
international standards regarding network planning activities 
and as a sponsor for interoperability testing. The ITU has 
established a Year 2000 Task Force as well as an Inter-Carrier 
Testing Task Force to address Y2K assurance of customer 
services involving multiple networks.
    For AT&T-branded networks and global partnerships, 
additional interoperability testing will be conducted, as 
necessary.
    In addition, AT&T plans to perform end-to-end call tests 
across its network and selected domestic and international 
access and egress provider networks, using a sample of call 
types, access configurations and geographical dispersions. The 
timeframe for these tests will be during 1999, after the 
involved networks have achieved Y2K-compliance.
    AT&T has also proposed the re-establishment of the NRIC--
the Network Reliability and Interoperability Council--an 
advisory committee to the FCC to assess the impact of Year 2000 
on our nation's networks and to encourage sharing of 
information solutions. This council could meet on a quarterly 
basis and membership would include the 20 or so major carriers, 
suppliers and LECs in the telecommunications industry.
    To further mitigate risk, contingency plans will be 
established well in advance of the millennium. In addition to 
existing operational safeguards and ``common sense'' practices 
like prioritization of test schedules to certify mission-
critical systems first, we are in the process of establishing 
Y2K-related contingency plans, including:
     Business resumption teams, on call during the 
millennium change, to react immediately to facilitate repairs 
and activate emergency alternate processes;
     Time zone ``quiet periods'' to de-activate some 
systems and processes during the 24-hour transition period when 
regional time zones pass through the millennium change period;
     Network capacity expansion engineered to 
accommodate demand peaks; and
     Alternate suppliers and implementation plans to 
replace third-party products or services that fail to meet 
commitment schedules.
    In summary, we are confident that AT&T will be successful 
in meeting the Year 2000 challenge.
    At the most fundamental level, our Year 2000 initiative is 
dedicated to ensuring business continuity--providing our 
customers with services that will work at the requisite level 
of performance in the year 2000 and beyond. AT&T's Y2K Program 
is designed to achieve that goal.
    But it's also about helping others--our network partners, 
suppliers and customers--to prepare for Year 2000. We believe 
our approach encompasses that broader view, too.
    I want to thank you for inviting AT&T to participate in 
this hearing. We think your interest in this area will increase 
cooperation and openness within the telecommunications 
industry. We have been meeting with representatives of the FCC 
and other government agencies, and are committed to work with 
our industry colleagues on the Year 2000 opportunity.
    Thank you.
      

                                

    Chairman Johnson of Connecticut. Thank you very much.
    Mr. Bennett.

   STATEMENT OF RONNIE LEE BENNETT, PROGRAM MANAGEMENT VICE 
              PRESIDENT, LUCENT TECHNOLOGIES, INC.

    Mr. Bennett. Madam Chairman, Congressman Coyne, and Members 
of the Subcommittee, good afternoon.
    I appreciate this opportunity to discuss the impact of the 
year 2000 date change on government communications systems and 
the national telecommunications infrastructure.
    Lucent Technologies is the world's largest communications 
systems and technology company. We have more than 100,000 
employees in the United States with a significant presence in 
18 States. Our more than $12 billion in annual purchasing 
supports more than 100,000 additional jobs in the United 
States. We have been designing and manufacturing 
telecommunications equipment for more than 100 years. With that 
history and experience we fully appreciate the magnitude of the 
challenge hosted by the year 2000 date change.
    Lucent has embarked on a full-scale effort to minimize the 
impact of the year 2000 date change on Lucent and our 
customers. We are aggressively working toward making our 
internal information technology and manufacturing 
infrastructure year 2000 ready. We believe that the year 2000 
date change will not significantly affect our ability to 
deliver products and services to our customers.
    Lucent has made significant progress in preparing both our 
switched network products and our business systems products for 
year 2000. For example, the year 2000 upgrade for the current 
Lucent 5ESS switch became available last month. This switch is 
one of the most important and widely deployed Lucent products 
in the public network. By the end of the third quarter of 1998, 
more than 90 percent of our currently supported network 
products will be year 2000 compliant or have available 
upgrades.
    We have also committed that all customer communications 
systems, manufactured and sold by our business communication 
systems unit that were introduced on or after September 30, 
1996, will be year 2000 compliant.
    Lucent has conducted year 2000 impact tests on many of our 
products that are not currently year 2000 ready and we're 
sharing those results with our customers. Lucent year 2000 
tests are performed in laboratories that follow clearly 
specified processes and methodologies. However, the public 
switched network and customer communication systems are 
complex, custom-designed systems that are assembled using 
equipment and software from many, many vendors. As a result, it 
is important that the owners of telecommunications equipment 
investigate the interoperability of their equipment.
    To support the interoperability testing of the public 
switched network, we are working the Telco Year 2000 Forum to 
test our network and products and their interoperability with 
other vendors' products. We are working in many ways to make 
our customers aware of the year 2000 challenge including 
reaching out to the industry groups, individual customer 
meetings and through direct mailings.
    Our goal is to understand the customers installed base of 
Lucent products, provide relevant product information and 
jointly develop year 2000 strategies.
    Lucent has a dedicated government solutions division that 
supports sales to the Federal Government, serving more than 
1,000 agencies, departments and offices. Within that division, 
a year 2000 team has been established to coordinate and support 
the efforts of these customers to meet the government's year 
2000 deadlines.
    We're also working with the GSA. We have provided 
information on the status of relevant products for the GSA year 
2000 telecommunications database. We've participated in two GSA 
government industry forums, and in addition, we've actively 
participated through presentations and survey responses in the 
year 2000 efforts of the FCC and the President's Council on the 
Year 2000 Conversion.
    Identifying year 2000 issues and implementing and testing 
solutions is time consuming. We believe we have sufficient 
resources to provide our customers with the year 2000 support 
that they require, but success can only be achieved in concert 
with our customers. Time is of the essence, therefore, we urge 
all involved parties to act with speed.
    Thank you.
    [The prepared statement follows:]

Statement of Ronnie Lee Bennett, Program Management Vice President, 
Lucent Technologies, Inc.

                              Introduction

    Thank you, Madam Chairwoman, Congressman Coyne and members 
of the Subcommittee, for the opportunity to appear before you 
to discuss the impact of the Year 2000 date change on 
government communications systems and the national 
telecommunications infrastructure.
    Lucent Technologies, headquartered in Murray Hill, New 
Jersey, became a fully independent company on September 30, 
1996. Lucent has over 100,000 employees in the United States 
and a significant presence in eighteen states. In addition, 
Lucent's more than $12 billion in annual purchasing supports 
over 100,000 additional jobs in the U.S.
    Lucent has a more than one-hundred-year heritage of 
designing and manufacturing telecommunications equipment. 
Central to this heritage is Bell Labs, the research and 
development arm of Lucent Technologies.
    Lucent is the world's largest communications systems and 
technology company, with over $27 billion in sales. Lucent 
supports a broad line of products--from network switches 
supporting local and long-distance carriers to voice and data 
business systems for enterprises. Business systems handle the 
communications needs of businesses and other multi-user 
environments, including, for example, the systems found in the 
offices of the agencies overseen by this Subcommittee. Lucent's 
products support the transmission of voice, video and data over 
wireline and wireless networks.
    The past hundred years have seen great changes in the 
design of Lucent's products. Today, software is the engine that 
drives virtually all of Lucent's products and supports all of 
Lucent's internal operations. As such, Lucent fully appreciates 
the magnitude of the challenge posed by the Year 2000 date 
change.

