[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
        REAUTHORIZATION OF THE FEDERAL COMMUNICATIONS COMMISSION

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

                                HEARING

                               before the

                  SUBCOMMITTEE ON TELECOMMUNICATIONS,
                     TRADE, AND CONSUMER PROTECTION

                                 of the

                         COMMITTEE ON COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 17, 1999

                               __________

                           Serial No. 106-13

                               __________

            Printed for the use of the Committee on Commerce


                                


                      U.S. GOVERNMENT PRINTING OFFICE
 55-640CC                    WASHINGTON : 1999
------------------------------------------------------------------------------
                   For sale by the U.S. Government Printing Office
 Superintendent of Documents, Congressional Sales Office, Washington, DC 20402



                         COMMITTEE ON COMMERCE

                     TOM BLILEY, Virginia, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio               HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                    RALPH M. HALL, Texas
FRED UPTON, Michigan                 RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio                FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania     BART GORDON, Tennessee
CHRISTOPHER COX, California          PETER DEUTSCH, Florida
NATHAN DEAL, Georgia                 BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma              ANNA G. ESHOO, California
RICHARD BURR, North Carolina         RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California         BART STUPAK, Michigan
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
GREG GANSKE, Iowa                    THOMAS C. SAWYER, Ohio
CHARLIE NORWOOD, Georgia             ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma              GENE GREEN, Texas
RICK LAZIO, New York                 KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming               TED STRICKLAND, Ohio
JAMES E. ROGAN, California           DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois               THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico           BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona             LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING, 
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland

                   James E. Derderian, Chief of Staff
                   James D. Barnette, General Counsel
      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

   Subcommittee on Telecommunications, Trade, and Consumer Protection

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL G. OXLEY, Ohio,              EDWARD J. MARKEY, Massachusetts
  Vice Chairman                      RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               BART GORDON, Tennessee
PAUL E. GILLMOR, Ohio                BOBBY L. RUSH, Illinois
CHRISTOPHER COX, California          ANNA G. ESHOO, California
NATHAN DEAL, Georgia                 ELIOT L. ENGEL, New York
STEVE LARGENT, Oklahoma              ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming               BILL LUTHER, Minnesota
JAMES E. ROGAN, California           RON KLINK, Pennsylvania
JOHN SHIMKUS, Illinois               THOMAS C. SAWYER, Ohio
HEATHER WILSON, New Mexico           GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING,       KAREN McCARTHY, Missouri
Mississippi                          JOHN D. DINGELL, Michigan,
VITO FOSSELLA, New York                (Ex Officio)
ROY BLUNT, Missouri
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
  (Ex Officio)

                                  (ii)



                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Furchtgott-Roth, Hon. Harold W., Commissioner, Federal 
      Communications Commission..................................    69
    Huber, Peter W., Partner, Kellogg, Huber, Hansen, Todd, and 
      Evans......................................................    21
    Kennard, Hon. William E., Chairman, Federal Communications 
      Commission.................................................    41
    Ness, Hon. Susan, Commissioner, Federal Communications 
      Commission.................................................    64
    Powell, Hon. Michael K., Commissioner, Federal Communications 
      Commission.................................................    74
    Tristani, Hon. Gloria, Commissioner, Federal Communications 
      Commission.................................................    80
Material submitted for the record by:
    Federal Communications Commission, response for the record...   115

                                 (iii)



        REAUTHORIZATION OF THE FEDERAL COMMUNICATIONS COMMISSION

                              ----------                              


                       WEDNESDAY, MARCH 17, 1999

              House of Representatives,    
                         Committee on Commerce,    
                    Subcommittee on Telecommunications,    
                            Trade, and Consumer Protection,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:06 a.m., in 
room 2123, Rayburn House Office Building, Hon. W.J. ``Billy'' 
Tauzin (chairman) presiding.
    Members present: Representatives Tauzin, Oxley, Stearns, 
Gillmor, Deal, Largent, Cubin, Shimkus, Wilson, Pickering, 
Fossella, Blunt, Ehrlich, Markey, Gordon, Rush, Eshoo, Engel, 
Wynn, Luther, Sawyer, Green, McCarthy, and Dingell (ex 
officio).
    Staff present: Justin Lilley, majority counsel; Mike 
O'Reilly, professional staff; Cliff Riccio, legislative clerk; 
and Andy Levin, minority counsel.
    Mr. Tauzin. Please come to order.
    Today, the subcommittee begins a process of re-authorizing 
and, hopefully, reforming the Federal Communications 
Commission. The Commission has been operating without statutory 
authority since 1991. It is my hope that this will be the first 
in a series of public hearings leading to the introduction of a 
comprehensive FCC reform legislation later this summer.
    When Congress passed the historic, much-publicized 
Telecommunications Act of 1996, I believe we made a fundamental 
mistake. We failed to reform an outdated, out-of-touch FCC when 
we overhauled the law. As a result, as America prepares to 
enter the 21st century, we have in effect a horse-and-buggy 
agency trying to bridle supersonic technology. And it is simply 
not working as well as it should.
    Simply put, can the agency created in the 1930's, instilled 
with the regulatory purpose and ingrained with the regulatory 
mindset, effectively oversee the deregulatory policies 
engineered by Congress for a modern-day marketplace? I believe 
the answer is no.
    And little wonder why. Keep in mind the FCC is based on the 
old Interstate Commerce Commission model, dating back to 1888, 
a time when telegraphs, not telephones, televisions, satellites 
or computers. In today's marketplace, it is more important for 
the FCC, literally, to get out of the way rather than to try to 
lead the way.
    To better understand the problem. Consider how the 
Commission is divided into six operating bureaus: mass media, 
common carriers, wireless telecommunications, compliance and 
information, international, and cable services.
    Twenty years ago, it made sense to have one bureau 
overseeing a monopoly like Ma Bell. But what about today? 
Because of cross-pollination in the telecommunications 
industry, hundreds of companies are involved in telephony, 
high-speed Internet services, cable television, satellite-
cellular, just to name a few.
    Suddenly the one-size fits all mentality simply doesn't 
work anymore. So we need to fundamentally restructure the 
agency and develop a 21st century model that works in a high-
tech global economy. But we must change the FCC's thinking as 
well. Today, nearly 3 years have passed since we passed the 
landmark Telecommunications Act. There is still no effective 
competition in residential telephone markets across America.
    We have failed to achieve full competition in the long-
distance loop. Why? Is the law flawed? I don't think so. In my 
opinion, it is the way the law is being interpreted and 
enforced. Instead of concentrating its efforts in areas where 
it can play useful roles and make a difference to consumers, 
FCC in recent years has delved into such controversial areas as 
free time for politicians, prohibiting liquor advertisement in 
radio and television, conditioning telecommunications mergers, 
and, worst of all, the FCC effectively, in my opinion, levied a 
$2 billion tax on telephone consumers to establish this so-
called E-Rate program.
    For the first time I have looked, no where in the 
Constitution is the FCC or any other Federal agency given the 
power to levy, raise, or collect taxes. While the FCC may call 
these new charges fees, I believe they are taxes in disguise.
    I have other deeper concerns as well. Concurrently, both 
the Department of Justice and the Federal Trade Commission 
possess statutory authority to review all mergers and 
acquisitions for anti-competitiveness. It is troubling to me 
and many of my colleagues that the FCC has assumed authority to 
condition mergers based on certain requirements even when these 
mergers have already passed DOG and FTC scrutiny--DOJ and FTC 
scrutiny.
    Based on this troubling track record, the FCC in the future 
may find the emerging Internet too tempting to resist, and 
therefore, I think it is vitally important for Congress to 
reform the agency from top to bottom.
    Simply put, FCC regulation of the Internet could have a 
paralyzing effect on the American economy, and I think the 
forbearance exercised by the Commission ought to be codified in 
law.
    Recently, I met with Chairman Bliley and pledged my support 
to work with him on a sweeping FCC reform bill. Among other 
things we plan to look at: forbearance, whether, indeed, 
forbearance can be codified; privatization, whether the FCC 
activities could or should be privatized, such as record 
keeping and information gathering; duplication, what FCC 
programs duplicate those of Federal agencies and could be 
eliminated; devolution, what FCC functions presently handled in 
Washington could be handled at the state level, and 
organization, what FCC structural changes can be made to 
streamline the agency and make it user friendly in today's 
competitive, fast-paced marketplace.
    As we begin these hearings, Chairman Bliley and I have two 
major goals in mind. We want to fundamentally restructure the 
agency, and second, we want to redefine the FCC's mission. We 
are starting today with a blank piece of paper.
    I want to welcome the input of Chairman Kennard and the 
entire Commission. Let me thank you all in advance. Your 
statements, which are a part of your record when we begin here 
today, are excellent starting points I think for this 
discussion.
    Astonishingly, there has been no comprehensive 
Congressional review of the FCC and its operations since the 
1970 Ashe Council report. Back then, there was only one 
telephone company, two commercial satellite providers, three 
television networks, and no one, not even Bill Gates in his 
wildest of dreams, had ever heard of a laptop computer with 
high-speed Internet access.
    Times have changed. Now it is time to change the FCC.
    I, of course, did not create the FCC, but I would love to 
recreate it in this process beginning today.
    I will be happy to yield to my friend, Mr. Markey, for an 
opening statement.
    Mr. Markey. Thank you, Mr. Chairman, very much. And I want 
to thank you for calling this hearing today on proposals to 
reform the Federal Communications Commission. And I want to 
thank Chairman Kennard as well as Commissioners Ness and Powell 
and Furchtgott-Roth and Tristani for being with us here today.
    The purpose of this hearing is to explore proposals to 
reform the Commission. I believe that constructive proposals to 
help the Commission do its job better and more efficiently are 
always welcome. I want to commend Chairman Kennard and the 
other Commissioners for the work they have already done to 
reinvent the Commission so that its functions are, in fact, 
discharged in a very competent and productive manner.
    Before we launch into a discussion about the job the 
Commission does and any proposals to help the Commission 
perform its tasks better, I think it is important to remember 
that the Commission has been entrusted with implementing the 
Telecommunications Act of 1996, a job that is unparalleled in 
scope and detail since the enactment of the 1934 act itself.
    We must also be cognizant that Americans today have the 
finest telecommunications system in the world. We are looking 
over our shoulders at No. 2 and three. It is overall, the most 
competitive, most diverse, and most innovative 
telecommunications marketplace on the planet.
    We should be very proud of what this committee has done, 
and we should be very proud of what the Federal Communications 
Commission has done in our private sector to bring us to this 
point. This is an American strategy. This is the blueprint 
which we laid out and has so far surpassed anything else that 
any other country in the world has even remotely contemplated.
    The fact is that this is the case, is, in fact, no small 
measure due to the fine work of the Federal Communications 
Commission and its staff. And I want to note that.
    But the fact also remains that we are not satisfied with 
the status quo. Most consumers still lack affordable 
alternatives to cable TV. Most consumers still lack choices for 
local phone service.
    Can we continue to add choices in the marketplace for the 
American consumer? Can we continue to foster ever-more ruthless 
competition and create more jobs?
    Yes, we can. And we should.
    Will there simultaneously be proposals to collapse the 
existing choices, either in the name of deregulation, or to 
concentrate economies of scope and scale?
    Yes, there will always be such proposals.
    Now that the communications act is finally getting out of 
its major rulemaking stages and we can get would-be marketplace 
participants out of the courtrooms--and I deeply regret all of 
the cases that have been brought by the Bell operating 
companies against the Telecommunications Act--we finally, 3 
years later, have most of them out of the way so that the 
marketplace can begin to work. I would suggest that reopening 
the Telecommunications Act or radically restructuring the 
Commission itself would be counter-productive.
    The last thing we should do right now is reverse the course 
of battling to de-monopolize telecommunications markets and 
jeopardize or delay deregulation.
    After all, we are not going to be able to deregulate until 
we de-monopolize and to break up monopoly barriers to 
competition. The Commission will need tools and resources, and 
competitors, both large and small, will need certainty in the 
marketplace.
    That certainty has finally arrived. I hope that this 
committee and the Congress does not create uncertainty by 
giving a promise to the monopolizers that they may get relief 
their need to open up their markets.
    Given the fact that there are literally billions of dollars 
being invested today, with billions more to come, now that the 
major legal challenges have run their course, the relatively 
small amount of funding that the FCC represents is pennies on 
the dollar in terms of the benefits consumers and workers 
ultimately derive from implementing the bill properly.
    To risk delaying emergence of a truly competitive 
marketplace and the arrival of the consumer choices and jobs it 
creates would be terribly shortsighted.
    I want to applaud the Commission for coming forward today 
with some suggestions for how to do its job more efficiently 
and better fulfill the numerous tasks and goals that Congress 
requires it to achieve.
    Common sense, consensus approaches to reform of the FCC are 
welcome as they are with any government agency. And I look 
forward to working with Chairman Tauzin in exploring how we can 
make progress together. And I look forward to working with 
Chairman Bliley and Mr. Dingell and the other members of the 
committee as we work with the FCC to ensure the full 
implementation of the Telecommunications Act so that it 
successfully works for all of the American people.
    On a final note, I would like to point out that our first 
witness today is a brilliant man. I have no doubt that he is 
one of the most brilliant men who has ever appeared before the 
committee. However, there are brilliant people on the other 
side of all of the issues, which Mr. Huber represents as well. 
And I would have preferred that we had two witnesses at least 
today, rather than one, because as well as Mr. Huber over the 
years has represented the Bell operating companies' perspective 
before regulatory agencies and in the courts, there are others 
who disagree with his perspective in terms of where we are at 
this point in time.
    And I know that Mr. Huber was invited very late to testify, 
and we had some difficulty in having an alternative point of 
view presented at this time. But I would like to stipulate for 
the audience and for the members of our committee that Mr. 
Huber represents one perspective, but there is another; there 
are other perspectives, but there is at least one other 
competing philosophical perspective that is at great odds with 
Mr. Huber in terms of what needs to be done to open up this 
marketplace more fully.
    And in the future, I would hope those other voices will be 
given a chance to testify as well. And I thank the chairman for 
allowing me that extra time.
    Mr. Tauzin. The Chair thanks the gentleman. Let me, before 
recognizing the vice chairman of the committee, let me point 
out to my good friend as we have had in private conversations, 
Mr. Huber is but the first of a number of voices we are going 
to hear. I think there are more than two perspectives. I think 
there are quite a few.
    And we are going to look for the brightest of minds who can 
paint pictures for us of where this incredible world is going 
so that all of us can work in a bipartisan and collegial way to 
find the right kind of agency for the Federal Government to 
work cooperatively with communications in our country.
    I pledge to my friend my cooperation in that regard, as I 
did privately. We will have other perspectives today. Mr. Huber 
I think will present an extraordinary picture for us. And we 
will have extraordinary pictures painted by people of, 
hopefully, equal men of capacity as Mr. Huber is, as we go 
forward.
    The Chair is now pleased to recognize the gentleman from 
Ohio, the vice chairman of the committee, Mr. Oxley, for an 
opening statement.
    Mr. Oxley. Thank you, Mr. Chairman. I applaud the decision 
to hold this morning's hearing, and I pledge my support for the 
committee's effort to re-authorize and reform the Federal 
Communications Commission. I believe the restructuring and 
modernization of the FCC is perhaps the most important project 
that we will undertake in this Congress--indeed, an attic to 
basement review of the FCC and its structure.
    I want to also welcome our witnesses and want to commend 
the Commissioners, in particular, for their testimony. From 
their prepared remarks, it is obvious that they have put 
serious thought into their recommendations. This kind of self-
analysis isn't necessarily easy. So I appreciate the fact that 
we begin this process with some excellent proposals.
    And let me throw a few bouquets to the Commissioners.
    Chairman Kennard's suggestion that the Commission focus on 
core functions not addressed by market forces is right on 
point. Increasing competition means a reduced need for 
regulation and a golden opportunity to streamline. Regulatory 
and statutory inertia are our enemies here.
    I would like to quote from the Telecom Reports dated March 
15 in which, based on Chairman Kennard's testimony, they say: 
``One of the difficult issues policymakers must grapple with is 
whether the convergence of new technologies requires the FCC to 
move away from its current structure, which includes separate 
bureaus handling common carrier, wireless, cable TV, mass 
media, and international matters. We are going to put that on 
the table, the chairman said. We are grappling with this issue 
of convergence.''
    Although it theoretically may make sense to break the 
agency down along functional lines rather than industry 
sectors, the Chairman goes on to say the FCC is bound by 
statute to treat industry segments differently. We need to 
recognize, the Chairman says, to recognize that we are dealing 
with statutes that haven't really dealt with convergence.
    And that is indeed our obligation as writers of law to make 
certain that that becomes a reality.
    Commissioner Powell's points on the duplication of the 
functions of other governmental agencies within the FCC are, I 
believe, especially insightful. This is a problem which hasn't 
received much scrutiny, but the implications are quite 
significant.
    Not only is it inefficient to have redundant regulation, 
but the replication of other bodies of law in FCC regulations 
and the creation of mini-regulatory agencies within the 
Commission invite the gaming of those rules to realize other 
means.
    Commissioner Powell cites the example of the FCC EEO 
program and points out that the telecommunications firms are 
already subject to the scrutiny of the EEOC as well as other 
Federal, state and local civil rights authorities.
    Commissioner Ness raises, in my view, one of the most 
important points of the day when she discusses the need to 
strengthen the FCC's technical assets and commit more resources 
to international representation. We provide a powerful benefit 
to American communication workers and consumers when the U.S. 
is well-represented in trade and standard-setting venues.
    Commissioner Furchtgott-Roth articulates the need for the 
Commission to make greater use of its regulatory forbearance 
authority and makes the cased for downsizing the FCC over time. 
I couldn't agree more.
    And Commissioner Tristani's comments on the need for an 
organizational restructuring that reflects technology and 
industry convergence are certainly well received, at least from 
this member.
    Let me also take a moment to praise the Commission for a 
few of the tasks it has executed quite well of late. I believe 
that your handling of disputes pertaining to CALEA has 
demonstrated great fairness and an appreciation of the needs of 
law enforcement.
    Congressman Stupak and I wrote the Commission last year on 
this topic, as you will recall, and I feel our concerns were 
heard. I hope you will continue to recognize the importance of 
digital wiretap capability to public safety.
    Second, I want to praise the international bureau for some 
outstanding work. The implementation of the market-opening WTO 
telecommunications agreement and the Commission's effort to 
bring international settlement rates more in line with costs 
are benefiting consumers in the U.S. and around the world.
    Last, I want to endorse the Commission's decision not to 
mandate cable unbundling as a condition of the AT&T-TCI merger 
or in other contexts. It is my view that unbundling will happen 
as market forces dictate, and that there is no need for 
Government to force that issue.
    Having said these things, I nonetheless believe that the 
Commission needs to be refocused. Reorganization of the FCC is 
an opportunity to make it more efficient and improve its 
ability to fulfill its mission. We need to repeal obsolete 
statutes, eliminate outdated regulations, and otherwise clear 
out the underbrush in the law.
    It is my view that the FCC modernization is an attainable 
goal this Congress, but only, and only, if we stay focused on 
restructuring and don't get sidetracked in old fights over 
telecommunications policy. There is no surer way to kill reform 
than to reopen those old disputes.
    Mr. Chairman, we need to stay focused on the regulatory 
framework of the Commission itself. If we can do that, we can 
remake the Commission into a model of what an independent 
agency ought to be, with long-term benefits for all 
telecommunications sectors and all telecommunications 
consumers.
    Again, Mr. Chairman, thank you. And I yield back.
    Mr. Tauzin. Thank you, my friend. The Chair is now pleased 
to recognize the ranking minority member of the full committee, 
the gentleman from Michigan, Mr. Dingell, who I know has some 
modest views on this subject.
    Mr. Dingell.
    Mr. Dingell. Thank you, Mr. Chairman. I always have 
moderate views, as you very well know.
    First of all, Mr. Chairman, thank you for recognizing me. I 
would like to commend you for holding this hearing and 
encourage you to persevere in your efforts, as you have said, 
to ``re-mission'' the FCC. I'm not quite sure what the re-
missioning means. As I note, remission is used where cancer is 
involved, and it would appear that in certain parts of the 
Commission something of that kind is going on.
    So if that is your interpretation, I support it. If you 
intend also to give them a better appreciation of what it was 
the Congress intended when we wrote the Telecommunications Act 
so that they may better and more fairly apply that statute and 
carry out the intentions of the Congress I actively support you 
in that undertaking, Mr. Chairman, and commend you.
    Just 3 short years ago, many of us trooped back here from 
the Library of Congress after the President signed the 
Telecommunications Act into law. At that time, many of us were 
optimistic that we had succeeded in crafting a good law, one 
that would provide the telecommunications road map into the 
21st century. We were going to allow everyone to get into 
everybody else's businesses. Let the consumers pick winners and 
losers through the marketplace.
    And we were not going to support any particular part of the 
marketplace, but we were going to see that competition gave us 
the best service that we could possibly get for all the 
American people.
    That was then. I would regretfully observe this is now. And 
it would appear that many of us, especially myself, are 
extremely frustrated with the manner in which the FCC has 
disregarded Congressional intent and implemented the new law.
    I will only give a few examples. And there are legions more 
of these.
    The Telecom Act required the Commission to issue new 
regulations to curb slamming of consumers by long-distance 
companies. The practice is, of course, one of the principal 
complaints we hear from consumers. The Commission postponed 
implementing this requirement for years until members of this 
committee finally did something about it and until we finally 
got on the Commission about a period of slothful inactivity on 
this matter.
    The Telecom Act required the Commission to establish a 
universal service fund to make sure that all Americans would 
continue to receive affordable basic telephone service, 
something of enormous importance to residents of inner cities 
and of enormous importance to people in rural areas, who, 
without this, will pay excessive and exorbitant costs for 
telephone service.
    The Commission has repeatedly postponed full implementation 
of that requirement as well. Inexcusable.
    As a result, we have now found ourselves having continued 
hidden subsidies in the system. Plus we have the new universal 
service charges showing up on consumer bills. That too is a 
source of many justified consumer complaints, and is of course 
reason to call the Commission to account.
    The act required the Commission to forbear from anything 
rather than from applying statutory and regulatory requirements 
that were no longer necessary in light of technological and 
economic changes. Essentially, we thought that they were big 
boys and big girls and that they would know how to implement 
the wishes of the Congress. We are disappointed.
    The Commission has ignored this mandate as well.
    On the other hand, when you search the law, the legislative 
history, and all the hearings for any reference to the term 
operational support systems, or OSS, you can't find a single 
one. The Commission in a remarkable exercise of imagination run 
wild, has grounded each of its five decisions denying a Bell 
company authority to offer long-distance service on the failure 
of the company to meet OSS requirements.
    I don't know what these are. I'm not convinced that the 
Commission does, but the Commission applies them with enormous 
diligence.
    I would note that there is virtually no increase in 
competition in long-distance. I would note that there is no 
competition in service to residential users. However, the FCC 
has diligently kept competition out of long-distance and has 
not done anything to stimulate competition with regard to 
service for the individual householder. A most curious set of 
circumstances.
    I have been regrettably driven to the conclusion that this 
Commission and the one preceding it have not only disregarded 
the law but has thumbed its nose at the Congress. The agency is 
implementing a law they wished that the Congress had drafted 
instead of the black and white version that the President 
signed into law.
    We are talking here about extension of the life of the 
Commission. It would appear to me that perhaps the re-
authorization should be for a period of 1 year or less, 
certainly not more, because we are going to need them before us 
to talk to us again about the mishandling of the business of 
the Commission and the derision that they have shown for the 
intentions of the Congress.
    In our government, everybody is accountable to somebody 
else for his or her actions, a very important Constitutional 
principle. We here in the Congress are accountable to our 
constituents. The lower courts are accountable to the higher 
courts. And, most curiously, the FCC thinks that it is not 
accountable to the Congress.
    I intend to have a few fine questions for the members of 
the Commission, and I intend an active role as the subcommittee 
develops its plans for restructuring the agency or, perhaps, 
re-missioning, as you have so wisely observed, Mr. Chairman.
    My efforts will be guided by the need for accountability by 
an agency that I believe is out of control and is not 
implementing the law. The agency has found that it needs more 
staff and more money. The agency has, however at the same time, 
required the filing of thousands and thousands of pages of 
documents in connection with applications by the Bell companies 
to enter long-distance. Nothing, however, has been done on any 
of these except kind promises from the Chairman that at some 
distant point in the future they would, of course, look with 
kindness on permitting competition to enter the long-distance 
service.
    I think that we find this whole situation a bit ironic. I 
would observe that in Monday's Telecommunications Daily, the 
Chairman of the FCC has kindly warned the Congress that we 
should not turn these proceedings into a backdoor rewrite of 
the Telecommunications Act.
    There speaks a real expert on the subject of backdoor 
rewrites of the Telecom Act.
    Writing laws is the business of the Congress. Those to whom 
the Congress delegates the implementation of law should refrain 
from giving us warnings about what we should or shouldn't do, 
or the job that the people elected us to do.
    Almost all of us who have been in here at this desk have 
been in public service long before the Chairman of the FCC 
received a Presidential appointment. And I would remind him 
that I think I was writing laws when he was wearing three-
cornered pants.
    I find his choice of words particularly distressing when I 
consider the Commission's action in implementing the 1996 act. 
I am sure that Chairman Kennard speaks as a real expert on 
backdoor rewrites. His comments proved to me, at least, that 
the chairman knows full well that the Commission's 
implementation of the act has been inconsistent with the 
intention of the Congress and, indeed, with the clear language 
of that statute.
    He has gotten away with it so far and does not want us to 
step in and to spoil his fun. Holding the Commission 
accountable and correcting its mistakes may require that we do 
rewrite portions of the act, or it may be possible that in 
prudence we will decide that we can cut certain portions of his 
budget so that he no longer needs to require massive piles of 
paper, so that he and the bureaucrats at the FCC may have a 
great deal of time running their shredders overtime and acting 
important by going to meetings to discuss over-large filings 
that need not be made under the statute.
    I see no reason to defer to Mr. Kennard on this point. We 
should do whatever is necessary to assure that the 
prohibitive--that the prohibited actions that he is taking, the 
anti-competitive actions that he is carrying forward, and the 
deregulatory goals that we have set are, in fact, achieved in a 
proper way.
    I thank you for recognizing me, Mr. Chairman. I yield back 
the balance of time. I may have some more things that will be 
less kind to say at a later time in the proceedings.
    Thank you.
    Mr. Tauzin. The Chair thanks the gentleman. The gentleman's 
time is slightly expired. I just want to----
    My friend, Mr. Markey, pointed out, Mr. Kennard, we were 
all wearing three-cornered pants when Mr. Dingell was already 
legislating.
    We deeply respect the dean of the House. The Chair, in 
order to recognize punctuality, is--follow our procedure of 
recognizing the most senior member when the proceedings opened, 
and that is Mrs. Cubin, will be recognized for an opening 
statement.
    Mrs. Cubin. Thank you, Mr. Chairman. And I gave up 
complaining for lent. And so what I say is I am not 
complaining, I am making a simple observation. And I guess that 
is what the ranking was just doing. Next year I am going to 
give up smoking. I haven't smoked in 21 years, and I won't be 
an abject failure at that I am sure.
    I do want to thank you for holding this very important 
hearing on re-authorization of the FCC. My main focus today 
will be to engage the Commissioners on issues pertaining to the 
access of telecommunications and technology. I want to assure 
all Americans that they will be able to experience the benefits 
of telecommunications and the technological advances that are 
rapidly being deployed across much of the United States.
    And when I say much of the United States, I say that for a 
reason. My constituents in the State of Wyoming are telling me 
that they are not experiencing many of the same benefits such 
as high-speed Internet service, increased telephone 
competition, and lower rates that many people in other parts of 
the country are enjoying.
    I am sure that the Commissioners would agree that less 
regulation in these areas, I hope they would agree, less 
regulation in these areas not more will allow rural areas of 
the country to partake in what truly should be a revolutionary 
time in our lives.
    I am encouraged by Chairman Kennard's Focus 1999 agenda 
that points out that growth in advanced services will strain 
the existing regulatory structure. Furthermore, the FCC should 
aggressively pursue ways to give these emerging markets the 
breathing room they need to innovate and prosper. Those are 
encouraging words to me both for startup businesses and 
existing telecommunication companies that really are burdened 
by excessive regulations, stymied by artificial controls, and 
hampered by a climate that seems to reward restraint instead of 
encourage progress.
    Advancements in technology are truly mind-boggling. Keeping 
up with these issues in the area of telecommunications, being 
new on this committee, is totally mind-boggling as well. And 
trying to keep up is like, my husband said, herding cats. It is 
virtually impossible to do.
    My goal for Wyoming is to make it as friendly as possible 
for outside businesses to locate there and also to maintain a 
climate that encourages current businesses to stay in the 
state. That means, we must work together to develop an 
environment for businesses to invest capital in an information 
infrastructure, create good-paying jobs, and provide a better 
way of life for the citizens of Wyoming.
    In considering the re-authorizing of the FCC, Congress must 
look hard at what is the best for the American people. We must 
develop a market-driven solution to the events that are 
happening in this past-paced industry.
    To believe that the Federal Government can keep up with 
industry is totally unrealistic. And that is why this 
regulatory dinosaur of the 1930's should be updated not only 
for the next decade but for the next century.
    None of us, of course, has a crystal ball. We would be 
foolish to predict the advancements that are yet to come. We 
must, however, look to the future as a guide so that we can 
recreate an agency that rewards progress instead of restraint, 
condones new ways of thinking instead of creating barriers, and 
moves at the same speed as the industry that it regulates.
    I look forward to hearing from the Commissioners and 
listening to their ideas on possible reforms. And, again, thank 
you, Mr. Chairman, for holding this hearing.
    Mr. Tauzin. Thank the gentlelady. The gentleman from Ohio, 
Mr. Sawyer, is recognized.
    Mr. Sawyer. Thank you, Mr. Chairman. Thank you for this 
hearing. I have a wonderful opening statement. I urge everyone 
to take it home and read it for all of its nuance in the 
evening, where you will appreciate it. It may move some of you, 
but I will forgo reading it at this moment.
    [The prepared statement of Hon. Thomas C. Sawyer follows:]
 Prepared Statement of Thomas C. Sawyer, a Representative in Congress 
                         from the State of Ohio
    Thank you Mr. Chairman for holding this hearing this morning. I 
especially want to thank Chairman Kennard and the four other 
Commissioners for coming to testify before us today. I know how 
difficult it is to get all of them together because of the growing 
demands on their schedules. So, I appreciate their taking the time to 
come to Capitol Hill.
    The jurisdiction of the Federal Communications Commission is quite 
extensive. The Commission's responsibilities range from regulating 
interstate telephony service to cable pricing to satellites. Obvious 
pressures are being placed on the Commission because of its 
jurisdiction and responsibilities. However, I strongly believe the 
Commission needs, and fully deserves, the tools and resources necessary 
to meet its statutory requirements and to do the job it was created to 
do. Unfortunately, however, the last time the FCC had a statutory 
authorization was in 1991 and for every year since Congress has had to 
appropriate funds without an authorization.
    Last month commemorated the three-year anniversary of the passage 
of the Telecommunications Act of 1996. During that debate, many thought 
that Congress should have revamped the FCC and provided it with a 
multi-year reauthorization package to meet the demands of deregulating 
the telecommunications industry. While the reauthorization has not 
occurred, the Commission has taken on a myriad of issues while 
attempting to implement the Act. Moreover, the structure of the FCC has 
essentially remained the same.
    Although the FCC has come under some criticism for its actions 
during this period, I am glad to learn that Chairman Kennard will be 
outlining his proposal for consolidating bureaus and modernizing the 
Commission. I believe this is an important step as we move into the 
next millennium. It is even more important that the FCC receive the 
proper authorization and direction from Congress so that its work on 
the implementation of the Act can properly move forward.
    Mr. Chairman, I believe it is important that the dialogue between 
Congress and the Commission continues to be honest and open because the 
work that we both do in this new era of telecommunication deregulation 
is important to the American people and to the world. I hope the 
Commission sees this opportunity to answer questions that have been 
raised since the last time we held a Reauthorization hearing.
    Again, thank you Mr. Chairman. I look forward to hearing from our 
witnesses

    Mr. Tauzin. I thank the gentleman. The gentlelady from New 
Mexico, Mrs. Wilson, is recognized.
    Mrs. Wilson. Thank you, Mr. Chairman. You know my problem 
on this committee is that the Minority Leader just sugar coats 
everything, and I can never understand exactly where he is 
coming from. I have that trouble all the time.
    I appreciate very much your holding this hearing. I kind of 
have a little bit different perspective on this and a certain 
amount of sympathy for those in the FCC. And the reason is that 
I formerly headed a State government agency that we 
reorganized, and I know that it is much easier to ask these 
questions to plan a reorganization than it is to actually 
reorganize and manage your way through that. So I have some 
sympathy for the challenges that you face in taking that agency 
to be more effective.
    The questions that we are here to ask and begin to answer 
today have more to do with how you do your jobs than what you 
are doing. It is not about policy. It is about management and 
responding and asking ourselves the questions of how has the 
mission changed, how has the environment changed, and how do 
you change your organization in the way in which you do your 
jobs in order to more effectively serve the customer and 
achieve the mission that you have been given.
    I will be interested in the answers to several questions 
that have been tossed around in my office, including some from 
my constituents. And I have a very active telecommunications 
group in Albuquerque, New Mexico, that has both positive things 
to say about the FCC and some, I think, very good questions and 
suggestions about how it can be made even better.
    I yield the balance of my time.
    Mr. Tauzin. The Chair thanks the gentlelady. The gentleman 
from Minnesota, Mr. Luther.
    Oh, he is gone. The gentleman from Tennessee, Mr. Gordon.
    Mr. Gordon, I'm sorry, the gentlelady from California. I 
think they said she was next.
    Ms. Eshoo. Thank you, Mr. Chairman, and good morning to 
everyone on the committee and those that are here to testify 
today.
    Over 3 years ago, of course, the Congress passed the 
Telecommunications Act and we restructured what was almost a 
century-old, monopolized industry into one based on competition 
and open access. I think we have yet to see the full benefits 
of the 1996 act, and I think that we have to keep looking for 
new and better ways to implement and to be moving in the right 
direction.
    But I think that there are some positive things that are 
happening. Yesterday, for the first time, the Dow, largely 
driven by the exploding telecommunications sector of our new 
economy, climbed over the 10,000 mark.
    Soon after the new century, which is just really moments 
away, it is likely that the number of people using the Internet 
will climb over and past 100 million. If someone were to have 
said that just a handful of years ago, would have been laughed 
out of the room, probably this room.
    It is estimated that Americans will spend over $1.5 
trillion in electronic commerce in the next 6 years. So I think 
that there are some very exciting things on the horizon. 
Obviously, the FCC has to adjust as competition continues to 
develop and new markets are created in this telecommunications 
field.
    Today, the Chairman of the FCC will present his plan for 
building a new FCC, and I think the burden really falls on your 
shoulders and that of the agency to really demonstrate what the 
word ``new'' means. If, in fact, it has some cobwebs around it, 
I suspect that there will be more Dingells around this 
committee.
    So it is up to you to present that plan to us and how you 
are going to handle the regulatory challenges that confront the 
telecommunications industry in the 21st century. The plan has 
to ensure that the explosion of the new technologies really 
ensure that each and every citizen in this country has access 
to what I just described. If that is not the case, then we will 
have all failed.
    And there are many challenges, I think, ahead, obviously, 
for the FCC to ensure that this is the case. I think, and I 
keep hammering on this, that more work has to be done on 
improving and expanding our Nation's 911 emergency phone system 
so that we can locate every caller. If this isn't the case in 
emergencies, then most of the citizens are going to throw their 
hands up and say, well what's new and what have you done to 
make it better for us.
    We should be encouraging additional studies of advanced 
trauma communications and elevating the public understanding of 
automatic crash notification systems. We should ensure that 
every student in every classroom in our country continues to 
have the opportunity to tap into the wealth of what the 
Internet really represents.
    And all of my colleagues know, over $1.6 billion has been 
sent to school districts throughout the country as part of the 
E-Rate System. Now this system has been criticized by some 
members of this committee, but despite that, I think the 
program is not only an important one but it is proving to be a 
success, enabling thousands of students across the country, as 
well as their teachers, to access the great learning tool that 
the Internet represents.
    So I am looking forward to hearing, most especially, form 
the Chairman of the Commission on some of the specifics of the 
goals that you outline in your printed testimony to us.
    I thank the chairman for holding this very important 
hearing. Hearings I think are really terrific because they are 
learning sessions for us. And I might that if we come in here 
with our minds made up about everything, I really don't know 
how much we are going to learn from those that we call before 
us to give their testimony.
    So I am looking forward to it. Thank you, Mr. Chairman. And 
if I have any time back, I yield.
    Mr. Tauzin. And thank the gentlelady and assure here that 
that is exactly what these are hearings are designed to do, to 
teach us. And we are going to learn a lot today, I hope.
    The Chair is now pleased to recognize and to reward for his 
punctuality the new member of our committee, Mr. Pickering from 
Mississippi.
    Mr. Pickering. Thank you, Mr. Chairman. And I commend you 
for holding this hearing today. This is an issue of great 
concern and interest to me. As many of those know, I spent 
primarily 3 years of my life during the 103d and 104th Congress 
as a Senate staffer, working on the Telecommunications Act of 
1996. It was after that that I ran for Congress and quickly 
lost all of my influence.
    One of the reasons I did run is that I thought if you could 
work out the complexities of this issue with the intense 
competitive pressures from all of the various industry 
segments, if we could find a public policy consensus in this 
area, then there is no limit to what we might could do in other 
areas as well, that people can come and work together. It was a 
great model, I think, and example of when Congress comes 
together and works together.
    Now what was our hope when we passed that act? We hoped 
that the rules would be in place in 1 year and that competition 
and the implementation of the act would be completed in a 2-
year period.
    Were we overly optimistic? Perhaps.
    We are changing 60 years of law and practice and the 
economy that it built up in telecommunications since that 1934 
act first passed.
    Did we expect the delays that came from litigation and some 
of the regulatory delays? We had hoped, maybe over 
optimistically, that that would not occur.
    But where are we today? Just as spring comes, the sprouts 
of competition are beginning to emerge, the certainty of the 
litigation, as it is now nearing its end with the Supreme Court 
decision, the regulatory framework seems to be almost in place, 
and we are beginning to see the competition emerging.
    And I do want to say that I think that we need to be 
cautious and careful not to reopen or introduce uncertainty 
just as we are beginning to see the fruits of our labor in the 
Telecommunications Act.
    Having said that, there are things that can be done better, 
more quickly, more efficiently. Streamlining can occur. I am 
somewhat concerned about the length of the mergers and 
acquisitions and the review that has taken place at the FCC, 
and see if we can have a way to put a timetable in that area so 
that we can introduce greater certainty in the marketplace and 
as these investment decisions are being made.
    It is with that background and with that context and the 
hope that we can find ways to do our job better here and 
working with the FCC, that we can see the full fruit of our 
labor in the Telecommunications Act, that I will be listening 
and working with the chairman on this very important act.
    Thank you.
    Mr. Tauzin. Thank the gentleman very much. The Chair 
recognizes the gentleman from Tennessee, Mr. Gordon.
    Mr. Gordon. Thank you, Mr. Chairman, for your continuing 
effort to help us educate ourself on these important and 
complicated issues. Let me just quickly say that I think that 
it is a very legitimate and important function of Congress in 
the area of oversight of our various agencies, both for our 
taxpayers and for our constituents. And I think that this is an 
important hearing.
    And I have to say that I share a lot of the frustration 
that has been echoed here today about the Telecommunications 
Act not reaching its full potential and what we had hoped to 
see by now.
    And there is plenty of fault, I think, to go around, and I 
don't think I need to add additional criticism of the FCC today 
because you are going to get plenty of it. You don't need my 
help right now. So let me just say that certainly the FCC could 
be doing a better job. Certainly industry could do a better job 
of trying to compete rather than just consolidate. And I think 
that maybe we probably should have done a better job in the 
original efforts on this bill.
    So there is improvement, I think, to go around. I think 
now, though, the time if for the FCC to come forward with a new 
model for a structure that, hopefully, will deal with the new 
times. And I think we need to talk about this. Hopefully we can 
come to a consensus and then move forward.
    And I think that we in Congress have a responsibility. 
After we do find this new model that we adequately fund it. If 
you look at the FCC's funding over the last few years, it's 
been flat. Employees have gone down. At the same time, Congress 
continues to ask more and more.
    So we've to sort of decide, if we are going to ask more we 
are going to have to fund you, if we don't want you to do more, 
then that's fine. But we can't have it both ways.
    So I am glad you are here. Hopefully we can learn about 
this new direction.
    Mr. Tauzin. Thank the gentleman. The gentleman from 
Maryland, Mr. Ehrlich, for an opening statement.
    Mr. Ehrlich. Thank you, Mr. Chairman, I intend to submit a 
formal statement for the record. And in view of that, I will 
forgo an opening statement at this time.
    Mr. Tauzin. The Chair thanks the gentleman. Mr. Green from 
Texas is recognized.
    Mr. Green. Thank you, Mr. Chairman. And I will submit an 
opening statement. I just want to raise two concerns.
    As a new member on--as a second-term member on the 
committee, in watching the FCC, and not on the committee in 
1996, I had some concern last year with the potential loss of 
the benefits of the E-Rate program, but the FCC salvaged it 
because of the opposition and the way it was structured 
originally.
    I also have a little concern about the recent ruling on the 
long distance charges for Internet use, and hopefully we will 
hear that today. But I will submit the whole opening statement.
    Compared to Mr. Dingell, it is very mild.
    [The prepared statement of Hon. Gene Green follows:]
  Prepared Statement of Hon. Gene Green, a Representative in Congress 
                        from the State of Texas
    The Federal Communications Commission is an independent agency 
whose mission is to encourage competition in all communications markets 
and to protect the public interest. In response to direction from the 
Congress, the FCC develops and implements policy concerning interstate 
and international communications by radio, television, wire, satellite, 
and cable.
    That basically is the current mission statement at the FCC. Today 
we are going to discuss FCC Reauthorization and FCC reform in light of 
rapid communications technology achievements, and we will try to figure 
out how we must reshape and refocus the FCC for the future.
    Communications technology is starting to transform itself at an 
exponential rate. Just in the past 5 years alone we have seen an 
explosive growth in the use and development of the internet and 
wireless technology.
    The internet is the one innovation that has drastically altered the 
telecommunications landscape. It has already started to transform the 
way we communicate today and the way we will communicate and interact 
in the future.
    While we look at the future of the FCC and how they can deal with 
the new convergence of technologies, we also must deal with current 
pending issues at the FCC.
    I hope that we can discuss the future of the FCC and the role they 
want to play, and I hope that we can get some answers to our questions.

