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



 
    FEDERAL COMMUNICATIONS COMMISSION REFORM FOR THE NEW MILLENNIUM

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

                                HEARING

                               before the

                  SUBCOMMITTEE ON TELECOMMUNICATIONS,
                     TRADE, AND CONSUMER PROTECTION

                                 of the

                         COMMITTEE ON COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 26, 1999

                               __________

                           Serial No. 106-85

                               __________

            Printed for the use of the Committee on Commerce

                    ------------------------------  



                    U.S. GOVERNMENT PRINTING OFFICE
61-037 CC                   WASHINGTON : 2000



                         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:
    Kennard, Hon. William E., Chairman, Federal Communications 
      Commission.................................................    12
    Furchtgott-Roth, Hon. Harold W., Commissioner, Federal 
      Communications Commission..................................    24
    Ness, Hon. Susan, Commissioner, Federal Communications 
      Commission.................................................    20
    Powell, Hon. Michael K., Commissioner, Federal Communications 
      Commission.................................................    26
    Tristani, Hon. Gloria, Commissioner, Federal Communications 
      Commission.................................................    32
Material submitted for the record by:
    Kennard, Hon. William E., Chairman, Federal Communications 
      Commission:
        Letter dated November 5, 1999, to Hon. Edolphus Towns....    73
        Responses for the record.................................    74

                                 (iii)

  