              Lucent's Response to the Year 2000 Challenge

    Lucent has embarked on a full-scale effort to minimize the 
impact of the Year 2000 date change on Lucent and its 
customers. Lucent's Year 2000 effort is coordinated by a 
company-wide program office. This office is charged with 
verifying that the multiple Year 2000 teams within Lucent have 
sufficient resources and are progressing in this effort in a 
timely fashion.
    Lucent is aggressively working toward making its internal 
information technology and manufacturing infrastructure Year 
2000 ready. Based on our current progress, Lucent believes that 
the Year 2000 date change will not significantly affect 
Lucent's ability to deliver products and services to its 
customers on a timely basis into the next century.
    Lucent has committed significant resources to make its 
current product offerings Year 2000 compliant, as well as to 
provide evolution paths for its customers who have non-Year 
2000 ready equipment. Lucent has several distinct product lines 
with very different customer groups. As a result, Lucent is 
organized into several business units that are structured to 
best support the needs of their respective customers. Lucent 
has established Year 2000 program offices in each of its 
business units. These program offices have identified non-Year 
2000 ready products and developed evolution strategies that 
include the upgrade of some products and the replacement of 
others. In addition, these program offices support Lucent's 
customer teams, who are working with their customers to develop 
customer-specific Year 2000 solutions.

                            Product Status 

    Lucent has made significant progress in preparing both its 
switched network products and its business systems products for 
the Year 2000. For example, the Year 2000 capability upgrade 
for the current Lucent 5ESS Switch became available 
last month. This switching equipment is one of the most 
important Lucent network products used in the public switched 
network. These 5ESS upgrades are now being tested by 
customers or have been deployed in their networks. By the end 
of the third quarter of 1998, Lucent believes that in excess of 
90 percent of its currently supported network products will 
either be Year 2000 compliant or have available upgrades. 
Virtually all of the remaining supported network products are 
targeted to be Year 2000 compliant or to have available 
upgrades by the end of 1998.
    Lucent also has committed that all products manufactured 
and sold by its Business Communications Systems business unit 
that were introduced as generally available on or after 
September 30, 1996 will be Year 2000 compliant. With respect to 
products generally available for sale prior to that date, 
Lucent has developed migration strategies as needed that call 
for either replacement or upgrade of the products. Lucent 
expects that the necessary upgrades will be available before 
the end of the third quarter of this year.
    In addition to preparing its products for the Year 2000, 
Lucent has conducted tests to understand the functional impact 
of the Year 2000 date change on many of its products that are 
currently not Year 2000 ready. The impacts vary widely by 
product and the significance of the impacts also varies by the 
type of equipment and customer application. Lucent is sharing 
this impact information with its customers.
    Both Lucent's product determinations and impact information 
are generated as a result of tests performed in laboratories 
that follow clearly specified processes and methodologies. 
However, the public switched network and many customer in-house 
communications systems are complex, custom-designed systems 
that are assembled using equipment and software from multiple 
vendors. As a result, it is important for the owners of 
telecommunications equipment to investigate the 
interoperability of their equipment.
    Lucent is working with its customers to provide information 
and other support to help customers' investigations. Further, 
to support the interoperability testing of the public switched 
network, Lucent is working with the Telco Year 2000 Forum, a 
group that includes many of the major local telephone 
companies, to test Lucent networking products and their 
interoperability with other vendors' products. Lucent supports 
the Telco Forum's interoperability testing by providing product 
information, reviewing test plans and providing access to 
Lucent's testing facilities. Lucent is working with the Telco 
Forum and Bell Communications Research, commonly known as 
Bellcore, to define Year 2000 interoperability test 
requirements for all telecommunications equipment 
manufacturers. Bellcore is the entity that creates many of the 
technical specifications and standards for the public switched 
network.

                          Support of Customers

    Effective communication and coordination are important to 
minimizing the impact of the Year 2000 on Lucent's customers. 
For example, Lucent is working with the Organization for the 
Promotion and Advancement of Small Telecommunications Companies 
(OPASTCO) to communicate Year 2000 product information to its 
members. In addition, Lucent's Business Communications Systems 
business unit successfully demonstrated a clock roll-over to 
January 1, 2000, on all of its major products last week at its 
International DEFINITY User Group meeting here in 
Washington, attended by 2500 of Lucent's enterprise and 
government customers.
    Lucent does not rely exclusively on public presentations to 
convey Year 2000 information to its customers. Lucent's 
communications and coordination efforts with its customers are 
primarily handled through direct contacts, ranging from 
individual meetings to general mailings to its customers. 
Common to all of these contacts is an effort by Lucent to 
understand the customer's installed product base of Lucent 
products, provide relevant product information and jointly 
develop a strategy for migrating the customer as appropriate.

           Lucent Year 2000 Support of the Federal Government

    In support of the U.S. Government, Lucent has a dedicated 
Government Solutions division that supports its sales to the 
Federal Government. Through this unit, Lucent serves more than 
1,000 agencies, departments and offices of the Federal 
Government. Lucent supports the Government through dedicated 
sales, customer service and maintenance teams. A Year 2000 team 
has been established within Government Solutions to coordinate 
and support these efforts. By providing product information and 
migration strategies, Lucent is working with its Government 
customers to support their efforts to meet or exceed the 
Government's various deadlines.
    Lucent began contacting its Government customers who have 
non-Year 2000 compliant products in the second half of 1997 to 
begin Year 2000 coordination and planning for these products. 
Lucent began a direct mail campaign in December 1997 to 
specifically notify its Government customers that they may need 
to update or replace some of their Lucent products. These 
customer communications efforts are continuing.
    Lucent has also supported the General Services 
Administration (GSA) in addressing Lucent telecommunications 
products within the Government agencies. At the end of 1997, 
Lucent provided information on the status of relevant products 
to GSA for inclusion in its Year 2000 Telecommunications 
database and participated in two GSA government industry 
conferences to facilitate information sharing between 
Government agencies and the telecommunications industry. Lucent 
is actively working with GSA and other agencies in their 
efforts to conduct Year 2000 demonstrations.
    In addition to Lucent's work with its government customers 
and the GSA, Lucent has also participated in the valuable, 
proactive Year 2000 efforts of the Federal Communications 
Commission (FCC) and the President's Council on the Year 2000 
Conversion. Lucent has made presentations in several Year 2000 
meetings held by these organizations. In addition, Lucent was 
among several telecommunications industry companies that 
responded to an FCC survey relating to Year 2000 readiness.

                               Conclusion

    The Year 2000 date change is a significant technological 
and management challenge, requiring full commitment by both the 
private and public sectors of a variety of industries. Lucent 
believes it has sufficient resources to provide its customers, 
both in the Government and in the private sector, with the Year 
2000 support they require, but the assistance of Lucent's 
customers is essential. If a significant percentage of Lucent's 
customers wait until 1999 to act, it will be difficult for 
Lucent to provide the necessary engineering, installation, 
demonstration and testing services for their Year 2000 support. 
Therefore, we are urging all involved parties to act with 
urgency to address this fundamentally important issue.
    This Subcommittee and Congress generally can play a very 
important role in raising awareness within Government and 
relevant industry sectors about the need for prompt action. The 
process of identifying products with Year 2000 issues and 
developing and implementing evolution strategies is very time 
consuming. Time, therefore, is of the essence. However, with 
careful planning and timely execution of readiness strategies, 
Lucent believes that its customers can successfully prepare 
themselves for the impact of the Year 2000 challenge.
    Thank you.
      

                                

    Chairman Johnson of Connecticut. Thank you very much, Mr. 
Bennett.
    Ms. Guthrie.