    Mr. Tauzin. Thank the gentleman. The gentleman from 
Illinois, Mr. Shimkus, for an opening statement.
    Mr. Shimkus. Thank you, Mr. Chairman. I think in any 
discussion of re-authorization I will be looking forward to our 
first panelist and the chairman to just address a couple of 
concerns. One is, what is their mission statement? What are our 
goals? And what are our objectives? Then how does the 
organization help or hinder those? Are these stated goals and a 
mission statement; or are they implied?
    I think only then, when we understand where we have evolved 
to, and it really just basic problem-solving techniques, once 
you understand the problem, then you develop the organization 
to identify the problem.
    The issue with agencies that have existed for over 60 years 
is sometimes they don't reorganize themselves to meet the new 
problems of today.
    And with that, Mr. Chairman, I will yield back my time.
    Mr. Tauzin. Thank the gentleman. The gentleman from 
Maryland, Mr. Wynn, is recognized.
    Mr. Wynn. Thank you, Mr. Chairman. I appreciate you calling 
the hearing, but in the interest of time I will defer an 
opening statement and submit for the record.
    Mr. Tauzin. Thank the gentleman. The gentleman from 
Florida, Mr. Stearns, is recognized.
    Mr. Stearns. Good morning, and thank you, Mr. Chairman, for 
holding this hearing on the re-authorization of the FCC. And I 
would like to thank Chairman Kennard for coming and all the 
other Commissioners.
    It has been a number of years since the Commission has be 
re-authorized, and I know it is the highest priority of our 
chairman to pass an authorization bill this year that will 
restructure the operations of the FCC. So I think it is 
appropriate that we hear from the chairman.
    In looking back at the Telecommunications Act of 1996, you 
know, the idea here was to deregulate, set a blueprint in 
place. To me the act, the purpose was threefold. One to begin 
efforts to bring competition to those sectors of the 
communication industry that were burdened with solitary, 
dominant companies. Two, foment additional competition in 
sectors with limited competitive players. And three, eliminate 
all unnecessary regulations in those sectors that have proven 
to be competitive for the public good.
    When you look at those three criteria, I think the FCC has 
done a pretty good job on the first two. It has been difficult 
to bring new competition to uncompetitive sectors, I think the 
FCC is attempting and fighting it out.
    But in the last area of responsibility, the elimination of 
unnecessary regulations, frankly, I would say to the chairman, 
I think the FCC has failed.
    In Title IV of the act, under section 402, titled 
``Biennial Review of Regulations: Regulatory Relief,'' the FCC 
was instructed ``in every even-number years, beginning with the 
year 1998, the Commission will, one, shall review all 
regulations issued under this act in effect at the time of the 
review that apply to the operation or activities of any 
provider of telecommunications service, and, two, shall 
determine whether any such regulation is no longer necessary in 
the public interest as the result of the meaningful economic 
competition between providers of such service, and, three, 
effect of determination, the Commission shall repeal or modify 
any regulation it determines to be of no longer necessity in 
the public interest.''
    Furthermore, Title II of the act specifically instructs the 
FCC to review its rules concerning broadcast services and all 
of its broadcast ownership rules biennially as part of the 
regulatory review and ``shall determine whether any such rules 
are necessary in the public interest as a result of 
competition. The Commission shall repeal or modify any 
regulation it determines to be no longer in the public 
interest.''
    You know, I think this review process created in the act 
was to rid the free market of burdensome and unwanted FCC 
regulation. The FCC, under the act, does not have the statutory 
power to create social solutions for our Nation. By not 
fulfilling the mandated responsibilities of the act, the 
Commission has failed in its duty to comply with the law.
    Saying that this review of 1998 was piecemeal, I think, is 
an understatement. The FCC had initiated to my latest 
information, just 31 proceedings on the literally hundreds upon 
hundreds of regulations the FCC maintains. And the FCC has 
issued only four orders modifying or repealing various rules. 
Only four.
    This is not what I believe this committee had intended. In 
response to this, my colleagues are aware that I have 
introduced legislation to remove numerous broadcast ownership 
regulations, including grandfathering of local market 
agreements, which the act specifically instructed the FCC to 
do. And for some unfathomable reason, they continue to refuse.
    Mr. Chairman, I hope we can move that bill that I have 
provided to a hearing and discussion with the committee.
    In closing, Mr. Chairman, we do need to improve some areas 
of the act, but that should be the responsibility of this 
committee and Congress and not the Commission. I discourage the 
Commission from attempting to open portions of the act for new 
regulatory efforts. I think Chairman Kennard and the other 
Commissioners would agree that the act should not be reopened 
on their own.
    Thank you, Mr. Chairman.
    Mr. Tauzin. I thank the gentleman. The Chair now recognizes 
the gentlelady from the show-me State of Missouri, Ms. 
McCarthy, for an opening statement.
    Ms. McCarthy. I do not have an opening statement, Mr. 
Chairman, but thank you for recognizing me. And I would like to 
put it in the record.
    Mr. Tauzin. Thank the gentlelady. It will be so ordered. 
The gentleman from New York, Mr. Fossella.
    Mr. Fossella. Other than to wish the wanna-be Irishmen like 
Ed Markey a happy St. Patrick's Day, I have nothing to add.
    Mr. Tauzin. Italian-Irish is something, man. Mr. Deal from 
Georgia is recognized.
    The Chair thanks all the members of the subcommittee for 
their contributions. And I have just received the statement by 
the Speaker of the House, Mr. Hastert, which he has asked to be 
submitted into the record.
    I won't read it all, but just some highlights, if the 
committee will allow me:
    ``I am a little envious of the subcommittee's collective 
role in this regard because for a few days last December I was 
looking forward to working with you and our colleagues to 
conduct rigorous oversight of the FCC. My short tenure as O&I 
subcommittee chairman-designate though gave way to another job, 
as you know.
    ``Mr. Chairman Kennard, I say it is good hear that you and 
the Commissioners see the need to scrap the outdated top-down 
regulatory model and are now offering a new FCC structure 
paradigm. I know we all appreciate hearing and plan to hold you 
to your recent statement that `as long as I am Chairman of the 
Federal Communications Commission, this agency will not 
regulate the Internet.' ''
    He goes on to mention, of course, that the Internet was 
mentioned only twice, parenthetically, in the 1996 act. And how 
rapidly times are changing. He mentioned his work with former 
Chairman Fields in attempting to begin the work on FCC reform.
    He said, looking back, when we enacted regulatory reform on 
the telecom industries, we should have also enacted regulator 
reform.
    He is indicating his strong support for the work of our 
subcommittee and our full committee, and his statement, like 
all the written statements of the members, without objection, 
will be admitted into the record at this point.
    [The prepared statement of Hon. J. Dennis Hastert follows:]
   Prepared Statement of Hon. J. Dennis Hastert, Speaker of the House
    Mr. Chairman, although I cannot be with you in person today at the 
start of these most important hearings on reform of the FCC, I wanted 
to speak to a few issues that have concerned me about this 65-year old 
independent agency. I appreciate your scheduling these hearings and 
want to commend you, Chairman Bliley, Ranking Member Dingell and Mr. 
Markey for your leadership in this important matter of FCC 
modernization. I am a little envious of the subcommittee's collective 
role in this regard, because for a few days last December, I was 
looking forward to working with you and our colleagues to conduct 
rigorous oversight of the FCC. My short tenure as O&I Subcommittee 
Chairman-designate, though, gave way to another job, as you know.
    To Chairman Kennard, I say it is good to hear that you and the 
Commissioners see the need to scrap the outdated, ``top-down'' 
regulatory model and are now offering a new ``FCC structure'' paradigm. 
I know we all appreciated hearing, and plan to hold you to, your recent 
statement that, ``as long as I'm chairman of the Federal Communications 
Commission this agency will not regulate the Internet.'' I see the 
Internet as an outstanding example of what happens when we do not 
micromanage, and instead let market forces design an economic engine of 
growth--I do not think any politician can claim all the credit for the 
success of its creation and development.
    As you know, since my service began on the House Commerce Committee 
in 1991, I have been integrally involved in various aspects of the FCC. 
Indeed, in the mid 1980's, I had the opportunity to manage legislation 
in the Illinois General Assembly which rewrote the Public Utility Act. 
I saw firsthand there the interface between the Illinois Commerce 
Commission (ICC) and the FCC. In 1995 and 1996, our former colleague, 
Chairman Jack Fields, myself and other colleagues worked on a plan to 
restructure and reform the FCC. In fact, we visited the FCC on a couple 
of occasions to ``kick the tires'' and see for ourselves, after talking 
with employees and observing their work, how best the FCC of the 1990's 
could be restructured to make them relevant in the 21st century.
    One thing that I would like to be remembered for during my tenure 
as Speaker is that this was a period when we encouraged competition to 
replace regulation at every opportunity. Indeed, the FCC is a classic 
example of an agency that when presented with a choice as whether to 
regulate or not regulate, the institutional inclination seems to be to 
choose the former course.
    By compiling a comprehensive hearing record on these issues, I am 
confident we can possibly remedy the current regulatory situation with 
a mixture of statutory changes and internal administrative reforms. We 
also need to encourage all of those stakeholders who are regulated by 
the FCC and to those others indirectly affected by it to come forward 
and help all of us in the cause.
    Finally, many of us are concerned about opening up the ``Act'' 
again after just barely three years since we passed a massive re-write, 
known as the Telecommunications Act of 1996. It was a great undertaking 
by many members of this subcommittee, and although we all agreed that 
the Act as written was fair and balanced, implementation by the FCC of 
congressional intent has left many of us less than satisfied. Looking 
back, when we enacted regulatory reform on the telecommunications 
industry, we should have also enacted ``regulator reform.''
    We know that the regulation of the communications industry has been 
a ``work in progress'' over the last 65 years. Title II of the 
Communications Act of 1934 was taken almost verbatim from the 
``railroad monopoly''-driven Interstate Commerce Act of 1887. In 1984, 
Title VI on cable services was added to the 1934 Act, and in 1993, a 
cellular and PCS title was added in OBRA to the 1934 Act. In fact, the 
term ``Internet'' is mentioned parenthetically only twice in the 1996 
Act.
    Again, look at what has happened as a result of the growth of this 
tremendous network in just the last three years. My point is this: we 
should be willing to continue to conduct oversight and to consider 
updates to the laws affecting telecommunications in this nation. We 
cannot manage lightning-speed advances in technology with ``status 
quo'' statutes. The growth of the Internet is a perfect example of this 
conundrum.
    Mr. Chairman, I look forward to following your hearings and working 
with you, Chairman Bliley, and the subcommittee on this critical issue 
in the future. Thank you.

    [Additional statements submitted for the record follow:]
Prepared Statement of Hon. Steve Largent, a Representative in Congress 
                       from the State of Oklahoma
    Mr. Chairman, I want to thank you for holding this important 
hearing. The FCC has played, and will continue to play, an essential 
role in implementing the rules of competition for the 1996 
Telecommunications Act. Over the past three years, the 
telecommunications industry has undergone a period of unprecedented 
growth, resulting in the development of new technologies and services 
that were unimaginable just a few years ago. I am, however, 
disappointed in the amount of litigation that has ensued since the 
passage of the Act, as various segments of the telecommunications 
industry competes for market share.
    I am interested to hear each of the Commissioners and Mr. Huber's 
thoughts on what regulatory function the FCC should play in the coming 
years to accelerate competition and reduce litigation as we transition 
to the digital age. In particular, I want to know what the Commission's 
plans are for universal service reform, access charges, and the 
deployment of broadband services.
    I look forward to hearing from our witnesses.
                                 ______
                                 
  Prepared Statement of Hon. Tom Bliley, Chairman, House Committee on 
                                Commerce
    I thank the Chairman for yielding me the time.
    Today, the Subcommittee meets to consider FCC reauthorization. 
Today is also St. Patrick's Day. You have to wonder if Chairman Kennard 
needs two reasons to enjoy a cold pint of ale this afternoon.
    In any event, I am pleased that the Subcommittee is holding this 
hearing. The reauthorization process is a good opportunity to promote 
efficiency, reduce redundancy and eliminate functions that are no 
longer needed.
    I anticipate that the Subcommittee will soon turn its attention to 
NTIA reauthorization as well.
    At the outset, let me make clear what I think the FCC 
reauthorization process should not be: a means to re-visit issues from 
the 1996 Telecom Act. Why on earth would we want to go through yet 
another multi-year cycle of implementation and litigation?
    It took three years to complete the last cycle, and it's not clear 
to me who benefitted from all this litigation . . . other than the 
lawyers, of course.
    While there is much work to be done, the Telecom Act is working 
just fine. Consumers are starting to see the benefits of competition, 
particularly in the area of broadband services.
    And, the incumbent telephone companies appear to now realize that 
competing is in their best interest, rather than spending their money 
on lawyers.
    Which leads me to the issue of local competition. In light of the 
Supreme Court's ruling, the FCC has no excuse at this point not to make 
local exchange competition its highest of priorities. Your legal 
authority in this area is now unquestionable. Use it!
    For instance, the Commission can and should push forward with 
reform of its physical collocation rules, revise its list of unbundled 
network elements, and speed implementation of intra-LATA toll dialing 
parity.
    I therefore hope that the reauthorization process will be a genuine 
effort to streamline this important agency. This Committee has a fine 
record on agency reform, namely FDA reform. I hope we can use that 
experience to inform us here today, and into the future.
    In that vein, I understand that Chairman Kennard is planning to 
unveil some recommended changes here today. I look forward to reviewing 
these changes closely.
    Before I conclude, I would like to address another matter. Last 
year the House passed, by a margin of 403 to 16, bipartisan satellite 
reform legislation, cosponsored by Mr. Markey and I. We plan to 
legislate on satellite reform again this year.
    These intergovernmental satellite organizations should be 
privatized. And they should be privatized in a manner that promotes 
competition by ending their current cartel-like structure. Our bill 
will encourage a pro-competitive privatization, and end COMSAT's 
monopoly over access to the INTELSAT system. No one should be permitted 
to get around the 10 percent outside-ownership cap on COMSAT, in the 
absence of overall satellite reform legislation.
    Some claim that one can ignore this cap under the guise of being an 
authorized carrier. Any action by the Commission to facilitate 
another's evasion of the cap will be treated for what it is: an attempt 
to end-run Congress, and to undermine the legislative process, as well 
as unjustified on the merits. I plan to eliminate the language 
regarding authorized carriers in whatever legislation we introduce in 
order to avoid any confusion in this regard. I also think that any 
devotion of resources by the Commission to acting on a pending 
application in this regard will not serve the public's interest in 
comprehensive satellite reform and would add fuel to the fire of those 
who argue the Commission has far more employees than it needs.
    I look forward to hearing the FCC's views on this matter. I thank 
the Chairman, and yield back my time.

    Mr. Tauzin. The Chair is now pleased to call our first 
witness and to recognize him for his contributions in public 
policy, the senior fellow from Manhattan Institute of Policy 
Research, a partner of Kellogg, Huber, Hansen, Todd, and Evans, 
Mr. Peter Huber.
    I want to point out to the committee that as we invited the 
Commission to come and give us their views on what the FCC 
might look like in the future, where the 1996 act is being 
fully implemented in an open, competitive marketplace full of 
vibrant competition and less monopolies, as my friend Mr. 
Markey pointed out, or providing new services to consumers, we 
thought it would be very useful to get someone of great 
reputation in this area to paint a picture for us of where 
these amazing technologies are going, what kind of future 
communications is likely to see, so that we can begin thinking 
of and formulating how we might want to picture an FCC working 
in that future.
    In that regard, we have invited Mr. Peter Huber because, as 
Mr. Markey said, fewer people have come before our committee 
and demonstrated more mental capacity in this area than Mr. 
Huber.
    He does have a background. He has worked for Bell 
companies. Want to put that on the record. If you see some 
perspectives in there that come from that affiliation and 
regarded as such, we will be inviting others with different 
perspectives to come, hopefully, as qualified and as 
contributing as Mr. Huber.
    But I want to thank you personally, Peter, for undertaking 
this effort to paint this picture for us and would invite you 
to do so at this time.

 STATEMENT OF PETER W. HUBER, PARTNER, KELLOGG, HUBER, HANSEN, 
                        TODD, AND EVANS

    Mr. Huber. Thank you very much, Mr. Chairman.
    Just a few days ago, my co-authors and I----
    Mr. Tauzin. Pull the mic close to you, Peter, so we can 
hear.
    Mr. Huber. Just a few days ago, my co-authors and I 
completed our second edition of ``Telecommunications Law'' and 
sent it off to our publisher. I have a copy here. I runs about 
a thousand pages. It would try your patience if I started on 
page 1 and read it into the record.
    Suffice it to say that nobody wishes more passionately than 
I that the third edition will be much shorter. This is much 
longer than the first edition, I might add.
    Let me just try and paint a few facts or a picture of where 
I think we are headed that I believe is, in fact, relatively 
uncontroversial.
    Within the next 5 years, the amount of traffic moving on 
phone and cable and broadcast and satellite wireless networks 
is going to increase by severalfold at least. Predictions vary, 
but we are looking, conservative estimates, at a three-to 
fivefold increase in total traffic moving over these networks.
    And I don't there is really much dispute about those 
estimates. Where is this coming. We are not going to be talking 
five times more on our phones. We are not going to be watching 
five times as many soaps, or five times as many Superbowls. It 
is coming from the rest, from this explosive, remarkably 
dynamic growth of the web and all that implies.
    Second, a plain engineering fact, which I think is also not 
widely disputed, the networks in place today, terrestrial 
broadcast networks, cellular networks, cable networks, phone 
networks, cannot accommodate a fivefold increase in traffic. 
The existing networks, based largely on analog technology and 
yesterday's technology, were not built for that kind of growth.
    In the next 5 years, the networks that will be in place and 
operating and serving businesses and residences, 5 years from 
now, behind the jacks, behind the telephone jacks, behind the 
antennas, behind the satellite dishes, those networks are going 
to change almost beyond recognition.
    We can argue at length. I have, everybody has too about who 
owns the past. I am not prepared to argue about who will own 
the future because I don't know. You don't either, and the very 
intelligent and dedicated and skillful people sitting behind me 
don't know either. And I don't think they claim to know.
    The equipment that we will be using 5 years from now hasn't 
been built yet, by and large. Today, already on the phone 
network, there is more data traffic than voice traffic. If I 
had made that prediction even 5 years ago, it would not have 
been taken seriously.
    Within 5 years, I think we can quite confidently predict 
that on our cable networks there will be more data traffic than 
the existing video traffic volumes. Within 5 years, and this is 
almost unheard of to speak of in the broadcast networks, but we 
are moving into the HDTV bands now--within 5 years, I think it 
is quite safe to predict that most of the traffic on the 
terrestrial airwaves will not be conventional fare. It won't be 
the stuff--the conventional fare will still be there. We will 
still be watching Superbowl and soaps and so on and so forth, 
but the lion's share of the traffic will not be those things.
    Every telecom medium out there is going to experience 
dramatic growth. We know--I think it is safe to predict only a 
few things about these networks.
    They are going digital. They are all going digital. There 
won't be any exceptions to that.
    Overwhelmingly they will go to packetized networks. Packet 
networks are quite different architecture from what we have 
used in the past, but they are very much more efficient. They 
are essentially the architecture of the web, and you boost them 
up fast enough and they can carry anything.
    And they will be boosted fast. We are talking about very, 
very substantial increases in capacity on all of these 
networks. As I say, they are all capable of going this way. 
They all will go this way because if anyone of those networks, 
the broadcasters or cable or telephone, if anyone of them says, 
Look, we are happy with what we got. We are sitting still. 
Their traffic will migrate onto another network that goes this 
way.
    Just as sure as day that this is coming. We don't know who 
will win. We are talking about a very fundamental restructuring 
of all of these networks.
    I am, I think, also fairly confident in saying that anybody 
who thinks there is one technology that will prevail, or one 
provider who will prevail, is surely wrong. Different 
technologies are going to be right for Wyoming, where people 
are spread far apart, or for New York, where they are packed 
close together.
    Business markets and residential markets are going to be 
drawing on different technologies. Demand will vary widely 
across different types of users, business and residential 
applications.
    You can't guess, I can't guess, none of us can guess who 
will win. And to the extent our Government institutions and our 
structures, or this committee, or the FCC attempt to guess, 
implicitly or explicitly, and attempt to pick winners and 
losers from this fray, we are simply going to retard this very 
important transition.
    I think it is equally fair to say that we do not know what 
pricing structures will emerge from this. We have three or four 
old paradigms at hand.
    We have the local phone pricing paradigm, which is an all-
you-can-eat-for-a-flat-fee, we have cable, which is a flat fee 
plus charges for special and premium services, we have the 
broadcast model, which is advertiser-supported, we have the 
basic catalog model, where everything is free because you are 
buying jellybeans online, or shopping at Land's End or 
something, and the telecom comes to you free.
    All of those models, I think, will their place in this new 
structure. But again, once again, to think that we can predict 
which is best for a market or particular class of consumers is 
a big mistake.
    I think it is fair to say, and this is not a reproach, I 
think it is simply a statement of fact, that notwithstanding 
the 1996 act, the FCC is still administratively and 
bureaucratically structured around yesterday's models. The 
basic title structure of the Commission, Title I, Title II, 
Title III, Title VI, reflects the 1934 act and accretions that 
there added with the advent of cable, satellite technology, and 
so.
    The 1996 act attempted to clear away some of these 
divisions, but it did not go very far. In many areas, certainly 
not all, but in many areas the regulatory presumptions are 
still the presumptions of the 1930's.
    It is forbidden until the Commission says it is permitted. 
And that often takes awhile.
    Does it take longer when people go to court? You get it 
does. And when they go to court they quite often win. I have 
represented some of them. Sometimes they win. The Commission 
wins its share. Other people win their share.
    Half the time the courts of appeal and the Supreme Court 
think of different reasons for upholding different parties, and 
the process goes up and down. And while it does, the markets 
hesitate and the markets wait.
    I think it is, again, accurate to say, without trying to 
pick sides, that overwhelmingly today how I do at the 
Commission depends on what I can persuade the Commission to 
call me. If I can get them to call me a broadcaster, and trust 
me, there's a whole lot of room in the word broadcast, you can 
be doing paging and data and other things--if I can get them to 
call me a broadcaster, that is one set of rules.
    And if I can get them to call me cable company or a cable 
service, that is another set of rules. And if I can get them to 
call me a PCS provider, that is another set. And if I am in the 
satellite DBS band, that is another set. And if I'm a local 
phone company, that is another set. But it depends which 
division or subsidiary I am of that local phone company, 
whether I am a separate sub under 272 or the main incumbent 
carrier.
    The Commission itself has recognized this in their recent 
analysis of--at least its staff has--in its recent analysis of 
how cable, for example, should be regulated. They quite openly 
and honestly and correctly, I said, said, look, we can 
basically make cable, Internet on the cable, anything we like. 
We can make it a cable service; we can make it a telecom 
service; we can make it an information service; we can forbear 
under section 10.
    Well, isn't that grand. I would like to have that much 
flexibility too. The problem is, you don't know how it is all 
going to emerge until it emerges. And the process takes a very, 
very long time.
    However the Commission makes these calls. They are subject 
to appeal. And as I say, the courts sometimes have different 
interpretations of the law than the Commission does.
    I could talk in more detail about proposed restructuring 
and so on, but I don't think it is my place, although I will be 
happy to answer questions.
    I will say this. I think it is tremendously tempting to 
look backward, to say, look, I am still worried about E-911, 
very important, or my constituents concern about universal 
service in poor areas, or just very cheap telephone service, a 
very important thing. Of course we should be concerned about 
this.
    But please, I would implore this committee and the 
Commission itself, look forward. We are talking, we are looking 
at 80 or 100 percent growth in the next year or 2, and another 
100 percent after that, and another 100 percent after that.
    Looking forward. Let us please put in place structures that 
let this market unfold at high speed with a minimum of advanced 
oversight.
    Thank you very much.
    [The prepared statement of Peter W. Huber follows:]
    Prepared Statement of Peter W. Huber, Senior Fellow, Manhattan 
Institute for Policy Research; Partner, Kellogg, Huber, Hansen, Todd & 
                                 Evans.
    Here's what won't change. Five years from now, Americans will still 
make plain old phone calls on plain old wireline phones. They will 
still watch movies and the Superbowl on their television sets. They 
will still rely, as they do today, on some mix of wired plugs and 
wireless antennas to get electronic information in and out of their 
homes and businesses.
    For the ordinary consumer, the change will really center on ``none 
of the above.'' Voice, which until recently occupied close to 100 
percent of the telephone network's capacity, will occupy under 20 
percent, and quite probably a lot less than that. Consumers, in other 
words, will be using phone lines to support a vast range of other 
services beyond voice. Cable jacks will be delivering more content than 
ever--but well under half of the traffic will be conventional 
television fare. TV stations will be broadcasting as many channels as 
they do today, or even more--yet conventional broadcasting will account 
for a rapidly shrinking fraction of total traffic moving over 
terrestrial airwaves in the UHF, VHF, and HDTV bands. We won't be 
talking less on the phone, or watching much less TV. But at home and 
even moreso at work, we will be spending an enormous amount of 
additional time beyond telephone and television--on the Web--to shop, 
read, browse, bank, invest, and chat.
    The new-generation data and video services will reach consumers 
over a broad array of media, and will be offered in a great variety of 
service packages and prices. The wired plugs and wireless antennas 
already in the home today--phone jack, cable jack, TV antenna, and 
satellite dish--will look much the same as they do today--but they will 
perform very differently. They will all carry digital traffic, not 
analog. They will be engineered to handle traffic packetized on the 
Internet's TCP/IP protocol, or more advanced successors to it. And all 
of these ports and jacks will be fast--hundreds of times faster than 
they are today.
    As I have noted, these same jacks and antennas will still support 
the services we are accustomed to today, the plain old phone calls, the 
old-fashioned television, the movies, the Superbowl. From the 
consumer's perspective, those old services will not have changed much 
at all. But from the provider's perspective they will have changed 
profoundly. No single, old service will account for most of the traffic 
on any network. All major networks, phone and cable, wired and 
wireless, terrestrial and satellite, will be capable of supporting all 
major services. We are engaged, here, in a truly fundamental 
transformation of the whole of the telecom infrastructure.
    Digital networks can support encryption and addressing, which make 
possible point-to-point messaging: the Internet already permits 
slightly tinny, two-way, voice conversations. As bandwidth increases, 
any digital network can likewise support one-to-many communication: 
even on the slow, analog bandwidth of ordinary phone lines, for 
example, the Internet already can deliver live radio broadcasts. With 
digital broadband technology, today's text-based bulletin boards will 
support voice and video--the Internet equivalent of radio and 
television. E-mail will support voice and video, too--the Internet 
equivalent of telephony and video-phones. High-speed data links on 
cable networks will offer similar capabilities, spanning everything 
from voice telephony to digital television. Digital broadcasters will 
be able to provide a limitless range of other digital services in 
addition to plain old broadcast fare.
    Every major company operating a network is scrambling to become a 
part of this future. For all of them, it means rebuilding network 
infrastructure, and at enormous cost. But the opportunity is equally 
enormous--and, in any event, they have no choice. Any network that is 
not upgraded to high-bandwidth digital will simply lose its traffic to 
others that are.
    Even if nothing else were changing, soaring demand would force an 
end-to-end rebuilding of existing networks. Demand for digital 
bandwidth is increasing at annual rates in the range of 50 to 200 
percent. By every plausible projection, it will continue growing at 
those rates for the foreseeable future. It will increase at least five-
fold over the next few years.
    If demand is going to grow five-fold--and it is--then network 
capacities will have to increase as much. But the existing phone, 
cable, broadcast, wireless, and satellite networks still rely, in 
significant part, on yesterday's analog technology, and they are 
already stretched to capacity. Systems deployed a decade ago cannot 
begin to accommodate five-fold increases in traffic. So new networks 
must be built--networks that are much more capacious than the ones they 
overlay. Which means, in turn, that 80 percent or more of the wires, 
trunks, cables, transmitters, receivers, switches, and routers that we 
will be using for digital transport five years from now will be built 
and put into commission between now and then. Nobody owns them yet. 
Hardware manufacturers have to build them. Phone, cable, broadcast, 
wireless, and satellite companies have to deploy them. Fast. And once 
they've built and deployed them, they have to build and deploy them 
again. And again, for as long as demand continues to grow at these 
explosive rates.
    It is impossible to say with any precision who will emerge with 
what share of the market for digital bandwidth. A list of likely 
contenders must surely include both phone and cable companies, along 
with both terrestrial and satellite-based wireless systems, using VHF, 
UHF, HDTV, cellular, PCS, satellite, and other spectrum bands. Electric 
power companies may join the fray, too. The best technology will vary 
from market to market. It will likely be different for rural and urban 
areas, different for business and residential customers. We cannot 
predict how things will shake out across technologies, providers, and 
markets. Government should not be trying to. The harder Government 
tries to guess, and the more it intervenes to back up its guesses with 
technology-favoring or competitor-favoring policies, the more it will 
get in the way of the healthy evolution of the market.
    Nor can we usefully guess or predict what pricing structures will 
emerge. There are countless different ways to price these services. 
They range from the traditional local telephone model--all you can eat 
for a flat monthly fee. To per-minute charges, like those traditionally 
applied for long-distance calls. To advertiser-supported services, like 
those traditionally used by broadcasters. To pay-to-play services, like 
the premium services traditionally offered by cable. Some providers 
will give you a free computer if you'll watch their advertising. Others 
will charge you $35 for a two-hour, commercial-free streaming video 
download of Wrestlemania. Service providers will offer free connections 
analogous to 800 numbers--the call is free if you shop the catalogue. 
Every variation in-between is possible.
    We have no clear idea what kind of corporate arrangements or 
structures will move us fastest toward the most productive and 
efficient market. Judging from the ferment in the computer industry, it 
is safe to assume that major restructuring will inevitably occur. 
Again, this should come as no surprise. Most of the equipment, most of 
the service that will be bought five years from now hasn't yet been 
deployed, hasn't yet been built. New conglomerates, new joint ventures, 
are going to emerge to build the new infrastructure.
    All we can anticipate with confidence is that demand for digital 
bandwidth will continue growing very fast, for many years to come. 
Digital bandwidth is now the most important economic commodity in the 
United States. It is the key to growth and prosperity. The computer 
industry's fortunes depend on it. The productivity of both labor and 
capital are, in turn, irrevocably linked to the growth of the digital 
infrastructure. Whether you manufacture cars or newspapers, whether you 
supply electricity or medical services, digital bandwidth will be a key 
input to your business, and a vital component of your consumption.
    The 1996 Act notwithstanding, the regulatory environment has not 
begun to catch up with the market now emerging, and the new 
technological realities. With most services, over most media, the 
starting legal and regulatory presumption is still this: What you want 
to do is forbidden, unless and until the Commission gets around to 
permitting it. And once it's been permitted, it may get forbidden 
again. You certainly can't depart sharply from past practices, or 
transfer your assets to a new owner, or fail to build out on the 
timetable favored by the Commission, or decline to carry traffic the 
Commission likes, or insist on carrying traffic it doesn't, without 
putting your licenses, permits, and regulatory favors at risk. The 
Commission is forever weighing--weighing charges, services, subsidies, 
interconnection, mergers, divestitures, cross-ownership, and more. 
Every major Commission rulemaking is followed by endless appeals. The 
Commission wins some of those appeals, loses as many more, and is 
forever reconsidering orders, reopening dockets, and reviewing 
licenses. While the Commission weighs things, and the courts reweigh, 
the market waits.
    Much of the basic structure of the 1934 Act remains in place, 
despite the 1996 Act. The 1934 Communications Act was written around 
the technological paradigms of its day: broadcasting and common carrier 
telephony. The Act distinguishes wire from wireless, carriage from 
broadcast, broadcast from cable, voice from video, and both voice and 
video from data. It draws lines based on the type of content conveyed, 
the prices charged or not charged for conveying it, the wealth of the 
conveying company, and the novelty of the service. Although digital 
broadband services were beyond imagination at the time the 1934 Act was 
enacted, they are nevertheless subject to the Act's taxonomy and the 
regulations that have emerged thereunder. Broadband services are 
subject to the entry restrictions of Section 214, and tariffing 
requirements and rate regulation under Sections 201-205. They are 
subject to the franchise-like regulation that applies, under Title III, 
to renewals, transfers, and ``trafficking'' of wireless licenses.
    At this point, telecom law is so convoluted that much of the 
regulatory battle has become one of arbitrary legal definition, nothing 
more. Wireline services can be slotted into Title VI (cable), or Title 
II (common carriage), or labeled Title I ``information services.'' 
Title II services can be treated as basic, legacy telecom services, 
subject to the full panoply of Section 251 unbundling, or as new 
services partly deregulated by being placed under the ambit of a 
Section 272 separate subsidiary. Wireless services can be slotted into 
the still quite heavily regulated broadcast model, or the less 
regulated DBS model, or the differently regulated PCS model. Each of 
these choices entails profoundly different regulatory consequences. The 
Commission pays lip service to ``technological neutrality,'' but it 
doesn't deliver it. Judging from its actions, and its own 
interpretations of the law, it doesn't wish to be neutral across 
broadband technologies, and doesn't believe that it lawfully can be.
    Consider a recent analysis set out in a paper prepared by the 
Commission's own staff. The paper discusses how the FCC might regulate, 
or decline to regulate, Internet services over cable. It concludes that 
under current law the Commission is free to regulate these services as 
common carrier services, under Title II, or as cable service, under 
Title VI, or view them as common carrier services but forbear from 
regulating them under Section 10 or Section 706. Yet another option, 
with slightly different regulatory consequences, would be to classify 
them as ``information services'' nominally under Title I. Similarly, 
the Commission has declared it can regulate high-speed data services 
offered by phone companies under Section 251, or sidestep regulating 
them by persuading phone companies to set up Section 272 separate 
subsidiaries.
    So who ends up regulated how under this labyrinth of possibilities? 
If Congress does not intervene to streamline things, the answers will 
emerge over the next five years, if we are lucky, after the Commission 
has proposed, and the courts have disposed, and the Commission has 
proposed anew, and the courts have disposed anew. Or it might take 
three rounds rather than two--as the Commission's ``Computer 
Inquiries'' have taken in the past. And while regulatory uncertainty 
reigns, the market will hesitate and hedge.
    For all of its talk to the contrary, the Commission seems quite 
eager to maintain and extend the old regulatory paradigms, even in the 
face of the sweeping changes set in motion by the 1996 Act. Late last 
year, for example, the Commission announced it would require phone 
companies to ``unbundle'' advanced services--even though the 1996 Act 
made clear that unbundling was to be extended only to network elements 
that were ``necessary'' to competition, elements without which 
competitive services would be ``impaired.'' The Supreme Court recently 
ruled that the Commission may not go so far. But it took almost three 
years to resolve that basic point. Why the Commission should ever have 
wished to apply the whole panoply of yesterday's regulation to highly 
competitive advanced services remains a mystery. Perhaps the Commission 
sincerely believed it was legally obligated to do so by the 1996 Act. 
The Supreme Court, however, easily concluded that it wasn't.
    The Commission has likewise failed to invoke its authority under 
Section 706 of the 1996 Act. That provision plainly offers the 
Commission flexibility to deregulate advanced services. The FCC, 
however, declines to read it that way.
    The Commission should be price deregulating the next-generation 
services across the board--but it shows no inclination to do so. It 
should be removing these services from the unbundling mandates of the 
1996 Act--but it has been pushing in the opposite direction. It should 
be lifting them out of the long-distance restrictions of section 271--
but it won't. It should be putting all providers of high-bandwidth 
services, wired and wireline, telephone and cable, on the same, 
deregulated footing--but it simply does not want to. The Commission 
should be preparing its end game, its exit strategy. There are no signs 
at all that it is doing so.
    The 1996 Act contains many of the right sentiments, and attempted 
to aim things in the right direction. But in its workings, as 
administered by the Commission, the Act has fallen short. The 
Commission, it turns out, has shown no real inclination to deregulate. 
Its primary instinct is to keep a tight hand on everything, everywhere, 
the law still leaves it plenty of authority to do so, and it acts 
accordingly.
    It is time for serious change. It is time to get the Commission out 
of the business of concocting general solutions ahead of time, and into 
the business of fixing specific problems, if and when they arise. It is 
time to transition the Commission from its traditional role of general 
regulator, to a new role of arbiter, adjudicator, and enforcer.