    FEDERAL COMMUNICATIONS COMMISSION REFORM FOR THE NEW MILLENNIUM

                              ----------                              


                       TUESDAY, OCTOBER 26, 1999

              House of Representatives,    
                         Committee on Commerce,    
                    Subcommittee on Telecommunications,    
                            Trade, and Consumer Protection,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:36 a.m., in 
room 2123, Rayburn House Office Building, Hon. W.J. ``Billy'' 
Tauzin (chairman) presiding.
    Members present: Representatives Tauzin, Oxley, Stearns, 
Gillmor, Cox, Cubin, Shimkus, Pickering, Fossella, Ehrlich, 
Bliley (ex officio), Markey, Eshoo, Engel, Luther, Sawyer, 
Green, McCarthy, and Dingell (ex officio).
    Staff present: Justin Lilly, majority counsel; Cliff 
Riccio, legislative clerk; and Andy Levin, minority counsel.
    Mr. Tauzin. The committee will please come to order.
    Good morning and welcome to the third hearing on FCC 
reform. Today we will hear from the FCC Commission regarding 
their views on the proposed FCC reforms put forth by this 
Commission and its strategic plan: a new FCC for the 21st 
century.
    I want to welcome Chairman Kennard and all the 
Commissioners and express my appreciation on behalf of the 
committee for your attention to this issue and for your 
presence here today. As usual, we deeply appreciate the dialog 
that we are beginning to have on this very important subject.
    When Congress passed the historic, much-publicized 
Telecommunications Act of 1996, I believe as I have often said 
in public, that we made a fundamental mistake. We failed to 
reform the outdated structure and the outdated mission of the 
FCC when we overhauled the law. As a result, as America 
prepares to enter the 21st century, I believe we have in effect 
a horse-and-buggy agency trying to bridle a supersonic 
technology, and it is simply not working as well as it could 
and should.
    These words, I am sure, are not unfamiliar to you. I have 
used them many times. But I am using them over and over in the 
hopes that they will ring clear in the minds of those with the 
authority to really effect change.
    In an attempt to further the reform of this agency, I 
recently appointed an FCC task force headed by my good friend, 
Paul Gillmor. As a result of his efforts and the efforts of the 
task force membership, I was presented this voluminous binder 
of recommendations. It is getting thicker and thicker. And I 
want to indicate how pleased I am that, in fact, they have 
taken this work so seriously and are devoting so many hours to 
it.
    As I promised members of the minority, this task force 
would be bipartisan. I again ask today that Mr. Dingell 
consider the appointment of several members from the minority 
to join with my Republican colleagues in that task force effort 
so that we might continue this process as we continue to call 
for efforts to craft comprehensive reform that is as much as 
possible not only bipartisan but hopefully nonpolitical.
    Let me say from the outset that I am pleased with the work 
of the task force, and I agree with many of the proposals set 
forth in the document. Let me also add parenthetically, one of 
the things I am very disappointed with is the willingness of 
the regulated community to come forward and speak to us about 
problems they experienced with the agency. They tell us many 
things privately, but won't go on record. That itself is 
ringing testimony that there is something wrong with the 
process where those who are most affected by it are unprepared 
or unwilling to go public with their criticisms.
    Where I and many of my colleagues as well as many in the 
industry agree with the efforts being made by the Commission to 
examine reform itself, let me indicate at the outset that many 
of us disagree on the timing of the proposed reforms by the 
Commission. Five years is simply twice as long as we believe is 
necessary, and this committee is going to be relentless in 
seeing that the FCC reforms are completed to a significant 
degree over the next 2\1/2\ years.
    Five years, Mr. Chairman. Currently 86 percent of the 
Internet delivery capacity in the United States is concentrated 
in the 20 largest cities in America. Five years, when analysts 
are projecting that within the next 3 years there will be a 
1200 percent increase in business-to-business Internet 
services, generating $1.5 trillion in revenues. Five years, 
when 210 of the country's 346 metropolitan statistical areas, 
roughly 61 percent, do not have direct on-ramps to the 
Internet. There are only 98 hubs serving towns in non-
metropolitan service areas in this country. California alone 
has 177 hubs. That is more than the combined total of 31 
States.
    Five years. There are 80 bills pending in Congress seeking 
to apply various regulatory or deregulatory provisions to 
commerce over and content on or access to the Internet or 
telecommunications in general. Five years is simply too long, 
especially in a world of this fast-changing technology. We need 
simply to catch up by creating changes in the processes here in 
Washington that make sense in a modern deregulated environment. 
The time for that is now.
    Again, let me thank Mr. Gillmor and the members of his task 
force for all of their hard work. I want to thank the minority 
in advance for their interest and hopefully their commitment to 
become part of this task force. And to members of the 
Commission, I want to again thank you not only for appearing 
today but for, as I said, taking this seriously and dialoguing 
with us today on what it takes to get this really moving and 
how long it will take to complete it.
    Again, let me thank you for your attendance, and the Chair 
will now yield to the gentlelady from California, Ms. Eshoo, 
for an opening statement.
    Ms. Eshoo. You caught me with coffee and a bagel, Mr. 
Chairman. Thank you very much.
    Mr. Tauzin. You have 5 years to take care of that.
    Ms. Eshoo. Good morning to you, Mr. Chairman, and thank you 
for calling this important hearing. It is always a pleasure to 
see the Chairman of the FCC, the distinguished Chairman Mr. 
Kennard, and each of the Commissioners, and I want to welcome 
you here today.
    First, let me just say that 7 months ago when you were last 
before this subcommittee, I brought up the need for further 
action on E. 911. Today I want to thank you publicly, each of 
you, for heeding my call and that of many others to revise the 
FCC's rules on this very important issue. I believe the ruling 
that the FCC issued in September will provide consumers with 
enhanced 911 emergency services that will promote the public's 
safety and competition among wireless 911 equipment 
manufacturers as well as the continued improvement in the 