 STATEMENT OF PRISCILLA E. GUTHRIE, VICE PRESIDENT AND GENERAL 
  MANAGER, BUSINESS ENTERPRISE SOLUTIONS & TELECOMMUNICATIONS 
        STRATEGIC BUSINESS UNIT, TRW, FAIRFAX, VIRGINIA

    Ms. Guthrie. Thank you, Chairman Johnson and distinguished 
Members of the Subcommittee.
    My name is Priscilla Guthrie and I am the vice president 
and general manager of TRW's Business Enterprise Solutions & 
Telecommunications Strategic Business Unit. TRW is a premier 
provider of systems engineering and integrations services and 
has solved complex problems of national significance for over 
40 years. Our network integration business is a critical 
component of these services.
    I have been asked to present a network integrator's 
insights into the year 2000 conversion effort. I've provided a 
written statement. In the interest of time, I'll summarize my 
statement by providing several rules of thumb which we have 
learned which apply to network Y2K compliance initiatives.
    The first rule of thumb is that a network's Y2K compliance 
schedule is contingent on the compliance schedules of those who 
supply the network's components. Suppliers of these components 
establish their own Y2K compliance schedules to meet their own 
unique business objectives and these schedules are obviously 
not always in tune with user schedule requirement.
    The second rule of thumb is to anticipate and prepare for a 
cascading effect when a single Y2K noncompliant application or 
device impacts other interfacing applications or devices, 
resulting in a need to replace them all. A well-thought-out 
plan for prioritized upgrades, integration and tests is 
essential.
    The third rule of thumb addresses an issue raised in 
testimony at previous hearings. The issue is risk and 
contingency planning. In spite of an integrator's best efforts, 
there will be items that are unique to a changing operational 
environment and could not be reasonably anticipated. Because of 
this, risk management and contingency planning are essential.
    As a final point, I'd like to address the issue of 
liability. There is no precedent for Y2K liability. Full 
cooperation of all organizations in business and government is 
critical to timely resolution of Y2K problems. The threat of 
litigation is currently an impediment to full cooperation. It 
is in the government's best interest to pass legislation 
protecting technology suppliers from undue litigation 
associated with Y2K issues.
    Thank you for the opportunity to testify today and I will 
be happy to answer any questions.
    [The prepared statement follows:]

Statement of Priscilla E. Guthrie, Vice President and General Manager, 
Business Enterprise Solutions & Telecommunications, Strategic Business 
Unit, TRW, Fairfax, Virginia

    Chairwoman Johnson and distinguished members of the 
Subcommittee, my name is Priscilla Guthrie and I am the Vice 
President and General Manager of TRW's Business Enterprise 
Solutions & Telecommunications Strategic Business Unit. TRW is 
a premier provider of systems engineering and integration 
services and has solved complex problems of national 
significance for over 40 years. Our network integration 
business is a critical component of these services because the 
movement and management of digitized information is a dominant 
force in our society. It is a pleasure to be here today to talk 
about TRW's experiences with the Y2K conversion problem.
    I have been asked to present a network integrator's 
insights into the Year 2000 conversion effort. For the purposes 
of this discussion, a network is defined as a collection of 
hardware, software, and transport media that supports the 
movement and management of information between geographically 
dispersed locations. Networks are normally configured to meet 
the requirements of a specifically defined customer community 
and can vary in complexity from a private intercom system 
within your Congressional office to a worldwide public network 
such as the Internet.
    The value and function of a network integrator lies in its 
ability to design, implement, maintain and operate a network 
that is reliable, flexible, secure and responsive. To 
accomplish this goal, a network integrator must select and use 
products and services from multiple sources. These sources 
include network hardware suppliers, transport media and local 
connection providers, and software developers. TRW provides 
network integration services to customers and, as part of these 
services, we are directly involved in the evaluation and 
implementation of Y2K-related activities. Network Y2K 
compliance is subject to the same basic activities as all Y2K 
efforts: accurate inventory; correct evaluation and assessment 
(including risk); rigorous test; aggressive remediation; and, 
on-going validation. The difficulty of a large-scale network 
Y2K compliance effort lies in the sheer number of components, 
many of which are legacy systems, spread over a wide geographic 
area and interfacing with numerous systems controlled by other 
companies or agencies. These factors make it extremely 
difficult, if not impossible, to perform end-to-end tests. 
Through our Y2K efforts, we have found several basic ``rules of 
thumb'' that apply to network compliance initiatives.
    The first rule of thumb is that a network's Y2K compliance 
schedule is contingent on the compliance schedules of those who 
supply the network's components. Suppliers of these components 
establish their own Y2K compliance schedules to meet their own 
unique business objectives. Those schedules are not always 
consistent with their users' schedule requirements. This is 
particularly true for large-scale limited access networks, 
where Commercial Off The Shelf (COTS) and Non-Development Items 
(NDI) dominate the network and applications software arena. For 
example, as an integrator, we may desire Y2K compliant network 
operations for a full year prior to the millennium date. This 
operational time allows for the identification and resolution 
of issues that could not be adequately evaluated and tested in 
a simulated environment. To do so, all elements of the system 
must be compliant and available as much as 16-18 months in 
advance of the millennium date. Unfortunately, the inability of 
suppliers to provide compliant products on time often keeps us 
from meeting milestones. We do not always have the luxury of 
following our optimum plan.
    The second rule of thumb is to anticipate and prepare for a 
cascading effect when a single Y2K non-compliant application or 
device impacts other interfacing applications or devices, 
resulting in a need to replace them all. This issue is 
fundamental to all networks. In one example, a network's 
database management system (DBMS) must be upgraded with a new 
version that is Y2K compliant. The new DBMS is not compatible 
with the current operating system, and the operating system 
must then be upgraded. Unfortunately, several compliant 
applications are incompatible with the new operating system and 
must be replaced. Because the upgraded operating system is 
designed to operate with the newer/faster processors and 
requires more memory than current hardware can support, the 
hardware must also be replaced. At a certain point, the most 
cost-effective long-term solution is to ``bite the bullet'' and 
go forward with a complete modernization effort. It is TRW's 
role to analyze tradeoffs and assist the customer in making 
appropriate decisions.
    In addition, the integrator must be prepared for problems 
resulting from a network's interface with systems of other 
individuals, companies or agencies. For financial institutions 
this could be a big problem due to the large number of 
individuals and small business customers over whom they have 
little or no control. Because of efforts undertaken in the 
telecommunications industry, these compliance issues are not 
expected to disrupt network operations. However, application 
compatibility between these users will be essential to assure 
data integrity. Discerning the difference between network 
problems and applications problems will be difficult, time 
consuming, and costly.
    The third rule of thumb addresses an issue raised in 
testimony at previous hearings. The issue is risk and 
contingency planning. In spite of an integrator's best efforts, 
there will be items that are unique to a changing operational 
environment and that could not be reasonably anticipated. 
Although the one-year, on-line verification mentioned above is 
a reasonable risk mitigation approach, it may not be realistic. 
In situations where the availability of critical Y2K compliant 
elements is uncertain, risk assessment and planning includes 
evaluation of alternative hardware and software solutions that 
will meet operational schedules. Another risk mitigation 
approach is the prioritization of Y2K activities into either 
`technical compliance' or `failure mode' categories. `Failure 
mode' issues will either disrupt the operation of the network 
or cause the network to deliver or act upon inaccurate 
information. Elements of a network which present Y2K issues but 
do not create failure modes fall into the `technical 
compliance' category. `Technical compliance' issues are 
reasonable candidates for waivers and/or deferrals when 
schedule and resource problems cannot be resolved by other 
means.
    As a final point, I would like to address the issue of 
liability. There is no precedent for Y2K liability. Network 
integrators address performance liability issues on a 
continuing basis. As a network integrator, the limitations on 
our liability regarding network performance are defined in our 
contracts. We expect that Y2K liability will be handled in the 
same fashion as other contract requirements, such as 
availability and throughput.
    Liability issues faced by individual hardware, software, 
and transport media providers are not fully defined. Many 
customers require vendors to provide certification of Y2K 
compliance before they buy or continue to use a supplier's 
products. The liability implications of these certifications 
are obvious. Unfortunately, the specter of liability has caused 
many organizations to defer certification of their products. 
Some suppliers have even refused to consider written 
certification due to the liability implications. These are 
straightforward business decisions, but they are not 
necessarily in the government's best interest. Unfortunately, 
delays in certification delay the ability of networks to be 
brought into full compliance. Full cooperation of all 
organizations--in business and government--is critical to the 
timely resolution of Y2K problems. The threat of litigation is 
currently an impediment to full cooperation. It is in the 
government's best interest to pass legislation protecting 
technology suppliers from undue litigation associated with Y2K 
issues.
    Thank you for the opportunity to testify today, and I would 
be happy to answer any questions.
      