    Mr. Tauzin. Thank you, Mr. Huber. The Chair will recognize 
members who would like to engage Mr. Huber before we introduce 
the Commission.
    Mr. Markey.
    Mr. Markey. Mr. Huber, in your testimony, you note that 
every Commission that rulemaking is followed by endless appeals 
and court challenges. Is that the Commission's fault?
    Mr. Huber. Well, I think the easy answer to that is it 
depends whether they win or lose. If they win, of course it is 
not their fault. It means they called it right. But if they 
lose, I suppose it probably is.
    And as a statistician and somebody who writes these up, I 
can say that they win some, they lose some. It is by no means 
their fault. This is a very opaque law that they are operating 
under.
    Mr. Markey. But like the Yankees, they have been winning 
lately. The Supreme Court has been upholding them on some of 
the big ones.
    Mr. Huber. Well, if you are referring to Iowa Utilities, 
you know, I have some clients in that, and I got to tell you in 
all candor, we count it, at worst, a draw and possibly a win. 
We have a remand on necessary and impair. And TELRIC is wide 
open.
    You know, we ain't begun to find out who won on that one, I 
am sorry to say.
    Mr. Markey. Even if the Commission agreed with you, Mr. 
Huber, and your law firm on every single substantive conclusion 
which you make about how the act should be interpreted, that 
still wouldn't mean that others wouldn't sue on different 
grounds that you were on.
    Mr. Huber. Of course you are right. Under a set of laws 
that gives the Commission the power to decide everything in 
advance, that will always be the case. I mean, if we win we 
will be happy, and the other side will sue.
    That is how laws of this kind operate. I might add, you 
don't have to write laws that are structured that way. If you 
write laws that say we will let the market proceed and wait for 
enforcement action, deliberate intervention in specific ways, 
which, I might add, is how the antitrust laws act, how a great 
deal of other consumer and commercial legislation operates, you 
get a quite different framework. And I might add you spend a 
whole lot less time in court.
    Mr. Markey. There is an ongoing tension between 
deregulation and de-monopolization. Many people place 
deregulation as the highest goal and stipulate that those who 
don't support immediate deregulation just don't understand the 
marketplace.
    Let me quote from a wise man: ``The member of Parliament 
who supports every proposal for strengthening the monopoly is 
sure to acquire not only the reputation of understanding trade 
but great popularity and influence with an order of men whose 
number and wealth render them of great importance. If he 
opposes them, on the contrary, and still more, if he has 
authority enough to be able to thwart them, neither the most 
acknowledged probity nor the highest rank nor the greatest 
public services can protect him from the most infamous abuse 
and detraction, from personal insults, nor sometimes from real 
danger arising from the insolent outrage of furious and 
disappointed monopolists.''
    Now this was written by Adam Smith in 1776. And 200 years 
later, whether it is telephone monopolies or cable monopolies 
taken on by the Commission, depending upon the issue, I think 
that there is inevitably going to be some great grief, which 
the Commission is going to receive from one former monopolist 
or recovering monopolist or another.
    But I think at the end of the day it comes with the 
territory. And I also believe that the 1996 act, as 
implemented--and I'm not saying it is perfect, we are going to 
have to come back and look, you know, various parts of I--but 
in general, I think it is working great, by your own testimony, 
that there has been this explosion of investments in capacity, 
which is out in the marketplace, whether we change a single 
word in the act or not.
    Mr. Huber. Well, to the best of my knowledge, the FCC 
funded none of that investment. I mean, the question is, 
whether we would have had double that with or without it. But 
even putting that aside, nobody, I am quite confident, that the 
monopoly of yesterday, which assuredly did exist. I know that. 
They were legal monopolies. They were de jure monopolies. The 
1934 act, you were actually a criminal if you competed in 
those.
    Of course they were monopolies. Who could possibly dispute 
that?
    I can tell you with absolute confidence there is no 
monopoly in this country for 200-kilobit-per-second digital 
service.
    Okay?
    Only about a million people in the country can even get the 
service.
    Mr. Markey. On the other hand, Mr. Huber, we still don't 
have any local phone companies. And we still don't have any 
wire-based cable competition. So the whole theory is great 
except for an ordinary citizen trying to get another cable 
company over the wire or local phone service over the wire. And 
they can't do that.
    So all the band width in the world doesn't do them any good 
if they can't find a competitively priced alternative to the 
two services which ordinary people use, local phone service and 
cable service.
    Mr. Huber. I agree fully. Now let us take, I mean, let us 
try and take those and look at some real history. Okay?
    Cable, okay, if you look at its regulatory history, all 
right, it started under de jure monopolies, franchise issued 
locally--just a second, just a second, because I would like to 
complete the answer.
    What has been the one potent force for competition for 
cable, and particularly in states that didn't even have cable, 
like Wyoming and----
    Mr. Markey. The 1992 act, which repealed local monopolies 
and added the programming access provision.
    Mr. Huber. No sir. No sir. There is virtually zero cable 
overbuilt today. It has been DBS. And you know how long it took 
to get a DBS license out of the Commission?
    Mr. Markey. Until the 1992 cable--when we passed the 
program access.
    Mr. Huber. It was the authorization of DBS licensing, of 
DBS spectrum, which took 10 years longer than it should have.
    I mean, cellular had a 14-year monopoly, and the PCS 
spectrum had been out 6 years--well, a duopoly. If PCS spectrum 
had been out 6 years earlier, we would have had more 
competition.
    Mr. Markey. Mr. Huber, the bottom line there is the cable 
industry had locked up all of its programming. Who in the world 
is going to subscribe to a satellite service that doesn't have 
TNT and CNN and CNBC. It just isn't going to happen. It took 
the Tauzin Amendment in 1992 to make it feasible for people's 
business plan to be able to gather the capital investment to 
make these dishes.
    Mr. Huber. It took the content, but even before it took the 
content, it took the spectrum. And nobody got it until the FCC 
gave it to them.
    Mr. Tauzin. The gentleman's time has expired. I thank the 
gentleman. The Chair now recognizes the vice chairman of the 
committee, Mr. Oxley, for a round of questions.
    Mr. Oxley. Mr. Huber, welcome back. Based on the 
exploration of the re-regulatory scheme and the 1992 act, is 
there any need for the FCC to continue the cable bureau within 
the FCC?
    Mr. Huber. No. We should get on with the business of 
deregulating cable. We should get on with the business of 
deregulating cable in the context of a market that can compete 
fully and effectively against cable.
    Mr. Oxley. What is your--I noted you kind of skipped over 
it--but I want to bring you back in terms of what your vision 
is relating to FCC reform. If you were to advise this committee 
as to how best to deal with that, what would be your major 
recommendation?
    Mr. Huber. I could distill into two, although I could write 
a book too, but No. 1, high-speed digital services, 128.8 above 
or 200 and above, whatever the Commission has said 200, and 
above, carve them off. Take them out of the advanced regulatory 
world. Let people provide those services and, if problems 
arise, get the Commission enforcing something against them.
    But create more than a presumption of statutory right to 
provide those services, any medium, anytime, anyplace, 
anywhere--there is no monopoly. The services don't exist yet.
    No. 2, at the very least, let's avoid this incredible 
duplication of function between agencies. I am representing 
people mergers, and I will say it first, but I don't know why I 
get to represent them twice.
    All right. Once before the Department of Justice and the 
second time before the FCC. I could go on with these, but let's 
do things right. Let's do them once and then get on with life.
    Mr. Oxley. So let me address that, particularly on the 
merger issue. So your testimony is basically that the FCC has 
no function whatsoever in terms of mergers.
    Mr. Huber. No. At the very least, I would say one agency. I 
don't even want to pick winners and losers among agencies. 
Okay?
    If we are going--I think DOJ will do fine. I actually think 
they are better at antitrust enforcers, but if Congress, in its 
wisdom, said let's just do it before the Commission, let's do 
it there.
    Why we do it twice, I truly do not know.
    Mr. Huber. Some of us had an opportunity to pay a visit to 
America Online yesterday and discuss some of the burgeoning 
issues with the Internet. And, one of the issues that the 
officers raised was the frustration that they have with getting 
enough band width to be able to provide all of the Internet 
services to rural areas, to under-served areas in cities and 
the like.
    And I raised it--I don't know whether you saw it or not--
the Time magazine article about the gentleman who had moved out 
to Leadville, Colorado, because he liked the lifestyle but 
found out that he was unable to conduct his business, which was 
Internet-related, because the telephone company out there was 
so devoid of having the capacity to provide that kind of 
service.
    What are your comments in that regard? And what are your 
suggestions?
    Mr. Huber. I view it, if I am evading at first, I will get 
directly to it, I view it as the paramount objective of this 
committee and in telecom, the country, to increase availability 
of high-speed digital band width.
    It is the essential commodity of the next century for 
business, for residents, for our civil freedoms--freedom of 
speech and so on. We clearly have got to be advancing that. At 
the moment, we have a bizarre structure of telephones, 
telephone companies being told you are going to have to 
unbundle what you haven't even deployed yet. All right? That 
sort of process grinding out before the Commission. Stuff 
doesn't even exist yet, and the regulations are already falling 
into place.
    You have the cable companies desperately jockeying, saying, 
please, call this anything but Title II telecom service: cable 
service, Title I information service. Call it something else so 
that we don't have to give equal access, don't have to offer it 
to AOL, and so on.
    You have the wireless PCS providers largely deregulated, 
but many other people, broadcasters among them, waiting in the 
wind, wondering what is going to hit them next as they begin 
rolling out their digital television, and whether they will be, 
you know, how free they will be to move that into aggressive, 
high-speed digital band width.
    I would like to tell all of these media providers across 
the board, You get up above that speed, you are free until we 
find a problem. Then we will go after you.
    Mr. Oxley. Thank you. Thank you, Mr. Chairman.
    Mr. Tauzin. Thank the gentleman. The gentleman from 
Michigan, Mr. Dingell, is recognized.
    Mr. Huber. I was in three-corner pants too.
    Mr. Tauzin. The gentleman from Michigan, Mr. Dingell, is 
recognized for a round of questions.
    Mr. Dingell. Mr. Chairman, I thank you for your courtesy. I 
have no questions at this time. I will have some fine questions 
later.
    Mr. Tauzin. The gentlelady, Mrs. Wilson, for a round of 
questions.
    Mrs. Wilson. Mr. Chairman, I have no questions of this 
witness.
    Mr. Tauzin. The gentlelady, Ms. Eshoo.
    Ms. Eshoo. Thank you, Mr. Chairman. Since today is St. 
Patrick's Day and they say that the world is divided between 
those that are Irish and those that wish that they were. 
Something about this saint, he converted, obviously, an awful 
lot of people to the faith. Now you hold a certain faith, and 
you are talking about converting or conversion at the FCC over 
to where you are.
    In terms of restructuring, and, in your view, where it 
should go, I know that Mr. Oxley asked you some questions about 
that, you have given at least one manifestation of it. Is that 
the sum total of how you view the FCC should be reorganized 
around where we are going?
    Mr. Huber. Oh no. I mean I could go on at length. There are 
a great number of functions that are obsolete. Okay? And there 
is a great amount of price regulation that should be obsolete.
    I have fought this battle----
    Ms. Eshoo. I didn't hear----
    Mr. Huber. A great amount of price regulation that----
    Ms. Eshoo. All right.
    Mr. Huber. I think as broadcast moves into the digital 
world and clearly its content delivery converges with content 
delivery over the web, we should free up those spectrum 
licenses step by step and give them freedom to use that 
spectrum as they want.
    I could go on.
    Ms. Eshoo. Do you want to elaborate? I mean, that is the 
question I am asking you. These are all considerations for the 
committee, and I think that it is important to get these out on 
the table.
    Mr. Huber. The core structural problems are that this 
Commission is divided. It is divided by statute and by history 
and by tradition along lines that track old technologies and 
old service paradigms. If you are called a broadcaster, that 
has one set of luggage that comes with it. You are called a 
local phone company, another set. You are called cable, it's 
another.
    In a high-speed digital world--it is not here today, it is 
coming fast, we want it come fast----
    Ms. Eshoo. Now, would your model fit with the speed we know 
that all of these industries under the umbrella of 
telecommunications are moving?
    Mr. Huber. Well, in so far as my model is saying they are 
all going there, and as they get there, and as they try and get 
into those markets, let them be. Or at least start with 
presumptions they are allowed to provide the services and if 
problems arise we will come in regulate them. Sure.
    And it cuts across them. We should not be structuring 
this--I had the extraordinary experience not long ago of 
talking informally somebody I would just as soon not name at 
the Commission. I said, how does all this fit along with cable. 
And I was talking about some phone company's problems.
    He said: Cable, cable, cable. We don't do cable. Cable is 
the other bureau.
    All right. And that sort of answer one just shouldn't be 
getting. It is not the other bureau anymore. And I'll tell you, 
if you think that is the least of the problems, broadcast is 
coming. In the 1996 act, you have given them additional slabs 
of spectrum. It is going to be digital spectrum. Okay?
    The satellite people, Teledesic and these, are doing 
digital spectrum. They have got to be brought under unified and 
uniform management. To say we have got all these different 
regulatory models for people who are going to be in the same 
industry competing to provide the same service is a bad 
mistake.
    Ms. Eshoo. Well, I appreciate your observations, and I 
think there are several points of what you have presented to us 
that we should be paying real close attention to.
    Do you think that the criticism is of the FCC really rests 
more with the old model that you describe that was designed a 
long time ago and has not been changed or their interpretation 
and reinterpretation of it?
    Mr. Huber. Okay, if I have to--if I am the line judge here 
or so, I would say it is sort of 90 percent of the problem is 
statutory and 10 percent is attitude.
    I wish they all had my attitude.
    They don't, but they were appointed by President Clinton 
and I wasn't. Right?
    Ms. Eshoo. We always wish the next person has our attitude. 
Right?
    Mr. Huber. Yes. Of course we wish that. But I mean--this 
law is fantastically opaque. When they say, we can call cable 
Internet service anything we like, I think they may well be 
right. They can because that is how the law is currently 
written.
    Ms. Eshoo. Well, I think that you have made a very 
important point here though for the members of the committee 
that if in fact we come to the conclusion that you have, that 
this is 90 regulatory and what needs to be cleaned up from the 
first half of this century, then maybe that is what we should 
be doing.
    I think it can be great political sport to beat people up 
because they don't agree or don't take the direction that we 
would want them to or thought we laid down for them to do, but 
I think that this can be a very important clarifying point in 
the work of the subcommittee and what we may recommend to the 
rest of the Congress and the re-authorization.
    Thank you very much, and I yield back.
    Mr. Tauzin. Thank the gentlelady. As we move along, and I 
just point out, there are now 1,708 radio stations on the 
Internet. An amazing development. Just within the last couple 
of years.
    And the question is are they broadcasters or are they 
something else? I don't know. We will find out 1 day.
    Who is next? The gentleman from Mississippi, Mr. Pickering, 
who has some background in radio, I think.
    Mr. Pickering. Thank you, Mr. Chairman, I have no questions 
at this time.
    Mr. Tauzin. On this side. The gentleman from Maryland, Mr. 
Wynn, is recognized.
    Mr. Wynn. Thank you, Mr. Chairman. I believe I heard you 
indicate that you felt that there was adequate competition in 
the cable industry, or competition with cable. John Q. Citizen 
that speaks to me basically complains about cable rates and the 
fact that he doesn't believe there is enough competition and 
his rates keep going up. What is your view of this problem? Or 
do you think it is a problem?
    Mr. Huber. I have watched cable regulation come and go and 
come again. In 1984, Congress deregulated it largely. Some 
members here part of that. In 1992 we re-regulated. Now, under 
the 1996 act, there is a sunset on it. I think we will get it 
right when we recognize that cable alone can't be treated as 
cable alone. All right?
    As long as cable alone is under one set of rules and phones 
companies can't compete on even terms, my clients are among 
them, as long as the airwave people, the over-the-air 
broadcasters aren't----
    Mr. Wynn. If I could just jump in for a minute, is that by 
implication your rationale for why the phone companies or 
others haven't gotten into the cable business?
    Mr. Huber. The way into the cable business today is not to 
overlay coax and try to do 30 channels of ``Gilligan's 
Island.'' All right?
    It is to deploy high-speed networks. All right? Very high 
broad-band networks that can do streaming video, that can 
deliver radio stations, that can deliver video. All right? And 
there are many, many obstacles to phone companies getting into 
that business.
    For the broadcasters, the way into overlaying cable, not 
with just one channel on 6 megahertz sub-spectrum, but with 
four or eight channels, multiplexed and digital spectrum, is to 
move ahead with that process. They labor under their own quite 
serious set of regulations and, of course, constantly face new 
demands soon as they try and deploy, that how much will be 
children's television, what will be the political rules, and so 
on and so forth.
    The best solution for cable today, as it has been for 
sometime, is to let other media truly liberate them to compete 
head to head with cable. Until we do that, cable will not be 
fully competitive. No. That is correct.
    Mr. Wynn. Thank you. That was helpful. I would like to 
perhaps pursue that another time.
    The other thing is, you were saying we can't look to the 
past or our past constructs, we have to look to the future. And 
you mentioned in the course of that discussion universal 
service, universal access. What do you see as the future of 
this notion of universal access?
    Mr. Huber. Look, let us be absolutely frank about it. One 
of the great triumphs of the old monopoly was that it could 
spread costs around, it could spread benefits around. We 
achieved very rapidly and very well very high penetration. It 
was an egalitarian, socially positive force in this country. 
All right?
    And there was nothing like the old monopoly phone company 
to push toward universal service at a flat rate, poor area, 
rich area, I mean, they did it.
    We have moved away from that model for better or for worse. 
Okay?
    These markets are open to competition. There is now an 
initiative to try and make the subsidies portable. I hope that 
happens someday.
    But, in any event, we are, to the extent we are going to 
get universal service, it is going to be through a different 
set of means now. It is going to be through competitive means, 
it is going to be through making subsidies portable, in other 
words, letting any company that wants to serve poor areas carry 
the subsidies with it. And that is the course we are embarked 
on.
    I hope, in terms of spreading the telecom wealth, it works 
as well as the old model. It is a challenge.
    Mr. Wynn. So it is possible that, perhaps, the old model in 
that respect, in terms of universal service, was a good thing.
    Mr. Huber. There is no questions that regulated monopolies 
are egalitarian. They spread the poverty around very uniformly. 
Okay.
    If you want the real abundance, however, you have to have 
open markets.
    Mr. Wynn. I guess it depends on where you live as to 
whether is spreading poverty or spreading access.
    Mr. Huber. Yes.
    Mr. Wynn. One kind of follow-up question. Absent the 
portability of the subsidies, is there any other way to address 
this concern of folks in rural or under-served or other areas 
like that, that would not be competitively attractively?
    Mr. Huber. I know, my clients among them, would just be 
absolutely delighted to have this Commission issue mandates to 
MFS and TCG and AT&T and all the people who are serving 1301 K 
Street, where my offices are, and say, go over to Anacostia, go 
into the poorer areas, run your fiber networks too. They are 
not doing it because they are not required to and because that 
is how the new law is set up.
    You can issue mandates, No. 1; No. 2, you can encourage 
wireless technologies, which are very non-discriminatory. They 
are especially important in rural areas as well. We have kept a 
lot of wireless technology bottle up over the years. And the 
more you encourage that, the more egalitarian----
    Mr. Wynn. How could you encourage it? What recommendations 
would you give to the committee to encourage that?
    Mr. Huber. No. 1, I would begin de-zoning wireless. This 
Congress in 1993 put a bunch of wireless on the same footing. 
It put PCS and cellular and other on the same footing. They 
hadn't been before that. It was a tremendous plus. It wasn't 
enough. You have a whole bunch more spectrum in the broadcast 
bands, the UHF bands especially, and certainly all the 
satellite bands. And you have to let anybody from any band 
provide any service. And these all have big footprints, they 
serve rich and poor equally, and that the wireless lands, wired 
networks never have that same automatic universal footprint.
    Mr. Wynn. Thank you.
    Mr. Tauzin. Thank the gentleman. Gentleman from Illinois, 
Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman. I have been trying to 
search for a good question to address. He is really above my 
level. So I am going to defer back and wait for the chairman to 
appear.
    Mr. Tauzin. I'm not sure what you meant by that. Ms. 
McCarthy is recognized. She's gone. Mr. Largent is recognized.
    Mr. Largent. Just have one question for Mr. Huber. Mr. 
Huber, have you read the testimony submitted by Mr. Kennard?
    Mr. Huber. I shall do shortly, but I confess I was on 
planes Monday and I just have not received a copy yet.
    Mr. Largent. Let me read just a couple of his comments from 
his first couple of pages. It says:
    ``Competition should be the organizing principle of our 
communications law and policy, and should replace micro-
management and monopoly regulation.
    ``That consumers will receive the benefit of lower prices, 
greater choices, and better services.''
    It also says that ``we must expect that in 5 years there 
can be fully competitive domestic communications markets with 
minimal or no regulation, including total deregulation of all 
rate regulation in competitive telephone services.''
    It sounds to me that what Mr. Kennard is suggesting is 
exactly what you are suggesting in terms of reorganization of 
the FCC. Do you disagree with anything that he said?
    Mr. Huber. No. That sounded very good. I wish I would see 
it backed up by clearer and more definite action earlier. At 
least as I look at the action, often, it doesn't appear to me 
to be advancing that. I am truly mystified, honestly mystified, 
notwithstanding the fact as to why we declared last fall that 
we were going to unbundle advanced services that nobody has 
even yet deployed yet.
    How that step and that initiative was consistent with the 
idea--perhaps it was compelled by law, although I don't believe 
so. But how that is consistent with the notion that we are 
going to try and deregulate things, if you are going to 
deregulate surely the place to start is with services that 
don't yet exist that nobody is yet providing and that surely 
nobody has yet monopolized. You can't have a monopoly if you 
are not there yet.
    Those objectives are great. We see eye to eye on 
objectives.
    Mr. Largent. Thank you, Mr. Huber. Thank you, Mr. Chairman.
    Mr. Tauzin. Thank you, Mr. Largent. Mr. Fossella.
    Mr. Fossella. Thank you, Mr. Chairman. I don't know if I am 
asking the same question in a different way, but do you think 
the FCC should be organized by technology, telephone, cable, 
broadcast, and wireless?
    Mr. Huber. At least on a going-forward basis, it should be 
organized around services. High-speed digital services going 
forward, all right, should be under a single jurisdictional 
umbrella with an absolutely compelling mandate to say open 
these markets, let people do it. This trumps the other stuff, 
it trumps the legacy stuff, if you are up in this domain.
    Mr. Huber. Yes. That should cut across the bureaus 
completely.
    Mr. Fossella. And second, and along those competitive 
notions, to what extent is regulation necessary, if at all?
    Mr. Huber. You know, after 65, or 62 years, of statutory 
monopoly, legally enforced monopoly, it is not unreasonable to 
say we are going to have to have a little bit of law to change 
course and direction. I have written books saying abolish the 
FCC, but I wrote them with some care, if you actually read 
beyond the cover. I think there is a transitional process.
    It is not particularly surprising to me that we are at the 
high-water mark of regulation. We have a lot of the old models 
in hand, and we are also trying to build the future. What is 
surprising to me is tenacious the past is, and how much it 
still controls and limits our movement to the next generation.
    Mr. Fossella. I haven't read your book, but one of these 
years I promise to do so. Wherein do you think the regulation 
should be, specifically?
    Mr. Huber. A certain amount, and I think Iowa Utilities as 
interpreted by the Supreme Court is on the mark here: a certain 
amount of unbundling of the core residual monopoly areas is 
appropriate.
    That has been in process since 1968 in Carter Phone. We 
unbundled the handset; we unbundled long distance; we unbundled 
the wireless services. A certain amount of that made sense.
    I think it can be pushed to gross excess, and in my view it 
has been. But other brilliant people have different views. I am 
aware of that.
    I think, residual price regulation, lifeline service, 
services for the poor, we are going to have that as long as 
there are single providers of legacy services, all right, but 
keeping it focused.
    There is a going to be a residual subsidy process. I would 
like to see it explicit, and I would like to see it done 
through Congress rather than through a Commission. But we 
subsidize lots of things in this country. It is part of a 
valuable, necessary social policy.
    I don't think any of us is absolutist about that. I'm 
certainly not.
    Mr. Fossella. I yield back, Mr. Chairman.
    Mr. Tauzin. Thank the gentleman. Before I let you go, Mr. 
Huber, the Chair would recognize himself briefly.
    Oh, Mr. Stearns has not been recognized. I'm sorry.
    Mr. Stearns. Thank you, Mr. Chairman. You know, Mr. Huber, 
your opening statement mentioned that the bill intended to 
deregulate but the FCC is operating under an old structure that 
is not deregulatory. That is basically, I think--is that an 
accurate sort of statement of what you said opening?
    Mr. Huber. Yes.
    Mr. Stearns. Okay. Let's say I was client and I came to you 
and I wanted you to represent my Internet company, what would 
you categorize the Internet company? I mean, would you say I am 
a cable, or broadcast, a telecommunicator, I mean, what would 
you suggest that I call myself to the FCC.
    Mr. Huber. Well, first, I would have to ask you a little 
bit more of what kind of an Internet company are you. Are you 
like AOL, in the content layer, that easy. I want you up under 
Title I. I am going to call you an information service 
provider.
    If you are going to provide any kind of access, or any kind 
of actual transport, then it is a much tougher call. Tell me 
some more. Which speed are you looking for? And which area of 
the country? And maybe we will try to slot you in under cable, 
if that is the medium you want to use. Maybe we are going to 
get you under broadcast side band or, you know, FM side band or 
VBI or something. I mean, there are--I got a book on it. We 
will find a home for you.
    Mr. Stearns. Oh. I understand.
    Is this just the real world. We can't change that. In other 
words----
    Mr. Huber. You can change it. I can't.
    Mr. Stearns. Are you suggesting that this committee go 
ahead and try and change it so that when I came it would be 
clear who I am?
    Mr. Huber. On a going-forward basis for new services for 
the future that is unfolding, it is readily possible.
    Mr. Stearns. It is possible for us to come up with 
categories that everybody would know right away who they are?
    Mr. Huber. On a going-forward basis for the high-speed 
services because nobody has them yet. They are just a drop in 
the bucket. And that is what you have to clean up. You really 
do.
    Mr. Stearns. Okay. Mr. Oxley talked about the broad-band 
Internet access. If you were a Congressman or Senator, what 
would you propose to make sure that broadcasters, long-distance 
operators, RBDOCS, cable, everybody, could get into this pipe. 
How would you structure this thing? What would you do 
legislatively? OR just let the market develop?
    Mr. Huber. It is a little bit risky to write legislation on 
the hoof here without pen in hand, but you can define a regime 
of service, basically by speed, you know, 128.8 and above or 
56.6 and above or 200 and above----
    Mr. Stearns. Let's say like a T-1 line so that everybody 
could videostream into this as well as put in other information 
topped onto the videostream.
    Mr. Huber. Roughly speaking, anybody with any medium, 
wireless, terrestrial or satellite, wireline, cable or phone, 
okay, forget the names. That is your service. We are going to 
start with the presumption, A, you're allowed to provide it, 
all of it, not just little bits, you can do that; B, you can 
bundle or unbundle or sell and resell, I mean freedom out 
there.
    Those markets don't exist yet.
    Mr. Stearns. So how would you assure that maybe if Oxley 
and I were in our garage starting an Internet company, we would 
have access just like AT&T or Disney or anybody, I mean, how 
would assure that any of us could pay the money to get access?
    Mr. Huber. Look, the absolute assurance I can't give. I can 
only propose the same assurance that I can give you on your 
ability to buy a hamburger, okay, which is that open markets 
and open entry and many different media somehow guarantee that 
if it is not McDonald's it will be Burger King. All right?
    I mean that is how competitive markets work. But can I 
guarantee for everybody. It is in the nature of open and 
competitive markets that absolute guarantees aren't given, not 
by government.
    Mr. Huber. So you don't think the Federal Government, 
Congress should step in and try top say we are going to 
regulate what this pipe will be to protect everybody. The only 
effect of doing so will be have fewer pipes available to fewer 
people.
    We've been there, done that. Okay? And it was all at voice-
grade level. We had that for 60 years. Okay, so basically you 
let the market decide.
    Mr. Huber. Going forward for the new service--I don't want 
to sound ridiculous, all right. I know the legacy services are 
there. Of course there is going to be a transitional period, 
perhaps a long one, in deregulating those. But we have to look 
to the future to the terrible disease in the town, 
particularly, is always to be solving yesterday's problems, and 
in many industries that makes sense. In an industry that is 
doubling in size very 2, 3 years, no, it does not make sense.
    Mr. Stearns. You know, if we had an FCC for the computer 
revolution, probably it would not have taken off like it did. 
Wouldn't you agree?
    Mr. Huber. I would.
    Mr. Stearns. Yes. Cause your idea of abolishing the FCC 
means just let us roll and see what happens.
    You know, in my opening statement, I mentioned that under 
the biennial review of 1998, the FCC had initiated to our 
information, just 31 proceedings on the literally hundreds upon 
hundreds of regulations that the FCC maintains, and that the 
FCC had issued only four orders modifying or repealing various 
rules.
    Assuming that information is accurate, don't you think they 
are way behind in repealing and trying to initiate----
    Mr. Huber. Yes. They are way behind. I mean, this 
Commission, like all Commissions before it, holds onto power 
and authority. It holds onto power to control transfers of 
licenses, whether they are wireline licenses or broadcast 
licenses, quite unnecessarily. It holds onto power to zone 
content, quite unnecessarily, in my view.
    Commissions, agencies tend to do that. Yes.
    Mr. Stearns. Thank you, Mr. Chairman.
    Mr. Tauzin. Thank you, Mr. Stearns. Let me carry Mr. 
Stearns' observations a little further, Mr. Huber. In 
differentiating between the service and the facilities which 
provide service, recognizing that we adopt a policy that says 
everybody can get into these new services. Go to it. Offer 
them. But also recognizing that are a limited number of 
facilities that can now deliver those services from the 
provider to the user.
    Should we have classes of facilities which are open and 
accessed to providers? And other classes which are closed? 
Should all of them be open to all providers for access, bundled 
or unbundled? Should they all be on their own to do what they 
want to do, as some would propose? To use their networks the 
way they see fit and to allow access for whom they choose?
    Where do we go with this. I mean, the concern I hear 
expressed more often than not in the high-speed broad-band area 
is that if there are going to limited facilities for people to 
use, and each facility eventually gets the right to pick and 
choose who is using those facilities, that you end up with some 
problems for users and providers.
    If on the other hand, you have a company that has to be 
open to all providers because it is called something, it is 
called the telephone company, as a common carrier as opposed to 
another company that is doing the same doggone thing, just is 
called something else, and doesn't have to be open, is that the 
world we want to envision? And what do you see there?
    Mr. Huber. It is absolutely correct to say there are going 
to be some finite number of providers, but the smallest finite 
number is zero, okay? And that is where we are today for most 
of these services in most places. You've got high-speed digital 
services in a million, maybe a couple of million, depends whose 
estimates you take, but a few million of residential lines. 
Okay?
    We have the old style services for 150 million, a 100 
million homes. So, you know, No. 1 challenge is to get from 
zero to one or two or three. All right? And we want that 
process to happen as quickly as possible.
    I know the fact is today that if I do Internet access on 
TCPIP protocols over cable, I am going to call myself anything 
but a common carrier, and I will get away with it. As of today 
I will get away with it.
    The dominant, I wouldn't dare go so far as to call them a 
monopoly, I do know they are the dominant provider today of 
high-speed residential, has got themselves a nice little 
regulatory niche there.
    Phone companies in this category are not the dominant 
providers. They are dominant providers of slow service, but not 
the fast stuff. And they are under a quite different regulatory 
ambit.
    Let us see if we can get up to 10 or 20 or 50 million 
providers, and look, if by chance then, we find out, gee, you 
know the AOL's are getting frozen, I don't for a minute think 
they will be, I think there is more money to be made in open 
systems than closed systems, and I think cable is probably----
    Mr. Tauzin. It's a healthy debate, but it also relates to 
how we restructure the FCC because you make the very valid 
point that depending upon what the FCC calls you in this area, 
you are either regulated as an open structure or regulated as a 
closed structure. Right?
    Mr. Huber. Yes.
    Mr. Tauzin. So being called something is pretty 
advantageous. And being regulated by the right bureau is pretty 
advantageous.
    Mr. Huber. Very.
    Mr. Tauzin. And that is kind of silly in this new world. It 
is not very rational, is it?
    Mr. Huber. It is worse than silly, Mr. Chairman.
    Mr. Tauzin. Yes. The second thing I wanted to get to, is 
the--because some of the Commissioners will speak to in just a 
minute, and I'm very interested in what they have to say about 
it--the Commission has, on this 1930's model, regulating 
monopolies for consumer protection purposes, universal service 
purposes, what have you, is based upon the concept of public-
interest standards.
    Commissioner Furchtgott-Roth correctly points out public-
interest standard means something different to each class of 
service. It is either a broader standard or a weaker standard, 
depending upon what kind of license you hold.
    In a world where all these services are merging, they are 
becoming the same in a digital world. How can the Commission 
operate with so ambiguous a standard? And how do we move from a 
regulatory paradigm, based upon that standard, to an 
enforcement organization that might come out of this process?
    Mr. Huber. Well, understand first that the main place the 
public-interest standard is enforced today, is in license 
issuing and license transfers. And it is enforced because it is 
written into the law. The Commission didn't make up those 
words. They are there in United States Code.
    But there is way, way more regulation and oversight of 
license issuance and license transfer than there ought to be. I 
mean, routine license transfers ought to be more than routine. 
We've got the Department of Justice that will dive in if it 
doesn't like the hands they are ending up in. Or if not DOJ, 
then the FCC do it, but let's not do it twice. Okay? Let's do 
it once.
    I think the Hart-Scott-Rodino Act gives pretty good review. 
If you truly sweep aside the licensing transfer overhead, most 
of which is wasted, you will solve a lot on that.
    Mr. Tauzin. Peter, we thank you very much. The Chair wishes 
to express his and the committee's appreciation for your 
written presentation and for the excellent presentation this 
morning. As I said, we will continue this process. And we have 
a lot to think about as a result. We thank you.
    Thank you, Mr. Huber. We are now pleased to call up the 
Commission and to recognize the Chairman of the FCC and the 
other Commissioners for their presentations today.
    In that regard, Mr. Chairman, let me offer a word of thanks 
and appreciation for the fact that you all are willing to 
engage us in this discussion, and to offer suggestions as to 
how we might move forward in this effort.
    And to, indeed, separate the question of our concerns about 
the FCC as an agency, as a structure, from the very excellent 
individuals who serve on the Commission today and who have 
served it before. We deeply all of you for the contributions 
you make to our country and for the work you do on the 
Commission.
    I want to separate those very clearly in the beginning 
because, as you know, I have deep respect for you personally 
and for the other members of the Commission. Our comments, our 
concerns are how we can build a better agency for the future, 
and I want to direct as much as I can the work of the committee 
in that respect.
    I am pleased now to introduce and welcome the Chairman of 
the Federal Communications Commission, Bill Kennard. Chairman 
Kennard, thank you, sir. Again, your written comments are part 
of our record if you would like to engage us in conversation, 
we would greatly appreciate it.
    Mr. Kennard.

STATEMENTS OF HON. WILLIAM E. KENNARD, CHAIRMAN; ACCOMPANIED BY 
HON. SUSAN NESS, COMMISSIONER; HON. HAROLD W. FURCHTGOTT-ROTH, 
 COMMISSIONER; HON. MICHAEL K. POWELL, COMMISSIONER; AND HON. 
     GLORIA TRISTANI, COMMISSIONER, FEDERAL COMMUNICATIONS 
                           COMMISSION

    Mr. Kennard. Thank you very much, Mr. Chairman, and I 
appreciate very much the remarks that you just made. And I also 
appreciate your convening this hearing. I am looking forward to 
having a very productive dialog with you and other members of 
this committee as we look to the future of the FCC and 
regulation.
    And clearly we are meeting here today at quite an 
extraordinary time, a time that is full of promise and 
unlimited potential, and at a time when we all are privileged 
to work in a field that is literally booming. I mean, all the 
economic indicators in the communications business are up. Job 
growth is up. Revenues are up. Investment is up. And we have 
prepared some charts for you that demonstrate that very 
graphically.
    So I think that it is wise for us to pause for a moment and 
just take stock of what is happening in the marketplace. There 
is a lot of good things happening out there in the 
communications marketplace.
    Now there is no question that the current economic boom 
that we are experiencing in this country, the longest peacetime 
expansion in our economy's history, is being fueled in large 
measure by advances in the telecommunications business.
    Over the past 3 years alone, revenues in the communications 
sector have grown by over $100 billion, as indicated by these 
charts here. The revenue among local service providers, 
companies that are providing competition to the incumbent local 
telephone companies, are way up. Their revenues more than 
doubled in 1997, and jumped again in 1998.
    And with these profits and growth, this industry has 
expanded and over 200,000 jobs have been created in the past 5 
years.
    The wireless industry is another terrific example where we 
have seen a lot of growth. I don't know if we have our wireless 
chart here. Oh, there it is.
    In that industry, since 1993, capital investment has more 
than tripled for a cumulative total of $50 billion. Service is 
becoming increasingly more reliable and affordable. Almost 70 
million Americans are using wireless phones today in this 
country. And Americans are paying 40 percent less for wireless 
service than they were 3 years ago.
    And I submit to you, Mr. Chairman, that this didn't just 
happen. It happened because we have in this country what I 
believe to be the right statutory and regulatory framework for 
this growth. And I believe that Congress got it right in the 
1996 act. You established a blueprint for growth and investment 
and innovation that is working.
    Now, obviously, the FCC needs to change. I think--I know 
that every Commissioner before you has indicated that we need 
to engage in this process of change and re-evaluation. And as I 
have detailed in the report that I will submit as my written 
testimony, it's a report entitled ``A New FCC for the 21st 
Century,'' we expect the FCC to change. It has to change. We 
have no choice.
    I envision an FCC that is much more efficient, more 
streamlined and focusing on what I think will be the three core 
functions of the agency for the future. One is consumer 
protection. As these markets become more competitive, there is 
a dramatic increase in the demand for the FCC to protect 
consumers in the marketplace. We see that with slamming and 
cramming, and issues about disclosures on telephone bills.
    Consumers are confused out there. They need an agency like 
the FCC to protect them, to give them the information that they 
need to make informed choices in the marketplace.
    And universal service is another core function. As we heard 
Mr. Huber say, this is a function that will have to be taken 
over by Government, and Government will have a continuing role 
in this area. Because we know that the market alone is not 
going to ensure that our poorest Americans and Americans in 
rural communities and inner cities have service.
    And the third area is spectrum management. If we were to do 
as some suggest and completely abdicate our responsibility to 
manage the spectrum, one of our great national resources, there 
would be absolute chaos in this country, I am convinced of 
that.
    So this agency has to focus on its continuing spectrum 
management functions.
    But I do believe, as has been suggested by you earlier, 
that our mission will change and that the traditional 
boundaries delineating the FCC's current operating bureaus will 
become increasingly less relevant over time. And I believe, as 
I set forth in my written testimony, that the FCC will look 
very, very different over the next 3 to 5 years.
    It will be doing very different things. We are beginning 
that process already. This change is inevitable, and it is 
necessary.
    But I do want to stress that we want change, we don't want 
chaos. The implementation of the 1996 act was a monumental task 
undertaken by the FCC. And we are just now reaching a point 
where some of the major jurisdictional issues that arose out of 
that act, that were litigated in the courts, are being 
resolved.
    When I talk to business people and people on Wall Street 
and, indeed, many of you, what we need is stability. This is 
the message that I am hearing. Give us some predictability and 
stability so that this framework can come to rest and we can 
stay the course and continue the job of bringing competition to 
these markets.
    I am proud of the work that the FCC has done over the last 
few years. I think that the FCC has undertaken this monumental 
task in a very professional way, and I think we have a lot to 
be proud of.
    And the other thing that I would stress, and this has 
really come home to me as I have had the privilege of meeting 
with my counterparts from other countries, many of us around 
the world today are working hard to bring competition to 
telecommunications markets. This is not just an issue that we 
are dealing with in this country. It is a worldwide movement. 
And those of us who have really put our shoulder to the oar and 
are doing the hard work of opening up these markets find that 
this is not a popular job.
    This doesn't make you popular to go to incumbent companies 
and say, open your markets because we must have competition. 
But it is an essential job because we have to get it done.
    If we don't get it done, the alternative is there is going 
to be an antitrust suit someday in the future and we are all 
going to look back at this period in history, this pivotal 
time, and say, gee, if only the FCC had stayed the course, been 
a little more aggressive in opening these markets to 
competition, perhaps we could have avoided divestiture of some 
of these facilities.
    The report that I have submitted is the first step in 
developing a 5-year strategic plan for the agency. I hope to 
get a lot of your feedback today and over the coming weeks. I 
hope that we will hear from members of industry, consumer, and 
many, many others on this plan. This should be a very public 
process, where we solicit comment from a lot of people.
    The changes that we are proposing in this plan are not 
trivial at all. They are substantive, they call for a re-making 
of the agency. So it is relevant in a rapidly changing 
industry.
    But no matter how it changes, the FCC must remain vigilant 
in ensuring that its core functions are done, and that is 
promoting competition, fostering the growth of new technology, 
ensuring that we have universal service and good, quality 
spectrum management.
    And first and foremost, we've got to ensure that all 
Americans participate in this revolution. I truly believe that 
if we do not ensure that all Americans participate in all of 
this economic growth, this revolution in communications will 
have been a failed revolution.
    But I know working with you and working with terrific staff 
of the FCC that we can change the FCC, and we will change it 
for the better.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. William E. Kennard 
follows:]
     Prepared Statement of William E. Kennard, Chairman, Feederal 
                       Communications Commission
       i. the federal communications commission and the changing 
                       communications marketplace
A. Introduction
    Congress enacted the Communications Act of 1934 to provide for the 
widest dissemination of communications services to the public. Section 
1 of the Communications Act states that the purpose of the Act is to 
``make available . . . to all the people of the United States, without 
discrimination . . . a rapid, efficient, Nation-wide, and world-wide 
wire and radio communication service . . . at reasonable charges.''
    This goal remains vibrant today. What has changed since 1934 is the 
means to get to this goal. With the passage of the Telecommunications 
Act of 1996 (Telecom Act), Congress recognized that competition should 
be the organizing principle of our communications law and policy and 
should replace micromanagement and monopoly regulation. The wisdom of 
this approach has been proven in the long distance, wireless, and 
customer premises equipment, where competition took hold and 
flourished, and consumers receive the benefit of lower prices, greater 
choices, and better service.
    The imperative to make the transition to fully competitive 
communications markets to promote the widest deployment of 
communications services is more important today than ever before. In 
1934, electronic communications for most Americans meant AM radio and a 
telephone, and sending the occasional Western Union telegram. Today, it 
means AM and FM radio, broadcast and cable TV, wireline and wireless 
telephones, faxes, pagers, satellite technology, and the Internet--
services and technologies that are central to our daily lives. 
Communications technology is increasingly defining how Americans 
individually, and collectively as a nation, will be competitive into 
the next century. It is increasingly defining the potential of every 
American child. So the goal of bringing communications services quickly 
to all Americans, without discrimination, at reasonable charges, 
continues to be of paramount importance. Competition is the best way to 
achieve this goal, while continuing to preserve and protect universal 
service and consumer protection goals.
    To accomplish this goal, our vision for the future of 
communications must be a bold one. We must expect that in five years, 
there can be fully competitive domestic communications markets with 
minimal or no regulation, including total deregulation of all rate 
regulation in competitive telephone services. In such a vibrant, 
competitive communications marketplace, the Federal Communications 
Commission (FCC) would focus only on those core functions that cannot 
be accomplished by normal market forces. We believe those core 
functions would revolve around universal service, consumer protection 
and information; enforcement and promotion of pro-competition goals 
domestically and internationally; and spectrum management. As a result, 
the traditional boundaries separating the FCC's current operating 
bureaus should no longer be relevant. In five years, the FCC should be 
dramatically changed.
     We are working to transition the FCC to that model--based on core 
functions in a competitive communications market--now. We are writing 
the blueprint for it, beginning with this report describing the steps 
we are already taking. After receiving input from our key stakeholders, 
we plan to develop this report into a five-year Strategic Plan which 
will outline precisely our objectives and timetable year by year for 
achieving our restructuring, streamlining, and deregulatory objectives. 
We must work with Congress, state and local governments, industry, 
consumer groups, and others to ensure that we are on the right track, 
and that we have the right tools to achieve our vision of a fully 
competitive communications marketplace.
B. The State of the Industry
    In the Telecom Act, Congress directed the FCC to play a key role in 
creating and implementing fair rules for this new era of competition. 
Over the course of the past three years, the FCC has worked closely 
with Congress, the states, industry, and consumers on numerous 
proceedings to fulfill the mandates of the Telecom Act.
    By many accounts, the Telecom Act is working. Many of the 
fundamental prerequisites for a fully competitive communications 
industry are now in place, competitive deployment of advanced broadband 
services is underway, and the stage is set for continued deregulation 
as competition expands.
    Furthermore, by many measures, the communications industry is 
thriving. Since the passage of the Telecom Act, revenues of the 
communications sector of our economy have grown by over $100 billion. 
This growth comes not only from established providers, but also from 
new competitors, spurred by the market-opening provisions of the 
Telecom Act. (See Appendix A, Charts 1 and 2) This growth has meant new 
jobs for thousands of Americans.
    In the wireless industry, capital investment has more than tripled 
since 1993, with more than $50 billion of cumulative investment through 
1998. Mobile phones are now a common tool for over 60 million people 
every day, and the wireless industry has generated almost three times 
as many jobs as in 1993. (See Appendix A, Chart 3)
    Consumers are beginning to benefit from the thriving communications 
sector through price reductions not only of wireless calls, but also of 
long distance and international calls. (See Appendix A, Charts 4 and 5) 
Consumers are also beginning to enjoy more video entertainment choices 
through direct broadcast satellites, which are becoming viable 
alternatives to cable. We are also at the dawn of digital TV, which 
offers exciting new benefits for consumers in terms of higher quality 
pictures and sound and innovative services. (See Appendix A, Charts 6 
and 7) As we enter this digital age, broadcast TV and radio is still 
healthy, ubiquitous, and providing free, local news, entertainment, and 
information to millions of Americans across the country.
    Beyond the traditional communications industries, the Internet has 
truly revolutionized all of our lives. According to a recent study, at 
least 38% of American adults (79.4 million) already are online and 
another 18.8 million are expect to go online in the next year. In 1998, 
26% of retailers had a website, over three times the number in 1996, 
and it is estimated that they generated over $10 billion in sales. On-
line sales for 1999 are projected to be anywhere from $12 to $18 
billion.
    Communications markets are also becoming increasingly globalized as 
the Telecom Act's procompetitive policies are being emulated around the 
world. Other countries are modeling their new telecommunications 
authorities after the FCC. As other countries open their communications 
markets and increase their productivity, new services and business 
opportunities are created for U.S. consumers and companies, as well as 
for consumers and companies worldwide.
C. Communications in the 21st Century
    Even more change is expected in the telecommunications marketplace 
of tomorrow. In the new millennium, millions of consumers and 
businesses will be able to choose from a range of services and 
technologies vastly different from those available today. Packet-
switched networks, running on advanced fiber optics and using open 
Internet Protocols to support seamless interconnection to transport 
immense amounts of information, will be ubiquitous. Millions of homes 
and businesses will be linked to this ``network of networks `` through 
``always on'' broadband connections. Outside the wired confines of the 
home or office, ``third generation'' wireless technologies will provide 
high-speed access wherever a consumer may be. Satellite technology will 
increase the ability to transfer data and voice around the world and 
into every home.
    Electronic commerce will play an even more central role in the 
economy of the 21st Century. Americans in the next century will be 
connected throughout the day and evening, relying on advanced 
technologies not only to communicate with others, but also as a vital 
tool for performing daily tasks (such as shopping or banking), for 
interacting with government and other institutions (such as voting, tax 
filing, health, and education), and for entertainment (such as video, 
audio, and interactive games).
    In the marketplace of tomorrow, it is expected that traditional 
industry structures will cease to exist. The ``local exchange'' and 
``long distance'' telephone markets will no longer be distinct industry 
segments. Video and audio programming will be delivered by many 
different transmission media. In a world of ``always on'' broadband 
telecommunications, narrow-band applications--such as our everyday 
phone calls--will represent just a tiny fraction of daily traffic. 
Cable operators, satellite companies, and even broadcast television 
stations will compete with today's phone companies in the race to 
provide consumers a vast array of communications services. In addition, 
telephone and utility companies may be offering video and audio 
programming on a wide-scale basis. As cross-industry mergers, joint 
ventures, and promotional agreements are formed to meet users' demand, 
the traditional distinctions between these industry segments will blur 
and erode.
D. Impact of Industry Convergence
    Convergence across communications industries is already taking 
place, and is likely to accelerate as competition develops further. 
Thus, in addition to refocusing our resources on our core functions for 
a world of fully competitive communications markets, the FCC must also 
assess, with the help of Congress and others, how to streamline and 
consolidate our policymaking functions for a future where convergence 
has blurred traditional regulatory definitions and jurisdictional 
boundaries.
    The issues involved in thinking about convergence and consolidation 
are complex. Prior to the Telecom Act, the core of the Communications 
Act was actually three separate statutes: it incorporated portions of 
the 1887 Interstate Commerce Act (governing telephony), the 1927 
Federal Radio Act (governing broadcasting), and the 1984 Cable 
Communications Policy Act (governing cable television). Telephony is 
regulated one way, cable a second, terrestrial broadcast a third, 
satellite broadcast a fourth. As the historical, technological, and 
market boundaries distinguishing these industries blur, the statutory 
differences make less and less sense. Maintaining them will likely 
result in inefficient rules that stifle promising innovation and 
increase opportunities for regulatory arbitrage.
    Some argue for developing regulatory principles that cut across 
traditional industry boundaries. For example, the policies of 
interconnection, equal access, and open architecture have served 
consumers well in the wireline context, a traditionally regulated 
industry. Similarly, concepts of connectivity, interoperability, and 
openness are the lifeblood of the Internet, an unregulated industry. 
While these similar principles appear to cut across these different 
media, it is unclear whether and how the government should be involved, 
if at all, in applying these principles in a world where competition 
will largely replace regulation.
    At the very least, as competition develops across what had been 
distinct industries, we should level the regulatory playing field by 
leveling regulation down to the least burdensome level necessary to 
protect the public interest. Our guiding principle should be to presume 
that new entrants and competitors should not be subjected to legacy 
regulation. This is not to say that different media, with different 
technologies, must be regulated identically. Rather, we need to make 
sure that the rules for different forms of media delivery, while 
respecting differences in technology, reflect a coherent and sensible 
overall approach. To the extent we cannot do that within the confines 
of the existing statute, we need to work with Congress and others to 
reform the statute.
              ii. the 21st century: a new role for the fcc
A. The Transition Period
    As history has shown, markets that have been highly monopolistic do 
not naturally become competitive. Strong incumbents still retain 
significant power in their traditional markets and have significant 
financial incentives to delay the arrival of competition. Strong and 
enforceable rules are needed initially so that new entrants have a 
chance to compete. At the same time, historical subsidy mechanisms for 
telecommunications services must be reformed to eliminate arbitrage 
opportunities by both incumbents and new entrants.
    The technologies needed for the telecommunications marketplace of 
the future are still evolving, and developing them fully requires 
significant time and investment. Moreover, there is no guarantee that 
market forces will dictate that these new technologies will be 
universally deployed. The massive fixed-cost investments required in 
some industries will mean that new technologies initially will be 
targeted primarily at businesses and higher-income households. Even as 
deployment expands, the economics of these new networks may favor heavy 
users over lighter users, and in some areas of the country deployment 
may lag behind.
    At the same time, consumer preferences will not change overnight. 
The expansion of communications choices is already leading to greater 
consumer confusion. Especially in a world of robust competition, 
consumers will need clear and accurate information about their choices, 
guarantees of basic privacy, and swift action if any company cheats 
rather than competes for their business.
    While the opportunities for the United States and the world of a 
global village are enormous, they can only be realized if other 
countries follow our lead in fostering competition in national and 
world markets. People all over the world benefit as more countries 
enter the Information Age and become trading partners. Thus, as we 
continue on our own course of bringing competition to former domestic 
monopoly markets, we must also continue to promote open and competitive 
markets worldwide.
    In sum, although the long-term future of the telecommunications 
marketplace looks bright, the length and difficulty of the transition 
to that future is far from certain. To achieve the goal of fully 
competitive communications markets in five years, we must continue to 
work to ensure that all consumers have a choice of local telephone 
carriers and broadband service providers, and that companies are 
effectively deterred from unscrupulous behavior. We must also continue 
to promote competition between different media, promote the transition 
to digital technology, and continue to ensure that all Americans have a 
wide and robust variety of entertainment and information sources.
B. The FCC's Role During the Transition to Competition
    During the transition to fully competitive communications markets, 
the FCC, working in conjunction with the states, Congress, other 
federal agencies, industry, and consumer groups, has six critical 
goals, all derived from the Communications Act and other applicable 
statutes:
    Promote Competition: Goal number one is to promote competition 
throughout the communications industry, particularly in the area of 
local telephony. The benefits of competition are well documented in 
many communications sectors--long distance, wireless, customer-premises 
equipment, and information services. The benefits of local telephone 
competition are accruing at this time to large and small companies, but 
not, for the most part, to residential consumers. We must work to 
ensure that all communications markets are open, so that all consumers 
can enjoy the benefits of competition.
    To meet this goal, we must continue our efforts to clarify the 
provisions of the Telecom Act relating to interconnection and unbundled 
network elements, work with the Bell Operating Companies (BOCs), their 
competitors, states and consumer groups on meeting the requirements of 
the statute related to BOC entry into the long distance market, reform 
access charges, and, as required by Sections 214 and 310(d) of the 
Communications Act and section 7 of the Clayton Act, continue to review 
mergers of telecommunications companies that raise significant public 
interest issues related to competition and consumers.
    In the mass media area, we must continue the pro-competitive 
deployment of new technologies, such as digital television and direct 
broadcast satellites, and the maintenance of robust competition in the 
marketplace of ideas. To meet these goals, we must continue rapid 
deployment of new technologies and services and regular oversight of 
the structure of local markets to ensure multiple voices, all the while 
updating our rules to keep pace with the ever-changing mass media 
marketplace.
    Deregulate: Our second goal is to deregulate as competition 
develops. Consumers ultimately pay the cost of unnecessary regulation, 
and we are committed to aggressively eliminating unnecessarily 
regulatory burdens or delays. We want to eliminate reporting and 
accounting requirements that no longer are necessary to serve the 
public interest. Also, where competition is thriving, we intend to 
increase flexibility in the pricing of access services. We have already 
deregulated the domestic, long distance market as a result of increased 
competition, and we stand ready to do so for other communications 
markets as competition develops. We have also streamlined our rules and 
privatized some of the functions involved in the certification of 
telephones and other equipment. We are currently streamlining and 
automating our processes to issue licenses faster, resolve complaints 
quicker, and be more responsive to competitors and consumers in the 
marketplace.
    Protect Consumers: Our third goal is to empower consumers with the 
information they need to make wise choices in a robust and competitive 
marketplace, and to protect them from unscrupulous competitors. 
Consumer bills must be truthful, clear, and understandable. We will 
have ``zero tolerance'' for perpetrators of consumer fraud such as 
slamming and cramming. We will make it easier for consumers to file 
complaints by phone or over the Internet, and reduce by 50 percent the 
time needed to process complaints. Further, we will remain vigilant in 
protecting consumer privacy. We will also continue to carry out our 
statutory mandates aimed at protecting the welfare of children, such as 
the laws governing obscene and indecent programming.
    Bring Communications Services and Technology to Every American: Our 
fourth goal is to ensure that all Americans--no matter where they live, 
what they look like, what their age, or what special needs they have--
should have access to new technologies created by the communications 
revolution. Toward this end, we must complete universal service reform 
to ensure that communications services in high-cost areas of the nation 
are both available and affordable. We must also ensure that our support 
mechanisms and other tools to achieve universal service are compatible 
and consistent with competition. We must evaluate--and if necessary, 
improve--our support mechanisms for low-income consumers, and in 
particular Native Americans, whose telephone penetration rates are some 
of the lowest in the country. We must make certain that the support 
mechanisms for schools, libraries, and rural health care providers 
operate efficiently and effectively. We must make sure that the 54 
million Americans with disabilities have access to communications 
networks, new technologies and services, and news and entertainment 
programming.
    Foster Innovation: Our fifth goal is to foster innovation. We will 
promote the development and deployment of high-speed Internet 
connections to all Americans. That means clearing regulatory hurdles so 
that innovation--and new markets--can flourish. We must continue to 
promote the compatibility of digital video technologies with existing 
equipment and services. Further, we will continue to encourage the more 
efficient use of the radio spectrum so that new and expanding uses can 
be accommodated within this limited resource. More generally, we will 
continue to promote competitive alternatives in all communications 
markets.
    Advance Competitive Goals Worldwide: Our sixth goal is to advance 
global competition in communications markets. The pro-competitive 
regulatory framework Congress set forth in the Telecom Act is being 
emulated around the world through the World Trade Organization 
Agreement. We will continue to assist other nations in establishing 
conditions for deregulation, competition, and increased private 
investment in their communications infrastructure so that they can 
share in the promise of the Information Age and become our trading 
partners. We must continue to intensify competition at home and create 
growth opportunities for U.S. companies abroad. We will continue to 
promote fair spectrum use by all countries.
C. The FCC's Core Functions in a Competitive Environment
    As we accomplish our transition goals, we set the stage for a 
competitive environment in which communications markets look and 
function like other competitive industries. At that point, the FCC must 
refocus our efforts on those functions that are appropriate for an age 
of competition and convergence. In particular, we must refocus our 
efforts from managing monopolies to addressing issues that will not be 
solved by normal market forces. In a competitive environment, the FCC's 
core functions would focus on:
    Universal Service, Consumer Protection and Information. The FCC 
will continue to have a critical responsibility, as dictated by our 
governing statutes, to support and promote universal service and other 
public interest policies. The shared aspirations and values of the 
American people are not entirely met by market forces. Equal access to 
opportunity as well as to the public sphere are quintessential American 
values upon which the communications sector will have an increasingly 
large impact. We will be expected to continue to monitor the 
competitive landscape on behalf of the public interest and implement 
important policies such as universal service in ways compatible with 
competition.
    In addition, as communications markets become more competitive and 
take on attributes of other competitive markets, the need for increased 
information to consumers and strong consumer protection will increase. 
We must work to ensure that Americans are provided with clear 
information so that they can make sense of new technologies and 
services and choose the ones best for them. We must also continue to 
monitor the marketplace for illegal or questionable market practices.
    Enforcement and Promotion of Pro-Competition Communications Goals 
Domestically and Worldwide. As markets become more competitive, the 
focus of industry regulation will shift from protecting buyers of 
monopoly services to resolving disputes among competitors, whether over 
interconnection terms and conditions, program access, equipment 
compatibility, or technical interference. In the fast-paced world of 
competition, we must be able to respond swiftly and effectively to such 
disputes to ensure that companies do not take advantage of other 
companies or consumers.
    The FCC is a model for other countries of a transparent and 
independent government body establishing and enforcing fair, pro-
competitive rules. This model is critical for continuing to foster fair 
competition domestically as well as to open markets in other countries, 
to the benefit of U.S. consumers and firms and consumers and firms 
worldwide. There always will be government-to-government relations and 
the need to coordinate among nations as communications systems become 
increasingly global. As other nations continue to move from government-
owned monopolies to competitive, privately-owned communications firms, 
they will increasingly look to the FCC's experience for guidance.
    Spectrum Management. The need for setting ground rules for how 
people use the radio spectrum will not disappear. We need to make sure 
adequate spectrum exists to accommodate the rapid growth in existing 
services as well as new applications of this national and international 
resource. Even with new technologies such as software-defined radios 
and ultra-wideband microwave transmission, concerns about interference 
will continue (and perhaps grow) and the need for defining licensees 
and other users' rights will continue to be a critical function of the 
government. We will thus continue to conduct auctions of available 
spectrum to speed introduction of new services. In order to protect the 
safety of life and property, we must also continue to consider public 
safety needs as new spectrum-consuming technologies and techniques are 
deployed.
D. Coordination with State and Local Governments and other Federal 
        Agencies
    In order to fulfill our vision of a fully competitive 
communications marketplace in five years, we need a national, pro-
competitive, pro-consumer communications policy, supplemented by state 
and local government involvement aimed at achieving the same goal. The 
Telecom Act set the groundwork for this goal, and the Commission is 
fulfilling its role of establishing the rules for opening 
communications markets across the country, in partnership with state 
regulators. The Commission must continue to work with state and local 
governments to promote competition and protect consumers. Toward this 
end, we have instituted a Local and State Government Advisory Committee 
to share information and views on many critical communications issues.
    The importance of working and coordinating our efforts in the 
communications arena with other federal agencies will also continue. We 
work particularly closely with the Federal Trade Commission on consumer 
and enforcement issues, and with the Department of Justice on 
competition issues. We also work with other federal agencies on public 
safety, disability, Y2K, reliability, and spectrum issues, just to name 
a few. We see our role vis-a-vis other federal agencies as cooperative 
and reinforcing, where appropriate.
           iii. the 21st century: a new structure for the fcc
A. The FCC's Evolving Structure
    The FCC must change its structure to match the fast-paced world of 
competition and to meet our evolving goals and functions, as derived 
from our authorizing statutes. Our transition goals must be 
accomplished with minimal regulation or no regulation where appropriate 
in a competitive marketplace. Moreover, a restructured and streamlined 
FCC must be in place once full competition arrives, so that we can 
focus on providing consumers information and protection, enforcing 
competition laws, and spectrum management.
    In sum, we must be structured to react quickly to market 
developments, to work more efficiently in a competitive environment, 
and to focus on bottom-line results for consumers. As competition 
increases, we must place greater reliance on marketplace solutions, 
rather than the traditional regulation of entry, exit, and prices; and 
on surgical intervention rather than complex rules in the case of 
marketplace failure. We must encourage private sector solutions and 
cooperation where appropriate. But we also must quickly and effectively 
take necessary enforcement action to prevent abuses by communications 
companies who would rather cheat than compete for consumers. 
Ultimately, throughout the agency, we must be structured to render 
decisions quickly, predictably, and without imposing unnecessary costs 
on industry or consumers.
B. Current Restructuring Efforts
    The FCC is currently structured along the technology lines of wire, 
wireless, satellite, broadcast, and cable communications. As the lines 
between these industries merge and blur as a result of technological 
convergence and the removal of artificial barriers to entry, the FCC 
needs to reorganize itself in a way that recognizes these changes and 
prepares for the future. A reorganization of the agency, over time, 
along functional rather than technology lines will put the FCC in a 
better position to carry out its core responsibilities more 
productively and efficiently.
    As the first step in this process, in October 1998, Chairman 
Kennard announced plans to consolidate currently dispersed enforcement 
functions into a new Enforcement Bureau and currently dispersed public 
information functions into a Public Information Bureau. The 
consolidation of these two key functions that are now spread across the 
agency will improve efficiency and enhance the delivery of these 
services to the general public and to industry. The consolidation of 
these functions will also encourage and foster cooperation between the 
two new bureaus, other bureaus and offices, and state and local 
governments and law enforcement agencies. The end result will be 
improvements in performance of both these functions through an improved 
outreach program, a better educated communications consumer, and a more 
efficient, coherent enforcement program.
    The new Enforcement Bureau will replace the current Compliance and 
Information Bureau and, likewise, the new Public Information Bureau 
will include the current Office of Public Affairs. Therefore, the total 
number of bureaus and offices at the Commission will remain the same.
    The Commission is also investing in new technology to process 
applications and licenses faster, cheaper, and in a more consumer 
friendly way through electronic filing and universal licensing. Our 
goal is to move to a ``paperless FCC'' that will result in improved 
service to the public. Examples of these efforts include universal 
licensing, streamlined application processes, revised and simplified 
licensing forms, blanket authorizations, authorization for unlicensed 
services, and electronic filing of license applications and 
certifications.
    1. Enforcement Bureau
    Since the Telecom Act was passed, telephone-related complaints have 
increased by almost 100%. In 1996, the Common Carrier Bureau received 
over 28,000 complaints; in 1998, that number increased to over 53,000 
complaints. With the increase in competition, we expect even more 
complaints to be filed as consumers grapple with changes in both 
service options and providers. While we have been implementing 
streamlined, electronic processes to address this burgeoning workload, 
we have also determined that the consolidation of the Commission's 
currently dispersed enforcement functions into one Enforcement Bureau 
is a necessary and important step to providing better service to the 
public.
    The Commission currently has four organizational units dedicated 
principally or significantly to enforcement--the Compliance and 
Information Bureau, the Mass Media Bureau Enforcement Division, the 
Common Carrier Bureau Enforcement Division and the Wireless 
Telecommunications Bureau Enforcement and Consumer Information 
Division. Consolidating most enforcement responsibilities of these 
organizations into a unified Enforcement Bureau will result in more 
effective and efficient enforcement. The Enforcement Bureau will 
coordinate enforcement priorities and efforts in a way that best uses 
limited Commission resources to ensure compliance with the important 
responsibilities assigned to the FCC by Congress.
    The consolidation of various FCC enforcement functions also 
responds to the fact that the need for effective enforcement of the 
Communications Act and related requirements is becoming even more 
important as competition and deregulation increase. As communications 
markets become increasingly competitive, the pace of deregulation will 
intensify. Those statutory and rule provisions that remain in an 
increasingly competitive, deregulatory environment will be those that 
Congress and the Commission have determined remain of central 
importance to furthering key statutory goals--e.g., providing a 
structure for competition to flourish, assisting customers and users of 
communications services in being able to benefit from competitive 
communications services, ensuring that spectrum is used in an efficient 
manner that does not create harmful interference, and promoting public 
safety.
    As unnecessary regulation is eliminated and the demands of the 
marketplace increase, the Commission must focus its resources on 
effective and swift enforcement of the statutory and regulatory 
requirements that remain. The consolidation of our enforcement 
activities will allow us to do just that in a streamlined, centralized, 
and more effective way.
    2. Public Information Bureau
    Consumer inquiries at the Commission have increased dramatically 
since 1996. In 1998, we received over 460,000 phone calls to telephone 
service representatives, and over 600,000 calls to our automated 
response system. There were on average over 266,000 hits on the FCC's 
web site a day, totalling over 97 million in 1998 (up over 400% from 21 
million in 1996). We expect these numbers to increase as more consumers 
seek information regarding the ever growing array of services and 
providers in the communications marketplace.
    Currently, consumer inquiries are handled by several different 
offices and bureaus throughout the Commission and the methods used to 
handle these inquiries vary widely. While each office has a small 
contingent of staff handling inquiries, they have had varying degrees 
of success in meeting the ever increasing volume. Although the 
Commission established a National Call Center in June 1996, current 
processes still require a great number of consumers seeking information 
to contact other offices and bureaus directly to get their questions 
answered.
    The creation of the Public Information Bureau allows the Commission 
to better serve the public by establishing a single source organization 
as a ``one-stop'' shop or ``FCC General Store'' for handling all 
inquiries and the general expression of views to the Commission, 
thereby better meeting the public's information needs. Merging the 
resources of the Office of Public Affairs, which includes public 
service and inquiry staffs, public notice distribution, and the 
management of the FCC web site, with the FCC Call Center will provide a 
streamlined, more efficient, and consolidated information source for 
the public. Consumers would only have to contact one source, whether by 
telephone (1-888-CALLFCC) or by E-mail or the Internet 
([email protected]). The Public Information Bureau also plans to 
establish one source for mailing inquiries to the FCC (for example, 
P.O. FCC).
    The creation of the Public Information Bureau will encourage more 
public participation in the work of the Commission. The staff of the 
Public Information Bureau will conduct consumer forums across the 
country to inform and solicit feedback from consumers about the 
Commission's policies, goals, and objectives. This feedback will be 
shared with other bureaus to help ensure that Commission rules are 
fair, effective, and sensible, and that they support competition while 
responding to consumer concerns. The Public Information Bureau also 
plans to share its databases with state and local governments as 
appropriate, to coordinate our respective abilities to respond to 
consumer complaints and track and address industry abuses.
    The creation of the Public Information Bureau supports the 
Commission's efforts to foster a pro-competitive, deregulatory, and 
pro-consumer approach to communications services. The staff of the 
Public Information Bureau will provide consumers with information so 
that consumers can make informed decisions regarding their 
communications needs. The staff of the Public Information Bureau will 
also work with other bureaus to issue consumer alerts and public 
service announcements to give consumers information about their rights 
and information to protect themselves from unscrupulous individuals and 
firms. Finally, the Public Information Bureau will provide easy public 
access to FCC information as well as a convenient way for the public to 
make its views known, thus supporting the Commission's efforts to 
assist communities across America in dealing with complex 
communications issues and to provide opportunities for a wide range of 
voices to be expressed publicly.
    3. Streamlining and Automating the FCC Licensing Process
    The Commission's ``authorization of service'' activities cover the 
licensing and authorization through certification, and unlicensed 
approval, of radio stations and devices, telecommunications equipment 
and radio operators, as well as the authorization of common carrier and 
other services and facilities. The Commission has already begun 
automating and reengineering our authorization of service processes 
across the agency by reengineering and integrating our licensing 
databases and through the implementation of electronic filing.
    The Universal Licensing System (ULS) project is fundamentally 
changing the way the Commission receives and processes wireless 
applications. ULS will combine all licensing and spectrum auctions 
systems into a single, integrated system. It collapses 40 forms into 
four; allows licensees to modify online only those portions of the 
license that need to be modified without resubmitting a new 
application; and advises filers when they have filled out an 
application improperly by providing immediate electronic notification 
of the error. During the month of February 1999, 75% of receipts (916 
applications) filed under the currently implemented portions of ULS 
were processed in one day.
    Universal licensing is an example of how we are working to change 
the relationship between the Commission, spectrum licensees, and the 
public by increasing the accessibility of information and speeding the 
licensing process, and thus competitive entry, dramatically. Universal 
licensing is becoming the model for automated licensing for the entire 
agency.
    In the Wireless Telecommunications Bureau, electronic filing has 
been fully implemented throughout the Land Mobile Radio services, 
antenna registration, and amateur radio filings. More than 50% of the 
Wireless Telecommunications Bureau's filings are now accomplished 
electronically. Significant service improvements are evidenced by the 
fact that 99% of Amateur Radio service filings are now processed in 
less than five days, with most electronically filed applications being 
granted overnight. The Wireless Bureau also has an initiative to 
transfer the knowledge used by license examiners in manually reviewing 
applications to computer programs so that applications can be received, 
processed, and licenses granted in even less time.
    The Mass Media Bureau is implementing a similar electronic filing 
initiative. In October, the FCC issued rules that substantially revise 
the application process in 15 key areas, including sales and license 
renewals, in order to effectuate mandatory electronic filing for 
broadcasters. When fully implemented, the new electronic filing system 
will reduce the resources required to process authorizations, 
accelerate the grant of authorizations, and improve public access to 
information about broadcast licensees.
    The Common Carrier Bureau has also implemented electronic filing of 
tariffs and associated documents via the Internet. The Electronic 
Tariff Filing System enables interested parties to access and download 
documents over the Internet, and to file petitions to reject, or 
suspend and investigate tariff filings electronically. Since July 1, 
1998, over 10,000 electronic tariff filings have been received, 
replacing approximately 750,000 pages of information.
    The results of all these streamlining efforts include a more 
economical use of FCC personnel resources, improvement in processing 
times, the ability of our customers to file via the Internet or through 
other electronic filing mechanisms, and the ability to provide our 
customers with immediate status reports on their applications as well 
as real time access to on-line documents. It is estimated that our move 
toward a ``paperless FCC'' will save the public approximately 700,000 
hours of paperwork in this fiscal year alone.
    4. Budget and Workforce Impact
    In anticipation of the expected increased efficiencies our 
restructuring plans and other streamlining and automation improvements 
will produce, the FCC is confronting the issue of how it should look 
and operate in FY 2000 and beyond. We expect that our re-engineering 
and restructuring efforts will yield increased efficiencies and 
streamlining opportunities, particularly in the area of authorization 
of service, due to automation and regulatory changes. However, these 
efforts will also result in the potential displacement of staff in 
certain locations and a need to retrain and reassign other staff.
    Buyout authority is a tool that will enhance the Commission's 
ability to alter the skills mix of its workforce to carry out its 
changing mission more effectively. Targeted buyouts for staff would 
facilitate our restructuring efforts in a cost-effective manner. The 
Commission has requested buyout authority in its budget request for FY 
2000.
    The Commission is dedicated to keeping staff informed and involved 
in our restructuring and streamlining efforts, and to minimizing 
workplace disruption that may result from these efforts through staff 
retraining, reassignment, and other methods. It is critical, as we 
consider ways to restructure and streamline Commission operations, that 
we continue to recognize and respect the hard work of our employees, 
many of whom have been with the Commission for many years. Change is 
always difficult, and it is imperative that our staff understands and 
supports the necessary changes that are taking place--and will continue 
to take place--at the Commission. Accordingly, we are working closely 
with the National Treasury Employees Union (NTEU) to ensure that staff 
is involved in all these issues and that their views are incorporated 
into the Commission's planning process.
    5. Restructuring Process and Timeline
    Planning for the Public Information Bureau began in late November 
1998 and for the Enforcement Bureau in mid-December 1998. A Task Force 
comprised of both managers and staff from relevant Bureaus and Offices, 
as well as NTEU representatives, has been meeting regularly since early 
January to consider such issues as the appropriate functions of each of 
the Bureaus and their organization. Efforts have also been made on an 
informal basis both inside and outside the Commission to ensure that a 
wide range of ideas are considered during the planning process. A 
proposed reorganization plan should be formally submitted to the 
Commission for its consideration in Spring, 1999. Upon approval by the 
Commission, it will be formally submitted to the NTEU and appropriate 
congressional committees.
C. Restructuring to Reflect Industry Convergence
    As the traditional lines dividing communications industries blur 
and eventually erode, the traditional ways of regulating or monitoring 
these industries will also have to change. The FCC must think about the 
complex issues resulting from converging communications markets from 
both a policy and structural perspective. How the FCC should be 
structured to address issues arising from a more competitive, converged 
communications marketplace is inextricably tied up with the policy 
choices that will be made on how to address the blurring of regulatory 
distinctions.
    From a structural perspective, as noted in our FY2000 budget 
submitted to Congress, there are a number of steps we are committed to 
take. We will continue to evaluate whether certain regulations are no 
longer necessary in the public interest and should be repealed or 
modified as required by Section 11 of the Communications Act. We will 
continue to use our forbearance authority where appropriate. We will 
continue our efforts to reduce reporting requirements and eliminate 
unnecessary rules, and to level regulation to the least burdensome 
possible, consistent with the public interest. In addition, in our FY 
2000 budget, we have committed to reviewing our cable services and mass 
media functions.
    We recognize that much additional analysis is needed to consider 
the impact of industry convergence on the FCC's policies and rules and 
on our structure. We will continue to meet with Congress, our state 
regulatory partners, industry, consumer groups, and others to solicit 
input and feedback on our restructuring, streamlining and policy 
initiatives and the impact of industry convergence.
                  iv. substantive deregulation efforts
    As telecommunications markets become more competitive, we must 
eliminate regulatory requirements that are no longer useful. We are 
already engaged in an ongoing process of reviewing our entire 
regulatory framework to see which rules should be eliminated or 
streamlined.
A. FCC Biennial Review of Regulations
    In November 1997, the Commission initiated a review of the 
Commission's regulations, as required by Section 11 of the Telecom Act. 
Beginning in 1998 and in every even-numbered year thereafter, the FCC 
must conduct a review of its regulations regarding the provision of 
telecommunications service and the Commission's broadcast ownership 
rules. The Telecom Act charges the Commission with determining whether, 
because of increased competition, any regulation no longer serves the 
public interest.
     Chairman Kennard announced in November 1997 that the Commission's 
1998 Biennial Review would be even broader than mandated by the Telecom 
Act. In addition, at the Chairman's direction, the Commission 
accelerated the Congressionally-mandated biennial review requirement by 
beginning in 1997 rather than in 1998. As part of the 1998 Biennial 
Review, each of the operating bureaus, together with the Office of 
General Counsel, hosted a series of public forums and participated in 
practice group sessions with the Federal Communications Bar Association 
to solicit informal input from the public. The Commission also hosted a 
web site on the biennial review and asked for additional suggestions 
via e-mail.
    After input from the public, the Commission initiated 32 separate 
biennial review rulemaking proceedings, covering multiple rule parts, 
aimed at deregulating or streamlining Commission regulations. The 
Commission devoted substantial attention and resources to the biennial 
review. Roughly two-thirds of the proceedings involved common carrier 
deregulation or streamlining. The Commission also instituted a broad 
review of its broadcast ownership rules. To date, the Commission has 
adopted orders in ten of the 1998 biennial review proceedings, with 
others to be forthcoming. (See Appendix B)
    From the outset, the focus of the Biennial Review has been on 
regulating in a common sense manner and relying on competition as much 
as possible. The Chairman and the other Commissioners have worked 
together to make the biennial review a meaningful force for 
deregulation and streamlining. The 1998 review was the Commission's 
first biennial review, and was being conducted while the Commission was 
still in the process of implementing the Telecom Act. The Chairman and 
the Commission intend to build on the 1998 review so that the 2000 
review and future reviews will produce even more deregulatory actions.
B. Continued FCC Deregulation Efforts
    As we move toward our goal of fully competitive communications 
markets, our efforts to streamline and eliminate unnecessary rules must 
be increased and expanded. Accordingly, the 2000 Biennial Review will 
be a top priority for the Commission.
    As we did with the 1998 review, we plan to start the 2000 review 
early, by putting a team in place in 1999 to work with the 
Commissioners and the Bureaus and Offices on planning and structuring 
the review. We will also continue to keep our review broad in focus. 
The team would evaluate the success of the 1998 review and consider 
whether changes are necessary for the 2000 review. The team would also 
consider whether any changes are needed in the methodology we have used 
to review our regulations. The team would again solicit input and 
recommendations from state regulators, industry, consumer groups, and 
others, to ensure that the 2000 review is a major force for 
deregulation.
    In short, we will be guided by one principle: the elimination of 
rules that impede competition and innovation and do not promote 
consumer welfare.
                     v. strategic planning efforts
A. Background
    The Government Performance and Results Act of 1993 (Results Act) 
provides a useful framework for a federal agency to develop a strategic 
plan. The Results Act recommends including as part of such a plan: a 
comprehensive mission statement; a description of the general goals the 
agency wants to achieve and how they will be achieved; a discussion of 
the means, strategies and resources required to achieve our goals; a 
discussion of the external factors that could affect achievement of our 
goals; and a discussion of the consultations that took place with 
customers and stakeholders in the development of the plan.
    The Results Act also recommends that an agency establish measurable 
objectives and a timeline to achieve the goals specified in the 
strategic plan. The agency would consult with Congress and solicit 
input from its customers and stakeholders. The purpose of the Results 
Act is to bring private sector management techniques to public sector 
programs.
B. FCC Implementation of the Results Act
    When the Results Act was passed, the FCC was already hard at work 
implementing similar management initiatives. In 1993, we began the work 
of reinventing ourselves, streamlining and restructuring the agency to 
meet the challenges of the Information Age. In the process we created 
the Wireless Telecommunications and the International Bureaus. In 1995, 
we issued a report--``Creating a Federal Communications Commission for 
the Information Age''--that included numerous recommendations for 
administrative and legislative changes, many of which were subsequently 
adopted.
    Each of our bureaus and offices developed their own mission 
statement, identified their customers and surveyed them on their needs. 
Benchmark customer service standards were established for each of their 
policy and rulemaking, authorization of service, enforcement and public 
information service activities. These standards were published on their 
websites and customers were periodically surveyed to determine whether 
their service goals were being met.
    We also volunteered to participate in Results Act implementation 
pilot projects, naming the Wireless Telecommunications Bureau's Land 
Mobile radio and the Office of Engineering and Technology's Equipment 
Authorization activities as the agency's two participants. We organized 
a Steering Committee with an ambitious schedule for completing the 
requirements of the Results Act.
C. Impact of the Telecom Act
    Enactment of the Telecom Act in February 1996 had a profound impact 
on the FCC. Pursuant to the Telecom Act, the FCC was required to 
initiate numerous rulemakings, many with statutorily mandated and 
expedited notice and comment period. The impact of implementing the 
Telecom Act affected every aspect of the FCC--its resource allocations, 
its schedule for rulemakings, and its very organizational structure--
for more than two years.
    Enactment of the Telecom Act also changed the scope and level of 
our Results Act planning effort. We had to reformulate our mission and 
performance goals in light of the Telecom Act. We decided for the first 
three years after passage of the Telecom Act to marry the major goal of 
the Act--to ``promote competition and reduce regulation in order to 
secure lower prices and higher quality services for American 
telecommunications consumers and encourage the rapid deployment of 
telecommunications technologies''--with the FCC's four major budget 
activities of policy and rulemaking, authorization of service, 
compliance, and public information services.
    This approach worked well during the major period that the FCC was 
implementing the Telecom Act. Under this approach, however, the 
performance goals for each of the individual Bureaus remained a 
somewhat disconnected patchwork of objectives reflecting a collection 
of individual Bureaus' efforts to implement the Telecom Act. Since 
passage of the Telecom Act, with the traditional distinctions between 
over-the-air broadcasting, cable, wireless, wireline and satellite 
becoming less distinct, it is becoming clear that the FCC must conceive 
a new approach to our mission and our structure.
D. New FCC Strategic Plan
    The FCC has determined that we need a new regulatory model and a 
new Strategic Plan that will serve as the Commission's blueprint as we 
enter the 21st Century. We need a new Strategic Plan to point the way 
to where we want to be and the means and resources by which we will get 
there.
     We are generally structuring our Strategic Plan based on our 
future core functions: universal service, consumer protection and 
information; enforcement and promotion of pro-competition 
communications goals domestically and internationally; and spectrum 
management. Our strategic planning efforts are thus tied into the 
restructuring and streamlining efforts that are already on-going. In 
addition, as noted above, we must take a hard look at how to organize 
ourselves for the New Media age. The convergence of technologies and 
industries require that we examine and change our stovepipe bureau 
structure, and we plan to address those issues in our Strategic Plan as 
well.
    Key senior managers will be responsible for developing the 
strategic objectives and performance goals for the Strategic Plan. As 
our work on restructuring proceeds, we will convene strategic objective 
planning sessions to develop a planning document for each of our core 
activities. We will also develop a schedule, based on fiscal years, on 
how we will achieve our objectives.
    The Strategic Plan will represent the cooperative work of the 
entire FCC, reflecting input from the Commissioners, Bureau management, 
agency staff, and others affected by or interested in the FCC's 
activities. In developing our Strategic Plan, we have already started 
to seek input from a wide variety of FCC stakeholders and intend to 
intensify our efforts in the next few months. These include other 
Commissioners, Commission staff, Members of Congress and their staff, 
the Office of Management and Budget (OMB), industry groups, consumer 
groups, academia and others. Suggestions will be gathered on both the 
draft Strategic Plan and on the steps to implement it--including 
deregulatory actions, restructuring and realignment of FCC functions 
and management. In addition, we plan to incorporate comments on this 
document, ``A New FCC for the 21st Century,'' into the draft Strategic 
Plan.
    Our draft Strategic Plan, along with any implementation proposals, 
will be made public and we will actively solicit comment. We will issue 
a Public Notice encouraging the public to comment on our draft plan, 
which will be displayed on our Internet Home Page by July 1999. We will 
hold a series of meetings with interested groups to gain their insight 
into how we can better serve the public interest. We will make 
particular efforts to discuss the draft plan with Congress, the states, 
industry, and with consumers and small companies affected by our work. 
We plan to submit a more final plan to Congress and OMB in September 
1999.
                            vii. conclusion
    Just as the communications industry and other sectors of our 
economy are constantly adapting to change and competition, so must the 
FCC. A new century and new economy demand a new FCC. We must plan for 
the future, while continuing to work on the challenges we face today to 
promote competition, foster innovation, and help bring the benefits of 
the 21st century to all Americans. We look forward to working with 
Congress, industry, consumers, state and local governments, and others 
on a critical assessment of what the ``New FCC'' should look like, and 
how we can get there.