quality of 911 service. I commend each one of you for this 
ruling, which I believe will in the end help to save countless 
lives in our Nation. That isn't any small contribution, and I 
am very, very sincere in saluting you for what you have done.
    Chairman Kennard has nicknamed the FCC reform plan The New 
FCC: fast, flat, and functional. I am pleased that part of this 
plan calls for the FCC to be looking to invest in new 
technologies to create a paperless FCC so that applications and 
licenses can be processed more efficiently. I think the agency 
has an opportunity to be a leader in the Federal Government in 
this respect, and I think it can start by becoming the first 
agency to accept and utilize the electronic signatures on 
letters of agency and other documents. I also think the FCC has 
the opportunity to take a big step in facilitating competition 
in the building access issue. And I think the FCC does have the 
authority to make a ruling on this issue.
    In this unprecedented period of increasing competition in 
the telecommunications industry, it would be unfortunate if 
residential and commercial building tenants were not given the 
opportunity to choose between carriers. I think that this is 
one of the manifestations of the Telecom Act, and I look 
forward to it being implemented. The FCC should use its 
authority to offer a fair and reasonable resolution that 
ensures that tenants have access to the local competitors of 
their choice. There is room for improvement on the length of 
time the FCC has taken to review mergers, and I am pleased the 
agency is in the process of creating an interagency merger team 
to streamline and accelerate the merger review process.
    So again, Chairman Tauzin, I would like to thank you for 
calling this hearing. I look forward to hearing more about the 
FCC's reform plan this morning. And again, I welcome you here. 
It is always good to see you, important to work together. I 
can't think of a more powerful agency in the life of America 
today, and we have to work every day to make sure the meaning 
of that power is felt by each and every American citizen in our 
country. After all, it is the telecommunications.
    Thank you, and I yield back.
    Mr. Tauzin. I thank the gentlelady. The Chair wishes to 
point out--I hope the Commission understands that the paucity 
of members here is not a reflection on either--any disrespect 
of your presence on the issue. We have got a conference going 
on of Republican members. I know there is an O&I hearing that 
is drawing some of our members away. They are coming.
    So let me now recognize the gentleman from California, Mr. 
Cox, for an opening statement.
    Mr. Cox. Thank you, Mr. Chairman. I want to thank the 
Commissioners for being here and explain my immediate absence. 
We have an O&I hearing exactly on top of this, which sometimes 
happens. I have read all the written testimony that has been 
submitted and I thank you for providing it and we will be most 
interested in reading the proceedings that I am going to miss.
    I don't think there is a more important issue before each 
of you and before us as a Congress in our oversight capacity 
than what the FCC looks like in the future. And I have to say 
that I think Chairman Kennard has laid out in general terms 
pretty much where we are headed and what the challenge is.
    The objects of regulation are changing so rapidly that if 
the FCC were not to rethink from the bottom up its entire 
reason for existence, we would be overtaken by events. I also 
think that we need to notice the difference between promoting 
markets through regulation and promoting markets. Sometimes we 
think by adopting a better, different or wiser regulation, we 
can get more competition, whereas in fact we simply end up 
creating another regulation.
    The E-rate program, which may or may not come up in 
members' questioning here, continues to trouble me because it 
is emblematic of the problems we have had in oversight of the 
FCC. Congress passed a law in 1996 and the FCC in many 
respects, at least in the view of many of the members of this 
committee, is doing something other than what the law intended. 
The E-rate program, which has been much litigated, represents 
probably the logical limit to which law by regulation can be 
pushed. There wasn't a provision for these particulars in the 
1996 act, and we have ended up imposing a tax which, however it 
might be justified and however it might be litigated, 
represents an enormous lapse in good judgment, it seems to me, 
in the appropriate roles of the branches; it would seem it 
would be for Congress to pass the taxes and to do so with a 
different kind of popular input than the FCC can take advantage 
of, and for the FCC not to do those things.
    It is for that reason that we had a bipartisan letter 
signed by the chairman and ranking Democrats in both the House 
and in the Senate, with some rather strong words, I would 
think, for bipartisan correspondence and for that genre, 
suggesting that the age of kings passed with the American 
Revolution, for example, and that we ought to impose taxes in 
this fashion.
    It has been called the Gore tax because of the Vice 
President's support for it, but making it the focus of next 
year's election is not anybody's idea of a good time. I would 
rather get rid of this tax now and, more to the point, get rid 
of the regulatory climate that permits the FCC to, I think, 
invade the legislative turf in that fashion.
    We ought to be thinking about ways to shrink regulation and 
shrink the FCC itself, not create new fiefdoms and enormous new 
jurisdictions with several sustaining their own non-legislative 
taxes.
    I thank the chairman for the time. I apologize for my 
absence but I am enormously interested in this subject and will 
pay very close attention to what you say, even when I am not 
physically present here. Thanks.
    Mr. Tauzin. Thank you, Mr. Cox. The gentleman from Texas, 
Mr. Green, is recognized.
    Mr. Green. Thank you, Mr. Chairman. Like my colleague from 
California, we have a vote, I am told, at 10 o'clock upstairs, 
on the Department of Energy, and I too will be leaving shortly. 
Let me just follow up on my colleague from California on the E-
rate, support of the E-rate, and realizing it was in the 1996 
act. And in fact our Chairman has a bill, and I think 
originally Congressman Klink had one that would replace the E-
rate with an actual tax, and I think that is a good mechanism. 
That is a tax cut on our side of the aisle, Mr. Chairman, we 
could probably support as long as it would be devoted to the E-
rate and the success we have seen with E-rate funding in my own 
district, at least across the State of Texas.
    We also might want to look at the universal service charge, 
because I have found a lot of constituents are just upset 