                                

    Chairman Johnson of Connecticut. Thank you very much.
    Mr. White.

  STATEMENT OF WILLIAM O. WHITE, MEMBER, TELCO YEAR 2000 FORUM

    Mr. White. Madam Chair, Members of the Subcommittee, on 
behalf of the Telco Year 2000 Forum, I'd like to provide 
testimony on its purpose and activities to address year 2000 
issues in the telecommunications industry.
    First, the Forum would like to commend the Ways and Means 
Committee for conducting hearings on this critical issue. We 
have heard how the year 2000 is an issue of worldwide concern 
and it will be the largest single project impacting companies, 
and in fact, it affects customer computer systems, hardware, 
operating environments and networks. It is a strategically 
important process for the telecommunications industry to make 
sure that we have addressed that.
    To that end, the Telco Year 2000 Forum was formed 
approximately 2 years ago as an outgrowth for Bellcore's CIO 
Forum which holds discussions on industry trends. The purpose 
of the Telco Forum is to focus and share information on common 
industrywide issues and to discuss and come up with solutions 
for potential impacts of the year 2000.
    The Telco Forum consists of Ameritech, Bell Atlantic, Bell 
South, Cincinnati Bell, GTE, SBC, Southern New England 
Telephone, and U.S. West. Its purposed is to act as an informal 
working Committee to address year 2000 issues and to share 
information. Our discussions are focused exclusively on 
technical and operational aspects of the year 2000. Our intent 
is to identify common challenges and solutions in order to 
facilitate and accelerate responsive actions by each of the 
member companies.
    Our principle activities are to pool and to share testing 
resources for common network components and to perform 
interoperability testing. The key in all this activity is that 
each member company is responsible for its own year 2000 plan 
and activity. Each member company has a very detailed and 
company specific plan to address their particular year 2000 
issues.
    Our process is that we meet six times a year, every other 
month with numerous conference calls and submeetings in 
between. We have focus areas within the public switched 
network, information technology and communication issues.
    The primary objection is network interoperability testing 
or, in other words, intranetwork testing. This is a voluntary 
effort by the member companies and is funded by the member 
companies and the intent is to test components of the public 
switched network. It will verify the operation of a multivendor 
multicompany environment. It is based on a standard issued by 
Bellcore called GR-2945. It is becoming the industry standard 
for meeting Y2K requirements for the telecommunications 
industry.
    As the process continues, each of the companies will 
configure its labs to support this interoperability testing. 
The basic types of components or services that the testing will 
comprise will be emergency services, basic enhanced and 
intelligence services, network management services, and data 
networks.
    For example, we'll be testing 7-digit calling, 10-digit 
calling, 800 numbers, operator-assisted completion calls, and 
so forth. Testing will be performed for approximately 21 
suppliers and 82 network elements and/or management systems. 
These configurations represent common deployed 
telecommunications capabilities in northern America.
    Our goal is to minimize risks of network failures, to 
minimize the risk of service interruptions, and to test the 
functionality of daytime sensitive operations. This process has 
been going on for 1\1/2\ years. We have been spending the last 
year organizing and defining these equipment configurations and 
the testing schedules. We have been negotiating with each of 
the member companies to utilize their laboratories.
    We anticipate our testing to begin in the third and fourth 
quarter of 1998 and to be done in our analysis by the early 
part of the first quarter of 1999.
    Some of the company's labs also support some of the 
Internet work testing being performed by the Alliance for 
Telecommunications Industry Solutions through its national test 
committee.
    The benefits of our forum is to improve the timeliness of 
deploying Y2K ready releases by working with major 
telecommunication equipment suppliers. We represent a unified 
force in working with companies as Lucent's Northern Telecom, 
and so forth, to make sure that we can have early access to 
their releases and software, such that we may conduct our 
testing and more quickly move them into the public network. 
This also reduces the need for each company to test each 
configuration by defining this in a common fashion we can 
expedite and achieve testing results much earlier than if each 
company had stood on its own.
    This allows each company to direct resources to other areas 
within the company to address other year 2000 issues. The forum 
also provides an area to discuss contingency planning on a 
joint basis.
    In conclusion, the year 2000 is a significant challenge to 
business and governments. And a Telco Forum demonstrates the 
degree in which our members are committed to being ready for 
the year 2000 and sets an example of cooperation within an 
industry.
    Thank you.
    [The prepared statement follows:]

Statement of William O. White, Member, Telco Year 2000 Forum

    Chairwoman Johnson and members of the Subcommittee, on 
behalf of the Telco Year 2000 Forum, I would like to submit the 
following written testimony on its purpose and activities to 
address Year 2000 issues in the telecommunications industry. 
First, the Forum would like to commend the Ways and Means 
Committee for conducting hearings on this critical issue.

                               Background

    The Year 2000 issue is a worldwide concern, which has been 
identified by many industry experts as the largest single 
project that companies will have to face. Many aspects of 
technology will be impacted including a variety of computer 
systems, hardware, operating environments and networks.
    As the end of the 20th Century approaches, it is becoming 
more evident that the Year 2000 will cause problems for some 
systems due to the limitation of the date field on some 
``legacy'' and other older systems. In a number of these older 
systems, the developers used a two-digit year field with the 
assumption that the century is nineteen (19). With the turn of 
the 21st century the need to differentiate between the 20th and 
21st century (19 versus 20) will be required in some 
applications.
    The Chief Information Officer (CIO) Forum sponsored by 
Bellcore has been discussing the Year 2000 issue at its 
meetings for some time. The Telco Year 2000 Forum was created 
as an outgrowth of these Bellcore CIO Forum discussions. The 
Telco Year 2000 Forum was created to focus and share 
information on a common, industry wide issue: the potential 
impact of the Year 2000 on the telecommunication industry.

                        Telco Forum Participants

    The Telco Year 2000 Forum was formed with participation 
from some of the largest U.S. telecommunication companies. The 
present participants include the following companies:

Ameritech Corporation
Bell Atlantic
BellSouth Telecommunications, Inc.
Cincinnati Bell Telephone Company
GTE
SBC
Southern New England Telecommunications Corporation
US West Communications Group, Inc.

    The Forum has also invited AT&T, MCI, SPRINT and USTA to be 
participants in the Forum activities. In addition, it has 
invited some of the major telecommunications equipment 
suppliers to attend the Forum meetings to discuss mutual 
concerns and issues.
    The Forum acts as an informal working committee to help 
address Year 2000 issues in the telecommunications industry. 
Its purpose is to share relevant Year 2000 information. The 
discussions are focused on issues exclusively relating to the 
technical or operational aspects of the Year 2000 problem. The 
intent of the information sharing is to identify potentially 
common challenges and solutions to address the Year 2000 issue 
and thereby facilitate and accelerate necessary responsive 
actions by each of the member companies.
    A principal activity of the Forum is to pool and share 
testing resources for common network components and to perform 
interoperability testing.
    Although the companies share relevant Year 2000 
information, each company is responsible for its own Year 2000 
plan and activities. Each member company has a very detailed 
and company specific plan to address its particular Year 2000 
issues.