[GRAPHIC] [TIFF OMITTED] T5640.001

[GRAPHIC] [TIFF OMITTED] T5640.002

[GRAPHIC] [TIFF OMITTED] T5640.003

[GRAPHIC] [TIFF OMITTED] T5640.004

[GRAPHIC] [TIFF OMITTED] T5640.005

[GRAPHIC] [TIFF OMITTED] T5640.006

[GRAPHIC] [TIFF OMITTED] T5640.007

                               APPENDIX B

                    1998 BIENNIAL REGULATORY REVIEW

           I. Proceedings Initiated/Completed--Orders Issued

             telecommunications providers (common carriers)

    Streamline and consolidate rules governing application 
procedures for wireless services to facilitate introduction of 
electronic filing via the Universal Licensing System. 1998 
Biennial Regulatory Review--Amendment of Parts 0, 1, 13, 22, 
24, 26, 27, 80, 87, 90, 95, 97, and 101 of the Commission's 
Rules to Facilitate the Development and Use of the Universal 
Licensing System in the Wireless Telecommunications Services, 
WT Dkt No. 98-20, NPRM, FCC 98-25 (rel. March 19, 1998), R&O, 
FCC 98-234 (rel. Oct. 21, 1998).
    Streamline the equipment authorization program by 
implementing the recent mutual recognition agreement with 
Europe and providing for private equipment certification. 1998 
Biennial Regulatory Review--Amendment of Parts 2, 25 and 68 of 
the Commission's Rules to Further Streamline the Equipment 
Authorization Process for Radio Frequency Equipment, Modify the 
Equipment Authorization Process for Telephone Terminal 
Equipment, Implement Mutual Recognition Agreements and Begin 
Implementation of the Global Mobile Personal Communications by 
Satellite (GMPCS) Arrangements, GEN Dkt No. 98-68, NPRM, FCC 
98-92 (rel. May 18, 1998), R&O, FCC 98-338 (rel. Dec. 23, 
1998).
    Eliminate rules concerning the provision of telegraph and 
telephone franks. 1998 Biennial Regulatory Review--Elimination 
of Part 41 Telegraph and Telephone Franks, CC Dkt No. 98-119, 
NPRM, FCC 98-152 (rel. July 21, 1998), R&O, FCC 98-344 (rel. 
Feb. 3, 1999).
    In addition to addressing issues remanded by the Ninth 
Circuit, reexamine the nonstructural safeguards regime 
governing the provision of enhanced services by the Bell 
Operating Companies (BOCs) and eliminate the requirement that 
BOCs receive pre-approval from the FCC on their Comparably 
Efficient Interconnection (CEI) plans. Computer III Further 
Remand Proceedings: Bell Operating Company Provision of 
Enhanced Services; 1998 Biennial Regulatory Review--Review of 
Computer III and ONA Safeguards and Requirements, CC Dkt Nos. 
95-20 and 98-10, FNPRM, FCC 98-8 (rel. Jan. 30, 1998), R&O, FCC 
99-36 (rel. March 10, 1999).

                                 other

    Amend cable and broadcast annual employment report due 
dates to streamline and simplify filing. 1998 Biennial 
Regulatory Review--Amendment of Sections 73.3612 and 76.77 of 
the Commission's Rules Concerning Filing Dates for the 
Commission's Equal Employment Opportunity Annual Employment 
Reports, MO&O, FCC 98-39 (rel. Mar. 16, 1998).
    Streamline broadcast filing and licensing procedures. 1998 
Biennial Regulatory Review-- Streamlining of Mass Media 
Applications, Rules and Processes, MM Dkt No. 98-43, NPRM, FCC 
98-57 (rel. Apr. 3, 1998), R&O, FCC 98-281 (rel. Nov. 25, 
1998).
    Provide for electronic filing for assignment and change of 
radio and TV call signs. 1998 Biennial Regulatory Review--
Amendment of Part 73 and Part 74 Relating to Call Sign 
Assignments for Broadcast Stations, MM Dkt No. 98-98, NPRM, FCC 
98-130 (rel. June 30, 1998), R&O, FCC 98-324 (rel. Dec. 16, 
1998).
    Simplify and unify Part 76 cable pleading and complaint 
process rules. 1998 Biennial Regulatory Review--Part 76--Cable 
Television Service Pleading and Complaint Rules, CS Dkt No. 98-
54, NPRM, FCC 98-68 (rel. Apr. 22, 1998), R&O, FCC 98-348 (rel. 
Jan. 8, 1999).
    Modify or eliminate Form 325, annual cable television 
system report. 1998 Biennial Regulatory Review--``Annual Report 
of Cable Television System,'' Form 325, Filed Pursuant to 
Section 76.403 of the Commission's Rules, CS Dkt No. 98-61, 
NPRM, FCC 98-79 (rel. Apr. 30, 1998), R&O, FCC 99-12 (rel.    , 
1999) [Adopted Feb. 1, 1999].
    Streamline and consolidate public file requirements 
applicable to cable television systems. 1998 Biennial 
Regulatory Review--Streamlining of Cable Television Services 
Part 76 Public File and Notice Requirements, CS Dkt No. 98-132, 
NPRM, FCC 98-159 (rel. July 20, 1998), R&O, FCC 99-13 (rel.    
, 1999) [Adopted Feb. 1, 1999].

                   II. Proceedings Initiated/Pending

             telecommunications providers (common carriers)

    Deregulate radio frequency (RF) lighting requirements to 
foster the development of new, more energy efficient RF 
lighting technologies. 1998 Biennial Regulatory Review--
Amendment of Part 18 of the Commission's Rules to Update 
Regulations for RF Lighting Devices, ET Dkt No. 98-42, NPRM, 
FCC 98-53 (rel. Apr. 9, 1998).
    Removal or reduction of, or forbearance from enforcing, 
regulatory burdens on carriers filing for technology testing 
authorization. 1998 Biennial Regulatory Review--Testing New 
Technology, CC Dkt No. 98-94, NOI, FCC 98-118 (rel. June 11, 
1998).
    Modify accounting rules to reduce burdens on carriers. 1998 
Biennial Regulatory Review--Review of Accounting and Cost 
Allocation Requirements, CC Dkt No. 98-81, NPRM, FCC 98-108 
(rel. June 17, 1998).
    In NPRM portion, considering forbearance from additional 
requirements regarding telephone operator services applicable 
to commercial mobile radio service providers (CMRS) and, more 
generally, forbearance from other statutory and regulatory 
provisions applicable to CMRS providers. Personal 
Communications Industry Association's Broadband Personal 
Communications Services Alliances' Petition for Forbearance For 
Broadband Personal Communications Services; 1998 Biennial 
Regulatory Review--Elimination or Streamlining of Unnecessary 
and Obsolete CMRS Regulations; Forbearance from Applying 
Provisions of the Communications Act to Wireless 
Telecommunications Carriers, WT Dkt No. 98-100, NPRM, FCC 98-
134 (rel. July 2, 1998).
    Provide for a blanket section 214 authorization for 
international service to destinations where the carrier has no 
affiliate; eliminate prior review of pro forma transfers of 
control and assignments of international section 214 
authorizations; streamline and simplify rules applicable to 
international service authorizations and submarine cable 
landing licenses. 1998 Biennial Regulatory Review--Review of 
International Common Carrier Regulations, IB Dkt No. 98-118, 
NPRM, FCC 98-149 (rel. July 14, 1998).
    Eliminate duplicative or unnecessary common carrier 
reporting requirements. 1998 Biennial Regulatory Review--Review 
of ARMIS Reporting Requirements, CC Dkt No. 98-117, NPRM, FCC 
98-147 (rel. July 17, 1998).
    Privatize the administration of international accounting 
settlements in the maritime mobile and maritime satellite radio 
services. 1998 Biennial Regulatory Review--Review of Accounts 
Settlement in the Maritime Mobile and Maritime Mobile-Satellite 
Radio Services and Withdrawal of the Commission as an 
Accounting Authority in the Maritime Mobile and the Maritime 
Mobile-Satellite Radio Services Except for Distress and Safety 
Communications, IB Dkt No. 98-96, NPRM, FCC 98-123 (rel. July 
17, 1998).
    Simplify Part 61 tariff and price cap rules. Biennial 
Regulatory Review--Part 61 of the Commission's Rules and 
Related Tariffing Requirements, CC Dkt No. 98-131, NPRM, FCC 
98-164 (rel. July 24, 1998).
    Deregulate or streamline policies governing settlement of 
accounts for exchange of telephone traffic between U.S. and 
foreign carriers. 1998 Biennial Regulatory Review--Reform of 
the International Settlements Policy and Associated Filing 
Requirements, IB Dkt No. 98-148, NPRM, FCC 98-190 (rel. Aug. 6, 
1998).
    Modify Part 68 rules that limit the power levels at which 
any device attached to the network can operate to allow use of 
56 Kbps modems. 1998 Biennial Regulatory Review--Modifications 
to Signal Power Limitations Contained in Part 68 of the 
Commission's Rules, CC Dkt No. 98-163, NPRM, FCC 98-221 (rel. 
Sept. 16, 1998).
    Streamline and rationalize information and payment 
collection from contributors to Telecommunications Relay 
Service, North American Numbering Plan Administration, 
Universal Service, and Local Number Portability Administration 
funds. 1998 Biennial Regulatory Review--Commission Proposes to 
Streamline Reporting Requirements for Telecommunications 
Carriers, CC Dkt No. 98-171, NPRM, FCC 98-233 (rel. Sept. 25, 
1998).
    Modify or eliminate Part 64 restrictions on bundling of 
telecommunications service with customer premises equipment. 
1998 Biennial Regulatory Review--Policy and Rules Concerning 
the Interstate, Interexchange Marketplace/implementation of 
Section 254(g) of the Communications Act of 1934, as Amended/
Review of the Customer Premises Equipment and Enhanced Services 
Unbundling Rules in the Interexchange, Exchange Access and 
Local Exchange Markets, CC Dkt Nos. 98-183 and 96-61, NPRM, FCC 
98-258 (rel. Oct. 9, 1998).
    Eliminate or streamline various rules prescribing 
depreciation rates for common carriers. 1998 Biennial 
Regulatory Review--Review of Depreciation Requirements for 
Incumbent Local Exchange Carriers, CC Dkt No. 98-137, NPRM, FCC 
98-170 (rel. Oct. 14, 1998).
    Repeal Part 62 rules regarding interlocking directorates 
among carriers. 1998 Biennial Regulatory Review--Repeal of Part 
62 of the Commission's Rules, CC Dkt No. 98-195, NPRM, FCC 98-
294 (rel. Nov. 17, 1998).
    Seek comment on various deregulatory proposals of SBC 
Communications, Inc. not already subject to other biennial 
review proceedings. 1998 Biennial Regulatory Review--Petition 
for Section 11 Biennial Review filed by SBC Communications, 
Inc., Southwestern Bell Telephone Company, Pacific Bell, and 
Nevada Bell, CC Dkt No. 98-177, NPRM, FCC 98-238 (rel. Nov. 24, 
1998).
    Consider modifications or alternatives to the 45 MHz CMRS 
spectrum cap and other CMRS aggregation limits and cross-
ownership rules. 1998 Biennial Regulatory Review--Review of 
CMRS Spectrum Cap and Other CMRS Aggregation Limits and Cross-
Ownership Rules, WT Dkt No. 98-205, NPRM, FCC 98-308 (rel. Dec. 
18, 1998).

                          broadcast ownership

    Conduct broad inquiry into broadcast ownership rules not 
the subject of other pending proceedings. 1998 Biennial 
Regulatory Review--Review of the Commission's Broadcast 
Ownership Rules and Other Rules Adopted Pursuant to Section 202 
of the Telecommunications Act of 1996, MM Dkt No. 98-35, NOI, 
FCC 98-37 (rel. Mar. 13, 1998).

                                 other

    Review current Part 15 and Part 18 power line conducted 
emissions limits and consider whether the limits may be relaxed 
to reduce the cost of compliance for a wide variety of 
electronic equipment. 1998 Biennial Regulatory Review--
Conducted Emissions Limits Below 30 MHz for Equipment Regulated 
Under Parts 15 and 18 of the Commission's Rules, ET Dkt No. 98-
80, NOI, FCC 98-102 (rel. June 8, 1998).
    Streamline AM/FM radio technical rules and policies. 1998 
Biennial Regulatory Review--Streamlining of Radio Technical 
Rules in Parts 73 and 74 of the Commission's Rules, MM Dkt No. 
98-93, NPRM, FCC 98-117 (rel. June 15, 1998).
    Streamline application of Part 97 amateur service rules. 
1998 Biennial Regulatory Review--Amendment of Part 97 of the 
Commission's Amateur Service Rules, WT Dkt No. 98-143, NPRM, 
FCC 98-1831 (rel. Aug. 10, 1998).
    Streamline the Gettysburg reference facilities so that 
electronic filing and electronic access can substitute for the 
current method of written filings/access. 1998 Biennial 
Regulatory Review--Amendment of Part 0 of the Commission's 
Rules to Close the Wireless Telecommunications Bureau's 
Gettysburg Reference Facility, WT Dkt No. 98-160, NPRM, FCC 98-
217 (rel. Sept.18, 1998).
    Streamline Part 90 private land mobile services rules. 1998 
Biennial Regulatory Review--47 C.F.R. Part 90--Private Land 
Mobile Radio Services, WT Dkt No. 98-182, NPRM, FCC 98-251 
(rel. Oct. 20, 1998).

    Mr. Tauzin. Thank you very much, Mr. Chairman.
    Now I am pleased to welcome the honorable Susan Ness, FCC 
Commissioner. Susan, again, your written statements are part of 
our record. We appreciate your presentation today.

                  STATEMENT OF HON. SUSAN NESS

    Ms. Ness. Thank you very much, Mr. Chairman and members of 
the subcommittee. I appreciate the opportunity to be before you 
today.
    The initial rulemakings required by the Telecom Act have 
been completed, and most of the judicial challenges to your law 
and to our orders are winding down, mercifully, although plenty 
of work remains.
    Even when viewed through ``green-colored'' glasses, there 
is no denying that companies are taking advantage of the 
opportunities that were created by the act, and consumers are 
beginning to reap the benefits.
    As has been mentioned, as a result of this law and other 
Congressional and FCC decisions, cable companies are now in 
fact beginning to offer telephone services in a number of 
markets. Wireless subscribership is substantially up, and 
prices are substantially down. In telephone services, new 
entrants have raised tens of billions of dollars in capital and 
are making inroads in local business and even in residential 
markets.
    Broad-band services are rapidly being rolled out by cable 
companies, incumbent telcos, and new companies that are 
sometimes called PCLECs or DATALECs. Fixed wireless and mobile 
satellite services are being launched. And every day, 50,000 
more Americans are using the Internet for the first time.
    Hundreds of thousands of classrooms are now being connected 
to the information superhighway, and communities that never 
would have dreamed of being able to afford this service in the 
past are now receiving access. Broadcasters and, to some 
extent, cable companies are moving ahead with deployment of 
digital television. And nations abroad are beginning to open 
their markets to competition, often establishing independent 
agencies modeled after the FCC.
    In short, we are clearly not there yet, but it is on track, 
with good progress. There is a lot of good news, and I think 
you all deserve a tremendous amount of credit for making these 
developments possible.
    The nature and velocity of the change is stunning, and as 
the marketplace changes so too must the FCC. We must continue 
to evaluate ways in which we can be more efficient and 
responsive and also so that the marketplace can enjoy, for 
once, regulatory certainty.
    Chairman Kennard's report provides an excellent foundation 
for that discussion, and in my written testimony I have 
suggested additional areas for consideration. I look forward to 
working together with all of you to ensure that the Commission 
remains efficient and responsive, and has the resources 
necessary to fulfill its present and future statutory 
obligations.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Hon. Susan Ness follows:]
Prepared Statement of Susan Ness, Commissioner, Federal Communications 
                               Commission
    Mr. Chairman and Members of the Subcommittee, I appreciate the 
opportunity to appear before you today.
    I welcome a dialogue between the Commission and our authorizing 
subcommittee. In particular, I am pleased to review with you our 
actions in implementing the Telecommunications Act of 1996, and to seek 
your guidance as we proceed on the course you have set based upon the 
principles of competition, deregulation, and universal service.
    This interaction between the Commission and our oversight committee 
is especially valuable now, during a period of monumental change. The 
telecommunications and information industries are currently undergoing 
a transition of epic proportions. The Internet and IP technology are 
splintering the regulatory structures of the past. Convergence is 
presenting an abundance of new opportunities--and challenges--as voice, 
data, and video are delivered over a host of new technologies.
    Recognizing an historic transition, Congress passed the 
Telecommunications Act of 1996. That law is working. The nature and 
velocity of the changes that are now underway are truly breathtaking, 
and although I would not recommend that the Act be reopened to a major 
rewrite, nonetheless a continued reassessment of both law and 
regulation is warranted.
    Surely the most profound development of the past three years has 
been the rapid growth of the Internet. The third anniversary of the 
Telecommunications Act was not much more than a month ago, and yet in 
these few weeks approximately two million Americans have logged on to 
the Internet for the first time! E-commerce is exploding and is likely 
to play a major role in the economy of the 21st Century.
    As a result, demand for bandwidth is burgeoning, and a variety of 
players are racing to be the provider of choice. Telcos are rolling out 
digital subscriber line services, and cable companies are offering 
cable modems, each spurring the other to deploy faster and more 
extensively. Meanwhile, fixed and mobile wireless, and soon satellites 
and even broadcast stations, are planning to expand consumer choices. 
The potential for consumer benefits is enormous, but the challenge for 
traditional regulatory paradigms is also substantial.
                        managing the transition
    Congress has established clear goals, and the means to get there. 
Our overarching goal is ``to accelerate rapidly private sector 
deployment of advanced telecommunications and information technologies 
to all Americans . . . '' Our primary tool is competition, which to 
varying degrees requires both regulation (see, e.g., 47 U.S.C. Sec. 
251(c)) and deregulation (see, e.g., 47 U.S.C. Sec. 160).
    We are already well along in the development of fully competitive 
and unregulated markets for long distance service, information 
services, customer-premises equipment, and wireless services. In these 
areas, choice is abundant, innovation is rampant, and prices are 
declining.
    Consider: just three years ago most residential consumers paid 20 
or 25 cents a minute for a long distance call. Today, 10 cent or even 
lower rate plans are widely available, and special offers abound, such 
as all-you-can-talk pricing for weekends and free calls on Monday 
nights.
    In commercial mobile radio service, the benefits of competition 
have been even more dramatic. A few years ago, a wireless call commonly 
cost 50 to 75 cents a minute, and customers paid hefty roaming fees. 
But when the first PCS providers challenged the cellular incumbents, 
rates plummeted 25%. They dropped even further as the 4th, 5th, or even 
6th operators joined the fray. And now we have ``one-rate'' pricing, 
where consumers are offered big buckets of minutes that equate to as 
low as 10 cents a minute--and often with regional or national calling 
and no roaming fees. Increasingly, it is cheaper to make an intrastate 
toll call by wireless phone than over the wired telephone system.
    Similarly, international call prices have plummeted as countries 
implement their World Trade Organization market-opening commitments, 
and as the FCC's accounting rate policies take hold.
    Competition has been more elusive in the video and local telephone 
markets, but even here there are signs of progress. DBS is becoming a 
more credible competitor to cable, and competitive local exchange 
carriers are making inroads against the incumbent local exchange 
carriers in business markets and in a handful of residential markets as 
well.
    In these markets, the challenge is to manage a successful 
transition from regulated monopoly to unregulated competition as we 
maintain our commitment to universal service.
    This transition is complicated. New services and technologies are 
surfacing that do not fit neatly into discrete regulatory structures. 
This leads both to creative tensions, and to anomalies.
    We need to remember that the development of full competition takes 
time. Just as we saw in the long distance market, and more recently 
with wireless services, there is often a gestation period of multiple 
years between when the key steps needed to promote competition are 
taken and when robust competition actually emerges.
    As we seek to accelerate the transition to competition, we need to 
be willing to take risks, as we did several years ago when we denied 
state petitions to retain price regulation of commercial mobile radio 
services. But we also need to be careful not to undermine basic tenets 
of the Telecommunications Act. Sometimes, when we hear ``if only the 
FCC would eliminate this requirement,'' the requirement in question is 
one that Congress carefully chose as a tool to enable competition--and 
even told us specifically that the provision was not subject to our 
forbearance authority until it had first been fully implemented.
    We also need to think with greater care about the layers of 
regulation that can flow from different levels of government. An 
incumbent or a new entrant may need to deal not only with the 
requirements of the Communications Act and the FCC, but also with state 
and local laws and regulations. Each layer of government has its own 
responsibilities, and its own legitimacy, but where possible we need to 
strive for cooperation and consistency that advance the national goals 
of competition, universal service, and deregulation. I am pleased to 
report that we have made considerable progress working with our state 
and local government colleagues in a renewed spirit of cooperation.
                           guiding principles
    As we move forward with our implementation of the 
Telecommunications Act, and with an evolution in the philosophy and 
structure of the FCC, I am guided by certain principles. First and 
foremost, of course, I take my direction from the law. It is not my 
place to second-guess your judgments, or to be selective in deciding 
which provisions of the law will be enforced.
    The law, however, leaves us a measure of discretion, and in 
exercising that discretion our principal goal should be to foster 
competition whenever and wherever it is practical to do so. And where 
competition has advanced, regulation can and should retreat. Thus, we 
must place greater reliance on marketplace solutions, rather than the 
traditional regulation of entry, exit, and prices; and on surgical 
intervention rather than complex rules in the case of marketplace 
failure. The forbearance authority which you gave us is an excellent 
tool.
    Another principle is reduction of regulatory risk. Capital 
formation is hampered when rule changes are pending or are uncertain. 
Rules and decisions should be as clear and as consistent as possible. 
Decisions, whether in resolving rulemakings or complaints or simply in 
processing routine applications, need to be prompt, and predictable. 
Enforcement should be swift and certain, so that regulatory delay is 
not a hindrance to market entry, or an impediment to protecting 
consumers against inappropriate conduct by service providers.
    In addition, government often serves best by focusing a spotlight 
on problems, and prodding parties to work together to design solutions. 
Public/private partnerships can speed the introduction of new 
technologies and help pave the competitive way in a global marketplace.
    Consumer interests, not those of any industry player, should be 
paramount. The Commission should not try to pick winners or losers, 
either individually or by industry segment. Nor should we be tempted by 
short-term ``fixes'' that impede long-term objectives.
    Finally, we should continually review our progress. It is important 
to evaluate, regularly and periodically, what is working and what is 
not.
                        ``reinventing'' the fcc
    As the marketplace changes, so too must the FCC. The FCC must 
continue to evaluate ways in which we can be more efficient and 
responsive.
    Chairman Kennard recently shared with all of us a preliminary draft 
of the report he filed with his hearing testimony. This report, ``A New 
Federal Communications Commission for the 21st Century,'' provides an 
excellent contribution to the discussion. Based on my initial review, I 
believe that the general thrust of the report is right on target.
    The report enumerates the critical functions of the FCC in a 
competitive marketplace. I generally agree with that assessment, and 
elaborate below on several of Chairman Kennard's points.
    Competition and enforcement: As the marketplace becomes 
competitive, the emphasis increasingly should be on enforcement, rather 
than rulemaking. Of course, the Commission has always had enforcement 
responsibilities in the past, and it is not likely to abandon all 
rulemaking functions in the future. But as competition grows, we are 
reducing our prescriptive and proscriptive rules, and relying more on 
public information and enforcement solutions.
    I firmly believe that competitive markets thrive with minimal 
regulation. I also agree that competitive markets will still generate 
disputes, both between service providers and between service providers 
and consumers. A separate Enforcement Bureau will help ensure that 
enforcement activities have the attention and resources they require.
    Consumer protection and information: Consumer protection begins 
with information. As competition increases, so too does the potential 
for consumer confusion. I therefore support the proposed creation of 
the Public Information Bureau. Full and clear disclosure of the terms 
of service offerings is essential. The Commission needs to coordinate 
closely with state public utility commissions, state attorneys general, 
and the Federal Trade Commission to maximize the effectiveness of our 
limited resources, to ensure that consumers have the information they 
need, and to avoid misconduct ``slipping through the cracks.''
    Universal service: Universal service is a major continuing 
responsibility of the Commission. Congress has made it clear that all 
Americans should reap the benefits of the communications and 
information revolution. In an economy that is increasingly dependent on 
communications and information, it is critical that society take steps 
to reduce the ``digital divide.''
    We all benefit when everyone has access to telecommunications. 
That's why it is so important that we maintain traditional support for 
low-income consumers (Lifeline and Link-Up) and for consumers in high-
cost areas, and that we enhance access on the part of schools, 
libraries, and rural health care providers.
    In these endeavors, we must not inadvertently hamper the deployment 
of advanced telecommunications technologies. We should maintain 
competitive (and technological) neutrality, so that we do not preclude 
solutions based on wireless, satellite, or other technologies.
    We also must work closely with our partners, the state commissions. 
Most of the subsidies that keep residential phone service affordable 
are in their domain, not ours. And even when dealing with those parts 
of the equation that are amenable to a federal solution, we need to be 
mindful of the need to accommodate the legitimate--but quite 
differing--interests of the high- and low-cost states.
    Spectrum management: Management of the radio spectrum is and will 
continue to be another critical agency function. We must ensure that 
spectrum--a national resource--is used efficiently. Licenses must be 
distributed fairly and swiftly. Spectrum planning needs to create 
opportunities for multiple providers, including new entrants, as the 
Act envisions.
    With the interests of the consumer in mind, we also need to work 
with the broadcast, cable, consumer electronics, computer, and content 
industries, to provide a smooth and consumer-friendly rollout of 
digital television. The marketplace--not government--will determine its 
ultimate success.
    We also need to ensure that U.S. interests are advanced in 
international spectrum planning bodies. As the Commission's lead 
representative at the World Radio Conferences in 1995 and 1997, I have 
seen first-hand how spectrum decisions affect billions of dollars worth 
of economic opportunities for U.S. industry. We must continue to 
improve the planning process for international radio conferences 
through early high-level government participation and frequent and 
well-timed meetings with our trading partners to resolve differences in 
advance of the WRC.
    Global competition: Market-opening measures are underway around the 
globe, spurred to a great extent by advocacy from the U.S. Greater 
global competition translates directly into improved communications 
infrastructure for citizens of many countries, but it also creates 
export opportunities for U.S. business. Meanwhile, U.S. consumers reap 
the benefits of increased foreign investment at home. The FCC has 
become a role model for countries establishing independent regulatory 
regimes to convert from monopoly to competitive communications markets 
abroad.
    Many of the forces that are changing our markets are global in 
nature. Accordingly, we need not only to continue our advocacy in 
multilateral and bilateral negotiations but also to continue to seek 
lessons abroad that can profitably be applied at home.
                          specific suggestions
    Subcommittee Chairman Tauzin's letter of invitation specifically 
requested suggestions for structural or organizational changes to the 
FCC. I appreciate the opportunity to participate in this discussion.
    1. I strongly support Chairman Kennard's plan to seek a dialogue 
with all stakeholders--particularly members of Congress--before 
decisions are made on any structural changes beyond the creation of the 
Enforcement Bureau and the Public Information Bureau.
    I am interested in exploring the public's views on structuring the 
Commission along functional lines, rather than by traditional industry 
segments. With service convergence, a functional structure could help 
stimulate innovative thinking and possibly reduce regulatory anomalies. 
I recognize, however, that the Communications Act provides for 
different treatment of these mechanisms: telephone (Title II), 
broadcasting and wireless services (Title III), and cable (Title VI). 
To avoid the pitfalls associated with thinking along industry lines, 
the Commission increasingly has assigned multi-bureau task forces to 
address major issues.
    2. I believe the Commission needs to strengthen its technical 
resources. For many years, the Commission conducted an engineering 
training program. It no longer does so, and therefore is diminishing 
our expertise precisely as technical issues are becoming more complex. 
I believe we should consider reviving this program so that we will have 
the expertise we need to evaluate spectrum sharing, equipment 
authorization, and other issues.
    3. I am also concerned about the adequacy of resources for 
international representation. As noted above, billions of dollars worth 
of economic opportunity are at stake, and it is important that we 
continue to make the resources available to ensure that U.S. interests 
are adequately identified, coordinated, and advocated.
    4. I further believe that we should evaluate new methods of 
building industry consensus. Time and again I have seen the value of 
parties coming together, under Commission auspices, to develop 
industry-driven solutions to problems. I believe it could be useful to 
work on ways in which such approaches might be encouraged, without the 
costs and delays of a full-blown APA rulemaking, the formality of an 
Advisory Committee, or all the due process trappings of a Negotiated 
Rulemaking.
    5. I recommend that Congress consider legislating to reduce the 
prospects for forum-shopping in appeals. Too often we see industry 
players delay market-opening measures by challenging an FCC decision, 
or even a provision of the Act itself, in first one court and then 
another. I believe it may be more efficient, as well as more 
predictable, to provide that all petitions for review under 47 U.S.C. 
Sec. 402(a) must be filed with the U.S. Court of Appeals for the 
District of Columbia Circuit, as is already required for appeals filed 
under 47 U.S.C. Sec. 402(b).
    I would welcome the opportunity to consider any other measures that 
might be suggested for ways in which to curtail the ability of parties 
to hinder or delay compliance with those orders that are intended to 
promote competition or protect consumers.
    6. Finally, the Commission is blessed with an extraordinarily fine 
career staff. The Commission's ability to perform its mission is highly 
dependent on the expertise and diligence of hundreds of professionals. 
Whatever we do to streamline and refocus the Commission's activities 
should take into account the working conditions and esprit de corps 
that are necessary to attract and retain high-caliber employees.
                               conclusion
    Consumers are already reaping many benefits from competition 
resulting from past decisions by Congress and by the FCC. Yet the pace 
of change in communications markets is still accelerating, and care 
must be taken to ensure that our actions promote the goals established 
by Congress.
    Our main challenges during this historic transition are to know 
when to intervene and when not; to use creatively and judiciously the 
wide assortment of tools available as we move from monopoly to 
competition; and, at all times, to keep the interest of consumers 
paramount. Only then will we be fulfilling Congress' vision of 
competition and deregulation for the benefit of all Americans.
    Thank you very much for inviting me to testify before you today. I 
am happy to answer your questions.