                         Telco Forum Structure

    The Forum meets approximately six times a year (every other 
month). Sub-groups are established to focus on some of the 
major issues in a more timely and efficient manner. At the 
present time there are sub-groups in place to address:
     Network issues
     Information technology issues
     Communications issues
    The entire Forum and/or its sub-groups also participate in 
conference calls to address specific issues or concerns between 
its regularly scheduled meetings

              Network Interoperability Testing Initiative

    A major initiative being undertaken by the Telco Year 2000 
Forum is the Network Interoperability Testing Project. This 
intra-network testing initiative is a voluntary project, which 
is entirely funded by the member companies to test the network 
and various services for Year 2000 Readiness. Its purpose is to 
verify the operation of a multi-vendor, multi-company 
environment.
    The goals of the testing project are to:
     Minimize risk of network failures
     Minimize risk of service failures
     Test the functionality of date/time sensitive 
operations
    The testing initiative is based on Bellcore's GR-2945 which 
has emerged as an industry standard for telecommunications 
products for the Year 2000 issue. The participating company 
laboratories are to be configured for Year 2000 
Interoperability testing to include:
     Emergency services
     Basic, enhanced, and intelligent services
     Network management systems
     Data networks
    Within these test configurations, a number of individual 
services such as 7 digit calls, 1+ 10 digit calls, operator-
handled calls, 800 calls, etc. will be tested and documented. 
The test configurations will test the Year 2000 readiness of 
approximately 21 suppliers and 82 network elements and/or 
management systems. Collectively this equipment represents the 
suite of equipment commonly deployed in the network for 
Northern America.
    The Forum has already contracted with a project manager and 
has concluded contract negotiations with an independent testing 
laboratory to validate and document the test results. Detailed 
schedules are being developed with the member company test 
laboratories and the equipment suppliers to test the Year 2000 
ready releases. It is anticipated that the testing will be 
conducted in the 3rd and 4th quarter of 1998.
    In addition to this testing initiative, Forum participants' 
laboratories will be used to support some of the inter-network 
testing being performed by the Alliance for Telecommunications 
Industry Solutions (ATIS) through its National Test Committee 
(NTC). The co-chair of the NTC is also a Telco Forum 
participant working on the Interoperability Testing Initiative. 
This will help ensure that there is a linkage between the two 
testing initiatives, which are intended to be complementary.
    The benefit of the interoperability testing approach is 
that it improves the timeliness of deploying Year 2000 ready 
products. It reduces the need for each Company to test every 
aspect of every new release and permits each to focus work 
efforts on the deployment of Year 2000 ready equipment. As 
noted previously, the interoperability testing initiative is a 
completely self-funded voluntary undertaking. It will 
supplement individual supplier testing and individual company 
testing of critical network elements and systems.
    In addition to the major interoperability testing efforts 
of the Forum, some of the other on-going activities and 
accomplishments of the Forum are outlined below.

          Other Activities and Accomplishments of Telco Forum

Sharing information regarding best/representative practices

    This is the purpose and major activity of the Forum. The 
sharing of information on best/representative practices 
facilitates and accelerates responsive actions by each of the 
member companies. The sharing of information regarding the 
approach being used to take responsive action and/or test some 
of the ``industry standard'' systems permits individual 
companies to focus their resources on company unique systems.

Working with major equipment suppliers

    The Forum has met with and/or contacted some major 
telecommunication equipment suppliers regarding their Year 2000 
Ready Releases. It has worked with some of these suppliers to 
improve delivery dates and/or for an earlier testing date on 
some of their products. The Forum plans to continue to work 
with suppliers to address identified Year 2000 equipment 
issues.

Sharing information regarding network products

    The network representatives on the Forum have developed an 
internal data set of suppliers' Year 2000 ready releases and 
their availability dates. This data set contains approximately 
93 vendors and 470 network elements. The database is a valuable 
resource to help ensure all participants are receiving and 
using consistent information regarding Year 2000 product 
release and availability dates.

Meeting with various government and industry groups

    Forum participants have met with various government and 
industry groups to share the Forum's concept and benefits. It 
has been useful to demonstrate the cooperative efforts being 
undertaken by the industry to help minimize the risk of network 
or service failures.

Starting discussions on contingency planning

    Although the individual members are responsible for their 
own Year 2000 plan and activities, the Forum has recently 
started discussing the issue of contingency planning. Also, 
since GTE has a close affiliation with the Canadian 
telecommunications industry, it has been able to share some of 
the contingency planning concepts being used there. It is 
expected that the issue of contingency planning will be 
addressed in greater detail in the months ahead.

                               Conclusion

    The Year 2000 issue represents a significant challenge to 
business, its customers, and the government. As noted at the 
outset, it is a worldwide concern, which has been declared by 
many industry experts as the largest single project that 
companies will have to face. It requires cooperation within 
industry and across industry boundaries. It also presents an 
opportunity to work with others on a common issue. The Telco 
Year 2000 Forum is a cooperative effort governed as a limited 
liability corporation actively working to address the Year 2000 
issue in the telecommunication industry.
      

                                