    Mr. Tauzin. Thank you very much, Madam Commissioner.
    And next we are pleased to welcome the honorable Harold 
Furchtgott-Roth, the FCC Commissioner. I think I have the order 
of seniority right here. Proceed, sir.

          STATEMENT OF HON. HAROLD W. FURCHTGOTT-ROTH

    Mr. Furchtgott-Roth. Thank you very much, Mr. Chairman. I 
want to thank you for holding this hearing. Particularly want 
to thank you for convincing Mr. Markey to allow this hearing to 
be held on such an important day of the year. It was very good 
of you, Mr. Markey, forbear from objecting to this date.
    Mr. Markey. Will the gentleman yield?
    Mr. Furchtgott-Roth. Yes.
    Mr. Markey. Thank you. See, here's the thing with the 
Irish. We were very big in the agricultural era. Then we 
skipped the entire industrial age.
    But, in the information age, where you can make a living 
just talking or communicating with words, the Irish are back. 
Okay?
    So we celebrate today, you know, this convergence of our 
culture with the new technologies.
    Mr. Furchtgott-Roth. Well, Mr. Markey and Chairman Tauzin, 
it is very good to be here. It is very good to be home, home to 
this committee, to this committee room that I have been in 
many, many times. I have a great deal of reverence for this 
room, a great deal of respect for this committee. I am humbled 
to be here.
    This committee was created when communications at best 
meant newspapers and at worst meant shouting. It is good to 
know in America we still have both of those fine institutions.
    This committee was created long before there was an FCC. I 
am hopeful that this committee will endure, that it will endure 
forever, and it may yet out-endure the FCC.
    But the FCC has a long and proud future ahead of it as 
well, but it is this committee and the Constitution that it 
serves that is truly timeless. This committee is about 
interstate commerce, is about the vision of James Madison.
    Originally, interstate commerce was the exception in 
America. Today, it is the norm.
    Mere citizens have many views on what good laws and bad 
laws are. Everyone has their favorite stop sign that they wish 
the government would change. But we don't go around asking 
policemen to change the law. And you have everyday before you 
lobbyists who come through these halls, many of them my very 
best and closest friends, who will tell you what the good laws 
and what the bad laws are.
    And I hope you listen to them because they are lobbyists, 
they are folks who are answering a very high call about trying 
to come up with a better America. But those individuals who are 
paid to lobby this committee and do it in a very fine form are 
not responsible for implementing the laws that this committee 
writes.
    We before you today have the burden, the responsibility of 
implementing the laws that this committee drafted, that this 
Congress passed into law, and that the President signed.
    I am humbled to be here, and I am very humbled to answer 
any questions you may have about how we have been implementing 
the law.
    But I am not here, and I will never be here, to ask you to 
change the law. That is for people who have the luxury of being 
able to express their views and not have to respond to 
individuals in America who ask them enforce the law. I, for 
one, cannot do that. I cannot, at the same time, enforce the 
law and, at the same time, ask to have that same law changed.
    I have only one request of that committee, of this 
committee, and that is that you be vigilant for all of the 
agencies that you oversee, and that you ask us simply and 
forcefully to follow the law as it is written.
    Frankly, almost everything that has been mentioned this 
morning are things if this Commission could do within in the 
construct of the Communications Act. And I hope that you will 
use this authorization process--this re-authorization process--
to instruct us, to advise us, to guide us in the proper 
implementation of the law. Help us to interpret the law that we 
have. Go beyond that if you will, but do not expect me to raise 
my voice one way or another in that debate.
    Please make sure that we stay clearly within the law that 
we have. Most of the times we do that, but in my many 
statements over the past year I have from time to time noted 
instances where I am not sure that we have stayed simply within 
the law.
    This committee is timeless. It will be here long after all 
of us are gone, and I hope that the reverence that I have for 
this committee is shared by all and that this committee will 
give us the proper instruction that the Commission needs.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Harold W. Furchtgott-Roth 
follows:]
Prepared Statement of Harold W. Furchtgott-Roth, Commissioner, Federal 
                       Communications Commission
Introduction
    It is a great honor for me to testify before this Committee. It is 
a homecoming for me, and I see many friends among the Members and staff 
of this Committee.
    I know this committee room well. It is a grand and stately room 
befitting a noble committee. Long before this room was built, this 
Committee was born. This Committee has seen Congresses and 
Administrations come and go; it has seen government agencies develop, 
evolve, and occasionally cease operations; it has seen the history of 
this Nation march before it.
    In many ways, this is the Committee of Madison, the Committee of 
interstate commerce, the Committee that takes its charge directly from 
the Constitution, the Committee that addresses that which holds this 
Nation together.
    Various causes have ebbed and flowed in the course of American 
history. One concept that has consistently grown, however, is the 
centrality of interstate commerce to American life. Two centuries ago, 
interstate commerce was the exception rather than the rule; today, 
interstate commerce rules. With it comes substantial federal 
jurisdiction for regulation.
    Regulation of interstate commerce is a weighty responsibility, one 
that this Committee oversees daily. Interstate commerce can be 
regulated clearly under federal statutes in open commercial markets in 
which property rights and contracts are enforced, and in which the 
market forces of supply and demand are allowed to blossom for the 
benefit of the American consumer. Alternatively, interstate commerce 
can be over-regulated to the detriment of all Americans by failing to 
enforce contract and property rights, by creating disincentives for 
investment, and by allowing the development of markets that are 
dictated by a few individuals who happen to be government regulators 
rather than by all individuals who happen to participate in a market.
    I come before you as a Commissioner of an independent agency, the 
Federal Communications Commission. Most of the authority that the 
Commission exercises is to regulate interstate commerce, in this 
instance, communications. The regulation of interstate commerce is, of 
course, exclusively Congressional authority under the Constitution. It 
is this Committee, the Committee on Commerce, that has primary 
jurisdiction over the FCC.
    The FCC is not an explicit part of the Constitution. We should 
exercise with great caution the limited authority that Congress has 
bestowed upon us. Three generations ago, there was no FCC. The future 
of the FCC is at the mercy and discretion of Congress. Perhaps future 
generations will know us directly; or perhaps we will be consigned to 
footnotes in history. Congress in general, and this Committee in 
particular, hold the keys to that future.
    We at the FCC cannot control our ultimate institutional destiny, 
but we can control our fate one day at a time. If in all of our daily 
actions at the Commission, we are faithful to the Communications Act 
and other statutes and interpret them narrowly as written, we will 
bring honor to this agency, honor to the Committee that drafted 
communications legislation, honor to the Congress that passed that 
legislation, honor to the Presidents that signed the pieces of 
legislation into laws, and honor to the American public. If we stray 
from the Act, if we exceed our authority in some areas, and if we fail 
to fulfill our obligations in others, we bring shame to ourselves and 
to others.
An Independent Agency
    The FCC is known as independent agency. The word ``independent'' 
refers to its independence from the executive branch. Some observers 
particularly note the inability of the President to remove a 
Commissioner at will. I think, more importantly, that the independence 
stems from the inability of Congress to delegate to the executive 
branch Congressional powers, in this case the power to regulate 
interstate commerce.
    This Committee and this Congress make federal policy about 
interstate commerce and about telecommunications. The Executive Branch 
cannot and does not. The FCC cannot and does not.
    For these reasons, it is important for this agency to look to 
Congress, and to this Committee in particular, for guidance: guidance 
on how to interpret the statutes drafted and championed by this 
Committee; guidance on how to regulate interstate commerce in a manner 
consistent with federal statutes.
Importance of Authorization Legislation
    The Commerce Committee oversees and directs the FCC in many 
manners. There is correspondence from Members to the Commission. The 
Committee may seek information or reports from the Commission. The 
Committee holds oversight hearings as it is doing today. The Committee 
marks up legislation affecting this agency, including the landmark 
Telecommunications Act of 1996. The Committee may write annual 
authorization legislation providing more detailed guidance to the 
Commission.
    We at the FCC look to this Committee for guidance in each of these 
areas. Congress has only infrequently exercised its authority to pass 
annual authorization legislation for the FCC. Should this Committee and 
this Congress decide to pass such legislation this year, we at the FCC 
look forward to your direction, and we will follow it.
FCC Should Not Lobby Congress for Statutory Changes
    Congress has vested in the FCC an extraordinary concentration of 
power. We draft and promulgate rules; we determine and levy fees; we 
administer and interpret our rules; we enforce our rules; and we 
adjudicate certain disputes involving our rules. We exercise this 
extraordinary array of powers all within the framework of our statutory 
authority.
    As I have explained in various statements at the FCC, I do not 
believe that, absent an express request from Congress, making 
recommendations about how the law should be changed is an appropriate 
function for the Federal Communications Commission. The Commission is 
bound to take the law as Congress makes it and to implement the law 
objectively; yet when we criticize extant statutes, enacted by Congress 
and signed into law by the President, we draw that objectivity into 
doubt. Moreover, as a creature of Congress' delegated authority, the 
Commission takes it direction from that body, not the other way around.
Need for FCC to Follow the Law
    It is a popular exercise in Washington to suggest what the FCC 
should be doing, as if our mission is some great mystery to be solved. 
I always have maintained, however, that the Commission simply should 
follow the law narrowly as written by Congress. The FCC does not make 
federal telecommunications policy; Congress does.
    More specifically, the FCC should not rely exclusively on broad, 
vague statutory grants of authority that contravene specific statutory 
mandates. If, for example, we wish to participate in an antitrust 
review of proposed mergers, we should do so pursuant to our clear 
statutory authority under the Clayton Act. We should not review mergers 
based merely on our broad authority to grant license transfers in the 
public interest. In addition, we should use our specific authority 
under Sections 10 and 11 of the Communications Act to help meet 
Congress's twin goals ``to promote competition and reduce regulation.'' 
Unfortunately, we have been both slow and reluctant to forebear from 
law and regulation pursuant to Section 10, and only timidly have 
exercised our duty to review and reduce our regulations pursuant to 
Section 11.
The Telecommunications Act
    Both Section 10 and Section 11 came from the Telecommunications Act 
of 1996. This Committee played a pivotal role in creating that statute 
which, notwithstanding the FCC's not infrequent failures to implement 
it faithfully, has been successful.
    Indeed, in 1995, consumers and telecommunications companies were 
hobbled by excessive regulation at the federal, state, and local 
levels. Regulation pigeon-holed companies into narrow lines of business 
and pigeon-holed consumers into narrow geographic markets. Regulators, 
not consumers, decided which companies could serve which consumers with 
certain services in a giant game of ``Mother May I?'' The answer all 
too often was ``No'' or ``Maybe in a few years.''
    Today, in 1999, consumers and business are less hobbled than 
before, thanks in large measure to the Telecommunications Act of 1996. 
The FCC has had an enormous task in implementing the Telecommunications 
Act of 1996. It has implemented many parts of the Act quite well, and--
as I noted before and described in my public statements over the past 
16 months--other parts not so well.
A Smaller FCC Over Time
    If the Commission does its job properly in implementing Act, there 
will be less and less regulation over time. Indeed, it is almost 
inevitable that the FCC will shrink over time. Our largest and most 
pressing responsibilities under the Act have ended. The necessarily 
rigid deadlines for initial rulemakings have ended, and the Commission 
met all of those deadlines. Surely, the Commission does not need nearly 
as large a staff in the year 2000 as it did in 1996 and 1997.
    Even if our staffing requirements were not decreasing, however, our 
likely funding resources for staffing certainly are decreasing. The 
FCC's staff is in the process of moving to a grand new headquarters 
building in Southwest Washington, DC. It is a beautiful building--but 
very expensive. Our leasing expenses are growing by more than 50 
percent, and the cost of the move itself will be $8.7 million for each 
of the next 9 years. The net result is that our office expenses have 
increased by more than $20 million annually.
    Regulatory fees levied by the FCC pursuant to Section 9 of the 
Communications Act can be assessed only ``to cover the costs'' of the 
services rendered by the agency. Accordingly, I believe it would be 
preposterously unfair to force entities regulated by the FCC and, 
thereby, American telecommunications users, to pay even a nickel more 
for this new office expense in the form of higher user fees. It simply 
would be impossible to show that any telecommunications user is 
receiving a higher quality of service as a result of the move. 
Consequently, the additional $20 million per year in office expenses 
must be borne by American taxpayers. The net result is that, unless 
Congress actively decides to change the law and increase the Commission 
budget substantially, the Commission can only afford to retain fewer 
employees.
No Need for Intermediary
    The FCC does not need any intermediaries to communicate with 
Congress. The Administration, however, recently sent budget proposals 
under the name of the FCC to Congress. They were in fact not the 
submission of the FCC, but rather the sanitized, highly edited, and 
augmented version submitted to Congress by the Administration's Office 
of Management and Budget. Although it is the Administration's 
prerogative to submit a unified budget for all agencies, I do not 
believe that the Administration can speak directly on behalf of this 
agency.
    The FCC submitted recommendations to OMB in a secret process. I 
dissented from those recommendations for a variety of reasons, but the 
recommendations proposed by the FCC were not nearly as bad as what the 
Administration subsequently proposed and delivered to Congress. For 
example, the Administration's proposal to impose spectrum taxes was 
simply irresponsible.
Open and Public Process
    Whether it be votes on FCC budget recommendations or the 
Commission's internal voting procedures more generally, I do not 
believe this agency should keep the American people in the dark. 
Indeed, I believe there is an urgent need for this agency to conduct 
its business in public. That is the principle that underlies both the 
Administrative Procedure Act and the Sunshine Act. Currently, however, 
the FCC's internal processes are known by but a few high-priced 
Washington lobbyists. Why shouldn't everyone know how we conduct our 
business?
Reorganization
    Finally, Chairman Kennard today unveils some new plans for the FCC. 
He is an extraordinarily bright and talented leader. I enjoy serving on 
the Commission with him, and I look forward to reviewing his plans.
    Ultimately, the fundamental responsibility of the FCC is to follow 
the law narrowly as written by Congress. If the Commission fails to 
follow the law narrowly, no reorganization plans--no matter how well-
meaning--will solve the agency's problems. If the FCC succeeds, it is 
not because the agency has invented a new organizational structure but, 
rather, because we have committed to following the law.

    Mr. Tauzin. Thank you very much, Mr. Commissioner.
    And now we are pleased to welcome the honorable Michael 
Powell, Commissioner of the Federal Communications Commission. 
Mike, again, your statement is a public record and we 
appreciate your coming before us.

              STATEMENT OF HON. MICHAEL K. POWELL

    Mr. Powell. Thank you, Mr. Chairman, and good afternoon, 
Congressman Markey, and other distinguished members of the 
subcommittee. It is a pleasure to be here at your invitation to 
help the subcommittee in its consideration of FCC re-
authorization. Apparently, the FCC has been an unauthorized 
agency since 1991, and I agree wholeheartedly that it is not 
wise to be driving without a license.
    Although I must admit that it did not stop me when I was 
15.
    Nonetheless, I feel a little about re-authorization like a 
sinner who has arrived at the Pearly Gates and is frantically 
trying to convince St. Peter that I have met the 271 checklist 
for entry.
    Before beginning any exercise to fix something, or to use 
Chairman Tauzin's word, to ``remission'' it, I think it is 
important to start with an examination of what we think is 
broken, or at least what our perception is about what is not 
working.
    I would first like to endorse the strategic plan offered by 
the FCC Chairman because I think in its tone and direction it 
is exactly on the mark. But in response to the subcommittee's 
invitation, I would like to offer specific areas for 
exploration that I think should guide, or would be helpful in 
guiding your deliberations.
    First, I believe the Commission needs to more clearly set 
out its priorities and its direction. This is a common 
complaint from the outside, that it is very difficult to 
understand what our priorities are, what direction we are 
heading, and often we are criticized for changing course 
abruptly.
    I believe one vehicle for consideration, on your part, is 
to require the Commission, under section 4(k) of the 
Communications Act of 1934 in which it submits its annual 
report, to also set out its annual list of priorities that 
could be developed as an outgrowth of a year-long formal, 
strategic process at the Commission.
    The next large area that I often hear criticism of, is the 
FCC is not efficient enough to meet the demands of its 
consumers. Clearly this is true. Mr. Huber talked about the 
incredible pace, the intense pace of change in this industry. I 
heard a telecom executive describe it the other day as ``it's 
Moore's Law on Viagra.'' I suppose that captures it better than 
anything else.
    But one important way in which you can improve the 
efficiency of any organization is, of course, have less to 
administer. And I believe that Congress properly provided two 
very powerful tools for doing that that have not been employed 
as fully as they might be.
    The first of course, under section 11, is our authority 
under the biennial review to root out and eliminate regulations 
that are no longer necessary. Others have said much about that. 
I would also say for the record that forbearance under section 
10 is a very powerful vehicle. It is well noted in my writings 
that I have been somewhat critical of the Commission's 
employment of that vehicle. And I want to point out that is 
less the substance or the merits of those forbearance decisions 
as it is the standard employed by the Commission and its 
exercise.
    I do believe that this subcommittee and this Congress 
expected us to accept a much greater responsibility for 
ourselves validating or re-authorizing regulations in the 
context of a healthy, competitive market than I believe the FCC 
has been willing to take on thus far.
    I have some specific suggestions as how the FCC ought to 
employ a proper burden-shifting mechanism along the lines of 
those used in civil rights cases, which is in my full 
testimony.
    A second subset under operating more efficiently, which as 
been referred to and is referred to in the chairman's 
statements, the shift to enforcement. And I fully support the 
enforcement bureau efforts as well as our ``rocket docket.''
    But I just want to point out that a shift to enforcement 
has to be more than a consolidated bureau. It has to be a 
change in the state of mind. It has to be a vehicle that you 
employ to deal with the kind of speculatory fears that are easy 
to conjure up in the context of a request to deregulate. I 
think the more we rely on enforcement, the more we can move 
past our speculative fears.
    Fourth, many have pointed out that we are not structurally 
aligned to meet the market trends. Certainly we could consider 
functional consolidation, but I would point out, in my own 
view, that that may not be as productive as one might assume 
because of, as people have pointed out previously, the statute 
itself is aligned along many of these structural lines, as are 
the rules that we must implement. And thus we are creating 
consolidated bureaus that merely then have subdivisions that 
mimic the original bureaus. I don't know whether that won't be 
form over substance.
    Nevertheless, it is in that context that I would guide your 
attention to the possible consolidation of cable, mass media, 
and DBS functions under a multi-channel video competition 
bureau, as well as possible consideration of some functions 
being merged between the common carrier and wireless bureaus.
    As well as needing to realign our resources to where our 
priorities lie, I believe fervently that more of our resources 
need to be shifted to the common carrier functions. If I had a 
list of 10 things I think we need to be doing, nine of them 
would be the areas of common carrier and telephone regulation.
    Finally, I think--second to last--I think we need to focus 
on duplicative functions. There are a number of areas in which 
the Commission engages in functions under its broad public-
interest standard, as well as others, that are shared in part 
or whole by other regulatory agencies. There may be value to 
two agencies doing two things, but those roles should be 
complementary and supplementary rather than simply duplicative. 
And I think that it would be a useful function for this 
Commission to examine some of those functions to make a 
conscious decision about where those overlaps are warranted and 
where they are not.
     And in my testimony I have some specific examples that 
might guide you in that regard.
    Finally, there is the issue of the breadth of the agency's 
quasi-legislative authority. Too many disputes at the Federal 
Communications Commission and in the courts are over our 
jurisdiction, whether we are being excessively aggressive or 
too cautious in interpretation of statutory law.
    I would point out, I believe this is a continuing tension 
between the 1927 act and 1934 act models and the 1996 act 
model. Under the 1934 model it was assumed that we would be a 
commission of enlightened wise men with a broad public-interest 
standard, free to reach wise decisions in an ever-technically 
changing world. It is the broadcast model.
    The 1996 act tries to lay out a blueprint with highly 
specific provisions, detailed provisions that we are expected 
to implement and not question. There is a constant tension 
between these two models, both at the Commission and by outside 
parties.
    I think that you have to recognize that as long as there 
are public-interest standards and there is that tension, it 
will empower regulators to self-initiate a broad range of 
government action without specific Congressional direction.
    I do not call for the elimination of the public-interest 
standard by any means, but I do believe there are many fruitful 
areas to consider, limiting principles on that standard, which 
I have also written about.
    Finally, to conclude, Mr. Chairman, I would just add a word 
of caution about an effort to hollow the agency. You have the 
power to cut employees, you have the power to eliminate 
Commissioners. I can find another job, but I will tell you 
what, at the end of the day you will still have applicants 
under this statute who will need a 271 application approved, 
you will still have schools and libraries that have to file for 
their applications for universal service funding, you will 
still have consumers who need redress from complaints.
    I don't know that a severely diminished agency will be able 
to serve those more efficiently than it does now.
    I thank you and welcome your questions.
    [The prepared statement of Hon. Michael K. Powell follows:]
    Prepared Statement of Michael K. Powell, Commissioner, Federal 
                       Communications Commission
    Good morning, Mr. Chairman and other distinguished members of the 
House Subcommittee on Telecommunications, Trade and Consumer 
Protection. Thank you for inviting me here to assist you as the 
Subcommittee deliberates the statutory reauthorization of the Federal 
Communications Commission (FCC).
    Initially, let me state that I support Chairman Kennard's effort to 
develop a strategic plan for restructuring and streamlining FCC 
functions and management. I am hopeful that we will be able to move 
forward quickly under this plan to make needed changes. In my testimony 
however, as the Subcommittee's invitation letter suggests, I will 
attempt to provide some specific suggestions for consideration during 
your deliberation on FCC reauthorization.
    Before beginning any exercise to fix (or to use Chairman Tauzin's 
phrase ``re-mission'') the Agency, I think it prudent to first consider 
what we think is broken or is not working particularly well at the FCC. 
I would submit five areas for exploration: (1) the need to more clearly 
define the Commission's annual priorities and focus; (2) the need to 
operate efficiently enough to meet the demands of an innovation driven 
market; (3) how to structure the Agency to better align with market 
trends and demands; (4) whether to continue the administration of 
functions that are largely duplicated elsewhere in government; and (5) 
the breadth of the Commission's quasi-legislative authority.
  i. the commission needs to more clearly define its annual priorities
    I believe that the key to any well-run organization is the 
enumeration of a clearly understood and widely communicated set of 
priorities. A common complaint I often hear is that outside parties 
have no solid sense of the Commission's priorities or direction. The 
Chairman often does share his view of the coming year in speeches, 
press releases and in daily conversation, as do other Commissioners, 
but there is no structured process by which the Commission formally 
develops and publicly reports its priorities.
    One way to address this problem would be the development of an 
annual, full Commission statement of priorities. Congress could require 
the Commission to set out a list of its priorities in the annual report 
it currently files pursuant to section 4(k) of the Communications Act 
of 1934. 47 U.S.C. Sec. 154(k) (West 1998). Such a compilation of 
priorities would help focus the work of the Commission and create 
greater regulatory certainty.
    ii. the fcc is not efficient enough to meet the demands of its 
                               customers
    The extent and pace of change in the telecommunications industry is 
mind-boggling. It is driven by exponential advancements in 
microprocessing power, digitalization, Internet protocol-based network 
models and bandwidth. As Royce Holland, Chairman and Chief Executive 
Officer of Allegiance Telecom, Inc. recently remarked, the pace of 
change in the industry is like Moore's Law on Viagra. Market 
opportunities in this environment are lucrative but fleeting. As in the 
days of old, however, the Agency still labors endlessly for many months 
and even years on policy issues and ultimately implements its judgments 
in the form of newly-minted rules and regulations. The relevancy of the 
new rules fades rapidly with time. Some are out right obsolete the very 
moment they are passed. In this environment, the FCC must become a 
dramatically more efficient place. A decision that comes too late, 
might as well not have been made at all.
A. Deregulation
    The most obvious way to improve efficiency at the Agency is to have 
fewer rules to administer. This highlights the importance of 
deregulation where the cost of a rule is not justified by its benefits. 
There are a number of vehicles Congress has provided for deregulating 
and I believe that they must be employed with greater rigor than they 
have to date. Congress wisely commanded the FCC to conduct a biennial 
review of its regulations and to shed those that it determines are no 
longer necessary. While we have made some progress in this area, I 
believe we can be much more aggressive.
    A second vehicle that I believe has been under-utilized is our 
forbearance authority under Section 10 of the Communications Act. 47 
U.S.C. Sec. 160 (West 1998). I have criticized many of our recent 
decisions in which the Commission declined to forbear from our rules. 
The merits of those forbearance petitions have been less my concern, 
for reasonable minds can differ. My dissatisfaction is with the 
standard we apply and our analysis, which seems to place the entire 
burden of forbearance on the moving party. I believe Congress expected 
the Commission to accept more responsibility for demonstrating a 
continued need for regulation in the presence of a healthy, competitive 
market. Indeed, I believe the Commission ought to employ a burden-
shifting device similar to that employed in civil rights cases.
    In operation, once a petitioner demonstrates that the market in 
which it operates is competitive (i.e., no competitive firm or entity 
enjoys market power, price trends are checked or downward, innovation 
is occurring) the burden would shift to the FCC to demonstrate why 
regulation is still necessary. And, in making that judgment, the 
Commission should not be able to simply rest on the grounds that the 
rule served a public purpose and petitioners have failed to prove that 
purpose is no longer worthy. The question should be whether the rule at 
issue is in fact superior to competition for serving that purpose. We 
should have to undertake a substantive and factual examination of the 
rule and its effects to determine if its purpose truly must be achieved 
through regulation instead of market forces. This approach presumes 
that healthy competition will normally maximize consumer welfare. 
Congress could explicitly adopt such a burden-shifting approach to 
forbearance.
B. Shift To Enforcement
    A second way for the Commission to become more efficient is by 
shifting away from pre-approval, ``by-the-grace of us'' regulation and 
toward enforcement. Telecommunications regulation has traditionally 
developed along the lines of the broadcast model. That is, parties need 
advance approval for initial operation, changes and deployment of new 
innovations. This has become a real impediment to timely decisions. A 
regime in which there are more presumptions of good faith on the part 
of competitors, backed up with strong enforcement by the Agency, would 
greatly enhance our efficiency.
    In this regard, I applaud the Chairman's initiative to assemble 
under one bureau the Commission's enforcement functions. Similarly, the 
initiative to create an expedited complaint resolution process, dubbed 
``the rocket docket,'' is a positive step in this direction. The shift 
to enforcement, however, needs to be more than a consolidated bureau. 
It needs to be a shift in thinking as well. The FCC, as a whole, must 
become more comfortable with enforcement as a means of regulation and 
must address our speculative fears about deregulation through 
enforcement, rather than let those fears paralyze our willingness to 
deregulate.
C. Need For Better Internal Process
    The Commission structure is inherently inefficient. Because it is a 
deliberative body with independent Commissioners who each have a vote, 
it is very difficult to keep things moving along at a pace demanded by 
the market. In contrast, organizations that are more hierarchical 
generally have better success with moving more quickly. Nonetheless, 
for the Commission to keep pace, it needs the benefit of management 
professionals dedicated to managing our agenda and keeping our 
substantive items on track.
    I would urge the Congress to consider creating a professional 
management directorate to accomplish this purpose. There are examples 
of similar activities in other government institutions. The court 
system has long employed a clerk's office that keeps the caseload 
moving, rather than leave this responsibility to the sitting Judges. 
Similarly, many divisions of the Department of Justice (such as the 
Antitrust Division) have a Directorate of Operations, headed by a 
substantive professional who helps keep the pipeline to the decision-
makers flowing. These functions at the FCC are presently managed by the 
Chairman's personal office.
      iii. the fcc is not aligned structurally with market trends
    It is regularly observed that the Commission is organized around 
industry segments that increasingly are less relevant as convergence 
strains and eliminates their unique technical distinctions. Many 
commentators have urged that Congress consider consolidating bureaus 
along competitive lines. I agree that it would be useful to consider 
such structural changes, though I believe there are limits to how much 
can be gained by such an effort.
    The balkanized structure of the Commission makes it difficult to 
re-deploy employees to address urgent tasks. Attorneys currently 
analyzing policy issues for the Mass Media Bureau, for example, cannot 
easily be moved to work on issues in other bureaus, even though the 
subject area may be similar. Thus, even though there is a need for 
attorneys in the Cable Services Bureau, separation of these bureaus 
prevents ready reassignment of personnel. Within larger bureaus, the 
Commission would have the opportunity to maximize its use of employees. 
It could, for example, cross-train the workforce through rotations and 
training. In this way, the Commission could maximize employee 
flexibility and enhance its ability to reallocate resources to match 
priorities.
    Though I do not take a strong position on any particular proposal, 
I would recommend considering consolidation in a few areas. The first 
would be the formation of a multi-channel competition bureau. Such a 
bureau would administer our rules with regard to what are currently the 
mass media, cable television and direct broadcast satellite (DBS) 
industries. Regulation of each of these mediums presently rests in a 
separate bureau. A single leadership structure overseeing these fields 
would allow for greater harmonization of rules and decisions in 
furtherance of a merged and increasingly competitive industry segment. 
With the elimination of some cable rate regulation at the end of this 
month, and increased attention being given to the inter-relationship 
between broadcast and DBS, the time may be ripe for considering such a 
proposal.
    A second area worthy of some thought is complete or partial 
consolidation of the Common Carrier and Wireless Telecommunications 
bureaus. There has been a great deal of discussion about wireless 
technologies competing with and serving as a substitute for traditional 
wireline service. Indeed, some have suggested that over time most voice 
communications will be carried by wireless carriers, while the wireline 
infrastructure will be used more for data. These trends may argue for a 
single bureau dedicated to these currently separate industries.
    I do note, however, that there is a limit to the value of this 
functional realignment. Because the statute is organized along industry 
lines our rules necessarily do as well and functional consolidation may 
be more form than substance. Additionally, many industries support 
industry organization because they enjoy having a ``champion'' to 
tussle over policy.
              iv. administration of duplicative functions
    A fifth area on which Congress may choose to focus is where 
Commission authority overlaps with that of other government agencies. 
Because communications is so fundamental to virtually all human 
activity, there is almost always some connection to FCC authority (no 
matter how tangential). Yet, the core expertise of the FCC should truly 
be considered in assigning to it, rather than some other agency, a 
central role on a given issue. While such governmental overlaps may be 
desirable, they at least should be complementary (or supplementary) 
rather than simply duplicative. A few suggested areas of inquiry are 
outlined below.
A. Merger Review
    The debate over the value of FCC merger review in addition to 
review by one of the antitrust agencies is well-worn. Clearly, as the 
keepers of the Communications Act and its policies, the FCC has some 
unique expertise that it can bring to telecommunications merger review 
that probably advances the public interest.
    Our review, however, is not generally limited to those areas in 
which we can claim primary expertise. Very often, we undertake a 
classic antitrust analysis, applying the same principles, precedents 
and guidelines as those employed by the antitrust authorities and 
rarely does it produce different results. Such reviews can be quite 
burdensome on the parties. For example, the FCC often requires 
voluminous filings that are duplicative of those made to the Department 
of Justice or the Federal Trade Commission. They often must incur the 
expense of outside counsel to prove their case to both agencies. I have 
come to doubt whether the marginal value of full blown merger review by 
the Commission is justified by its cost in time and resources. 
Moreover, with all due respect to our hard working staff, we do not 
really possess enough personnel schooled in antitrust and competitive 
economics to do the job well consistently. The antitrust authorities 
do.
    I believe that there is room to preserve a complementary role for 
the FCC in the review of mergers, while limiting it to its areas of 
expertise. Perhaps, consideration of the legislation recently 
introduced by Senators DeWine and Kohl would be a good place to start.
    The Commission engaging in simultaneous review with the antitrust 
authorities could improve efficiency. Under such a scheme, the parties 
would be required to file most documents only once and to one agency. 
The Commission would consider issues such as whether the merger would 
violate an express provision of the Act, or would otherwise undermine 
the congressional scheme. Furthermore, it would consider the merger's 
impact on other communications policies such as media diversity and 
universal service that are not appropriately considered by antitrust 
authorities. But the Commission would defer (either substantially or 
completely) to the antitrust authority's competitive analysis.
B. Consumer Affairs
    An important function of any branch of government is to safeguard 
consumers. Undoubtedly, because of our regulatory authority over 
certain industries and our intimate understanding of the industry, we 
are uniquely positioned to administer certain consumer affairs. 
Nonetheless, there are other agencies that have similar authority and 
some judgment might be made as to which is best positioned to 
administer certain issues. For example, the FCC has occasionally jumped 
into issues that relate to advertising under its public interest 
authority. The Federal Trade Commission, however, has specific 
authority in these areas. The same is true of other issues such as 
consumer fraud (e.g., ``cramming'' and ``slamming.'') Congress should 
evaluate the benefits of such overlapping jurisdiction.
C. Equal Employment Opportunity
    I personally support narrowly tailored Equal Employment Opportunity 
(EEO) rules. The Commission has administered its own EEO program in 
certain industries for some time. Yet, in most other industries there 
is not an EEO authority separate from the Equal Employment Opportunity 
Commission and the federal, state and local civil rights authorities. I 
believe that there is some advantage to having the FCC involved because 
of its unique relationship with certain industries, particularly those 
that operate pursuant to a government-conferred license. However, I 
would be remiss if I did not point out there is some overlap that 
should be examined to ensure that the respective roles are 
complementary and not duplicative. By eliminating duplication, such an 
examination, in my view, would bolster support for the government's 
role in promoting opportunity in communications.
D. Political Rules
    Finally, I would point out that the FCC has historically 
administered a number of rules that are designed to affect the quality 
of elections. These rules are focused on the obligations of the 
licensee and not the candidates, but they undoubtedly are intended to 
shape the quality and tenor of elections. Greater involvement in this 
area would require a more comprehensive understanding of campaigns and 
existing election laws than I believe this Agency possesses. 
Furthermore, any extension of such authority should be weighed against 
the role of the Federal Election Commission. I am uncomfortable, 
personally, as an un-elected regulator initiating policies and rules 
that affect the electoral process without specific congressional 
direction to do so.
        v. the breadth of the fcc's quasi-legislative authority
    A phenomenal amount of time is consumed in this industry in fights 
over the FCC's jurisdiction. One major source of this ongoing battle is 
the tension between the statutory regime that reigned under the 1927 
and 1934 Acts and that predominantly adopted by Congress in the 1996 
Act. The former's hallmark is that it conferred sweeping authority in 
the Commission to act to ensure ``the public interest, convenience and 
necessity.'' The 1996 Act, however, attempted to craft, in many 
respects, a detailed blueprint for the industry and the Agency. In many 
places, it provides highly detailed statutory provisions and 
instructions. There is a real tension between these two regimes, 
elements of which are scattered throughout the Act.
    The venerable public interest standard has much to commend it. It 
provides a great deal of flexibility and punctuates a consumer focus. 
However, this standard does allow the Agency to self-initiate a broad 
range of government action without specific statutory direction. That 
is, it serves as a basis for quasi-legislative action by the 
Commission.
    The quasi-legislative authority of the Commission has its merits, 
but if read too broadly, it serves to invite industry, consumer groups 
and special interest to seek both redress and advantage from the 
Agency, rather than Congress. This can lead to the Agency initiating 
action that Congress subsequently disapproves of, or believes conflicts 
with a more specific mandate in the statute.
    I am not suggesting elimination of the public interest standard. I 
do believe, however, that Congress might consider certain limiting 
principles with respect to its employment as a jurisdictional basis in 
certain areas.
                             vi. conclusion
    I would like to conclude with one caution. As long as the 1996 Act 
is the basis for telecommunications law, Congress would be ill-advised 
to hollow or unduly wound the Commission. There are undoubtedly areas 
in which we tinker where we should not. There are certainly ways to 
improve our processes and our decisions. But, even controlling for all 
that, the FCC will remain a very important institution for dealing with 
the telecommunications sector and its transition to competition and its 
transformation in response to innovation.
    Congress has the power to cut employees and even Commissioners if 
it chooses. But if not done carefully, rather than harm the Agency, the 
industry and consumers will be harmed. It is the industry that will 
still have to come to the Commission to get its licenses approved or 
have a section 271 application approved. It will still be states and 
local schools that have to file for universal service. Consumers will 
still need somewhere to have their complaints acted upon. Such redress 
will not be enhanced by a diminished Agency.
    I look forward to continuing to work with Members of Congress and 
with my colleagues on the many challenges, and tremendous 
opportunities, that await us in implementing the 1996 Act. I trust 
that, by working collaboratively and by having faith in free markets, 
we will bring the benefits of competition, choice, and service to 
American consumers.
    Thank you for your attention.

    Mr. Tauzin. Thank you very much, Commissioner Powell.
    The Chair is now pleased to recognize the newest member of 
the Commission, Ms. Gloria Tristani, for your testimony. Ms. 
Tristani.