    Chairman Johnson of Connecticut. Mr. White, you've invited 
AT&T, MCI, Sprint, and USTA to be participants in the forum and 
a number of suppliers as well, why have these four major 
telephone companies not participated?
    Mr. White. AT&T was a member for approximately 1 year, 
withdrew last fall, and I'm unable to comment on their reasons 
for withdrawing. Comments like Lucent have been very 
cooperative attending a number of our meetings and presenting 
their status, and we've had ongoing discussions with USTA.
    Chairman Johnson of Connecticut. Is the Bellcore GR-2945 
that you say is emerging as an industry standard, is that a 
divisive development?
    Mr. White. It's a document that was developed in late 1996 
that provides the requirements for the network equipment to be 
year 2000 compliant. It is the specifications provided to the 
industry vendors.
    Chairman Johnson of Connecticut. And are the other 
companies, whether they're in this group or not in this group 
using that as their standard?
    Mr. White. I know for a fact that Lucent is and most of the 
equipment suppliers to the forum have adopted that and are 
complying with that standard.
    Chairman Johnson of Connecticut. Mr. Pasqua, could you 
comment?
    Mr. Pasqua. Yes, we are using that standard, for one. The 
question about AT&T being in the Telco Forum are not--the 
gentleman is correct. We chose not to continue participation in 
Telco Forum. For what it's intended to do we think it's an 
excellent forum for its membership. It's primarily focused, if 
I could characterize it, on intranetwork testing. Mainly, 
testing the components that make up the network, as the 
gentleman indicated.
    We're doing that anyhow at AT&T. We have the wherewithal, 
as I mentioned in my submission, to independently test all of 
our vendor products in our test environments with our test 
suites, ways that we use those products to assure ourselves and 
our customers that those components are compliant, and if 
they're not, to get a supplier that does have compliant 
components.
    So the benefit to AT&T to participate in this joint testing 
of components was not significant. Rather, we're focusing our 
attention, to build on the Telco Forum when that's completed 
its testing, on internetwork testing. We think that's the 
critical testing and testing that's required, not only between 
AT&T, but the other players in our industry, not only 
domestically but internationally. That's why we're focusing our 
attention there.
    Chairman Johnson of Connecticut. And are the standards you 
are using the same standards as they are using?
    Mr. Pasqua. Yes, they are.
    Chairman Johnson of Connecticut. And what influence has 
this had on the development of international standards? This 
level of agreement among American companies?
    Mr. Pasqua. I believe these standards are being reviewed by 
standards bodies like the ITU for consideration on the 
international front. But, you'd have to speak to the ITU 
representatives as to what the status of that is.
    Chairman Johnson of Connecticut. Does it concern you that 
there are not yet any international standards?
    Mr. Pasqua. No, there is still time. It's not a time to 
panic. There is time to be successful with Y2K. I think we're 
well beyond the awareness stage. I think most corporations, 
certainly domestically, are making the investment in terms of 
critical skills, dollars, resources and priorities to get Y2K 
on track. I think the initiatives we've launched with the ITU 
and other correspondent relationships that we have are making 
great progress in defining test plans and to ensure that 
compliancy will be in time for us to implement those standards.
    Chairman Johnson of Connecticut. And are the standards, for 
instance, that have emerged in Canada and the United Kingdom 
such that they are similar to these standards? And, am I 
offbase in assuming that if you're all using the same 
standards, it's more likely that we'll have interoperability or 
are they unrelated?
    Mr. Pasqua. This is perhaps, giving it more time than it 
might deserve. We are talking standards for compliancy. It's 
pretty simple, at least to my simple brain. You have to have 
your system work before, during and after the millennium 
change. Millennium change may not be for your system 12/31/99. 
It may, in fact, occur earlier in 1999 because you're running a 
system that has transactions that will span a year.
    To make sure that your system works before, during, and 
after, we know how to do that. We have regression tests and 
we've supplemented our regression test suites with specific Y2K 
scenarios running certain dates. For instance, 12/31/99, 1/1/
2000, 1/3/2000--the first business day of the new millennium; 
2/28 and 2/29 because as you know, the year 2000 will be a leap 
year because it's divisible by 400.
    So there are some unique Y2K scenarios, if you will, that 
we will supplement our existing regression tests to ensure this 
thing works before, during, and after the millennium change.
    Chairman Johnson of Connecticut. Ms. Guthrie, could you 
comment on this issue of standards and the national and 
international acceptance of standards and the implications for 
interoperability?
    Ms. Guthrie. Yes. I would agree that the actual test 
execution is fairly simple. It's not too much of an issue. 
There are some issues with international standards. We're 
obviously a global company. We find that Europe especially, is 
lagging a little behind in their Y2K compliance. They tend to 
be more focused on the Euro, and because of that, their 
standards aren't in place immediately. It would be helpful to 
have international standards.
    Chairman Johnson of Connecticut. Could you elaborate on the 
portion of your statement that says the second rule of thumb is 
to anticipate and prepare for the cascading effect when a 
single Y2K noncompliant application impacts other interfacing 
applications or devices. It sound to me like you know a lot 
about devices; you know a lot about testing; and why is there 
such a fear of cascading?
    Ms. Guthrie. Well, it's very easy to look at the set of 
things that you think are on the table when you look at Y2K 
compliance. You may have to make a change with one component 
which then won't run with another component. You have to track 
these things all the way back to the root, and it's a very 
interesting problem. Some of the products, they're not there 
yet, or they haven't been completed, so you don't know exactly 
what they'll run with.
    So when you put together a baseline plan to do your Y2K 
compliance, you have to not only look at the things right 
before you, but the next level back.
    Chairman Johnson of Connecticut. And how much do we know 
about the things that are not compliant? About how many 
products are there that are not yet compliant and what is the 
timeframe for those products to be compliant?
    Ms. Guthrie. Let's see, we're learning more everyday. I 
think that from a telecommunications only perspective, it's not 
such a difficult problem. I think that the real trouble will be 
when we do or don't do the end-to-end tests because the 
environment's not available. There will be a tremendous 
opportunity for fingerpointing because not all of the system 
components will work in concert with one another.
    I guess the easy analogy is that most of us have tried to 
print something off our computers and had the printer not work. 
We spend an inordinate amount of time trying to figure out 
whether it was the connectivity between the computer and the 
printer or it was the printer problem, whether it was an 
application problem, or whether it was user error. And those 
are the kinds of problems that end-to-end tests should help us 
find early. If we don't have an opportunity for end-to-end 
tests, there are liable to be a lot of small problems that 
require a lot of time and effort and are very costly to find 
that probably have nothing to do with telecommunications, per 
se. But it will be difficult to discern the difference between 
an applications compatibility issue and a telecommunications 
issue.
    Chairman Johnson of Connecticut. I'm going to yield to 
Congresswoman Thurman.
    Ms. Thurman. Thank you, Madam Chairman. I apologize for not 
being here for all of the testimony.
    This is probably not a question that private industry 
always likes to hear, and to say that here, we're with the 
government and we're here to help, but as folks are involved in 
this, and listening to GAO and listening to the Commissioner: 
What do you see as our role in this process within the private 
sector as far as--I think, Ms. Guthrie, what you were talking 
about earlier, it's not only what you're doing but what's going 
on beyond that with those people that will integrate into your 
system--what can we do to help this process? Or is it best for 
us to just stay out of it totally? I mean, I don't know.
    Mr. Pasqua. I think, you can obviously help keep awareness 
up as to the nature of the problem. I think you can help by 
sorting through--what we call, the chaff from the hard bodies--
sorting through what the facts are regarding where we are and 
what remains to be done as opposed to sometimes the claims as 
to where we are. My experience has been, at least in some 
areas, the claims are not as positive as reality.
    But doubling back to a previous question: How much do we 
know about our supplier products? AT&T has over 4,000 products 
supplied from outside suppliers. We either have the compliant 
product and have integrated it into our system or we're testing 
it or we're about to get it in a timeframe that's consistent 
with our overall program milestones.
    The reason that's true, is that suppliers that wouldn't 
give us the information have been replaced. So, along that 
front, are we declaring victory? Absolutely not. But we have a 
handle on the problem. We have the data we need to be 
successful.
    But I think the other things that I mentioned and some of 
the other speakers mentioned about the support with the ITU, a 
part of the UN, the NRIC, the advisory board we could meet 
perhaps, and I know my colleague from GTE supports this. We 
could meet on a quarterly basis or as frequently as the FCC 
would deem warranted to share progress on our Y2K plans against 
our baseline plan, to share lessons learned and barriers that 
we may be having that perhaps, the government can help us with. 
So there are things, but they are so obvious, I shouldn't have 
taken this much time.
    Ms. Thurman. But none of those things are happening now?
    Mr. Pasqua. No, I think they are happening now. If I could, 
in the spirit of candor, mention a point, however, we need to 
keep working with the Federal agencies and regulators--I'll 
speak for AT&T--and share information on a regular basis. If 
there would be a way to facilitate, to coordinate that dialog, 
that ongoing status reporting in a focused way to minimize 
responding to--and this is a future potential--responding to 
the same questions again that we've responded to another agency 
or another group, that would be very helpful.
    I don't know if that's something I should say here, but 
that would be helpful for all of us.
    Ms. Thurman. We asked the question, we want an honest 
answer.
    Mr. Pasqua. Thank you.
    Ms. Thurman. Anybody else?