               STATEMENT OF HON. GLORIA TRISTANI

    Ms. Tristani. Thank you, Mr. Chairman. And before I begin, 
I'm glad you are back, Mr. Markey, because I thought I would 
let you know that I claim being Irish by association. I am 
married to an Irish man. My son's middle name is Patrick, and 
he has decided he may be just Patrick from now on. And I wanted 
to wish you a happy St. Patrick's Day.
    Mr. Markey. Thank you. Mr. Chairman, just 1 minute. If Vito 
Fossella would be able to explain his political lineage, could 
you, for the committee for a second? I think it would be a 
little bit--I think it would be surprising to the----
    Mr. Tauzin. I'm not sure we want to hear it, but go ahead.
    Mr. Fossella. I'm sure everyone is on the edge of their 
seat waiting for--well, Mr. Markey, you may know that my great-
grandfather, James Aloysius O'Leary was a Democratic 
Congressman who served this body in the 1930's and the 1940's. 
So, believe it or not, Vito is an O'Leary as well.
    Ms. Tristani. Mr. Chairman, members of the committee, thank 
you for this opportunity to be here today. I am pleased to 
report on the progress in carrying out Congress' vision that 
all Americans have the opportunity to share in the benefits of 
the telecommunications revolution. I would like to highlight a 
couple of areas.
    Universal service. As a member of the Federal-State joint 
board on universal service, I supported the principal 
recommendations that the board made to the FCC on high-cost 
funding. If these recommendations are adopted, I believe 
consumers will benefit because local rates will be kept at 
affordable levels and competition will be able to take root in 
residential areas.
    Another aspect of universal service that is particularly 
important to me is connecting unserved areas. I know we have 
talked about having wonderful connectivity in this country, but 
there are still areas of this country, and I can talk about 
Indian reservations where 30 to 50 percent of homes do not have 
basic telephone or any kind of communication service. I believe 
the Federal Government, in the interest of advancing universal 
service, must take a more active role in connecting all 
Americans.
    E-Rate. I am the first to admit that the implementation of 
this program has not always been perfect, but the goals of the 
program are sound. And I am convinced that the E-Rate funds 
that have been recently committed to schools around the country 
will generate enormous social and economic benefits for the 
Nation in years ahead.
    Broad-band deployment. Our first report on the state of 
broad-brand deployment under section 706 was guardedly 
optimistic while recognizing that it is still too early in the 
process. Indeed, with respect to rural and other hard-to-serve 
areas, I remain more guarded than optimistic. I am not yet 
convinced that these Americans will have access to advanced 
services on a reasonable and timely basis.
    I believe there are two ways we can accelerate the 
deployment of advanced services. One is to ensure that 
competitors have access to the basic building blocks of 
advanced services that are controlled by incumbent LECs, and 
two is to ensure that we are not over-regulating the provision 
of advanced services by incumbent LECs.
    Slamming. I strongly supported the rules we recently 
adopted to fight slamming. The highlight of our new rules is 
that a customer who is slammed need not pay the slammer.
    Equal employment opportunity. We have proposed new 
broadcast EEO rules that we believe address the concerns raised 
by the DC Circuit in striking down the outreach portions of our 
previous EEO rules.
    Finally, on FCC restructuring, and Mr. Chairman, I am glad 
and welcome that you have brought this to the table, and I look 
forward to a continuing dialog on this.
    First, we need to become more enforcement oriented. Second, 
we need to continue restructuring the agency to reflect the 
continued convergence of technology across traditional industry 
lines. And third, we should initiate a top-to-bottom review to 
ensure that our staff is deployed in a way that reflects the 
agency's current priorities.
    Thank you again, Mr. Chairman, members of the committee, 
and I look forward to answering any questions you may have.
    [The prepared statement of Hon. Gloria Tristani follows:]
     Prepared Statement of Gloria Tristani, Commissioner, Federal 
                       Communications Commission
    Good morning Mr. Chairman and Members of the Subcommittee. I am 
pleased to be here today to discuss the role of the FCC as we continue 
to work toward the goal set forth in the Telecommunications Act of 1996 
of opening telecommunications markets to competition for the benefit of 
all Americans.
    Last year, I came before this Committee and talked about my 
commitment to carrying out Congress' vision that all Americans--rural 
and urban, rich and poor, minority and nonminority--have the 
opportunity to share in the benefits of the telecommunications 
revolution. I'm pleased to report that we have made some progress in 
the past year. I wanted to update the Committee on a couple of things 
we have accomplished and where we might go from here.
    First and foremost is universal service. In rural states like my 
home state of New Mexico, universal service permits average Americans 
to have phone service who otherwise would not be able to afford it. 
Right now, we are working to ensure that universal service support does 
not erode as competition develops. Last summer, the FCC referred key 
issues involving high cost funding to the Federal-State Joint Board on 
Universal Service. As a member of the Joint Board, I was pleased to 
support the principal recommendations that the Joint Board made to the 
FCC last November. Among the recommendations were to move away from a 
strict limit of 25 percent federal funding of universal service. 
Instead, the Joint Board recommended that the FCC provide more than 25 
percent of the support needed in cases where a state cannot reasonably 
bear 75 percent of the cost of universal service. If this 
recommendation is adopted by the FCC, I believe consumers will benefit 
because local rates will be kept at affordable levels, and competition 
will be able to take root in residential areas. I also believe that the 
recent work of the Universal Service Joint Board, under the leadership 
of my colleague Commissioner Susan Ness and Florida Commissioner Julia 
Johnson, demonstrates the increasingly cooperative relationship between 
federal and state commissioners in fulfilling Congress' goals for 
universal service reform.
    One aspect of universal service that is particularly important to 
me is connecting unserved areas. In enacting section 254, Congress told 
us not only to ``preserve'' but to ``advance'' universal service. I see 
no more worthy means of advancing universal service than to devise 
creative solutions to problem of unserved areas. In many of these 
areas, customers remain unserved because the alternative is to pay the 
local phone company thousands of dollars to have a line extended to 
their home. This is unacceptable. I believe the federal government, in 
the interest of advancing universal service, must take a more active 
role in connecting all Americans.
    I would note that many unserved areas are on Indian lands, and that 
Indians are among the poorest groups of Americans. Chairman Kennard has 
recognized this problem, and I commend his leadership on this issue. 
Recently, the Chairman and I held a field hearing in New Mexico where 
we were joined by Congresswoman Heather Wilson, a fellow New Mexican. 
We took testimony and visited Indian reservations to learn firsthand 
about the causes of this problem and some possible solutions. That 
field hearing marked the beginning of a real commitment in the area of 
telecommunications to better fulfill the federal government's trust 
obligation with respect to Indians living on reservations.
    In addition, I would like to express my continuing support for the 
e-rate program. I am the first to admit that the implementation of this 
program has not been perfect. But the goals of the program are sound 
and I am convinced that the e-rate funds that have recently been 
committed to schools around the country will generate enormous social 
and economic benefits for the nation in the years ahead.
    Another area of increasing importance to all Americans is broadband 
deployment. Access to broadband capacity will be a crucial tool for our 
citizens to compete in the information economy of the 21st century. In 
Section 706 of the 1996 Act, Congress directed the Commission to 
monitor the roll-out of advanced telecommunications capability, and, if 
necessary, take steps to ensure that all Americans have access to such 
capability on a reasonable and timely basis. We recently issued our 
first Section 706 Report, which was guardedly optimistic about the 
state of broadband deployment while recognizing that it is still too 
early in the process to declare victory. Indeed, with respect to rural 
and other hard-to-serve areas, I remain more guarded than optimistic. I 
am not yet convinced that these Americans will have access to advanced 
services on a reasonable and timely basis. The next several years will 
be critical. As advanced services begin to become a marketplace reality 
in many areas of the country, we need to improve our data collection 
and assessment efforts to ensure that all Americans have reasonable and 
timely access to these services.
    I believe there are two ways to accelerate the rollout of advanced 
services. The first is to ensure that competitors have access to the 
basic building blocks of advanced services that are controlled by 
incumbent LECs. That includes things like conditioned local loops and 
collocation space. Competitors can then combine those inputs with their 
own advanced services equipment to offer high speed connections to end 
users. I believe the Commission will strengthen the collocation rules 
at tomorrow's Agenda meeting, and in the near future the Commission 
will, I hope, formally reinstate the requirement that conditioned loops 
be made available to competitors.
    The second way to spur advanced services is to make sure we're not 
overregulating the provision of those services by incumbent LECs. I 
recognize that there may be markets where, unlike the market for basic 
local telephone service, incumbents do not have a hundred-year head 
start. We need to think carefully before applying rules that may be 
ill-suited for such emerging markets. If we proceed thoughtfully in 
this area, I am optimistic that the FCC's policies will provide the 
right incentives for both new entrants and incumbents to furnish the 
bandwidth that millions of consumers are asking for.
    On the broadcast side, Equal Employment Opportunity is one of the 
things that we have been working on to broaden opportunities for all 
Americans. As the Committee is aware, this past year a panel of the 
U.S. Court of Appeals for the District of Columbia Circuit struck down 
the outreach portions of our previous EEO rules because it believed 
(wrongly, I think) that our rules essentially required hiring decisions 
based on race. We have proposed new rules to eliminate any confusion on 
this point and to clarify that all that the new rules would require is 
outreach to women and minorities, not hiring preferences. Outreach 
requirements simply expand the pool of candidates for consideration. 
They do not exclude anyone based on race or gender. Reaching out to all 
parts of the community would help ensure true equal opportunity--giving 
everyone the opportunity to participate in, own, and see themselves 
reflected in, the media that has such a pervasive impact on our 
nation's cultural and political life.
    There are those who question whether we can craft new EEO rules 
that will withstand judicial review. I do not doubt that any rules we 
adopt will be challenged in court, and I have no illusions that some 
will argue that even simple outreach requirements require the strictest 
judicial scrutiny. But if the burden of proof is high, so are the 
stakes. I believe we must make every effort to develop a meaningful EEO 
program that can and will be sustained.
    Although much of the Commission's work addresses the broad 
structure of the telecommunications industry, the actions I've drawn 
the most satisfaction from are those that directly improve the dally 
lives of average Americans. That is why I strongly supported the rules 
we adopted last December to combat slamming. The highlight of our new 
rules is that a customer who is slammed need not pay the slammer. This 
is good public policy for two reasons. First, allowing consumers to 
withhold payment from the slammer takes the profit out of slamming. 
That should substantially reduce the frequency of slamming. Second, 
allowing a slammed customer to withhold payment compensates the 
slamming victim for the trouble and aggravation of being slammed. I 
hope and expect that these new rules, combined with our aggressive 
enforcement efforts against slammers, will dramatically reduce the 
frequency with which consumers are slammed.
    Another consumer issue that I've been intensely interested in is 
the V-chip. This is the year that the V-chip will finally become a 
reality in the lives of average Americans. By July I of this year, half 
of the new television models with screens thirteen inches or larger 
must have a V-chip installed. By January 1, 2000, all such sets must 
have a V-chip. This will empower parents to protect their children from 
material that they deem harmful to their children. I commend you, Mr. 
Chairman, for helping to forge a consensus on a useful ratings system, 
as well as Congressman Markey, for his long-time leadership in this 
area. You have given parents an important tool to help them raise their 
children even when they cannot monitor what their children are 
watching.
    Now, I'd like to turn to the specific issue you asked us to 
address, Mr. Chairman--the restructuring of the FCC. I applaud your 
efforts, Mr. Chairman, to take a fresh look at the FCC from the ground 
up. We should not fear such a review; if we are doing our job, we 
should welcome it. We are fortunate at the Commission to have a 
tremendously talented and dedicated staff. We owe it to them, we owe it 
to you, and, most importantly, we owe it to the American people, to 
create an FCC that is as smart and efficient as possible. I do not 
pretend to have all of the answers as I sit here today, but I do have a 
few thoughts that I'd like to share.
    First, I agree with those who say that we need to become more 
enforcement-oriented. That is, we need to impose fewer rules that 
burden all regulatees up front--the good actors and the bad actors 
alike--and develop the restraint to step in only when a problem 
emerges. Under Chairman Kennard's leadership, I'm pleased that we have 
already been moving in that direction. In the mass media area, for 
instance, we are substantially reducing the amount of paper that 
broadcasters must file, and instead are relying on the wider use of 
compliance certifications and a program of random audits to deter 
abuse. To make this system work, we need to ensure that bad actors, 
when they are identified, are subject to swift, certain and consistent 
punishment.
    Second, we need to rethink the way the agency is structured. As the 
industries we regulate continue to advance and converge, we have to 
continually ask ourselves whether our organizational structure still 
makes sense. Chairman Kennard has taken some steps in this regard with 
the planned consolidation of currently dispersed functions into new 
Enforcement and Public Information Bureaus. I fully support those 
efforts and hope to see similar efforts to restructure the Commission 
in other areas that cut across traditional jurisdictional lines.
    Third, given that the mix of expertise needed by the Commission 
changes over time, we need to make certain that our staff is deployed 
in a manner that reflects the agency's current priorities. If there are 
subgroups within the agency that were formed to address a particular 
need that may have dissipated, we should reassign that personnel to the 
many areas within the Commission that are understaffed. There is no 
rule that says that an agency subgroup, once created, can never be 
disbanded. I do not have any particular subgroups in mind, but I 
believe that now is a good time for a top-to-bottom review. Our staff 
is too valuable to allocate them in a way that fails to maximize their 
ability to contribute to the agency's mission.
    Once again, I appreciate the opportunity to testify before you 
today.