    Mr. Bennett. Also, continuing to press the need to move 
quickly. As I mentioned we feel that there are enough resources 
to manage the problem to make sure that our customers have what 
they need. But as time moves on, if there is an action, really 
this year, then you start to run out of the ability to support 
and that's when we get into real trouble. So I think, 
encouraging moving now is very important.
    Ms. Thurman. Mr. Baker.
    Mr. Baker. I think your keeping the awareness up and 
keeping panels like this is also very important. But some bad 
things can happen if we get down the road where the media plays 
year 2000 and it's the movie of the week, and we want this on 
the Learning Channel, the Discovery Channel, not Jerry 
Springer, I think the efforts in that area, because there is a 
lot of uncertainty out there. And clearly the people 
representative at this table and the companies I've talked to 
have not been asleep at this wedge for 2 years. They have 
senior people with a roadmap compliance and adequate time for 
tests.
    There's a lot of uncertainty out there and across the 
board, the large companies that I speak to, they're not worried 
about themselves so much, it's about the other guy. We're 
worried about the other guy. Something that they are not 
visible, down in the food chain that comes up and then it bites 
them.
    I think there's a lot of positive things going on but it 
needs to be increased. It's the very last and we've got 
something to do about it, and I think that's a very important 
part of this. In the United Kingdom, Tony Blair has put his 
country on an emergency footing. Clearly, I think the 
discussions inside the beltway in Washington are going to stop 
real quickly asking the question: Will your mission-critical 
systems be compliant in time?
    Some probably will not. The shift has to go to contingency 
plans to work around to minimize the impacts, and I think 
that's an important thing to keep in mind.
    Ms. Thurman. Can I take this one step further? Because all 
of you are making that point that we need to be focused. We 
need to have these things happen. We need to make sure these 
things are happening. Are there incentives, penalties or 
anything that you see that we should be looking at for those 
that are not? I'm just curious. I mean, sometimes, the Chairman 
has been working for years on trying to get compliance with the 
IRS just to be able to do electronic filing and we end up 
backtracking every other year, that well, we're going to now 
just worry about this group, and then we'll worry about this 
group, now, we find out that it's going to save millions of 
dollars and just easier for everybody. Somebody was saying we 
put in some penalties or we might say, give them some 
incentives.
    Are there some things that we should be looking at in that 
direction?
    Mr. Baker. Well, I could give you a few examples of some 
things that just happened in the last week actually, that 
proved to be some pretty positive steps.
    Back to our friends up north in Canada, they figured out 
slowly and we probably will here too, that the impacts are 
going to be to the smaller companies that don't have the senior 
vice president in charge or a year 2000 staff or an IT budget. 
Companies like that were recognized to give them an incentive 
for information technology upgrades, computers, and things like 
that they buy because of the year 2000. Small and medium 
companies were given some tax credits. That was very well 
received. That just happened in the last 3 to 4 days, I 
believe. And that's across the country to Canada and we failed 
to break any news on that.
    I think we're going to have to get involved in the 
liability question. That's going to have to come up. You hear 
the figures that are out and unbelievable. Some people are 
saying that the corporate lawyers are saying, show me the 
carcass to feed from. We can't let that happen. That's why our 
visibility, I think, ma'am, is shallow in a lot of areas 
because of liability. It's not the fact that they don't want to 
show their hands, it's the liability question. I think you 
ought to get involved in this Subcommittee with that issue this 
year.
    Ms. Thurman. Well, I thank you for your openness. I 
appreciate it. Thank you.
    Chairman Johnson of Connecticut. Thank you. That is a 
question I wanted to turn to. Ms. Guthrie brought up the 
liability issue. I have heard that the legal profession is 
already offering workshops on how to sue whom if there are 
problems. I am very concerned about the statements you made in 
your testimony, Ms. Guthrie, regarding the reluctance of 
companies to certify because they can only certify the 
performance of their own equipment and they can't certify the 
performance of their equipment's interoperability with other 
equipment.
    So would any of you like to comment further on the 
liability issue and what we need to do to fix it? What is it 
that's needed? Would you like to answer in writing?
    Mr. Pasqua. I could make a comment on that. We're from the 
school just tell the truth and get on with it, especially when 
we have a global situation. This is, and I know it sounds trite 
and obvious, it's the most unique project we've ever 
experienced in our lifetime. That's why I volunteered to take 
over this role. Because it's one program you can't debate 
whether it's deferrable, and we can't slip the date. That gets 
us through a lot of issues that tend to trip us up.
    There are certain contractual arrangements we have with 
some of our suppliers built into the contracts that say, 
information that you develop by testing our product, you cannot 
release that to the public unless you have our approval in 
advance. Tell us, so we can fix it. So, those contracts have to 
be honored.
    In terms of public disclosure, with that one exception to 
the rule of what we're doing at AT&T, we're now coming out, 
bigtime, on announcing what we're doing, how we're doing it, 
where we are, where we want to be. We have an external Web site 
now and plan on substantially improving it with score cards 
showing where we are. I must sign 100 to 200 customer letters 
and inquiries a week responding to customers as to where we 
are. I meet with customers, and my other colleagues at AT&T 
meet with customers on a daily basis, in large groups and small 
groups trying to share not only where we are as a supplier, but 
our approach and our technique because maybe they can benefit 
from it in improving their Y2K program.
    And similarly, in some cases, they share their Y2K program 
approach with us and we will steal shamelessly to improve our 
program. So it's a collective benefit.
    Chairman Johnson of Connecticut. Ms. Guthrie--I'm sorry. 
Mr. Bennett.
    Mr. Bennett. We've been asked to participate through the 
Special Assistant of the President on some legislation comment 
we've done. We also recognize if we work with our customers 
that there may be a need for such legislation. We're still 
monitoring and watching it.
    But importantly, we've been sharing information with our 
customers all along and will continue. In particular, sharing 
information about the impact of our products that aren't Y2K 
compliant, our test plans, and summaries about our test results 
are the data that we are passing. So, we haven't seen a need to 
change laws in that case to be able to pass that information. 
And our intent is to continue to share that information with 
our customers as we move forward.
    Chairman Johnson of Connecticut. Mr. Baker, would you like 
to comment further?
    Mr. Baker. Say it again, Ms. Johnson?
    Chairman Johnson of Connecticut. Would you like to comment 
further, share your level of concern, and why you think it's 
going to be such a big problem?
    Mr. Baker. On liability and what that's going to be. Well, 
the way you look at it. A couple of States, and you're probably 
aware of this, have put Y2K in an act of God category. Nevada 
has done that and there are several others that are looking at 
that. Real danger flags come up when you see something like 
that. That's a real incentive not to do something. Hopefully, 
that's not going to catch on.
    It's hard for people to come out into the open to talk 
about Y2K because of liability. That's why you don't see a lot 
of CEO's raising their hands and coming to Washington to talk 
about their 3-year program and the millions and millions of 
dollars spent on it.
    I will comment that AT&T is one of the very companies that 
actually have an external Y2K Web site. What a breath of fresh 
air it is to see something where someone's interested in the 
company, or a shareholder in the company, and you can actually 
ask questions and you can get answers back. I've tried it and 
it actually works. Things like that really would help and be a 
real incentive to get through the liability issue. The more 
disclosure the better. It's a real positive thing to down play 
the liability question, itself.
    Chairman Johnson of Connecticut. So, you think it would be 
in the interest of companies as well as in the interest of the 
level of awareness in the business community and in society as 
a whole if everybody were very open about the information?
    Mr. Baker. Oh, absolutely, I think so. I think there's a 
potential, talking about the stock market, to drive people out 
of the market. I think there's a logic trail we can follow 
here. Where there is uncertainty because of the lack of 
disclosure on Y2K, it would drive people away from the market. 
Where there is disclosure and openness about it, I think that 
confidence, that shareholder confidence, would clearly be there 
and the liability will go to small L, rather than a large L. 
Disclosure and the cooperative efforts are positive things 
because the shareholders and the public out there sure are 
interested in this.
    Before the media gets hold of it and puts a bad spin on it, 
we have the opportunity now to start initiatives and to get the 
word out. Start in open forums to bring confidence up, and then 
you'll see liability be a much smaller issue I think, at the 
end of the day.
    Chairman Johnson of Connecticut. Mr. Pasqua.
    Mr. Pasqua. Madam Chair, I have one followup cautionary 
note I'd like to add though. That is, some of this information 
needs to be analyzed and used carefully. I can tell you I've 
tested a product and it's compliant, you can assume it's 
compliant. I don't have to test it, you don't have to test it 
in your environment and be lulled perhaps into a false sense of 
security because my tests were not as extensive as your tests, 
my test environment, my test scripts, our different use of that 
same technology. So we have to be guarded in terms of is there 
really a silver bullet here?
    Chairman Johnson of Connecticut. I guess that's why I was 
so interested in this issue and standards. And perhaps, I'm 
hearing your testimony on the issues of standards as somewhat 
more definitive and assuring than perhaps I should.
    Mr. Pasqua. Yes, standards give guidelines for defining 
what is compliance and the types of test scenarios or cases you 
should consider using. We don't consider those spelled out test 
cases sufficient. We do additional testing than what the 
minimal standards suggest, and that's a local call by an 
individual business and group as to what's really your 
priorities, how are you triaging, what are your business 