    Mr. Tauzin. Thank you very much, Commissioner Tristani.
    The Chair now recognizes himself and will recognize members 
in order.
    First of all, Mr. Kennard, I am pleased that you accepted 
our invitation to literally describe an FCC for this future 
that Mr. Huber and others have been predicting for us.
    You mentioned three missions of the agency as you see it 
going forward, consumer protection, the provision of universal 
service, and spectrum management. I noticed you did not 
mention, although your statement talks about incentivizing 
competition. Where does that lie in your areas of priority?
    Mr. Kennard. Well, I think it should be all-pervasive. I 
think that the act that you wrote in 1996 clearly made 
competition the organizing principle of our law and policy. And 
in everything we do, we should always promote competition first 
and foremost. I think that this is fundamental and paramount.
    Mr. Tauzin. Obviously, this gets into the issue of whether 
the agency remains a regulatory agency or moves successfully 
into an enforcement-agency role, the question of how fast and 
how efficiently we can build competitive markets. But I guess 
the question is, how long do you think that takes? Is this a 5-
year plan, a 10-year effort? When do we reach a stage where, in 
your opinion--I realize everyone has their own crystal ball on 
this--where the agency can be less relied upon regulatory 
initiatives and more reliant upon simply its enforcement 
authority to police against bad behavior in a competitive 
marketplace.
    Mr. Kennard. Well, I think it has already happened in some 
areas. You see it in the wireless area, for example, where we 
have had marked competition in wireless communication in this 
country. The Commission been able to deregulate in some fairly 
significant ways.
    Forbearance from local number portability is a good recent 
example of that. In the long-distance marketplace, for example, 
as we saw more and more competition over the last decade or so, 
the FCC has consistently deregulated, de-tariffed in that area. 
In the international satellite area, we have a record of having 
eased off of regulation as we have seen more competition.
    The real crux of the matter is making sure that we are 
focusing our attention on what are the remaining bottleneck 
facilities that need to be opened up to competition, and that 
is the prerequisite to deregulation.
    Mr. Tauzin. I want you comment directly upon Mr. Huber's 
concern. It is one I hear a lot, and one we think is worthy of 
our consideration as we move forward, and that is that the 
Commission has the power under the law to define a set of 
regulatory rulemaking to a class of service just depending upon 
what you call that provider. How do you react to that concern?
    Mr. Kennard. You know, with all respect to Mr. Huber, I 
think the point was a little bit overstated because----
    Mr. Tauzin. Well, give me your take on it.
    Mr. Kennard. Okay. If you look in Title I of the act for 
example, the Congress set forth pretty clearly some of the 
definitions defining telecommunications service providers, 
information services. We are bound by those definitions. And 
so, clearly, there are some areas in the act where we don't 
have freedom to just define what is, what service fits within 
what particular definition.
    But that being said, I think that Mr. Huber's point is well 
taken that our overarching goal should be to promote more 
competition and eliminate barriers where we have regulatory 
authority to do it.
    Mr. Tauzin. But, Bill, doesn't the mere fact that we are 
moving into a digital age, where communications, they are all 
going to look the same--visual, telephony, and data, and--it's 
all going to be in the same screen. Doesn't that itself lead to 
the conclusion that, depending upon what you call the facility, 
it is subject to different regulatory authorities and different 
regulations. Isn't that the crux of the problem here?
    Mr. Kennard. My point is, is that some of that is in the 
statute. I mean some of these companies----
    Mr. Tauzin. So we may have to change the statute.
    Mr. Kennard. I mean, some of these companies are providing 
these services coming from different regulatory heritages.
    Mr. Tauzin. Yes.
    Mr. Kennard. From cable under Title VI and telephone is 
under Title II. But the one point that I would have to take 
issue with Mr. Huber on is that on advanced services. He made 
the point that what we should be doing is completely 
deregulating the provision of broad-band services. And I think 
that certainly should be the goal, but we also have to 
recognize that in many cases the provision of those services do 
require the use of central facilities: the copper wire into the 
home. And the act that you wrote very clearly addressed that 
issue and that is why we are working hard to open up that 
copper wire to competition.
    Mr. Tauzin. With the indulgence of the committee, and this 
will be my last question, I would each of you to quickly 
respond. The chairman has outlined his three missions for a new 
FCC. I just recited them for you. And, Harold, I know you don't 
like to give us advice until we ask you, so I am asking you 
now: If each of you could give me your top three, four missions 
of an FCC in a world of competitive marketplace as opposed to 
the 1930's world of monopoly, regulated marketplaces, starting 
with Commissioner Ness.
    Ms. Ness. Thank you, Mr. Chairman. Certainly one set of 
priorities involves ensuring that competition does, in fact, 
take place and that abuses of market power are addressed where 
there are complaints that are filed. That's the enforcement 
side.
    Ensuring that universal service is afforded to all 
consumers throughout this country, is another extraordinarily 
important goal of the act and one that we should continue to 
work on.
    Spectrum management is also critical. We need to make sure 
that the commercial uses of the band are in fact taken care of 
expeditiously, that we work with our colleagues abroad to make 
sure that all of the services are able to see the light of day. 
So that is a very important mission.
    Ensuring that there is no interference, or that 
interference is minimized, in the spectrum is extremely 
important as well.
    So I see all of those pieces and then----
    Mr. Tauzin. So you basically endorse Chairman Kennard?
    Ms. Ness. Yes, I do.
    Mr. Tauzin. Commissioner Furchtgott-Roth, again, put on 
your thinking cap. You are not a member of the committee or 
Commission. You are just that good citizen out there. What 
should he Commission be doing in the future?
    Mr. Furchtgott-Roth. Mr. Chairman, I believe under section 
5 of the act the Commission has the authority to organize its 
staff in any manner that it sees fit. I have not yet finished 
reviewing the chairman's proposals, but I think that there are 
any number of ways that the Commission could be organized that 
would make sense.
    If you look around, the hundreds of Federal agencies, there 
is no single way in which they are organized. They each have 
different organizational structures, organizational structures 
that change periodically. In some cases, the organizational 
structure is statutory and in some cases it is not. In the case 
of the FCC, it is not statutory.
    And I think if you look at the different agencies around 
Washington, the ones that are successful, that you may consider 
to be successful, I'm not sure you could attribute its success 
to organizational structure. And the ones that are not 
successful I'm not sure that you could attribute that to 
organizational structure.
    I believe organizational structure is an internal matter 
for the Commission. I look forward to working with Chairman 
Kennard and reviewing his plan, and to the extent it makes 
sense, I will be very happy to----
    Mr. Tauzin. Assuming it's reorganized, what's the new 
mission of the agency?
    Mr. Furchtgott-Roth. The mission of the agency is very 
simple. It is to follow the laws as written. You know, I don't 
think we can distill that into any set of principles, into 
anything beyond saying we implement the law. We cannot give 
added weight to some section of the act and lesser weight to 
other sections, Mr. Chairman.
    I have a very simple mind about this. And you know, it's a 
good thing I'm not a lawyer.
    Mr. Tauzin. Commissioner Powell, what's the new mission of 
the new FCC?
    Mr. Powell. Mr. Chairman, I think first and foremost, the 
Commission has to continue to serve out its role set forth in 
the 1996 act, of transitioning the legacies that we inherit out 
of its current regulatory structure and all of the assumptions 
that go with that: the technological assumptions, the 
regulatory assumptions, the tools and devices we use to 
regulate them.
    A perfect example would be data information which doesn't 
lend itself as much to the per-minute kind of pricing vehicles 
we have used historically.
    I think, first and foremost, we are in the messy business 
of transitioning the legacies out. Where we get focused on 
competition though is as we get those things out the door, we 
have to hesitate as those things create newer realities and new 
environments and the temptation to want to tinker in their 
migration.
    I believe competition is not something you manage, or that 
you ``master chef'' for the public, it's a replacement for us 
as the decisionmaker. It will make the decisions about the 
highest and best uses as dialog between consumers and private 
firms. But I would point out that I think we need to become 
increasingly focused on what I would call innovation policy. 
Innovation is what is driving these markets, more than our 
classic, tired versions of price and choice regulation. And I 
think deregulation has to be the central vehicle in innovation 
because I think competition has proven to be the superior 
vehicle for innovative economies.
    Second, I would agree with the Chairman and Commissioner 
Ness, as long as it is the policy of the United States that 
spectrum is a resource that is owned by the Government, there 
will be a role for someone, us or someone else, in the 
management and issuance of the spectrum.
    But I will point out that shouldn't be the end of the 
question. There are many advances in thinking about what you 
can do with spectrum that are more consistent with market 
dynamics. And I think that is what Mr. Huber was attempting to 
suggest, that some versions of pricing, spectrum flexibility 
that allow quicker and more timely, more efficient uses of 
spectrum rather than coming in to get permission could be that.
    And finally, I think, as everybody would allude to, there 
is always a residual of consumer protection and affairs that 
government would never want to abdicate. If we thought mobile 
phones were frying your brain, I think everyone, no matter the 
truest free-marketer, would want somebody to do something about 
that.
    But I think there is a spectrum of consumer protection that 
can quickly cross over from core protection of our consumers' 
health, safety, and welfare into things that are the micro-
managements of markets, and I think we have to be careful of 
where that line is. I personally believe that the high water 
mark in the middle is antitrust enforcement for anti-
competitive effects.
    But when you start heading on the other side of the 
spectrum toward the right price, the right quality, the right 
et cetera, et cetera, you are in another world I think.
    Mr. Tauzin. Thank you very much. And finally, Commissioner 
Tristani.
    Ms. Tristani. I'm going to agree with something my fellow 
Commissioner, Furchtgott-Roth, said. And I believe the new 
mission is to implement the 1996 act as you wrote it, 
competition and universal service.
    And Mr. Markey reminded us at the beginning of this hearing 
that we do have the finest communications in the world, and 
still envied by everybody else. And we need to make sure that 
it continues to be the finest and is accessible as it has been 
to most Americans.
    Mr. Tauzin. Thank you very much. Mr. Markey.
    Mr. Markey. Thank you. My district is half Irish and half 
Italian, and my greatest fear is that I would ever have to run 
against someone who could appeal to someone whose name started 
with O and ended with O.
    And it is all combined in Vito Fossella over there.
    Mr. Tauzin. Would the gentleman yield?
    Mr. Markey. You bet.
    Mr. Tauzin. Is the new phrase ``Oh forget about it''?
    Mr. Fossella. Just for today, Mr. Chairman.
    Mr. Markey. You know, the irony of the cellular industry--
if someone could put the wireless chart back up over here--was 
that when this committee back in 1993 moved 200 megahertz over 
for the PCS revolution, one of the things that I wanted and 
that ultimately the FCC put on the books as a rule was that 
neither of the two incumbents, cause as you remember we gave 
away the first two licenses back in the early 1980's, neither 
of the two incumbents would be able to bid for the third, 
fourth, fifth, and sixth licenses in their marketplace.
    And so because of Federal regulation, Federal law, we 
created this very competitive marketplace with five and six 
competitors in each marketplace with rapid technological 
change, geometric plummeting of pricing, that had not happened 
from 1981 all the way up to 1993 and 1994. It was only when the 
Government created a policy which wouldn't allow the incumbents 
to consolidate. And so it is ironic now that the industry, many 
in the industry, are now arguing that there should be 
consolidation which should be allowed, that there should be a 
lifting of the caps in terms of what would be permitted, in 
terms of any individual marketplace.
    And I have, without question, great concerns about that 
because that is a success story. And that is what we should be 
looking for in every other marketplace.
    I would like to discuss, if I could, with the Commission 
how to make wireless more fungible as a service to and 
competitive to the local loop.
    And I would like you, Mr. Chairman, and the other 
Commissioners to give me your views on when it might be 
possible for us to move to, to deal with the issue of calling-
party-pays or with number portability so that we can add that 
additional revolution to this wireless phenomenon so people can 
keep their cell phone on all day long with a number which is 
fungible.
    Mr. Kennard. Certainly. I think we are--I am very 
encouraged by what is happening in the wireless industry 
because we are seeing the price points in wireless declining to 
a point where we may well see some people turning off their 
wireline phones and picking up the wireless phones. Some of the 
flat-rate pricing plans that we are seeing are very 
encouraging.
    Calling-party-pays, I think, may also hold a lot of promise 
in expediting competition in wireless. This is on the, 
certainly on the front burner of the Commission's agenda. I 
believe that it is time for the FCC to take up the issue of 
calling-party-pays. We have to work through a lot of the 
difficult policy issues to implement calling-party-pays in the 
country, but it is time to do it. And I am fully supportive of 
moving ahead with that.
    Mr. Markey. Any other Commissioners wish to deal with that 
calling-party-pays issue, especially?
    Ms. Tristani. I would agree with the chairman.
    Mr. Markey. Now here's another irony, which would be that 
the industry, that is the cable industry, fought the DBS 
revolution. They fought the program access provision. Now, of 
course, they turn and use the DBS revolution as the argument 
that there should be complete deregulation of their industry.
    But, if this committee hadn't acted, they wouldn't have 
that as an opportunity. That is, that there would be no 
competition, which could have emerged absent the Congress and 
the FCC having acted. And again, I just want to continue to 
point out that a lot of what we are saying, and Mr. Huber 
documented it quite well, this rapid expansion of technology 
choices for consumers is as a result of what has happened on 
this committee.
    And I have one final question, if I can. One of the 
complaints that new competitors are bringing to us is that they 
are thwarted in providing competing services in multiple-
dwelling units, such as apartment buildings, where a consumer 
may want video or other telecommunications services because 
they can't get sufficient access.
    Obviously, with cable rates being deregulated, we want 
consumers to get the chance to choose alternatives if they can 
and want to.
    How can the Commission help us with this bottleneck?
    Mr. Kennard. I think you put your finger on a very 
important challenge in promoting competition, particularly at 
the residential service level. I look forward to working with 
you, Mr. Markey, and you, Chairman Tauzin, on your efforts to 
revisit the law in so far as you would like to move more 
aggressively on the inside wiring front. I think that that is, 
like the last mile, that is one of the--it is really the last 
few feet of competition. And it is a very important few feet. 
And I think your efforts to look at statutory approaches to 
changing that is very productive, and I offer any assistance 
that we at the Commission could do.
    Mr. Markey. And I would like, Mr. Chairman if I can 
briefly, there is an interview with the CEO of Bell South in 
USA Today on March 1st, and a question to him is, ``Do you 
detect a change in attitude at the FCC?'' And his answer was, 
``The working environment is as good as I have seen it over the 
last 3 years. There has been a great deal of changeover in 
staff, the FCC seems to be working much harder under Chairman 
William Kennard's leadership to define specifically what the 
requirements are for the local Bell companies to enter the 
long-distance market.''
    I want to congratulate you, Mr. Chairman, and the rest of 
the Commissioners for creating an environment that would elicit 
a comment of that nature from the chairman of Bell South.
    Thank you very much.
    Mr. Tauzin. They are still trying to get a permit approved. 
I don't blame him for saying that.
    I thank the gentleman. Let me point out for all of you that 
we have already scheduled in April a hearing on the inside 
wiring issue. And I want to thank you, Mr. Kennard, for your 
offer of assistance. We are going to need all your advices, 
including you Harold, on how to make some good policy. And we 
welcome your comments as we move forward.
    The Chair is pleased to welcome the vice chairman of the 
committee, Mr. Oxley, for a question.
    Mr. Oxley. Thank you, Mr. Chairman. Let me follow up if I 
can on my opening statement and in particular on some responses 
that you have had. As you know, Chairman Kennard, I quoted you 
to say that we need to recognize that we are dealing with 
statutes that really haven't dealt with convergence. I think 
that is obviously a true statement and even reflects on the 
1996 act, even though I think we have made some progress in 
that regard. And you also talked about how the FCC would look 
different in 5 years. And I think all of us would applaud that.
    The real question is, how do we get from here to there? And 
can we do it--let me just ask you this: Could you do it without 
legislation?
    Mr. Kennard. I think we must proceed to do all we can 
without legislation, but certainly we look forward to working 
with you on changes that might even advance competition more 
and help the agency work even better.
    Mr. Oxley. Well, you are in many respects bound by statutes 
that don't recognize the changes that have taken place in the 
marketplace.
    Mr. Kennard. Well, that is right. And I guess the point I 
am trying to make is that we would certainly welcome you to 
address this issue of convergence, legislatively, because the 
total solution will have to come legislatively. But I want you 
to understand that we are not going to wait. We will do 
everything we can in the interim to advance a pro-competitive 
agenda.
    Mr. Oxley. Do any other Commissioners have a comment in 
that regard?
    Let me, then, move on. The term universal service has been 
used quite a bit. Ms. Ness and others spoke of universal 
service. Will the definition of universal service change as 
technologies and the markets change? If, in fact, universal 
service changes, is it going to be changed by the FCC? Is it 
going to be changed by the Congress? Is it is going to be 
changed by the marketplace? Will what we consider the standard 
of POTS, plain old telephone service, essentially being 
universal service, will that change? How rapidly will it 
change? And how do we adjust as policymakers to that potential 
inevitability?
    Mr. Kennard. Well, Mr. Oxley, I think that some of these 
issues were clearly contemplated in the act. In section 254 of 
the 1996 act, I believe Congress clearly contemplated that 
universal service would be an evolving concept and that we 
would continue to update it as technology changes. And we 
certainly will follow the statue in that regard.
    But I think that one thing that we could certainly do 
immediately is to do everything we can to ensure that wireless 
providers are part of the universal service dynamic because we 
do know that in many rural, high-cost, low-density areas, 
wireless is providing solutions to the universal service 
conundrum. And we ought to be doing everything we can to 
promote universal service support to wireless companies and 
satellite companies if they can provide services most 
efficiently in those remote areas.
    Mr. Oxley. Well that then raises the question of how you 
pay for it and who pays for it and how you structure or, 
restructure essentially, the universal service fund. How soon 
is that coming? How soon does it have to come?
    And, let me back up a little bit, in the 1996 act, there 
was a lot of debate, there were some folks on this committee 
that wanted to define universal service. We, I think, 
thankfully, avoided that conundrum and left, essentially, that 
section relatively amorphous. I don't think we really nailed it 
down, nor should we have. But where are we then? And what's 
going to happen? Universal service is a big deal.
    Mr. Kennard. It is.
    Mr. Oxley. It is a big deal for us. It is a big deal for 
the carriers. It is a big deal for the consumer. I'd like to 
just ask each one of you where you see this process going in 
your best judgment.
    Mr. Kennard. We are working very hard on universal service 
issues at the FCC. The FCC in 1997, spring of 1997, issued the 
first major order implementing the universal service provisions 
of the act. This Commission then turned its attention to 
completing that task.
    We learned very early on that we need really extensive 
engagement and input from our colleagues in the States to come 
up a comprehensive reform of universal service.
    So we convened a joint board of Federal and State 
Commissioners under the leadership of Commissioner Ness, which 
provided us some very useful recommendations which the 
Commission is considering now. We hope to complete our review 
of universal service this summer.
    Mr. Oxley. Other comments from any of the Commissioners? 
Ms. Ness.
    Ms. Ness. Thank you. Universal service has a number of 
component parts to it. And we are trying to work through these. 
But I want to assure this committee that all pieces of 
universal service are in place as provided under the act. What 
we are trying to do now is carry through the changes that need 
to take place as competition comes into the marketplace.
    In other words, today there is a high-cost fund that is 
providing for subsidies in the high-cost areas. Low-income 
consumers are getting the benefit of modifications that we made 
to those programs. Schools and libraries funding is in place, 
and with rural health care we are working through some start up 
issues but there's a program there.
    The issues are very complicated, and as Chairman Kennard 
mentioned, they involve a partnership with the States. Most of 
the implicit subsidies that support universal service are at 
the State level and are controlled by the State Commissions. So 
we need to work with our State colleagues to ensure that there 
is adequate funding in the high-cost areas that can come from 
the Federal side, but there is a limit to the amount the 
Federal side can handle. We need to work through a whole host 
of issues, including revision of access charges or access 
reform, to make this into a composite that's going to work for 
all consumers so that we also do not see any rates going up for 
consumers. It is a very important piece of this puzzle.
    Mr. Oxley. Thank you, Mr. Chairman.
    Mr. Tauzin. Thank you, Mr. Oxley. The Chair recognizes the 
gentleman from Michigan, Mr. Dingell, for a round of questions.
    Mr. Dingell. My questions of the Chair----
    Mr. Tauzin. What we plan to do is, if the gentleman will 
complete his round, if the Commission--I'm sorry----
    Mr. Dingell. What were the wishes of the Chair? Mr. 
Chairman, I will go now if it be your wish or do later.
    Mr. Tauzin. I would hope that the gentleman would proceed 
now.
    Mr. Dingell. Then I shall do so.
    Mr. Tauzin. And then, but let me make an announcement, if 
it is acceptable to the witnesses and to the committee. Perhaps 
after Mr. Dingell completes his round that we can take a 40-, 
45-minute break. That is why I am asking your thoughts on it. I 
suspect this may go on a little while, and, Mr. Powell, we have 
been here before where we kept you sitting here a long, long 
time.
    Mr. Powell. Got to let me go to the bathroom.
    Mr. Tauzin. That's what my point is.
    I remember the last time we did this, it went on a long 
time. With your indulgence, I would like to proceed with maybe 
a 40-minute break. Would that be acceptable to everyone?
    Mr. Kennard. It would be fine with me, Mr. Chairman.
    Mr. Tauzin. All right, let's do that. Mr. Dingell, you are 
recognized at this time.
    Mr. Dingell. Mr. Chairman, thank you. Chairman Kennard, 
under section 254 of the Telecom Act, the FCC was required to 
establish within 15 months of the date of enactment a specific 
timetable for fully implementing a universal service fund. That 
was to be done by May 8, 1997. Is that correct?
    Mr. Kennard. Yes.
    Mr. Dingell. And it has not been done. Is that correct?
    Mr. Kennard. By that date, Mr. Dingell, we did issue a 
universal service order which established a timetable for 
completing the universal service reform. Yes.
    Mr. Dingell. You were supposed, however, to implement a 
universal service fund. That is not laying out a timetable. 
That is implementation. So you have not done it. Very well.
    Now, initially, the December 1997 date was postponed until 
December 1998, which was in turn postponed to July 1, 1999. I 
believe the reason for this is that the FCC cannot agree on a 
model to quantify how much support is needed for this high-cost 
fund. Is that correct?
    Mr. Kennard. It is not exactly correct, Mr. Dingell.
    Mr. Dingell. What is correct?
    Mr. Kennard. On the timetable, what we did is, we came up 
with the universal service order in May 1997. It would not have 
been prudent for us to have completed all of universal service 
reform at that time without the kind of extensive input and 
engagement that we needed with our colleagues in the States.
    And, as I would reiterate what Commissioner Ness said, it 
is important to recognize that we do have a sufficient 
universal service support system in place. This is a question 
of updating it for a more competitive marketplace for the 
future.
    Mr. Dingell. Well, I think this brings it down to the point 
that you have not yet constructed the model of what the 
universal service fund is supposed to do, how much money will 
be coming in, how much money will be going out as of this 
moment. Have you?
    Mr. Kennard. That process is ongoing as we speak. Yes.
    Mr. Dingell. But it is not done?
    Mr. Kennard. Correct.
    Mr. Dingell. And yet, it is fair to note that you are now 
allowing long-distance companies to proceed, to move forward, 
to decide whether they are going to pocket the lower access 
charges, whether they are going to move them back to consumers, 
or whether they are going to dissipate them in other ways. Is 
that not so?
    Mr. Kennard. Well, I am not quite sure what you mean by 
that, Mr. Dingell.
    Mr. Dingell. I mean that you have done nothing to assure 
that the long-distance companies address either the problem of 
providing enough service at low-enough cost or whether there is 
enough money in the access fund to assure that there are low-
cost services afforded to the needy categories of users that 
the Congress intended would be served by that. The result of 
this is that there is a strong possibility that the fund will 
be dissipated by being transferred out of the fund into the 
pockets and the hands of the long-distance carriers.
    The practical result of this will be that those moneys will 
be dissipated and, at the end of which time, there may be no 
money in that particular fund to address the needs and concerns 
of the residential users, the local service users, who are 
supposed to be the beneficiaries of that fund.
    Now deny that if you please.
    Mr. Kennard. I will. That has not happened, Mr. Dingell.
    Mr. Dingell. But you don't know whether it will or will not 
happen, do you? You have completed neither modeling nor have 
you written any orders on this matter.
    Mr. Kennard. The reason why we are proceeding in a very 
deliberate way in working closely with our colleagues in the 
States is that we want to prevent that very thing from 
happening so that we can protect consumers.
    Mr. Dingell. Now are you able to sit there and tell me that 
this will not happen?
    Mr. Kennard. No. I am telling you that it will not happen.
    Mr. Dingell. So you cannot tell me that. You are then in 
the position of sitting idly by, allowing these moneys to be 
returned to the long-distance carriers with a fairly assurance 
that you don't know what is happening. So you cannot sit there 
and tell me, with any degree assurance, that these moneys are 
not going to be turned over to the long-distance carriers with 
the result that the local service, particularly the residential 
users and others, will find at the appropriate time there is no 
money to meet the claims that the Congress wants them to have 
on that fund in terms of assuring low-cost service being 
readily available to all of the inner-city users and the rural 
users, who were supposed to be the beneficiaries of that fund.
    Mr. Kennard. Actually, the access charge revenue is flowing 
not to the long-distance companies, it is flowing to the local 
companies for the purposes of--some of which is being used to 
provide universal service.
    Mr. Dingell. There is a subsidy in access charges, is there 
not?
    Mr. Kennard. Yes. And we are determining the precise amount 
of that subsidy that goes to universal service support.
    Mr. Dingell. And that is currently supposed to be used to 
provide universal service at affordable costs to inner-city 
users, residential users, and to high-cost users in rural 
areas. Is that not so?
    Mr. Kennard. Well, some portion of it. Therein lies the 
debate.
    Mr. Dingell. But unfortunately you sit there in sublime 
ignorance of what that amount might be. You don't have any 
idea, and you don't have any way of telling us what is the 
amount of that subsidy, what should be the amount of that 
subsidy, how the changes that are going on with regard to the 
use of that subsidy will impact either the inner-city 
residential users or the high-cost rural users.
    Mr. Kennard. Well, Mr. Dingell, it would be irresponsible 
for me to make up a number and tell you that that is what it is 
because it is an important number. And we have to make sure 
that it is developed in a deliberate and comprehensive way, 
working with our State colleagues.
    Mr. Dingell. So you don't know the amount but you propose--
you are not contemplating doing automatic reductions in July?
    Mr. Kennard. No.
    Mr. Dingell. It has been widely reported that you intend to 
do that.
    Mr. Kennard. Well, we are----
    Mr. Dingell. That you intend to do that not just this July, 
but annually.
    Mr. Kennard. Well, you are going back to the access----
    Mr. Dingell. And to do so in blithe ignorance of what the 
impact of that is or what the amounts of money involved might 
be or who and how they will be impacted.
    Mr. Kennard. Mr. Dingell, nobody in this room, in fact, 
nobody in the country to my knowledge, knows exactly what 
amount of access is devoted to universal service. It is a 
complex question. That's why we are working hard to develop the 
models which will answer that question.
    Mr. Dingell. Well, explain to me, since you don't know the 
amount of the subsidies and the access charges and the impact 
of this action, why should you be proceeding now toward 
reducing these access charges and helping the long-distance 
carriers who have no responsibility to subsidize the people 
that it was the Congress' intent would be subsidized?
    Mr. Kennard. I am certainly not interested in proceeding 
with access reform to help the long-distance industry.
    Mr. Dingell. That will be the practical effect, however.
    Mr. Kennard. Not necessarily. No, no, not necessarily. 
Access reduction should flow to consumers.
    Mr. Dingell. It is going to be the practical effect because 
you can't tell us how this money is going to flow, how much 
money there is, or what the impact is going to be on the 
different persons who have claims on that fund.
    So you are proceeding blithely toward dissipating this 
money not knowing what is going to be the impact on the inner-
city residential user or the high-cost rural user.
    Mr. Kennard. I don't believe I am, Mr. Dingell. And 
frankly, I don't think my Commissioners would support a vote if 
we didn't determine what those numbers were in a responsible 
way.
    Mr. Dingell. Well, if you don't know by July, are you going 
to proceed to move forward, to do the annual reduction?
    Mr. Kennard. I am going to work on the access restructuring 
in tandem with the universal service proceedings and how they 
are coordinated.
    Mr. Dingell. That does not answer the question. Are you 
going to proceed if you don't have the answers to the questions 
I have been asking about how this change will impact the inner-
city residential user and the high-cost rural user?
    Mr. Kennard. Well, we hope to have these answers by the 
summer, and we will proceed when we have the answers.
    Mr. Dingell. Will you have the answers by the summer?
    Mr. Kennard. We hope to have the answers by the summer.
    Mr. Dingell. If you do not have these answers, will you 
proceed?
    Mr. Kennard. It would be difficult to proceed if we didn't 
have the answers.
    Mr. Dingell. I think you should anticipate being held to 
that statement at some future time.
    Mr. Tauzin. The Chair would interrupt. What was the answer? 
Are you proceeding or not? This may be difficult, but you 
didn't say whether you would or not. I think this committee 
would like an answer.
    Mr. Dingell. The answer is he doesn't know.
    Mr. Tauzin. Do you know?
    Mr. Kennard. It is a complicated question. The X factor 
does kick in in July based on the productivity of the local 
exchange carriers. That is correct. But universal service 
reform is proceeding in tandem, we are working hard to develop 
the actual numbers, the actual amount of universal service 
support which is embedded in access, and we will work on that 
number and come up with an access reform plan that works in 
tandem with that.
    Mr. Dingell. Mr. Chairman, would you permit--this is a 
wonderful answer, and I am enjoying. And if I had more time I 
would probably enjoy it more. The fact of the matter is that it 
is not responsive.
    Mr. Tauzin. The Chair has extended the gentleman's time, 
and, without objection, the Chair will extend it for another 
minute or 2.
    Mr. Dingell. The X factor kicks in July, does it not?
    Mr. Kennard. Yes.
    Mr. Dingell. So aren't we well served to get an answer to 
the questions now before we proceed? Then get the X factor just 
as soon as we can. Then decide what it is we ought to do about 
this matter. So that you know that you are not dissipating 
funds. May very well be that you are not, but you can't sit 
here and tell me you are not. So why are we not waiting until 
we have the answers to the question before we proceed?
    Mr. Kennard. What we don't want to do, is do anything that 
will jeopardize universal service support.
    Mr. Dingell. That is precisely the point I make. Yet you 
are blindly continuing without the vaguest idea of whether or 
not you are going to impair this fund or not.
    Mr. Kennard. That will not happen, Mr. Dingell. We will not 
impair universal service.
    Mr. Dingell. I have dealt with folks for years who have sat 
in the well and told me, trust me. And way back when I was 
young and dumb and green, I did. But I have gotten smarter.
    Reed Hunt moved exactly the opposite direction. Did he not? 
He increased the X factor. And he didn't even know whether it 
was in the subsidy or not. Did he?
    Mr. Kennard. I can't answer that question now.
    Mr. Dingell. Are you going to repeat, replicate his error? 
I wonder if the other Commissioners have a comment that they 
would like to make----
    Mr. Tauzin. The Chair will ask, yes, if any of the other 
Commissioners wish to respond. Any of the other Commissioners 
want to jump in here?
    Mr. Kennard, any final statements?
    Mr. Kennard. Yes. I just wanted to point out in response to 
Mr. Dingell's question. I don't know whether he will find this 
responsive or not. But, interstate access usage is going up in 
this country, and so we can offer--we can take some comfort in 
the fact that universal service is not going to be jeopardized 
while we proceed with this restructuring, which we are working 
very hard to do with our colleagues in the States and, really, 
all of the affect industries.
    Mr. Dingell. The answer is you don't know.
    Mr. Kennard. Nobody knows, Mr. Dingell.
    Mr. Dingell. When will you know? And when you know, what 
will you do?
    Mr. Kennard. As soon as I know, you will be the first to 
know, I assure you.
    Mr. Tauzin. With that behind us, the gentleman's time has 
expired. We have beaten this X factor horse to death.
    Mr. Kennard. I beg your pardon.
    Mr. Tauzin. I think we beat this X factor to death. I think 
we'd better move on. Let's take about a 40-minute break. Let's 
get back at about 1:40. That will give everybody time to have 
lunch. The committee will stand in recess.
    [Brief recess.]
    Mr. Tauzin. The committee will please come back to order. 
While members are returning, let me do an exercise that might 
be useful. Let me list a couple of--you know, one of the 
things, Mr. Chairman, I have asked members of the industry to 
begin doing, both the regulated industry and the unregulated 
side of the communications, is to begin putting together ideas 
and suggestions for us as to what direction reform ought to 
take, some ideas.
    I want to list a number of things, and before the day is 
over I would like you to think about this and maybe comment on 
each one.
    I'm going to list, in fact, a list of 8, 10 approaches that 
have been widely, broadly suggested to us. One is that ending 
the FCC's role--somebody called it the Department of 
Redundancy--that is, doing the same things other agencies are 
required to do. Some of you mentioned that.
    Some kind of a process that would, I know Mr. Huber talked 
about it, level the playing field for different players in a 
time of convergence. How do you get to a more level playing 
field for all the players in a time of convergence consistent 
with deregulatory approaches?
    A third one we hear a lot about is ending the let's-make-a-
deal philosophy. That is, that when people come to the 
Commission for licenses or merger approvals or something that 
all too often they find the process held up in sort of let's 
make a deal, what can you do for us that we would like you to 
attitude. We hear a lot of that. And I would like some of your 
comments about why you think that is either appropriate or 
inappropriate for a regulatory Commission to be doing, 
particularly a Commission that is migrating over to an 
enforcement type agency.
    The question of whether or not there ought to be a 
presumption in favor of forbearance over regulation--Mr. Huber 
mentioned that--as opposed to a presumption that you have to 
get permission to do something as a part of the re-missioning 
of the agency.
    Mr. Dingell has talked about ending the uncertainties in 
the implementation of universal service. What can we do in 
terms of reform that would help get us to that point sooner. I 
realize that may be limited, but what if anything we can do.
    The using the biennial review to eliminate outdated and 
outmoded regulation. That is, actually requiring the FCC to use 
that biennial review process to do that.
    You have all mentioned the modern, forward-looking agency 
structure. Mr. Powell, you particularly expressed concerns 
about whether or not it would really get anywhere. We would end 
up with multiple variations of the same structure under new 
headings. If you can all comment to us on what kinds of new 
structures would be worthwhile pursuing, and which would not.
    Another I think some have alluded to, defining a framework 
for the worldwide web. That is, making some rules that would 
apply to it now, some general rules that would apply to all the 
systems that might come into play.
    Deadlines for deliberations, instead of the open-ended 
deliberations. Some outside time limit to get something done, 
particularly when an applicant is before the agency. We hear 
that a lot from people who are complaining to us about current 
procedures, that if they only knew at some point there would be 
a decision, that there would be some, perhaps, more certainty 
in the marketplace.
    Sunsetting. Whether or not any forms of sunsetting of FCC 
rules, absent an affirmative finding, that the requirement is 
necessary to serve the public interest. That is a common 
element used in reform in many legislative areas. I know that 
was a very popular sort of tool used in reforming executive and 
legislative branches as I was coming up. You sunset unless you 
can affirmatively say that this is worth doing again, and for 
this new reason.
    Those are all concepts that perhaps if you would think 
about and as we further explore this, either now or later, if 
you could comment to us on them.
    Mr. Pickering is recognized from Mississippi.
    Mr. Pickering. Thank you, Mr. Chairman.
    Mr. Chairman, I have a few questions. First, the core 
mission of the Telecommunications Act of 1996 was basically to 
open up all markets and remove all barriers, but the critical 
mission was to open local and then have the subsequent entry of 
the regional Bells and telephone companies into long distance. 
As we talked about earlier, we are seeing emerging competition, 
and are seeing, I think, good developments in the marketplace 
in technology and alliances and partnerships. I believe that we 
are poised to have this year as the breakthrough year.
    We talked about earlier, we hoped for it to be sooner, but 
as we go into the third-year anniversary, my question for you 
is where do we stand on any 271 agreement, a breakthrough that 
would set a blueprint and, hopefully, would be a catalyst to 
expedite competition across the country in local and long and 
in the convergence that we hope follows from that?
    Mr. Kennard. Well, as we have talked before, Congressman, 
we don't have a 271 application pending before us, but we 
anticipate that we will have applications later this year. I am 
very encouraged by the progress that we are seeing in some of 
the States that have 271 proceedings ongoing, like in Texas and 
in Georgia, New York, California. And I think we went through a 
process, which you alluded to during the first few years after 
the passage of the act where a lot of companies were hedging 
with the litigation. They had, sort of, one eye on the courts 
and the other eye on the FCC.
    And I think that as these legal issues get resolved, I am 
seeing a change in attitude among some companies that they 
really want to roll up their sleeves, do the hard work of 
opening these markets, and making the 271 process work. So, 
even though we don't have an application pending before us, I 
do believe that progress is being made and will be made this 
year.
    Mr. Pickering. Let me just encourage and emphasize. I think 
to a certain degree, our credibility, Congressional credibility 
in the passage of the act, and the expectations that we would 
see greater progress, faster progress than we have seen to 
date, the FCC's credibility is, I think, at stake in this year, 
the third year, to see progress and a breakthrough on a 271.
    And so I encourage you and all the Commissioners in the FCC 
to work closely with the States and all competitors and 
participants to see a 271 agreement hammered out. And I hope it 
can be done in this year.
    And I hope that we see the blueprint that will then be 
established for the rest of the country and the market forces 
that would hopefully replicate, or cause replication, quickly.
    Do you think that can be done this year? Do you predict a 
271 breakthrough this year?
    Mr. Kennard. Well, it is hard to predict, although, I'll 
say again, I think that we are seeing some encouraging 
progress. Folks are really focusing on it in some States. But I 
think it is important to note that the, at least in my view, 
the end in itself should not be to grant a 271. The end, and 
I'm sure you share this concern because we have talked about 
it, is to open the markets. That should be the goal because 
that is how the public is ultimately served.
    Mr. Pickering. I agree. But I do hope that everyone has the 
certainty of what is required and that we do see, in those 
states that you mentioned, possible breakthroughs this year.
    Let me move on to the FCC merger review process, review and 
approval process, with first, Bell Atlantic-Nynex, MCI-
Worldcom, now with Ameritech. What is the average time for 
those approvals in the merger process?
    Mr. Kennard. Well, Congressman, as you know, the FCC 
approves many, many mergers in the ordinary course. And, in 
fact, since the act was passed, we have literally approved 
hundreds of transactions, where companies have come together 
and combined and needed our approval. The time varies depending 
on the complexity of the transaction.
    In an unopposed, routine situation, we approve--broadcast 
transactions often go through in 2 months, unopposed. Some of 
the international deals go through that quickly.
    The average time is about 6 months. In the extraordinary 
case, where you have a hotly contested merger, where you have a 
huge record, like the Big Bell mergers, it takes much longer 
because you have important market structure issues to deal with 
and you have just a very voluminous record. So those can take 
longer than 6 months.
    Mr. Pickering. As you know, in the Telecommunications Act, 
we repealed 221 (A), and we tried to separate--we foresaw the 
merger of some of the cable, telco issues, and we wanted to 
give Justice Department the antitrust review. Now we maintained 
public trust standard review for mergers as they went forward. 
And this goes back to the same question of stability, 
predictability, and certainty for markets and investment.
    And if we come to a merger process, and it is long and it 
is drawn out, then that can have a negative effect as we 
position ourselves to have the companies partner-ally, deploy 
networks, and the uncertainty of what is the standard at the 
FCC. What is the time?
    I think it does a disservice. And we need to find a way of 
possibly to have a certain timetable. All through the bill, we 
set timetables for the 271, for the regulatory process, for the 
rulemaking process. Would you support a 180-day, a 120-day 
requirement for all merger review at the FCC?
    Mr. Kennard. I think we would have to look at--the short 
answer is yes, but. And I think the but is an important one 
because I think we would have to look at lots of factors that 
play into the merger-review process, like the timing of the 
Justice Department review, the timing of other regulatory 
approvals, not only State approvals but also, increasingly, 
approvals from other jurisdictions outside the United States. 
And what we have tried to do is coordinate with these other 
entities so that that we can make the process work not only 
well for us at the FCC, but also work well for the companies 
and the parties involved.
    I definitely share your concern that we could, we need to 
make this process work better so that it is not duplicative of 
other Government agencies. And I would love to work with you on 
that.
    Mr. Pickering. Mr. Chairman, I know my time is up, could I 
ask just two quick questions?
    Mr. Tauzin. Without objection.
    Mr. Pickering. And just to follow up to Commissioner 
Powell, do you have any thoughts, you mentioned in your 
testimony a possible streamlining of that process, or clearly 
delineating the responsibilities of the Justice Department and 
the FCC, do you have any thoughts on the merger-review?
    Mr. Powell. Well, Congressman, I would certainly love to 
work with you in more detail to flesh out proposals, but I will 
give you a few thoughts.
    I think it starts with determining what you believe to be 
the unique expertise of the respective agencies that are 
currently playing a role in merger review. The case is often 
eloquently made that the Federal Communications Commission has 
some unique expertise that add value to the merger 
considerations when a telecommunication company is at issue.
    And I suspect you wouldn't argue with that. Also, there are 
particular policy functions that cannot be considered 
appropriately under the antitrust laws. For example, the impact 
on diversity in the context of a broadcast merger, for example, 
would never be considered in an antitrust analysis, or 
universal service, or whether it is a circumvention of section 
271.
    But often if you look in detail, a substantial portion of 
the merger review, in fact, is a duplication of classic 
horizontal or vertical merger analysis, applying the same 
precedents, principles, and guidelines applied by the antitrust 
division. I personally have come to believe that a great deal 
of the marginal value of that full-blown analysis is not 
justified by the costs imposed. That is two sets of documents 
often being filed at two different agencies, two separate 
arguments.
    I think that there is room to work to tailor the value of 
our role to the value that we do bring and nothing more, and 
try to limit those areas of duplicating competitive analysis 
for which we, in my opinion, are not particularly trained or 
uniquely skilled to do, certainly as compared to the antitrust 
authorities.
    I also, with respect to your question about timeframes, I 
would actually take a slightly different tack than the 
chairman, maybe to your surprise, and say, ``no but.'' I think 
that what you might consider playing with two variables, time 
and permission to continue--it's not unlike the Hart-Scott-
Rodino process in antitrust. I could imagine a proceeding that 
I know is partly contemplated in the Kohl-Dewine legislation in 
the Senate on this issue, in which after a short period of 
time, a quick look, it would require the vote of the full 
Commission to continue the investigation.
    You might have additional milestones further out. I do get 
nervous in antitrust analysis, having previously been an 
antitrust lawyer, of setting some prophylactic ``It's over'' at 
6 months no matter where you are because I think you 
potentially have dangerous or anti-competitive mergers that 
only by virtue of time you begin to gamed by the companies 
because they know you are running out of clock. And I think 
that if you trust at all, you should allow some majority of 
Commissioners to be able to say we think there are enough 
serious issues to continue the evaluation.
    But I think the idea of Hart-Scott-Rodino-like milestones 
of which after 30 or 45 days, you would be required, the 
bureaus would be required, to submit to the Commission a 
recommendation on continuing this investigation and require us 
to take responsibility for its continuance.
    Mr. Pickering. Basically, I take it that we can work on 
both the time and the scope and look forward to working with 
the chairman on this issue. Just one small editorial comment in 
the spirit of Hershey, which is this weekend, and in the 
principles that are outlined in the Telecommunications Act of 
open and non-discriminatory access. I would hope that with all 
of your Commissioners, Mr. Chairman, that you would give open, 
equal access, non-discriminatory access, to all information, to 
all of your Commissioners.
    And with that, that is my only editorial comments.
    Mr. Tauzin. Well said. The Chair will now recognize the 
gentleman from Chicago, Mr. Rush.
    Mr. Rush. Thank you, Mr. Chairman. To the Commissioners, I 
want to, again, join with my other colleagues in expressing my 
sincere appreciation for your coming over here to engage us in 
this dialog that we have been involved with for most of the 
morning and into this afternoon. I really appreciate all that 
you are doing, and, I tell you, some might not share this 
opinion, but, in my humble opinion, this is one of the best 
Commissions that we have had. I think that you all are doing a 
fantastic job under some really difficult and trying 
circumstances.
    And I want you to know this is one Member of Congress who 
appreciate all that you do because I can see progress. My 
constituents in my district, the First District in Illinois, 
they see progress. And I just want you to know I would just ask 
you to keep up the good work. You are doing a fantastic job.
    Problems have not been solved. There are still problems. 
But from all indications from my perspective, I see some real, 
sincere efforts to solve the problems, to re-focus the FCC on 
the issues that face the American public. And I again want to 
say thank you so very, very much for the work that you are 
doing.
    I read the chairman's testimony and I think that it is a 
significant step in the right direction. And in my estimation, 
it puts a balanced framework before the Congress, before the 
American people, and for the stakeholders. It will allow us all 
to have a role in determining what the FCC will look like once 
this reorganization takes place.
    I have one question, and that is, at relates to the 
telecommunications areas and concerns in my district, which is 
an urban district. In 1996, the Telecommunications Act was 
supposed to deliver certain capacities to us and certain 
capability to low-and moderate income urban areas, and I see a 
problem because the results have been somewhat disjointed. Of 
course, with the universal services and also with the E-Rate, 
there is some significant attempts to equalize and provide some 
equity in terms of access to the Internet.
    I am somewhat frightened and somewhat concerned about the 
latest developments in terms of the telecommunications industry 
in terms of this advanced telecommunications capability. And in 
too many of our neighborhoods and communities throughout this 
Nation, we don't have the basic access to telecommunications, 
to the technology. And now there is a part of this Nation, the 
other America, is moving toward high-speed Internet access.
    They are moving--they are light years ahead of some places 
in my district, and I'm just, Mr. Chairman I want to ask you, 
what methods and what approaches are we, are you engaged in to 
try to bring all of America up to par, bring it up to standard, 
one standard for all America as it relates to 
telecommunications technology? What are you, how are you 
working to correct this inequality? And what else needs to be 
done in terms of correcting this inequality?
    Mr. Kennard. Mr. Rush, I think you have just stated very 
eloquently what I believe to be one of the greatest challenges 
that confronts all of us as we move into the information age, 
making sure that all Americans are a part of it. And there is 
lots that we can do. We can, first and foremost, do what we are 
doing to promote competition because we know that competition 
does serve consumers best, it lowers cost, it promotes 
innovation, and it allows more Americans to get services 
faster.
    But we also know that competition alone won't solve this 
problem. That is why we have to have a universal-service 
subsidy mechanism in place that works. That is the role of 
government. That is why I believe that is one of our core 
functions.
    And I also believe we have to work with industry. In fact, 
when AT&T and TCI first proposed their merger, and they came in 
to see me to talk about it, one of the things I asked them is, 
what are you doing to make sure that these advanced services 
that you are promising the country reach all of the country, 
particularly our lower-income areas. And they actually brought 
in maps, including a map of Chicago, and they committed to me 
that they had upgraded the cable systems in the city of Chicago 
for the rollout of advanced services and that this will happen 
in all of Chicago.
    That was a commitment they made to me, and I am hoping that 
we can work together to make sure that they fulfill that 
commitment.
    Mr. Rush. Mr. Chairman, I have no additional questions.
    Mr. Tauzin. Thank my friend. Also want to point out that at 
least in lots of parts of the Chicago area there are 
competitive wires offering cable service now which has your 
part of the world ahead of a lot of our parts of the world, 
Bobby. I hope--yes, you are doing pretty good in that regard.
    The Chair recognizes the gentleman from Florida, Mr. 
Stearns.
    Mr. Stearns. Thank you, Mr. Chairman. Mr. Kennard, Chairman 
Kennard, the Commission continues to work on deciding the 
technical standard for CALEA, compliance. Can you or the 
committee provide us any kind of update? When will the standard 
decision will be announced?
    Mr. Kennard. Certainly. We have been working hard on that. 
We put a notice out, I believe it was late last year, a notice 
of the proposed CALEA standards, and we scheduled to have a 
decision this spring.
    Mr. Stearns. Okay. When we gave you the Telecommunications 
Act, the Commission itself--I don't mean you personally--and 
then we gave you the budget agreement in 1997, within all of 
these were stipulations about the LMA's. In fact, in subsection 
G of section 202 of the Telecommunications Act report language, 
Congress specifically instructed the FCC to grandfather LMA's 
currently in existence upon enactment of this legislation.
    I guess the question is, why hasn't the Commission, why 
have you refused to act based upon direct orders from Congress, 
and I think this goes to several pieces of legislation, which 
included that language. And we are just puzzled by why you 
still don't seem to act, and in fact you are in direct opposite 
to what we requested.
    Mr. Kennard. Well this proceeding is teed up for action. 
Indeed, we were poised to move late last year. There was some 
concern about some of the proposals, and we felt we needed to 
do more outreach with the industry and with Chairman Tauzin and 
other members of this committee. That proceeding is still teed 
up and we anticipate this spring as well on that.
    Mr. Tauzin. If the gentleman will yield?
    Mr. Stearns. Sure.
    Mr. Tauzin. I think what the gentleman is asking, though, 
is both the budget act and the Telecom Act both included 
specific language that the LMA's should be grandfathered.
    If the gentleman will let me ask the question?
    Mr. Stearns. Yes.
    Mr. Tauzin. Is the Commission going to follow the 
instructions of Congress? And if not, why not?
    Mr. Kennard. Well, Mr. Chairman, we may have a disagreement 
about precisely what that language means on grandfathering, 
although I----
    Mr. Stearns. Reclaiming my time. I think you mentioned to 
Sen. McCain regarding local marketing agreements--you told Sen. 
McCain last year you had a different definition of 
grandfathering. So maybe the key problem here is--you tell me, 
what is your definition of grandfathering is?
    Mr. Kennard. Well you know, the precise statutory language, 
the directive in the 1996 act, I think the plain reading of 
that statute gives the Commission discretion. Now the report 
language is different, and I'm not saying that we are going to 
exercise that discretion, but I will say that on the legal-
technical point, we may have a difference of opinion on that.
    Mr. Stearns. We have a difference of opinion on what 
grandfathering is?
    Mr. Kennard. No. On what the----
    Mr. Stearns. Yes.
    Mr. Kennard. There seems to be a conflict between the 
statutory language and the 1997 budget act legislative history.
    Mr. Tauzin. Would the gentleman yield?
    Mr. Stearns. Sure.
    Mr. Tauzin. Is there any ambiguity in the report language 
of both the budget act and the 1996 act that says the 
Commission shall grandfather LMA's?
    Mr. Kennard. There is no ambiguity in the budget act 
legislative history, and there is no ambiguity in the statute, 
but they don't say the same things, precisely the same things.
    In fact the Commission addressed this----
    Mr. Stearns. Why don't you take the language in the Telecom 
Act and act? In other words, why don't you take the language in 
the Telecommunications Act, I mean, basically you are just an 
exemption based upon what circumstances that pre-exist. So 
exempt them all.
    We have had to come back and do this again and again.
    Mr. Kennard. That is clearly one of the things we are 
considering doing, and we will be acting on that soon.
    Mr. Stearns. Okay. I urge you because it has been 3\1/2\ 
years or so and seems as though----
    Mr. Tauzin. The Chair will be generous, will the gentleman 
yield again?
    Mr. Stearns. Sure. Go ahead.
    Mr. Tauzin. Let me try to make this case. If there is any 
ambiguity in the statute, there are pretty clear instructions 
as to what Congress meant in the language of the report. Why 
are you lawyering us to death on this thing? Are you hearing 
anything other than what the report says from Congress, as to 
what we meant when we wrote the act? Has anyone written you? 
Have you gotten a lot of calls from Congress saying don't 
grandfather LMA's?
    Mr. Kennard. There is not unanimity of opinion on this 
particular provision in the statute among all Members of 
Congress.
    Mr. Stearns. Well, if Congress passes a bill and we send it 
to the President and he signs it, that seems pretty unanimous 
in our decision. And we do it twice. I don't see how you could 
come here and say there doesn't seem to a unanimous opinion on 
this. Doesn't Congress have the right to act by majority vote, 
pass legislation, the President sign it, give it to--aren't you 
under orders to enforce it?
    Mr. Kennard. I guess, Congressman, that is not exactly what 
I am saying. What I am saying is that there is a discrepancy 
between the legislative history of the budget act and the 
statutory language of the 1996 act.
    Look, I don't want to lawyer this to death. And I don't 
want to get into a detailed exposition of statutory 
interpretation. I will say, though, that I think we need to 
preserve the point that there is a discrepancy between that 
language. As a lawyer, it is an occupational hazard. I have to 
point that out.
    But we understand your point of view on this particular 
provision, and we will be moving ahead on it this spring.
    Mr. Tauzin. Would the gentleman yield again?
    Mr. Stearns. It is a broader problem, Mr. Chairman. And let 
me try to state it. The broader problem is--I think Mr. Huber 
spoke about it, some of you spoke about it in terms of re-
authorizing and reforming the FCC, the FCC too often finds 
reasons not to follow the will of Congress. And granted you may 
find that there is some wiggle room in there, but the will of 
Congress, and particularly those who wrote the statute, pretty 
well expressed in the report language. There is a unanimity of 
expression from the folks who wrote that language as to what 
they meant.
    They meant for these LMA's to be grandfathered. Pretty 
clear. I mean, yes, you can find some wiggle room if you want 
to, but the broader question is why does the FCC do that? Do we 
need to change some laws so the FCC doesn't have this authority 
to go out and make policy that is directly contrary to what is 
clearly the intent of the folks who write the law and send it 
to you to enforce it?
    I mean Harold made a great statement about not wanting to 
tell us how to write the law, that his job is just to enforce 
it. That is pretty nice. Why isn't that the rule at the 
Commission, particularly in a case where it is so very clear 
what the authors of the legislation mean when they spell it out 
twice in two statutes in the report language? I mean, why are 
we having this legal argument over this?
    Mr. Kennard. Well, I take your point, Mr. Chairman. I guess 
the--whenever the Commission addresses issues of statutory 
interpretation, it is not that we are just doing this to 
frustrate your will, it is because if we don't raise these 
issues and think them through carefully, people will raise them 
in court. And that is where we get into trouble in the Judicial 
Branch. So----
    Mr. Tauzin. Will the gentleman yield again? I will be 
generous if the gentleman wants to proceed.
    But if you say you have discretion, and that is your legal 
conclusion, and if there is language in the report language 
from Congress saying do this. Who are on earth is going to win 
a battle in court against you that you used your discretion and 
did what Congress asked you to do here? Who on earth is going 
to win that legal battle?
    Why would any lawyer advising you say, watch out, you are 
going to get sued on this one?
    I mean, that is hard to follow, Bill.
    Mr. Kennard. I take your point on that.
    Mr. Tauzin. The gentleman may proceed.
    Mr. Stearns. Let me just finish up here, Mr. Chairman.
    Chairman Kennard, the D.C. Circuit Court recently 
invalidated the FCC's affirmative action rules as a violation 
of the Constitution's equal protection clause. Yet, I recently 
read that the FCC is considering adopting new affirmative 
action rules, notwithstanding the court's Constitutional 
ruling. And I understood that one of your legal bases for doing 
this is you are relying upon language in a conference report 
accompanying the 1992 cable act.
    And I guess the question is, is that true?
    Mr. Kennard. Well, certainly in the 1992 cable act Congress 
did pass legislation codifying EEO rules in the statute. I 
don't know what you are quoting from and what we are relying 
on, but I will tell you what we are doing with the EEO rules.
    Mr. Stearns. Sure.
    Mr. Kennard. The U.S. Court of Appeals did invalidate the 
Commissions rules as applied to broadcasting. The Commission 
revisited those rules in the wake of that court decision and 
put out a proposal to modify the rules to address the concerns 
of the court.
    It was a view of the majority of the Commission that the 
rules are important and that the Commission should try to 
restructure the rules to address the concerns of the court. And 
that is what we are doing.
    Mr. Stearns. I was just trying to show how you are using 
accompanying language in a Congressional report to invalidate a 
D.C. Circuit Court. I think what I am suggesting, and the 
chairman and I are on the same track here, we are trying to 
show you how you go to Congress when you want to go ahead to 
invalidate a District Court ruling, you will use language from 
the report, and then when we instruct you twice dealing with 
LMA's, you are sort of saying, ``Oh, we can't go forward 
because there seems to be confusion between the budget act and 
the Telecommunications Act.
    It is not necessarily asking for an answer, but I am just 
saying that the feeling we have here is that you folks are 
grasping for anything you can to push a different agenda than 
from which Congress is trying to instruct you.
    And so we submit that the case that Chairman Tauzin and I 
have brought forward dealing with the grandfathering of LMA's 
is clear example where you are not doing what Congress is 
asking you to do, understanding grandfathering. The definition 
is very simple.
    And now you say you are going to do something in spring, 
but we have brought this before and there just seems to be 
waiting and waiting on this issue.
    So, Mr. Chairman, is there anything you want to add 
certainly. I think----
    Mr. Tauzin. I think you covered it. Thank you.
    Mr. Stearns. Okay. And I thank the chairman.
    Mr. Tauzin. Thank the gentleman. The Chair recognizes the 
gentleman from Illinois, Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman. This has been very--a 
good hearing and very educational. Mr. Chairman, I will yield 
to the opposite side.
    Mr. Tauzin. I don't think the gentleman has gone yet at all 
on the first round? That's right.
    Mr. Shimkus. Correct.
    Mr. Tauzin. On the first round. That's right. So we joined 
through the first round. I'm sorry.
    No, I understand. I was answering the gentlelady's request. 
We are still on the first round. If the gentlelady will allow 
me, Mr. Shimkus is recognized on his own time.
    Mr. Shimkus. This has been a good hearing. I know it is 
kind of like the Bataan death march for many of us, but we are 
learning and we are getting some good issues out on the table. 
I am glad that my colleague from Florida went first because I 
am pretty sympathetic. I want to keep my focus on the future 
restructuring of the FCC, but I just want to associate myself 
with the comments of the chairman and my colleague from 
Florida. I used to teach government and politics in high 
school, and this is a very simple case study of why we have to 
return time and time again and continue to rewrite laws based 
upon the Executive branch reinterpreting Congressional intent.
    I don't think there is a clearer example than what the 
gentleman from Florida brought up. Pretty clear, 
straightforward, a non-lawyer can understand it, 95 percent of 
the American public can understand it. We ought to just fix it, 
and we ought to comply. But I appreciate my colleague bring 
this up. It has fired me up, and I didn't want to be fired this 
late in the day.
    I do want to focus on a kind of macro issue and a micro 
issue. Macro is going back to the future of the FCC, going back 
to your three categories, consumer protection, universal 
services, spectrum management. Mr. Huber in his comments talked 
about an area of high-speed digital system. And really, I 
think, from the layman's terms of taking all the analog systems 
of broadcast, telephone, and looking at the high-speed digital 
system, which I would think would be another sub-category, if 
you were to accept his model--I guess the question is, does 
that position make sense in a future of the FCC?
    Mr. Kennard. I think it does in this respect. I agree with 
Mr. Huber that the world is changing, the world is changing 
very fast. The FCC has got to change with it. We talked earlier 
about some of the statutory constraints. And I look forward to 
working with this committee on addressing some of those. And 
there are also regulatory constraints.
    I guess I would reiterate something that Commissioner 
Powell said a little earlier. And that is that, to paraphrase, 
we shouldn't reform just to reform. We ought to have a clear 
sense of what our mission is. I get a little bit concerned when 
I hear people talk about creating these sort of super bureaus 
at the FCC because I don't know if that is going to solve the 
problem, because a lot of these issues sort of go beyond 
structure.
    So I am not sure if that directly answers your question, if 
not----
    Mr. Shimkus. Well, what I also have--I talked to 
Congressman Oxley earlier in this day because I now serve on 
his subcommittee on the financial services, and I think the 
debate--I shared it with him to make sure that I was, that my 
thought process made a little bit of sense. And the process is, 
if you look at--the debate we are having is, where is the 
future role of your agency? And is it a regulatory agency? Or 
will it be an enforcement? And how do we move there?
    And I think we have a great example of the SEC, who is 
really more enforcement oriented. And that is where I see the 
future being, especially as you address the issues of 
competition, as being really another category that you thought 
was critically important. So I would--is that a proper analysis 
of the future: more of enforcement than regulatory?
    Mr. Kennard. Absolutely. Absolutely. One of the things that 
I did last year is, in consultation with my colleagues, 
announced our plans to create an enforcement bureau. And this 
is more than symbolic. We really do want to change the 
enforcement ethic at the FCC. It is my view that as these 
markets become more competitive, we have to have an enforcement 
mechanism that makes more sense and that allows us to get out 
of the business of being the gatekeeper, deciding who gets in 
which market and who can compete where, but rather to write the 
rules of competition to make sure that the real fundamental, 
pro-competitive rules are in place and then enforce them 
aggressively and swiftly.
    So I do agree with you. The philosophy should shift toward 
enforcement.
    Mr. Shimkus. Mr. Chairman, if I may?
    Mr. Tauzin. The gentleman may proceed.
    Mr. Shimkus. On the competition side, and not just with the 
merger analysis, but also on all your proceedings, I think it 
would be helpful in the competitive aspect of something that 
you support is that there be--I mean we are in March Madness 
time--that there be a shot clock of some sort so that everybody 
on board knows, especially in proceedings, how long they can 
expect to wait or not to wait so that the investors can get 
lined up, the process can move forward.
    I am a former Army officer. You know, when you make no 
decision, that is a decision. If you delay a decision, that is 
a decision. And it throws the future in peril by delay. I 
think--I believe that our committee would clearly be, a large 
percent of us would want to encourage you to move proceedings 
along at a much greater pace. And that is a comment on my part.
    The last point I will make is, micro, the E-Rate. You have 
heard my complaints about it before. You put us in a terrible 
bind. Those of who are tax cutters and want to address the E-
Rate, we are in a bind between being a tax-cutter and against 
schools, or for schools and for tax increases.
    I want to publically state my support for my chairman's 
position, which he will formally take, I hear, in a week to 
address this problem that we have with the E-Rate and do it in 
a proper way when he releases his bill. I would like to have 
your comments on that position.
    Mr. Kennard. Glad to.
    Mr. Shimkus. I yield back.
    Mr. Tauzin. Thank the gentleman very much. The Chair 
recognizes the gentleman from Texas, Mr. Green, now.
    Mr. Green. Thank you, Mr. Chairman. I am glad my colleague 
from Illinois brought that up because the E-Rate, the way it 
was originally handled, and thank you for correcting it, but 
before I came to the Commerce Committee, I served on the 
Education Committee, and obviously the E-Rate and the uses of 
those funds are important to my schools in Houston, Texas, 
getting an urban district.
    But Mr. Shimkus, one of our colleagues, Congressman Klink 
from Pennsylvania, has a bill that would eliminate the E-Rate 
and cut the Federal excise tax. So our rate-payers would 
actually save money then. And that is a bill--I know I am a co-
sponsor of--and so it is something we might want to consider in 
this committee.
    But let me go to some of the other questions because I 
think you have heard about the E-Rate, and I am glad it has 
been corrected because it is awfully important to urban areas, 
and even rural areas, particularly in urban areas that do not 
have the resources to wire schools, even though we work with 
our local phone companies.
    A few weeks ago, the Commission ruled on ISP traffic in 
reciprocal compensation agreements. And in the ruling, you said 
that ISP traffic on the whole is interstate in nature, and that 
set off lots of letter-writing campaigns, but not that many, 
mainly an e-mail campaign.
    Mr. Kennard. That's right.
    Mr. Green. And saying that we are going to make ISP calls 
long distance. And in my opening remarks, I mentioned it. And 
if you could give me your assurance, one, that the FCC will not 
take those steps to make ISP calls a long distance call, and 
does your ruling open the door to assessing an ISP call as a 
long-distance call because if it is, and if the provider has to 
pay it, then you and I know that the ultimate Internet user 
will have to do it.
    And I know if we have been bombarded on this committee, I 
can imagine you have too. And so if you could address that.
    Mr. Kennard. In the wake of that decision, Congressman, I 
started getting about 500 or 600 e-mails a day. So I am very 
familiar with this particular issue. And the message that we 
conveyed back to those folks who sent us e-mails is that, rest 
assured, we are not interested in changing the way that people 
use the Internet. One of the reasons why the Internet is 
growing so fast is because people can use the Internet for a 
flat rate, it is treated as a local call. Nothing that we did 
in our decision recently is going to change that.
    And I know that there is a unanimous commitment from this 
Commission not to impose any sort of permanent charges on the 
use of the Internet.
    Mr. Green. For long-distance calls?
    Mr. Kennard. Yes.
    Mr. Green. That is the fear.
    Mr. Kennard. Yes. That is what I mean, long-distance 
charging.
    Mr. Green. And I also, you know, I know the 1996 act that I 
wasn't on the committee for, also, I understand the language in 
there, made sure that that is not happening.
    But as my colleague, my ranking member Dingell, sometimes 
the statutes may not be interpreted the same way at the 
Commission as they are here. Let me go to my next question. I 
appreciate that, and believe me, we will follow up with our 
constituents, who have been concerned about it.
    The FCC released the property record audit of the Bell 
operating companies which said that these companies could not 
locate over $5 billion worth of equipment. And I know Chairman 
Tauzin and my ranking member Dingell sent you a letter 
requesting answers to a series of questions about the audit 
process, and I don't know if you have responded to the letter, 
and if you have, if we could get a copy of the response. Again 
the concern I have, at least it is being played out in the 
newspapers and the media, that the property record audit, the 
Bell operating companies did not have the opportunity to 
actually show that they have these assets, and if you could 
just address that.
    Mr. Kennard. Sure. First of all, we did respond to the 
letter that was sent to us by Chairman Tauzin and Mr. Dingell. 
And I would be happy to get you that response.
    Second, the Bell operating companies did have lots of 
opportunities to work with the FCC in the many months leading 