processes, what's important to your customers--and so forth.
    So standards is a start but it's not the definitive end of 
specifying every test case that you need to run.
    Chairman Johnson of Connecticut. Well, I appreciate that. 
But certainly, when we set standards in any area it's just to 
advise its positions or technology or certify any level of 
capability. There is sort of a general level at which you 
determine everyone must reach. And above that there are 
additional levels, but would you say, Mr. White, that the 
standards that have been generally agreed to in your group are 
specific enough so that if a company uses them or if they say 
they meet those standards, that should give it some confidence?
    Mr. White. Yes, they should. But they do go through and 
specify the types of dates and the type of test scenarios and 
requirements that go along with that. However, if you take a 
look that maybe on a component-by-component basis, if I go and 
take 10 components and put them together, that's where you have 
to take a look at the usage. So, the gentleman from AT&T is 
correct. That's where you start and that does provide a high 
level of assurance within the telecommunications----
    Chairman Johnson of Connecticut. And so, do we have no 
standards that govern the use of a number of different 
components?
    Mr. White. There are standards on how the network is 
actually put together, what elements talk to another.
    Chairman Johnson of Connecticut. Are the standards well 
enough to go up so that you could say anything that has met 
these standards that there would be a presumption of innocence 
on liability?
    Mr. White. I wouldn't be able to comment on the liability 
issue within the Telco Forum, that we have been working on the 
last 6 months is not just the tests per component, but the 
actual complete integration of those components and how we want 
to test those integration--those connection points--just to 
ensure ourselves as we went through each level of componency 
testing and that passed, then we add all the pieces back 
together. So we have taken the standard as a foundation and 
gone well beyond that.
    Chairman Johnson of Connecticut. Ms. Guthrie, would you 
comment on this?
    Ms. Guthrie. Yes, I think that all the standards that are 
available today have problems with them. You can get products 
that meet standards and yet, they don't interface properly. So, 
yes. It would be beneficial if there were strong standards 
about Y2K. But I think that interoperability and end-to-end 
testing will still be required because there is no standard 
that's going to be sufficient to assure that you have an 
interoperable system just because you've worked off----
    Chairman Johnson of Connecticut. But how can you hold that 
individual producer or provider of service liable for the 
affects of interoperability when really all they can do is test 
their components and systems and the product within a certain 
point within their system.
    Can we define the level of accountability that individual 
producers of parts and systems and providers of services should 
be accountable for, recognizing that then as things are 
integrated, we are going to have problems? And there are going 
to be failures. I don't see any way that you can move into 
this, the interlocking of this repaired, accommodated, adjusted 
system as we must deal with, and imagine that you won't have 
some glitches.
    So, if you're going to get people out there doing the very 
best job they can to avoid glitches, I think, we are going to 
have to begin thinking about what is any one company liable for 
and what's the state of the art that we can hold people for? We 
can't hold people liable for things they have no control over.
    Would you say, Ms. Guthrie, that you could actually define 
those levels?
    Ms. Guthrie. No, I'm not saying you can. System development 
is an arena that still has a lot of problems associated with 
it. There are many programs that have had difficulties because 
of these very many issues. And to mandate a set of standards 
that allows you to take an installed legacy base and make 
modifications across the board in this very short timeframe and 
have no glitches is not reasonable.
    What's important is that everyone work together to try to 
resolve the issues and be open and communicate so that there's 
not a withholding of information.
    Chairman Johnson of Connecticut. And yet, you say that the 
threat of litigation is currently an impediment to full 
cooperation. That's certainly the impression I got from Mr. 
Baker. It is also the comment that people walk up and make at 
home after the formal discussion of these issues.
    Ms. Guthrie. Yes, it very much is. And I think that we're 
seeing it more in our commercial business rather than in our 
government business. We're seeing companies pull back from Y2K 
conversion----
    Chairman Johnson of Connecticut. But you can't sue the 
government? It's real easy.
    Ms. Guthrie. Well, yes. And there's still a question about 
how will government respond to their vendor base when Y2K 
issues do arise, because they will arise. I think that it's 
better understood how commercial companies are going to 
respond. But we need the openness to solve the problems.
    Chairman Johnson of Connecticut. Well, I don't want to beat 
that issue to death, but I do offer to you the opportunity to 
put any comments you may have in writing. We will treat them 
confidentially. I am convinced that this is an area we are not 
getting the input we need for a lot of very good and logical 
reasons and I have talked to a number of other Committee 
leaders about this and it only stands to reason, and I was 
truly horrified to hear the legal profession is already holding 
workshops on how to go about this.
    So, we can only damage ourselves as an economy and a 
community and a market if we expend our resources in that 
fashion over this problem which is far beyond the dimensions of 
any problem we have ever been confronted with. It's far beyond 
the capability of any one company, or any individual, or 
bureaucracy to handle. And if we do to ourselves in Y2K what we 
did to ourselves in Superfund--because we've done this before--
in the Superfund. We wrote a law that penalized people and held 
them liable for things they could not have known and for 
abiding by standards that actually, we set.
    So totally irrational things can happen intentionally. And 
we've seen that. So, I'm very concerned about the possibility 
through, in a sense, neglect and an unwillingness to face the 
seriousness of this aspect of the problem we could create for 
ourselves an extraordinarily costly and diversionary sector of 
the economy--of economic activity. So, I am very concerned 
about it. I will treat your comments respectively and assure 
that they will be treated with confidence unless we decide to 
go ahead, and then we would check with you. But, we do need 
input. I can tell you that.
    Last, Ms. Guthrie, do you think the Treasury in the IRS 
have sufficient in-house expertise in telecommunication 
technology to be able to assess and implement the solutions to 
their problems?
    Ms. Guthrie. No, and that's why they're using their 
contractor base.
    Chairman Johnson of Connecticut. And is their use of their 
contract base broad enough now to give you some confidence they 
will be able to succeed?
    Ms. Guthrie. Let's see. They are starting to involve their 
contractor base. I believe the new Commissioner of IRS has 
taken some fairly aggressive steps to work Y2K. He's very 
focused on it and we're pleased with what he's doing.
    Chairman Johnson of Connecticut. I am too. I am very 
impressed with what he is doing and I want to know from your 
point of view as an insider in that operation, whether you 
think it is as strong as it needs to be. And I hear the answer 
to that is yes.
    Ms. Guthrie. Yes.
    Chairman Johnson of Connecticut. Mr. Bennett and anyone 
else who might like to comment very briefly: Do you think that 
private sector is going to be capable of delivering in an 
adequate and timely fashion telecommunication components to 
allow their installation throughout the many levels of the 
system that we have, in a timely fashion, both public and 
private sector to renovate the networks? I'm sorry that was 
sort of a backhanded question.
     Mr. Bennett.
    Mr. Bennett. Sure. First, I do believe that resources are 
available both from us, Lucent, as a manufacturer, but I 
believe from the other manufacturers as well, to solve the Y2K 
problem. What I'm concerned most about is getting it done 
quickly because as we kind of push this bough wave--if I can 
use the term--forward through the year, all of it becomes much 
more difficult. So the issue is to move quickly and to get what 
needs to be done now.
    As I work with the Telco Forum and others, I see that 
happening.
    Chairman Johnson of Connecticut. Time is certainly of the 
essence and it's one of the reasons why we've been holding this 
hearing and some of the other Committees have to try to give 
the kind of focus and pressure that will develop a greater 
urgency.
    But last, let me just ask you whether or not, through your 
contacts and experience out there in the private sector, 
whether you are concerned about compliance in the small 
business sector. You heard me quote earlier the CRS report that 
says ``80 percent of small businesses will probably experience 
some failure.'' They're defining small as under 2,000 
employees. So, that's extremely concerning to me. What do you 
see in terms of business compliance out there?
    Mr. Bennett. Based on the information we provided to the 
FCC, for example, with the Lucent products rollover, half of 
our products as we began our process of making sure Y2K was 
ready--our products were ready--we're already there, over half 
of the products. So, I am a little surprised by the numbers 
that I heard earlier today.
    As we move forward making many of our products, the 
majority them now ready, I am surprised as I heard the numbers. 
So, I don't have any basis to support the numbers I heard 
earlier. I believe we're moving better than that. But I don't 
know from which basis they drew their----
    Chairman Johnson of Connecticut. Anyone else have any 
comment on that?
    Mr. White.
    Mr. White. I think what Commissioner Powell's alluding to 
always needs to be asked is: ``80 percent of the businesses may 
experience a year 2000 problem, what kind of problem will they 
experience?'' If they have a file that they print that's got 
the wrong date at the top of the paper, is that of significant 
consequence to the business versus a more significant one that 
they can't produce bills to send out to their customers? So, I 
think that's always the key question to ask any analyst who 
touts very large numbers is to break that answer apart into 
multiple categories.
    Chairman Johnson of Connecticut. Well, thank you very much 
for testifying before us today. I appreciate your input and I 
invite your follow-on comments on any aspect of these problems 
that you might observe in the coming weeks ahead.
    Thank you very much.
    This hearing is adjourned.
    [Whereupon, at 5:15 p.m., the hearing was adjourned subject 
to the call of the Chair.]

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