up to the FCC's decision to release the audit. In fact, for 
approximately a year, the FCC staff worked closely with 
auditors from the Bell company so that they could understand 
what we are doing and we could respond to their concerns. But 
they will have even more chances because the release, when the 
FCC voted to release this report, we did so without drawing any 
conclusions about what the report means. In other words, we 
didn't take enforcement action, we didn't indicate what the 
implications of this would be for rate-payers.
    And so we hope to have yet another opportunity, not only 
for the Bell companies, but for other people in the 
marketplace, and particularly the State regulators who are very 
interested in this data. In fact, the National Association of 
Regulatory Utility Commissioners passed a resolution asking the 
FCC to release this report so that they could have the benefit 
of the information in it.
    And so there will be opportunities for lots of people to 
comment on it further.
    Mr. Green. And so the FCC--did you consult with the 
independent public accounting firms that do the annual audits 
for the Bell operating companies?
    Mr. Kennard. Did we what? Did we meet with them?
    Mr. Green. Was there the opportunity to consult with the 
independent accounting firms that perform the financial audits 
for the Bell companies?
    Mr. Kennard. I believe so, although I wasn't involved in 
those meetings. So I am not exactly sure. But I know that I 
directed the staff to meet with the Bell companies and their 
auditors to get their perspective on this audit report. Whether 
they were independent auditors or in-house auditors, frankly, I 
don't know, but I could certainly find out.
    Mr. Green. Okay.
    And, also, you mentioned that the local--like in Texas we 
have the Public Utility Commission--the continuing property 
records I am sure will have an effect on the consumer rates and 
also the access charges that may be set in local jurisdictions, 
and I guess even--so that has an impact.
    Mr. Kennard. Well, that is an issue that will have to be 
vetted in the public record. Again, we haven't drawn any 
conclusions as to how this affects access charges or rates, or 
compliance with our rules. We just wanted the information out 
there so that the Bell companies could have yet another 
opportunity to review the information and that members of the 
public, consumer groups, State regulators, competitors, will 
have access to that report.
    Mr. Green. Okay. Thank you, Mr. Chairman. I know we have a 
vote on.
    Mr. Tauzin. Thank you very much, sir. The Chair recognizes 
himself. We are going to go a little while longer, take a break 
for these votes, and come back. The problem is, we have a 5-, a 
15-minute, and a 5-. So we may need to come back at 3:30.
    Let me quickly ask you a couple questions, Mr. Chairman. 
And I wanted to follow up on something Mr. Pickering was doing 
regarding these mergers, time limits on them.
    Ms. Eshoo. Mr. Chairman, I hate to do this, but I have been 
here since 10:07 this morning. Can I just submit my questions 
to the chairman to be responded to in writing so that I don't 
have to stay any more? I mean, it has been instructive, but 
this has really been a long haul. With your permission, I would 
like to do that.
    Mr. Tauzin. Let me ask the gentlelady, has she had a round 
yet with the Commission?
    Ms. Eshoo. No. I haven't.
    Mr. Tauzin. Well, my apologies. The gentlelady is 
recognized right now. Proceed.
    Ms. Eshoo. At this point, I would just like to submit them 
in writing and ask for permission to do that, and ask that the 
chairman respond. Thank you.
    Mr. Kennard. Gladly.
    Mr. Tauzin. I thank the gentlelady.
    What do you want to do? We are going to go another 5 
minutes. We will come back at 3:30
    In regard to what Mr. Pickering was moving on, the question 
of mergers and holding mergers up. We repealed and got rid of 
comparative license renewal and went to auctions for licenses, 
trying to get away from a process where there was a lot of 
green-mailing going on. A lot of people were filing objections 
to licenses, green-mailing individuals, shaking them down, as 
close to blackmail as I have ever seen.
    And one of the reasons we moved to get rid of that process, 
to go to some objective process of re-licensing was to 
eliminate that opportunity. I want to ask you, is the process 
by which the Commission holds up merger applications, holds up 
acquisition applications for licenses, is it leading to the 
same problem? People are filing objections to these mergers. 
People are delaying the Commission's work in these areas. Do 
you sense, do you find, do you feel that there is a chance that 
people are doing this in order to green-mail or legally 
blackmail applicants before the Commission?
    Is this another opportunity for the same problems to 
express themselves as they did in the old licensing 
broadcasters situation?
    Mr. Kennard. I really don't think so. The Commission 
addressed this issue in the broadcast context a number of years 
ago, when the Commission reformed its rules to make sure that 
people couldn't do exactly you described. They would file a 
petition and then hold up a licensee for money or for some 
other considerations. So we scrutinize those petitions pretty 
carefully, and, in fact, under our rules they have to come in 
and disclose what consideration was received in exchange for 
any dismissal of a petition or anything like that.
    I think that, you know, a lot of the--in the current 
mergers on the telcom side, what we are seeing now are 
competitors coming and raising a lot of, you know, fairly 
complex issues about market structure.
    Mr. Tauzin. I am aware of those. I am more concerned about 
these acquisition applications where--there are two concerns. 
Mr. Pickering has raised the one about where it is open-ended, 
where there are no time limits for adjudication, raised the 
concern to make sure that there was adequate sharing of 
information among Commissioners regarding those situations.
    I am raising the concern that it may open the door, these 
open-ended processes, may open the door to people finding it 
convenient to hold somebody up for an illegitimate purpose. And 
I am suggesting that reform in that area may cure that 
possibility, as it did in the comparative license renewal 
situations.
    Second, I am deeply concerned with the notion that people 
who are entitled to relief in an application before the 
Commission may be held up because the Commission may decide 
that we want to hold you up pending a decision as to whether we 
are going to change our rules and regulations, say on an 
ownership issue.
    Is it fair to an applicant who is trying to purchase a 
license or acquire a license and merge to have their rights 
withheld them because the Commission may want to change the 
rules in the future when they are entitled to their remedy 
today under the current rules of the Commission?
    Any one of you. Would you like to respond?
    I see Mr. Powell shaking his head. Would you like to 
respond, Michael?
    Mr. Powell. I will say this, having worked at the antitrust 
division of the U.S. Department of Justice, there is the 
opportunity for what you describe. And I would probably agree 
with the chairman that we are seeing rampant uses of this at 
the moment, but I wouldn't be honest if I didn't say I have 
seen attempted uses of it, modest, but quite frequently.
    Part of the problem is that merger review in an 
administrative agency's structure, is open to the 
Administrative Procedures Act and the kinds of processes and 
requirements that we have to go through that the antitrust 
division does not. The antitrust division insulates itself from 
this by insisting it is a law enforcement agency.
    And I assure you, the DOJ halls are not being walked by 
every opponent of every possible merger review getting 
audiences with Joel Klein. At the FCC, every time someone files 
an ex-parte, every time someone attempts to come in and meet on 
a merger, we generally, our staffs, are required to respond to 
any considerations raised in these contexts or they would be 
accused on review of having not adequately addressed the 
record, et cetera.
    There is an enormous amount of opportunity within that 
structure to abuse and use it for reasons that are, arguably, 
not really merger-specific or are, in fact, an attempt to delay 
or impose predatory conditions on a future competitor. And I 
think that that happens a bit. I think there is potential for 
it to happen a lot. Right now----
    Mr. Tauzin. I understand. I would hope you would be 
watching that all the time. And I am assured you would. I am 
concerned that the opportunity is there.
    Second, do any of you believe you have the right as a 
Commission to deny someone an application because you may 
change your rules later on? Any of you believe you have that 
right? Are applications being held up because you may change 
your ownership rules in the future, to be specific?
    Mr. Kennard. What? I am confident that the Commission 
wouldn't deny an application because of----
    Mr. Tauzin. But you might not take action on it, just 
waiting to see if you are going to change the rules.
    Mr. Kennard. No. Actually, what happens is usually the 
reverse.
    Mr. Tauzin. How do you mean?
    Mr. Kennard. Companies come in and they file an application 
asking for a transaction to be conditioned on the outcome of 
some future rulemaking. And frankly, that has created problems 
at the FCC, particularly in the broadcast area.
    Mr. Tauzin. Yes.
    Mr. Kennard. And that is an area we are trying to get away 
from.
    Mr. Tauzin. I just want to raise an issue, because I think 
as we address the issue of how mergers and applications are 
handled by the Commission, those are concerns I would like you 
to be thinking about and interacting with us on.
    Finally, I think Mr. Dingell did want to do another round, 
but I think I am going to let you go, with his indulgence. I 
think we are just going to wrap it up here.
    Let me just ask one more thing, Mr. Kennard. My 
understanding is the President's budget includes a provision 
that, if enacted, would permit the Commission to strip 
bankruptcy licensees of their licenses even if they were under 
the protection of the bankruptcy court.
    You and I know what this is all about.
    Mr. Kennard. Yes. Of course.
    Mr. Tauzin. This is snuck in appropriations. This is being 
done outside the authorizing committee. And, No. 1, I would 
hope that the Commission is not part and parcel of an attempt 
to avoid the authorizing committee in this area. And, No. 2, I 
would ask you why should the Commission receive more favorable 
treatment than any other creditor, including equipment 
manufacturers, such as Lucent, in these cases? Why should the 
Government, the Commission, get more favorable treatment in a 
bankruptcy?
    And more importantly, why would anyone seek to handle this 
issue in an appropriations level instead of through the 
committee that I hope you respect as much as we try to respect 
your authority.
    Mr. Kennard. Well, of course, as you know, Chairman Tauzin, 
we have talked about this issue many times. And I have always 
sought your input on this particular issue, and will continue 
to do so. But my view is that it is important that the FCC have 
the ability to take licenses, to circumvent the bankruptcy 
process when we have optioned licenses and become, in effect, 
the creditor for the licensee because for the auction process, 
in my view, to work best, we have to have confidence that if 
somebody bids in our process, gets an installment payment plan, 
and then gets into trouble and can't pay, that we will be able 
to re-option that spectrum because, after all, it belongs to 
the public. And we have to ensure that it is put to good use 
for the public----
    Mr. Tauzin. You and I know we disagree on that?
    Mr. Kennard. Yes.
    Mr. Tauzin. But why would--I hope you are not part of it. 
Why would you be part of it? I hope you tell me you are not. Of 
an attempt to do this in a rider on an appropriations bill 
instead of settling this before the authorizing committee?
    Mr. Kennard. well, I don't know what the genesis of this 
particular rider is----
    Mr. Tauzin. Just snuck in there?
    Mr. Kennard. Yes. I don't know how it got in there.
    Mr. Tauzin. Did the Commission ask for it?
    Mr. Kennard. I don't know. I will find that out for you 
though.
    Mr. Tauzin. I would appreciate a direct response on that.
    Mr. Kennard. Certainly.
    Mr. Tauzin. I have to go make the vote. And I think Mr. 
Dingell will understand. I think he does. The hour is late and 
we very much appreciate all of you being here, we will continue 
this process, of course.
    I deeply appreciate, again, your patience, your time. And 
again want to reiterate how important I think this issue is and 
how much I appreciate the fact that you are taking it seriously 
because we certainly are. Thank you very much, sir.
    Mr. Kennard. Thank you, Mr. Chairman.
    Mr. Tauzin. The committee stands adjourned.
    [Whereupon, at 2:52 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
    Responses of the Federal Communications Commission to Follow Up 
                        Questions for the Record
          question for the record from representative stearns
    Question: Chairman Kennard, the 1996 Telecom Act directs the FCC to 
liberalize its ``one to a market'' radio/television cross ownership 
rule in the top 50 markets. Since 1993, the FCC has granted 36 
permanent one to a market waivers, and of those, nine have been waivers 
encompassing one television station, two FM and two AM stations. So for 
6 years, it has been the FCC's policy to grant permanent waivers 
authorizing one tv and four radio station combinations.
    It has been widely reported that the FCC's staff proposal on one to 
a market last November was to allow the one tv/two FM two AM 
combination. But that strikes me as somewhat disingenuous. The '96 Act 
clearly directs the FCC to liberalize the rule. But if all you do is 
adopt current practice dating to 1993, doesn't that fall far short of 
what Congress intended in the '96 Act?
    Answer: The Commission has adopted a ``presumptive'' waiver policy 
under which it will look favorably on granting a waiver to allow the 
common ownership of one TV station, one FM station, and one AM station 
in the top 25 television markets if at least 30 independently owned 
broadcast voices remain after the merger. See 47 C.F.R. Sec. 73.3555, 
Note 7(1). Section 202(d) of the Telecommunications Act of 1996 
directed the Commission to extend this waiver policy to any of the top 
50 television markets ``consistent with the public interest, 
convenience, and necessity.'' In a Second Further Notice of Proposed 
Rule Making, 11 FCC Rcd 21655, 21685 (1996), the Commission stated 
that, ``[c]onsistent with Section 202(d) of the 1996 Act, we propose, 
at a minimum, to extend the Top 25 market/30 voice waiver policy to the 
Top 50 markets.''
    It is also true that the Commission has permitted permanent 
television-radio combinations consisting of up to one television 
station and two FM and two AM stations in the same market, where the 
applicant had made specific factual showings satisfying a stated five-
factor waiver standard. In the Second Further Notice, the Commission 
invited comment on a variety of possible changes relaxing the one-to-a-
market rule beyond that specifically contemplated by section 202(d) of 
the Act.
    We have received a wide range of comments regarding these 
proposals. Some parties have urged the Commission to relax the one-to-
a-market rule, but a number of others oppose modifying the rule given 
their concerns about the impact this would have on competition and 
diversity. I am studying all the options raised by these proposals. In 
deciding these issues, I will of course be guided by section 202(d) of 
the 1996 Act as well as section 202(h) of the Act which requires the 
Commission to review its ownership rules biennially and ``determine 
whether any of such rules are necessary in the public interest as the 
result of competition.'' In doing so, I will ``take into account the 
increased competition and the need for diversity in today's radio 
marketplace,'' as is stated in the Conference Report on the 1996 Act.
          questions for the record from representative largent
    Question: The Telecommunications Act of 1996 required the FCC to 
reform universal service in order to make universal service 
competitively neutral while ensuring the delivery of service in high 
cost areas. If universal service subsidies are limited to incumbent 
carriers, won't competitors find it difficult to provide service in 
high cost areas? What is the status of universal service reform and 
when can we expect universal service to be complete?
    Answer: I agree that limiting universal service support to 
incumbent carriers would limit competitors' ability to enter the 
market. Historically, universal service support for serving rural and 
high cost areas was only available to incumbent carriers. In the First 
Report & Order implementing section 254 of the Act, however, the 
Commission made universal service support ``portable'' to any carrier 
that wins the customer. This change took effect January 1, 1998.
    I, and my colleagues on the Commission, are working diligently to 
reform the universal service mechanism for large carriers serving rural 
and high cost areas in an effort to make the program more consistent 
with the development of competition. As required by section 254, we 
convened the Federal-State Joint Board on Universal Service and 
received their initial recommendations in November 1996. In May 1997, 
the Commission adopted a comprehensive plan for high cost universal 
service reform. The Commission determined that support should be 
portable, as noted above, and that it should be based on the forward-
looking cost of providing the supported services, which is the basis of 
economic decision making in a competitive market. The reform process 
was bifurcated, and small, rural carriers were guaranteed that there 
would be no potential decreases in the support available to them until 
at least 2001. For large carriers, the Commission set about refining 
and selecting a cost model for estimating forward-looking costs.
    In November 1998, the Commission received further recommendations 
from the Federal-State Joint Board on Universal Service as to how 
support amounts should be determined in light of forward-looking costs, 
particularly with respect to support for maintaining reasonably 
comparable intrastate rates. The Commission is currently considering an 
Order and Further Notice of Proposed Rule Making acting on the Joint 
Board's recommendations in May 1999. Commission staff are working to 
refine the cost model and we are striving for implementation of a 
universal service support mechanism for large carriers serving high 
cost areas in January 2000.
    In reforming universal service support for rural and high cost 
areas, I believe the Commission must ensure that support--for the 
carrier that wins the local customer--will not be eroded as the Act's 
competitive environment emerges, while acknowledging that high cost 
universal service support is an existing program on which many carriers 
depend. I am striving to strike a balance between ambition and caution 
as we move forward. Of necessity, therefore, the process is and has 
been an incremental one.
    Question: One of the major goals of the '96 Act was to bring 
competition in the local telecommunications marketplace. We have heard 
a lot about competitors seeking entry into the business marketplace, 
but we hear less about competitors seeking to enter the residential 
market. What is the status of competition for residential service? Is 
competition for residential service emerging anywhere? What ingredients 
appear to be necessary for successful residential local competition?
    Answer: Thanks to the 1996 Act, competition has begun in the local 
telecommunications marketplace. Today there are ten times the number of 
competing local carriers (nearly 150) as there were prior to the 1996 
Act. There are also over 20 publicly-traded competitive local exchange 
carriers (CLECs) with a combined market value of $33 billion versus 
just 6 with a combined value of $1.3 billion prior to the 1996 Act. The 
Commission has worked hard to eliminate barriers to entry into the 
local markets. One means the Commission uses to determine whether 
incumbent LECs are taking the necessary steps to open their local 
markets to competition is the section 271 review process. Another means 
is through dialogues that the Commission has had with Bell Operating 
Companies (BOCs), competing carriers, and other interested parties. 
Information gathered using both these means shows that no BOC provides 
nondiscriminatory access to its respective operations support systems 
(OSS) functions consistent with the 1996 Act's nondiscrimination 
requirement. Review of the BOCs' deployment of OSS functions under the 
section 271 process, at both the state and federal levels, will assist 
in opening the local exchange market to competitive entry as envisioned 
by the 1996 Act.
    Nondiscriminatory access to interconnection and collocation is also 
crucial to the development of local exchange competition. Through the 
review of section 271 applications, and other information, the 
Commission has been unable to conclude that any regional BOC provides 
nondiscriminatory access to interconnection and collocation. As part of 
its Advanced Services proceeding, the Commission has recently released 
new rules on collocation. With these efforts, the Commission hopes to 
eliminate certain interconnection and collocation practices that pose 
barriers to entry. Further, in accordance with the 1996 Act, the 
Commission promulgated rules requiring incumbent LECs to combine 
unbundled network elements (UNEs) for requesting carriers so that 
requesting carriers could provide local exchange service entirely 
through the use of UNEs. Access to combinations of UNEs allows new 
entrants to provide local exchange service to end users on the same 
cost basis as the incumbent LEC. The Commission's rules in this area 
were vacated by the Eighth Circuit Court of Appeals. The U.S. Supreme 
Court reversed much of the Eighth Circuit's decision, but also 
remanded, in part, the Commission's implementation of the network 
unbundling obligations as set forth in the 1996 Act. The Commission 
recently released a Further Notice of Proposed Rule Making in this 
proceeding and hopes to act on this issue as soon as possible. In the 
meantime, the Commission will continue to review BOC section 271 
applications to ensure that new entrants are able to combine network 
elements in a non-discriminatory manner.
    Competition in the residential market is developing, but not as 
quickly as we had hoped. A number of cable television companies are 
providing competing wireline local exchange service to residential 
customers in their serving areas and this type of residential 
competition is expected to grow rapidly in the next few years. For 
example, in the context of the AT&T/TCI merger, AT&T described its 
plans to upgrade TCI's cable systems in order to provide competing 
telephony services and assured the Commission that it intends to use 
these upgraded systems to provide residential local exchange service in 
the foreseeable future. Certain industry members claim that there may 
be insufficient profit margins associated with serving residential 
customers within certain markets that make it difficult for competitors 
to compete with the incumbent LECs in serving these customers. Costs 
incurred by competitors to utilize elements of incumbent LECs' networks 
such as loops and for collocation can make it economically difficult to 
provide competitive service in some markets. A serious barrier to 
``mass market'' competition is deficient interconnection between the 
incumbent LECs and the competitive LEC's operations support systems. 
Without seamless electronic interconnection between these systems, 
manual intervention is required. Such manual efforts are capable of 
handling only a very small volume of high revenue (i.e., business) 
customers. We are seeing progress in these areas, as incumbents improve 
their operations and as this Commission and our state colleagues step 
up enforcement activities. In addition, by bundling local telephone 
service with other services, such as long distance, Internet access, 
and video, some competitors are able to create a viable package of 
offerings. I also note that utility companies, either on their own, or 
through joint ventures, have begun offering local telephone service to 
residential customers. A number of competitive LECs are offering 
residential services to apartment complexes where the density of 
customers makes it economically feasible to build competitive 
facilities. The development of local competition, particularly in the 
residential markets, takes time. The Commission, nonetheless, is 
optimistic that residential consumers will soon reap its rewards.
    Question: Recently, I have heard a great deal from my constituents 
on the issue of number portability charges on their phone bills. Would 
any of you care to comment?
    Answer: (Chairman Kennard) In the 1996 Act, Congress mandated that 
all local telephone companies provide local number portability in 
accordance with requirements to be established by the Commission. The 
number portability charge that appears on your constituents' telephone 
bills is the result of the Commission's implementation of the number 
portability provisions of sections 251(b) and 251(e) of the 
Telecommunications Act of 1996.
    Long-term telephone number portability provides residential and 
business telephone customers with the ability to retain, at the same 
location, their existing local telephone numbers when switching from 
one local telephone service provider to another. Congress recognized 
that consumers are less likely to switch local phone companies if 
required to change phone numbers in the process, and that 
implementation of number portability would lower barriers to entry and 
promote competition in the local exchange marketplace. Although 
telecommunications carriers must incur costs to implement number 
portability, and some part of those costs may be passed on to 
consumers, the long-term benefits will give consumers more competitive 
options, lower local telephone prices and, consequently, stimulate 
demand for telecommunications services and increase economic growth. 
For example, after the Commission required number portability in 800 
numbers, enabling customers to keep their 800 number when changing long 
distance carriers, demand for toll free service increased dramatically. 
Although the savings that have accrued to consumers are not easily 
quantified, since price is a significant component of demand for this 
service, it is reasonable to conclude that consumers are benefitting 
from lower prices and greater choice.
    In the 1996 Act, Congress also mandated that the costs of 
establishing number portability should be borne by all carriers on a 
competitively neutral basis. In May 1998, the Commission released the 
Third Report and Order, reaffirming its previously adopted 
competitively neutral standard and establishing the cost recovery 
standards for long-term number portability. To enable local exchange 
carriers to recover number portability costs on a competitively neutral 
basis, the Commission permits, but does not require, incumbent local 
exchange carriers to recover some of their costs of implementing number 
portability through a federal charge assessed on end-users and through 
a query service charge assessed on other telecommunications carriers. 
Recognizing consumers' sensitivity to end-user charges and that many of 
the network upgrades made by carriers to implement number portability 
also will provide other services or features, the Commission narrowly 
defined the costs it would permit carriers to recover through federal 
charges. The Commission determined that only costs directly related to 
number portability are to be recovered through number portability end-
user and query services charges. These are costs that: (1) would not 
have been incurred ``but for'' number portability; and (2) must be 
incurred ``for the provision of'' number portability.
    Under the Commission's rules, local exchange carriers cannot begin 
to charge their end-users for the costs of local number portability 
until local number portability is available in their area, can begin to 
charge consumers in areas where number portability is available no 
earlier than February 1, 1999, and must end consumer charges after 5 
years. Moreover, not all costs are passed directly through to 
consumers. For example, query service charges other carriers pay for 
using the local exchange carrier's querying capabilities help lower the 
charges local exchange carriers assess their end-users.
    By carefully scrutinizing the local number portability tariffs 
filed by local exchange carriers, the Commission is acting to ensure 
that end-user and query services rates for long-term number portability 
are reasonable and as low as possible. Following an investigation of 
these tariffs, which must be concluded within 5 months of the effective 
date of the tariff, rates found to be unreasonable may be rejected. The 
Commission then may prescribe a just and reasonable rate and order 
refunds of overcharges, if any.
    As noted above, the Commission understands consumers' sensitivity 
to additional charges on their telephone bills. In the long term, 
consistent with Congress' intent, the Commission expects the 
implementation of local number portability to benefit consumers by 
lowering prices, making a wider variety of telecommunications services 
available, encouraging more advanced telecommunications services, and 
improving the quality of telecommunications services as new local 
telephone companies compete for business.
    Answer: (Commissioner Ness) I agree with the Chairman that long-
term number portability is crucial for competition, because it enables 
consumers to change service providers without being forced to change 
their phone number. Number portability is a statutory requirement, and 
it imposes costs on all carriers which they are entitled to recover. 
Nonetheless, as I noted at the time of the Commission's decision, I was 
troubled by the prospect that a single class of carriers--the incumbent 
LECs--would recover their costs from consumers who do not yet have a 
choice of local exchange carrier. I would have preferred that 
residential consumers be shielded from such number portability charges 
until they actually experience the benefits of competition. But, in the 
give and take that led to the consensus order, I ultimately agreed to a 
regime under which incumbent LECs are allowed to recover number 
portability costs only in areas where number portability capability has 
actually been deployed. In such areas, consumers at least have a 
greater potential--but not the certainty--of having a choice of local 
carrier.
    Answer: (Commissioner Furchtgott-Roth did not respond to this 
question.)
    Answer: (Commissioner Powell) I generally subscribe to the views 
expressed by Chairman Kennard in his response to this question. One of 
the most difficult challenges of implementing the Telecommunications 
Act of 1996 concerns the need to require changes in the telephone 
network, which was designed primarily for use by monopoly providers, in 
order to allow multiple, competing carriers to provide service using 
parts of that network. Implementation of the Act's local number 
portability requirements involves one of these changes to the network. 
The network modifications necessary to provide number portability are 
analogous to steps taken more than a decade ago to provide long 
distance companies with ``equal access'' to the local telephone network 
following the divestiture of AT&T. Equal access has led to an 
increasingly competitive long distance market. Similarly, I believe 
that changes in the network relating to local number portability will 
make it easier for firms to compete with incumbent local telephone 
companies and hopefully thereby bring the benefits of competition to 
consumers. Although I am sensitive to the public's concern about the 
appearance of local number portability charges on customer bills, I 
also believe that carriers should have some reasonable and fair 
opportunity to recover their costs of complying with the statutory 
requirements. That said, I firmly support taking effective steps to 
scrutinize the manner in which carriers are allowed to recover these 
costs.
    Answer: (Commissioner Tristani) Since the 1996 Act became law, 
carriers have added a number of new charges to the bill, and the 
occasionally inadequate or misleading descriptions of the charges only 
add to consumer frustrations. So I well understand consumers' 
unhappiness with the new charge for number portability that has 
recently appeared on some local telephone bills.
    The 1996 Act mandated that carriers deploy number portability. 
Since the carriers were forced to spend significant sums of money to 
comply with this legal requirement, I believe carriers should be 
allowed to recover that cost in some reasonable manner. They are doing 
so through the number portability charges on local telephone bills. I 
note that the Commission is currently investigating the number 
portability charges of several carriers that were submitted in tariff 
filings to insure that they are reasonable. It is also worth noting 
that carriers are free not to impose number portability charges on 
their customers. The FCC did not mandate that carriers impose number 
portability charges; it only permitted this method of cost recovery. In 
the end, I am optimistic that number portability will accelerate 
competition in the residential telephone market and will lower prices 
and improve service. Those benefits, I believe, will outweigh the 
charges now being paid by some telephone customers.
    Question: I understand that the FCC is about to let the U.S. 
registration of the 60 deg. orbital slot lapse. Aren't satellite 
orbital locations an increasingly scarce resource? Isn't this one of 
the particularly valuable slots because it covers both North and South 
America? Why would the FCC voluntarily give this up?
    Answer: The FCC has acted aggressively to preserve the 60 deg. W.L. 
orbital location for use by a U.S. satellite operator, and is 
continuing to contest the expiration of the U.S. filing at 60 deg. W.L. 
at the International Telecommunication Union (ITU). The FCC believes 
that there is significant ambiguity within the ITU process relating to 
the determination of the expiration date. Under our interpretation of 
ITU rules and related ITU actions, the deadline for a timely U.S. 
filing at 60 deg. W.L. was April 25, 1999. As explained below, the U.S. 
sought to meet that deadline.
    In September 1998--well in advance of the expiration of the nine-
year limit under our interpretation of the rules--we notified potential 
U.S. operators of the impending expiration date in a concerted effort 
to preserve the U.S. filing at 60 deg. W.L. At the same time, we also 
initiated correspondence with the ITU, seeking to clarify the 
expiration date and to extend the life of the filing at 60 deg. W.L. to 
the full extent possible.
    In the meantime, on February 5, 1999, PanAmSat Corporation 
(PanAmSat) filed a request for Special Temporary Authority (STA) to 
relocate an in-orbit satellite to 60 deg. W.L. It was aware of the 
uncertainty of the filing status at the ITU at that time. On April 1, 
1999, the FCC granted PanAmSat's request to locate at 60 deg. W.L. for 
sixty days. The satellite, which was moved from another orbital 
location, reached 60 deg. W.L. on April 12, 1999. Thereafter, PanAmSat 
filed a request for STA to operate from 60 deg. W.L. for a period of 
180 days. On April 13, 1999, the FCC put that STA on Public Notice. On 
April 21, 1999, we granted PanAmSat interim temporary authority to 
operate from the 60 deg. W.L. location for 60 days. In order to 
preserve the right of the U.S. to use 60 deg. W.L., on April 21, 1999, 
the FCC submitted the requisite information to the ITU in order to 
complete the satellite notification process at 60 deg. W.L. prior to 
the April 25, 1999 date.
    At the same time, we have pursued procedural remedies within the 
ITU to clarify the status of the 60 deg. W.L. location. On March 12, 
1999, the ITU notified the United States by letter that the nine-year 
period lapsed in June of 1998, and that the U.S. filing would be 
cancelled. The FCC appealed the decision on March 22, 1999. That appeal 
was denied. The FCC appealed again to a higher level of the ITU on 
April 1, 1999. That appeal also was denied. We are continuing to 
explore further possible appeals so as to preserve this orbital 
location for a U.S. operator.
    Question: Much of what we are talking about today is how to revamp 
the FCC for the 21st Century. We are all looking for ways to get out of 
the way of electronic commerce or enhance it where we can. With that in 
mind, I understand the FCC has asked for input on whether or not 
companies should be allowed to sign up customers for long-distance 
service over the Internet. Assuming there is personally identifiable 
information given voluntarily by a consumer (such as a credit card 
number), shouldn't the FCC take this opportunity to enhance E-commerce 
by recognizing a change in service request obtained over the Internet? 
I would like to hear from each Commissioner on this point.
    Answer: (Chairman Kennard) The Commission's recently adopted 
slamming rules require that all carrier changes be verified in 
accordance with one of three methods: written Letter of Agency (LOA), 
electronic authorization, or independent third-party verification. 
These requirements were adopted by the Commission, pursuant to 
Congress' directive in section 258 of the Telecommunications Act of 
1996, in order to ensure that all changes in consumers' preferred local 
and long distance carriers have been knowingly authorized by the 
customer.
    The Commission recognized in that Order that many carriers recently 
have begun to utilize the Internet as a marketing tool to gain new 
subscribers and that such solicitation can be an effective and 
efficient method of making these services available to the public. The 
Commission expressed concern, however, as to whether carriers using the 
Internet to sign up new customers were complying with the Commission's 
verification requirements so as to ensure consumers utilizing this 
method are afforded the protections from slamming intended by the Act 
and Commission rules. For example, the Order noted that, absent 
adequate verification procedures, a consumer surfing the Internet could 
inadvertently sign up for a switch in long distance service or could be 
misled into signing up for a contest that actually results in a long 
distance carrier switch.
    Accordingly, the Commission sought comment on whether further 
modifications to the existing verification rules were necessary in 
order to encourage the efficient use of the Internet to request carrier 
switches, while still protecting consumers from fraudulent practices 
such as slamming. In particular, the Commission sought comment on its 
tentative conclusion that electronic signatures used in Internet 
submissions of carrier changes would not comply with the signature 
requirement for LOAs required under existing rules because they fail to 
identify the signer as the actual individual whose name has been signed 
on the Internet form and they fail to ensure that individual is the 
person actually authorized to make the decision to change carriers. 
Unlike a signed LOA or recorded third-party verification, an electronic 
LOA, without additional personally identifiable information, does not 
appear to provide tangible evidence of authorization that can be 
challenged by the consumer.
    Therefore, in order to enhance the ability of companies to use 
electronic commerce for this purpose, the Commission specifically 
sought comments from the industry and consumer groups as to what 
additional information provided by the customer during such 
transactions would be sufficient to verify that the consumer had 
authorized a carrier switch, as mandated by section 258 of the Act. For 
example, we asked whether obtaining a subscriber's credit card number, 
social security number or mother's maiden name would provide sufficient 
proof of a valid verification without jeopardizing the subscriber's 
privacy. the comment period on this Further Notice has closed, and the 
Commission expects to act soon to take whatever further action is 
deemed necessary to facilitate the use of Internet commerce in this 
area.
    Answer: (Commissioner Ness) I agree that we should be looking for 
ways to enhance electronic commerce, and that the Internet can be a 
valuable tool for making telecommunications services available to the 
public. Allowing carriers to sign up customers over the Internet, 
however, raises some concerns. Congress and the Commission both have 
been inundated with complaints about slamming, that is, the 
unauthorized change of a customer's choice of carrier. We need to 
ensure that changes in service providers occur only when they are 
requested by a person who is authorized to make the request. The 
challenge is to make it easy for appropriate changes in service 
providers, while making it difficult for unauthorized changes to be 
made. Given all of the fraud and confusion that we have seen lately, I 
believe that we should proceed with caution--and cannot assume that 
every carrier change requested via Internet is an authorized change.
    Answer: (Commissioner Furchtgott-Roth) I support the Commission's 
decision to ask industry and consumer groups what additional 
information provided by a customer should be sufficient to verify that 
a consumer has authorized a carrier switch, as mandated by section 258 
of the Act, thereby enhancing the ability of companies to utilize 
electronic commerce.
    Answer: ( Commissioner Powell) I generally subscribe to the views 
expressed by Chairman Kennard in his response to this question. As part 
of the Commission's recently-adopted ``slamming'' rules, we have 
already sought and received comment on whether modifications of our 
verification requirements for carrier changes were necessary to 
encourage the efficient use by consumers of the Internet to select new 
providers, while still protecting consumers from being switched to a 
new carrier without their consent. I look forward to working closely 
with my colleagues to address the concerns raised in these comments and 
thereby enhance consumers' ability to use electronic commerce to 
request changes in telephone service.
    Answer: (Commissioner Tristani) I fully support efforts to enhance 
the availability of the Internet as a viable, effective means of 
commerce. Indeed, the Commission's recent inquiry into the use of the 
Internet by carriers to sign up new customers is intended to examine 
whether the Commission needs to make modifications to its carrier 
switch rules in order to allow for this type of e-commerce, while 
continuing to ensure that consumers are adequately protected from 
slamming and other frauds.
    The Commission's recently adopted slamming rules require that all 
carrier changes be verified in accordance with one of three methods: 
written Letter of Agency (LOA), electronic authorization, or 
independent third-party verification. These requirements were adopted 
pursuant to Congress' directive in section 258 of the 
Telecommunications Act of 1996, which mandates that no carrier may 
submit a request to switch a customer's local or long distance 
presubscribed carrier without first verifying the consumer's 
authorization in a manner prescribed by the Commission.
    In the Further Notice section of the Slamming Order, the Commission 
noted that many carriers recently have begun to utilize the Internet as 
a marketing tool to gain new subscribers and that such solicitation can 
be an effective and efficient method of making competitive 
telecommunications services available to the public. The Order raised 
questions, however, as to whether carriers using the Internet to sign 
up new customers were fully complying with the Commission's 
verification requirements so as to ensure that consumers utilizing this 
method are afforded the protections from slamming intended by the Act 
and Commission rules. The Order expressed particular concern as to 
whether the electronic signatures used in Internet submissions of 
carrier changes comply with the signature requirement for written LOAs. 
Unlike a signed LOA or recorded third-party verification, an electronic 
LOA, without additional personally identifiable information, does not 
appear to provide tangible evidence of authorization that can be 
challenged by the consumer.
    The Commission sought comment on whether further modifications to 
the Commission's verification rules are necessary in order to encourage 
the efficient use of the Internet to request carrier switches, while 
still protecting consumers from fraudulent practices such as slamming. 
The Commission specifically sought comments from the industry and 
consumer groups as to what additional information provided by the 
customer during such transactions would be sufficient to verify that 
the consumer had authorized a carrier switch, as mandated by section 
258 of the Act. The comment period on this Further Notice has closed, 
and I expect the Commission to act soon to take whatever further action 
is deemed necessary to facilitate the use of Internet commerce in this 
area.
    Question: Why would an electronic LOA (letter of agency or 
registration for service) be any less reliable than a signature sent on 
a piece of paper or a recording of a consumer's voice claiming to want 
the service? People can misrepresent a signature or record a voice that 
is not that of the customer. Isn't an electronic LOA with personally 
identifiable information actually more secure?
    Answer: (See answers to above question.)
          questions for the record from representative shimkus
    Question: The Commission recently voted to move ahead with a 
proposed rulemaking on low-power FM. I have some concerns that in doing 
so, the FCC is seemingly willing to ignore the potential impact such a 
new service would have on the quality of the existing FM band.
    What technical evidence does the FCC have to show that adding 
hundreds or thousands of these mini-stations won't erode the quality of 
the FM band? What studies have you conducted? Aren't we putting the 
cart before the horse here?
    Answer: The Commission has issued a Notice of Proposed Rule Making 
concerning a possible low-power radio service, but it has not yet 
reached any conclusions in this matter. In reviewing the record in this 
proceeding, of course, the Commission will consider very carefully the 
potential impact of a new low-power radio service on the reception of 
existing radio service. This is a threshold issue of the rulemaking 
proceeding which we will examine closely.
    I and every one of my colleagues on the Commission have firmly and 
repeatedly stated our individual and collective belief that one of the 
Commission's primary mandates is to guard the technical integrity of 
the spectrum, not to degrade it, and that before any one will conclude 
that a new service is feasible, we must be satisfied that the technical 
issues have been adequately addressed.
    At the same time, it is our duty to see that the great natural 
resource that the radio spectrum represents is fully exploited for the 
benefit of the public, and to examine ways in which it can be more 
efficiently utilized. We are currently conducting testing to ascertain 
whether certain station-locating principles we have used for full-power 
stations may be unnecessarily preclusive for low-power stations. We 
also expect to receive the results of testing and analysis from other 
interested parties and qualified experts as a result of our rulemaking 
Notice.
    Question: Isn't it true that in your own proposal and your table of 
stations, you admit that the only way to create any new stations in 
major metropolitan areas is by changing the 2nd and 3rd channel 
interference protections currently in place? How can the Commission 
support a proposal that would diminish the audio quality of the current 
FM service?
    Answer: The successful implementation of a low-power radio service 
may depend in significant part on whether the Commission can modify 
certain of its station separation requirements in the context of low-
power stations. The Commission has successfully employed modified 
station separation standards in limited instances in the past to permit 
improvements to some existing full-power stations without degrading 
audio quality. We intend to study and test whether these principles can 
be safely applied to a low-power radio service.
    Question: What about the impact on in-band, on-channel digital 
radio? My understanding is that the digital channel will be added on 
the sides of the main analog channel, and therefore will be more easily 
disrupted by interference from adjacent channels if this proposal goes 
forward. Why are we willing to throw out the potential of digital radio 
just to license some more people to have radio stations? And why was 
the microradio issue taken up before the digital audio broadcasting 
rulemaking now awaiting action was resolved?
    Answer: The Commission will take care to preserve the opportunity 
for terrestrial digital audio radio service in the event it establishes 
a low-power radio service. The Commission has yet to determine the best 
method for transitioning to terrestrial digital radio, and an in-band 
on-channel (IBOC) methodology is a significant possibility. Multiple 
IBOC and terrestrial digital radio systems at varying stages of 
development are still being worked on, analyzed, tested and refined by 
the industry, and the technical architecture of any system will 
ultimately be a function of the radio environment in which it will 
operate.
    The Commission has made a firm commitment to developing terrestrial 
digital radio service, and we intend to do so as promptly as possible. 
We have issued several experimental authorizations to IBOC proponents 
to test their technology and develop their systems. We have already 
received comments on a petition filed by one of the IBOC proponents, 
and Commission staff is consulting with industry groups as part of the 
process of beginning a rulemaking proceeding. However, while we intend 
to open a rulemaking proceeding as soon as is practicable, it is 
possible that the rulemaking process, particularly with competing 
undeveloped technologies at present, could take some time to complete.
    If we can reliably establish parameters that will preserve 
necessary flexibility for terrestrial digital audio, we should not 
unnecessarily delay the introduction of low-power service for the 
public. We have specifically asked in the low-power rule making for 
comment and expert input on what measures are appropriate to maintain 
appropriate flexibility for a transition to digital, including 
potential IBOC systems, and have recently extended the lengthy original 
comment deadlines in the low-power radio proceeding to provide 
opportunity for additional input on this issue.
    Question: Aren't there frequencies now in smaller markets that 
people can apply for? What happens to those people already awaiting 
processing for full-power stations--why is it fair to leapfrog those 
folks who've been waiting patiently for stations and suddenly create a 
whole new class of service out from under them?
    Answer: There are a limited number of FM stations available in 
certain small markets, but this is not universally so. Many small 
communities with any proximity to a larger metropolis do not have full-
power frequencies available. Even where full-power frequencies are 
available, full-power facilities can be unnecessarily and even 
prohibitively expensive to build, and may not be supportable by the 
local market.
    The Commission expects to resolve the issues that have prevented 
the processing of certain new FM applications and begin that processing 
by this fall. This will be long before any low-power applications would 
even be filed, if such a service is authorized. Our ability to resolve 
these applications is unrelated to the low-power proceeding. Moreover, 
for applicants seeking to provide a full-power service, low-power 
facilities would be a far less desirable or even unacceptable 
alternative.
    Question: Mr. Furchtgott-Roth, you were the only commissioner to 
oppose this proposal. Can you explain to this subcommittee why you had 
concerns about it?
    Answer: (from Commissioner Furchtgott-Roth) I write in response to 
your follow-up question regarding my decision to dissent from the 
Commission's recent Notice of Proposed Rule Making on low-power radio 
stations. Below, I set forth my reasons for taking this position.
    As an initial matter, I am not opposed to the creation of a low-
power radio service. Whatever new service can be provided within the 
range of existing interference regulations would be something worth 
considering. I do not believe that the Commission should create new 
stations at the expense of current interference protection standards, 
however.
    As the appendix attached to the Commission's Notice of Proposed 
Rule Making itself showed, under existing interference rules the 
Commission can authorize so few new stations that the results would 
hardly warrant the effort. In order to create any substantial amount of 
new service, protection standards have to be loosened so far as to 
eliminate third and even second adjacent channel safeguards. This is a 
severe incursion on the rights of current license holders, as well as 
on the value of their licenses, which will be drastically undercut in 
the market if these proposals are adopted.
    This proposal also potentially impairs the ability of current 
licensees to serve their listeners, who must not be forgotten; while 
new people may be able to broadcast, others may lose their ability to 
receive and listen to existing stations due to interference. It 
especially troubles me that the Commission has made no effort to 
assess, much less quantify, the effect on existing stations of 
eliminating these safeguards.
    Even if the second and third adjacent channel protections were 
wholly eliminated, however, very little new service would be created in 
the major urban markets at which this proposal is supposedly aimed. For 
instance, in New York City, there would be no LP1000 stations and no 
LP100 stations, and in Los Angeles there will be only one LP1000 
station, no LP100 stations with translator protections and six LP100 
stations with unprotected translators. In addition to their small 
number, these services will be relatively unavailable to mobile 
audiences due to their low wattage.
    Furthermore, while many proponents of this rule making see it as a 
means of increasing broadcast ownership by minorities and women, there 
is in all likelihood no constitutionally sound way to assure such a 
result. There is simply no way that the Commission can say that, if a 
first-come, first-served rule is adopted, these licenses will not be 
awarded to whoever applies for them first or that, in the case of 
mutually exclusive applications, these licenses will not go to the 
highest bidder.
    Also, the creation of low-power radio by elimination or 
modification of current interference rules may also have an adverse 
effect on the FM radio band itself by hindering the development of new, 
advanced services such as in-band, on-channel digital radio.
    Plans for the delivery of this service have been based on current 
interference standards, and it is unclear whether these plans can be 
successfully modified should those standards change. While the rest of 
broadcasting (indeed the entire communications industry) moves toward 
the advantages of digital technology, this contemplated FCC policy may 
make it harder for the FM radio band to keep up.
    Moreover, communicating with one's community or expressing a point 
of view--the posited aim of low-power advocates--can be achieved 
through a variety of ways other than the creation of microradio. People 
can communicate with others by obtaining extant commercial or 
noncommercial licenses, the purchase of air time on broadcast 
properties, leased access and/or PEG cable schemes, amateur radio, e-
mail, Internet home pages, bulletins and flyers, and even plain old-
fashioned speech. The notion that a message must be broadcast over 
radio spectrum before its speaker has a ``voice'' overlooks the 
realities of modern life. Indeed, as time goes on, broadcasting has 
faced increasing competition, becoming less and less powerful a medium. 
It is no secret that the television broadcast networks are attempting 
to find innovative ways to deal with decreasing viewership in the face 
of cable, DBS, and other video delivery and entertainment systems that 
compete for the public's attention.
    And, of course, Commission enforcement of rules and regulations 
applicable to the new stations will be an administrative drain and 
involve the Commission in micromanagement of the smallest of 
operations. Thus, the low power proposal does not do much to advance 
its supposed goals. What minimal furtherance of those goals it would 
achieve comes at great cost to current license holders and listeners. 
Good--arguably better, even--alternatives for the dissemination of 
messages in America certainly exist. And the administrative burdens on 
the Commission will likely be great. Accordingly, I do not think this 
proposal represents an efficient use of radio spectrum. In addition, I 
do not view concern about the effects of consolidation in the radio 
industry as the result of the 1996 Telecommunications Act as an 
appropriate motivation for this Commission to create low-power radio 
stations. These are, at bottom, arguments against consolidation. 
Congress, however, made the clear policy choice to lift national 
ownership limits. Whatever the results of that choice, they are the 
function of Congress' elected course, and this Commission must follow 
it.
    In sum, given the potential harmful effects on current licensees 
and their listeners; the limited benefits of creating a low-power radio 
service; the burdensome regulations placed on the new stations; the new 
enforcement duties for the Commission; and the availability of 
alternatives for communication, I do not believe that the pursuit of 
this proposal comports with the Commission's statutory duty to ``make 
available . . . a rapid, efficient, Nation-wide and world-wide wire and 
radio communication service.'' 47 USC section 151 (emphasis added). 
Please do not hesitate to contact me if I can be of further assistance.
    Question: The idea behind this microradio proposal is to give 
people the chance to get into the radio business that couldn't afford 
to buy an existing station. How can the FCC predict who will get these 
licenses? And is there any evidence that even with low-power FM 
licenses, the pirate problem will go away?
    Answer: The Commission has received thousands of inquires regarding 
low-power radio stations prior to and since the publication of its 
Notice of Proposed Rule Making. Schools of all types, various kinds of 
community groups, churches, music associations, a wide variety of 
individuals, political activists and others have made inquiries, 
expressed a strong interest, and are participating in the rule making. 
We believe it is reasonable to infer from this that such entities would 
participate in low-power radio, if it is authorized. While some illegal 
activity may persist from those who simply must defy authority, we 
fully expect that the availability of legal facilities will remove a 
primary incentive for illegal radio operations. In any event, the 
Commission will continue to vigorously enforce the prohibition against 
operating a broadcast station without a license.
    Question: How will the FCC have the resources to oversee this new 
group of stations, most of whom will not have run a radio station 
before or care about operating under regulations?
    Answer: One of the significant technical issues raised in the 
Notice is the type of equipment to require for low-power radio 
licensees. Certified equipment, with strict technical specifications 
should reduce the likelihood of signals that ``wander'', cause 
interference, or cause unwanted signals on other frequencies. Also, 
because we maintain data on licensees such as frequency, power, and 
location, the Commission can quickly contact a licensee if technical 
problems occur. Additionally, the likely reduction in illegal 
operations if low-power radio is authorized should ease that demand on 
our resources.
    We must expect that low-power licensees, as any others, will be 
conscientious about learning and performing their responsibilities. 
Nonetheless, enforcement begins with making sure that licensees are 
informed of their responsibilities. For licensees that are new to any 
service, the Commission already provides multiple avenues for licensees 
to learn their responsibilities. We also will consider how to develop a 
pro-active means of effectively informing licensees of their 
responsibilities. The Office of Communication Business Opportunities 
(OCBO) provides information to small businesses, especially those that 
are new to the communications industry. Information is also available 
on the Commission's Internet site and from the National Call Center, as 
well as from the Mass Media Bureau. The Commission can also provide 
assistance as it does with its other broadcast licensees through its 
current Alternative Broadcast Inspection Program (ABIP). The 
Commission's Compliance and Information Bureau also provides checklists 
on its home page on the Commission's website, www.fcc.gov, that a 
licensee can use to conduct self-inspections. In addition, based on our 
experience in the rulemaking proceeding and our knowledge of illegal 
operations, we expect that there will be quite a network of information 
exchange on the Internet within the low-power community. As stated 
above, we will also search for effective means of educating licensees 
as part of the application or licensing process.
           questions for the record from representative blunt
    Question: On July 8, 1998, the Missouri Municipal League, the 
Missouri Association of Municipal Utilities, City Utilities of 
Springfield, City of Columbia Water and Light, and the City of Sikeston 
Board of Utilities filed a petition for preemption with the FCC, 
seeking preemption of section 392.410(7) R.S.Mo. (CCPol Docket No. 98-
122). Responses have been made by all interested parties and the 
parties are waiting for a decision by the FCC. Is there a time frame 
for making this decision by the FCC, and when can the parties expect a 
decision?
    Answer: I would like the Commission to issue a decision in the 
Missouri Preemption proceeding early this Fall if at all possible. 
Regardless of other competing priorities, I expect the Commission to 
take action in this proceeding before the end of 1999.
    Question: It is my understanding that you have concerns about the 
limitations that states have placed on municipal electric utilities in 
telecommunications. A Missouri law, section 392.410(7), is an example 
of such a limitation. A copy of this law is attached for your 
information. Would it be fair to say that this is the type of state law 
that concerns you?
    Answer: I am concerned about the enactment of state statutes 
prohibiting the provision of competitive telecommunications services or 
facilities by municipalities or municipal utilities. I believe that 
enactment of such statutes by the states is generally undesirable as a 
matter of public policy because they eliminate a strong potential 
competitor from the market. This can have a particularly undesirable 
effect on rural areas where municipal utilities may be the most likely 
source of facilities-based competition. At the same time, I believe 
that the Commission must tread very carefully in considering requests 
for preemption of such statutes under section 253 of the Communications 
Act.
    Question: You have been quoted as saying that there have been some 
problems in the courts that haven't allowed some of these municipal 
utilities to provide telecommunications services. Has the FCC made any 
decisions that would preempt a limiting state law and would allow a 
municipal utility to provide telecommunications services?
    Answer: To date, the Commission has not preempted state laws 
restricting the provision of telecommunications services by municipal 
utilities. In the Texas Preemption proceeding, the Commission declined 
to exercise its section 253 authority to preempt a Texas statute 
generally prohibiting municipalities from providing telecommunications 
services or facilities. The Commission concluded that it was not clear 
that Congress intended the Commission to intrude into the relationship 
between the State of Texas and its municipalities. This decision was 
upheld by the U.S. Court of Appeals for the D.C. Circuit. The 
Commission's decision in the Texas Preemption proceeding, however, 
specifically reserved the question of restrictions on municipal utility 
entry for future consideration. This question is now before the 
Commission in the Missouri Preemption proceeding.
    Question: You have been quoted as testifying before the Senate 
Judiciary Subcommittee on Antitrust, Business Rights and Competition, 
that you ``think that we ought to continue to work hard to open up 
every competitive avenue, if we can.'' Is this an accurate statement of 
your testimony, and if so, do you believe that the FCC should continue 
to work hard to open up competition in telecommunications services?
    Answer: I strongly support the competitive provision of 
telecommunications services, and believe that the Commission must 
continue to work hard to remove barriers to competition. It is my 
experience that competition benefits consumers by increasing the 
choices available to them, fostering the deployment of new technology, 
and bringing downward pressure to bear on prices.
    Question: Do you share the belief stated by others that letting 
electric utilities compete in telecommunications was a key part of the 
Telecommunications Act of 1996?
    Answer: I agree with this statement and envision electric utilities 
as becoming formidable competitors in the provision of 
telecommunications services.
    Question: Do you understand that the legislative history of the 
Telecommunications Act of 1996 evidences the fact that there was an 
intent by Congress to let municipal utilities compete in 
telecommunications?
    Answer: Our staff is considering the legislative history of the 
1996 Act as part of its review of the public record we have developed 
in the Missouri Preemption proceeding. I am reluctant to address this 
issue while that matter is pending, but I will be glad to respond to 
this question fully at the appropriate time.
    Question: Section 253(a) of the Telecommunications Act of 1996 is 
clear that state and local laws cannot ``prohibit . . . any entity'' 
from providing telecommunications services. Does a publically-owned 
electric utility fit within the definition of ``any entity?''
    Answer: In the Texas Preemption proceeding, the Commission declined 
to exercise its section 253 authority to preempt a Texas statute 
generally prohibiting municipalities from providing telecommunications 
services or facilities. The Commission concluded that Texas 
municipalities were not entities separate and apart from the State of 
Texas for purposes of section 253 of the Communications Act. The 
Commission also found it was not clear that Congress intended the 
Commission to intrude into the relationship between the State of Texas 
and its municipalities. This decision was upheld by the U.S. Court of 
Appeals for the D.C. Circuit. The Commission's decision in the Texas 
Preemption proceeding, however, specifically reserved the question of 
restrictions on municipal utility entry for future consideration. This 
question is now before the Commission in the Missouri Preemption 
proceeding. I am reluctant to address this issue while that matter is 
pending, but I will be glad to respond to this question fully at the 
appropriate time.
    Question: What is your view of the obligation which the FCC has 
under section 253 of the Telecommunications Act to preempt state or 
local laws or regulations which serve as barriers to entry?
    Answer: Commission preemption of state and local laws and 
regulations that violate section 253 is mandatory, assuming compliance 
with the substantive and procedural requirements of that section. I 
believe that the Commission's authority under section 253 to preempt 
state and local requirements that prevent competitive entry is a vital 
element in ensuring realization of Congress' vision of local exchange 
competition. At the same time, I believe that the Commission must use 
preemption of state and local actions cautiously as a last resort. I 
note, for instance, that Congress specifically preserved certain 
authority for state and local governments in the areas of universal 
service, public safety and welfare, quality of service, consumer 
rights, and management of rights-of-way, to the extent such authority 
is exercised in a competitively neutral and nondiscriminatory manner. 
Further, Congress authorized FCC preemption of state and local 
requirements that violate section 253 only ``to the extent necessary to 
correct the violation . . .'' I believe the Commission has implemented 
section 253 consistent with these criteria and must continue to do so 
in order to further the pro-competitive goals of the 1996 Act.
           questions for the record from representative eshoo
    Question: Chairman Kennard, you mention in your testimony that your 
fourth goal during the transition to competition is to bring consumer 
services and technology to every American. With over 60 million people 
using wireless phones today, the FCC has a role to play with industry 
and other government agencies, to ensure that our nation's Emergency 
911 service is reliable 100 percent of the time. Where does E-911 fit 
within your view of the 21st Century FCC?
    Answer: I agree with you that there is an important role for the 
Commission to play in ensuring that all Americans have access to 
reliable and efficient wireless 911 services as we move into the 21st 
Century.
    A core obligation given to the Commission by the Congress in the 
Communications Act of 1934 is to promote the safety of life and 
property through the use of telecommunications services. Fulfilling 
this obligation is a cornerstone in the transition to a more 
competitive telecommunications marketplace. For these reasons, it is 
critically important that the Commission continue its efforts to work 
with the public safety community, emergency service providers, consumer 
groups, other Federal agencies with an interest in public safety 
issues, and the wireless industry in order to forge an alliance 
dedicated to working for improvements in the availability and 
dependability of wireless 911 service.
    As you know, in the wireless E911 rulemaking proceeding, CC Docket 
94-102, the Commission has developed rules that require wireless 
carriers to improve 911 service. As a basic 911 requirement, wireless 
carriers are now required to forward all 911 calls they receive to a 
Public Safety Answering Point, without delays for validation or the 
blocking of calls from non-subscribers. At the Commission's Agenda 
Meeting on May 13, 1999, the Commission adopted rules to improve the 
ability of analog cellular telephone users to successfully complete 911 
calls. One of the important issues in the wireless E911 proceeding 
concerned proposals to help improve the transmission of 911 calls, 
especially in geographic locations where a wireless caller attempts to 
make a 911 call but the cellular system to which the caller subscribes 
has a ``blank spot''--an area where the system's radio signal is weak 
or non-existent. The Commission on May 13, 1999 adopted a requirement 
that new analog cellular-capable handsets manufactured starting in 
February 2000 be able to complete 911 calls to the other cellular 
carrier in those situations. The purpose of this new rule is to improve 
911 reliability, increase the probability that 911 calls will be 
efficiently and successfully transmitted to public safety agencies, and 
help ensure that wireless service will be maintained for the duration 
of the 911 call.
    The Commission bears a continuing responsibility to ensure that we 
harness the benefits of emerging technologies for wireless 911 service. 
To take one example, our rules require carriers, beginning in October 
2001, to provide location information for wireless 911 calls, with 
accuracy within 125 meters. Our challenge is to foster the development 
and application of wireless technologies that can improve upon this 
level of accuracy, and can also provide information about the precise 
location of callers in multi-story buildings.
    As we move into the 21st Century, we should continue our active 
involvement in working toward achievement of our fundamental goals for 
wireless 911--increased levels of call completions, reliable and 
dependable service quality, and pinpoint accuracy in locating wireless 
911 callers.
    I appreciate your active involvement in this proceeding and assure 
you that the Commission will continue its commitment to promote public 
safety.
    Question: Chairman Kennard, please cite specific examples that fit 
your fifth goal of fostering innovation. Do you have any specifics to 
tell us about relative to development and deployment of high-speed 
Internet connections to all Americans?
    Answer: High-speed Internet connections are one form of--and so far 
the most popular form of--what we call ``broadband'' or, in the words 
of section 706 of the 1996 Act, ``advanced telecommunications 
capability.'' Recently, the Commission issued a Report finding that the 
deployment of broadband to all Americans appears, at this initial 
stage, to be proceeding in a reasonable and timely manner.
    The single most important thing the Commission has done to get such 
connections built and used by Americans is to adopt a policy of open 
entry into all forms of local and long distance communications. As a 
result, in the past few years tens of billions of dollars have been 
invested in broadband facilities by incumbent and competitive local 
exchange carriers (LECs), long distance companies, satellite companies, 
cable television providers, public utilities, and all kinds of wireless 
licensees (fixed and mobile, land-based and satellite, licensees of 
longstanding and recent winners of auctions of newly allocated 
spectrum).
    The history of this business over the last thirty years has shown 
that competition leads to widespread, low-priced, high-quality, and 
technically innovative service faster than monopoly or oligopoly. 
Especially in a market where different technologies may serve different 
areas and different customer needs best, the Commission wants to avoid 
picking one technology and one set of companies as its chosen 
instrument.
    The Commission is taking targeted action to facilitate high-speed 
Internet connections, and broadband in general, in many specific 
proceedings. For example, we are considering the issue of access to the 
``last hundred feet'' in multiple dwelling units (MDUs) such as 
apartment buildings in several proceedings.1 We are moving 
ahead with proceedings that promote the deployment of wireline 
broadband services 2 and the commercial availability of 
``set top box'' navigation devices.3
---------------------------------------------------------------------------
    \1\ For example, WinStar has requested that we apply section 224 of 
the Communications Act, governing regulation of pole attachments, to 
require public utilities to make rooftop facilities and related riser 
conduit owned or controlled by the utility available to competing 
providers of communications services. Implementation of the Local 
Competition Provisions in the Telecommunications Act of 1996, CC Docket 
No. 96-98, WinStar Communications, Inc., Petition for Clarification or 
Reconsideration (filed Sept. 30, 1996). See also Inside Wiring Report & 
Order & Second Further NPRM, 13 FCC Rcd at 3778-82.
    \2\ See Deployment of Wireline Services Offering Advanced 
Telecommunications Capability, CC Docket No. 98-147, Memorandum Opinion 
& Order & Notice of Proposed Rulemaking FCC 98-188, released Aug. 7, 
1998, available at 1998 WL 458500.
    \3\ See, e.g., Implementation of section 304 of the 
Telecommunications Act of 1996, Commercial Availability of Navigation 
Devices, Report & Order, 13 FCC Rcd 14775 (1998).
---------------------------------------------------------------------------
    In addition, we are pursuing initiatives to ensure that wireless 
services, both fixed and mobile, are true competitors in the consumer 
market for broadband. We will continue to allocate, auction, and 
license more spectrum for uses that include broadband, especially 
facilities that serve the last mile and last hundred feet.4 
We are also encouraging the next generation of mobile services and are 
re-examining our 45 MHz CMRS spectrum cap.5 We are working 
for efficient international harmonization of spectrum allocations, 
product certifications, and technical standards for interfaces. 
Moreover, we will promptly grant licenses so that broadband facilities 
can be built promptly.6 We will continue authorizing 
broadband capacity for traditional geostationary C- and Ku-Band 
frequencies. We also expect to license new, innovative systems in the 
Ka- and millimeter wave Bands.7
---------------------------------------------------------------------------
    \4\ See, e.g., Amendment of the Commission's Rules with Regard to 
the 3650-3700 MHz Government Transfer Band, ET Docket No. 98-237, 
Notice of Proposed Rulemaking & Order FCC 98-337 at para.para. 1, 6, 
released Dec. 18, 1998.
    \5\ See 1998 Biennial Regulatory Review--Spectrum Aggregation 
Limits for Wireless Telecommunications Carriers, WT Docket 98-205, 
Notice of Proposed Rulemaking FCC 98-308, released Dec. 10, 1998.
    \6\ For example, the Commission is now in the second licensing 
round for Ka-band satellites and will rule on 18 requests for licenses 
and modifications or amendments to existing Ka-band licenses.
    \7\ See, e.g., Allocation & Designation of Spectrum for Fixed-
Satellite Services in the 37.5-38.5 GHz, 40.5-41.5 GHz, & 48.2-50.2 GHz 
Frequency Bands, IB Docket No. 97-95, Report & Order FCC 98-336, 
released Dec. 23, 1998.
---------------------------------------------------------------------------
    Lastly, the Commission is monitoring on a continual basis the 
appearance of chronic shortages of high-speed Internet connections and 
other forms of broadband in rural areas, low-income inner city 
neighborhoods, for the disabled and for educational and health-care 
facilities.
    I am strongly committed to bringing high-speed Internet access to 
all Americans and will do all that I can as Chairman of this Commission 
to make that goal a reality.