because of all the charges on their bill that are broken out 
now that used to not be broken out.
    I want to thank you for calling the hearing, Mr. Chairman, 
on the FCC and the New Millennium and its growing digital age. 
It is nearly impossible for regulatory agencies and legislators 
to keep up with the explosive growth with the telecom industry. 
For example, the Internet has successfully cut across all 
traditional communications boundaries so that a person over the 
Internet can make a long distance call or listen to the ball 
game or watch television programming. It is really exciting.
    In March of this year, Chairman Kennard came to us and laid 
out a vision of the FCC. It was enlightening to hear that the 
FCC was going to try to keep up with the times and restructure 
the Commission to meet with these demands, while sustaining the 
main charge of promoting competition and communications, 
protecting consumers and supporting access to all Americans to 
the existing advanced telecommunications.
    Like the Chairman, I encourage you to act as expeditiously 
as possible on the reforms because the technology changes are 
so rapid.
    Let me point out the need for resources--and I was noticing 
in our booklet today, Mr. Chairman, the 1996 act that was 
passed, that year the FCC requested $223.6 million, we 
appropriated $185.7 million in each year for the next up until 
2000, when the FCC requested $230.9 million and we appropriated 
$2.210 million. Each year it has been anywhere from $10 to $20 
million less in appropriations than what the FCC requested. Not 
that we need to exactly match the dollar, but if you give 
someone a responsibility to do a job, then you also need to 
give them the resources to do it. I know that is not our 
committee but we may want to point that out to our folks over 
at the Appropriations Committee.
    I appreciate the opportunity to discuss with the 
Commissioners on many issues that are before the FCC. And I, 
coming from Texas, I am glad the SBC and the Ameritech issue 
has been settled and that is moving along, because I know as 
soon as that was done, there is another giant merger that you 
have to consider. That is, I guess, the nature of the 
competitive system we have today.
    I do have a particular situation. We have an application 
from some folks in Houston for a Spanish-language TV station in 
the Blanco, Texas area, north of San Antonio and west of 
Austin. It seems like it has gotten caught up in bureaucratic 
problems over the FCC. We sent letters, the Texas delegation 
has. And if you could look at that, there was a competing 
ownership and there is one of the people that applied for it 
had some, I think, ethical problems in what they were doing; 
but people who actually are looking for the station have been 
caught up in that problem, but they are--with their 
competitors--and I would hope that under our, Mr. Chairman, 
under our FCC reform bill, even though we want to auction off 
the spectrum if there is no availability of bidders on certain 
areas, then we set some type of minimum amount or some type of 
amount that will raise money but also provide for the FCC, 
where we can have in some rural areas these opportunities for 
alternatives other than English-language broadcasting.
    With that, Mr. Chairman, again thank you for calling this 
hearing.
    Mr. Tauzin. I thank the gentleman from Texas.
    The chairman of the FCC Reform Task Force, vice chairman of 
our committee, Mr. Gillmor, is recognized.
    Mr. Gillmor. Thank you very much, Mr. Chairman. I 
appreciate your holding this hearing. I want to thank the five 
Commissioners for taking the time and coming up and visiting 
with us. I look forward to your testimony.
    Mr. Chairman, last spring you asked me to serve as the head 
of the informal task force, Commerce Committee members, to look 
at developing a consensus about issues affecting the 
reauthorization of the FCC. I want to commend your leadership 
in trying to resolve that issue. In the ensuing weeks the task 
force had a number of meetings and discussions with FCC 
employees. We also polled numerous industry groups for their 
recommendations, and I think we have received some remarkably 
useful feedback. We now have a solid body of knowledge on which 
to build in the future.
    I also support the notion that the task force should now 
seek out additional information from the FCC itself, and I 
would welcome the establishment of a working group between the 
FCC and our committee so that the common areas of agreement can 
be established.
    I also endorse reaching out on both sides of the aisle in 
our committee, and I would look forward to recommendations in 
that respect as well.
    To an outsider, reauthorization of a government agency with 
five Commissioners and some 2,000 employees would seem like a 
relatively simple endeavor. But on the contrary, I think this 
is one of the greatest challenges we have. The number of legal, 
of regulatory, of personnel, organizational and 
telecommunications issues are staggering, very complex, and 
they often do not lend themselves to easy solutions.
    We are going to no doubt hear much talk in this hearing 
about streamlined bureaucracy, about increased competition, 
about less regulation. And I think that the vast majority of us 
agree with those goals. And the devil lies in the details, and 
that is why we are here today. A change in technology very 
frequently bypasses a regulatory structure that we set up. The 
regulatory structure that we set up, for example, in the 
financial services area, where we have just completed work in 
conference committee, has resulted in a major recommendation 
where we are just trying to meet the changes regulatorily that 
have taken place in the marketplace. And we have the same thing 
in telecommunications. And what we are trying to do here is to 
change our regulatory structure in a way that it meets what is 
happening in the marketplace.
    So I wanted to again thank the Commissioners for being here 
and I yield back the balance of my time.
    Mr. Tauzin. I thank the gentleman. The Chair is now pleased 
to recognize the ranking minority member of our committee, 
still licking his wounds from that awful beating the Yankees 
put on his favorite team, my friend, Mr. Markey.
    Mr. Markey. Good morning. I want to thank Chairman Tauzin 
for calling this hearing today on proposals to reform the 
Federal Communications Commission. And I would like to thank 
Chairman Kennard as well as Commissioners Ness and Powell and 
Furchtgott-Roth and Tristani for being with us here this 
morning.
    The purpose of the 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 it functions in a confident and 
productive way.
    Before we launch into a discussion about the job the 
Commission does and any proposals to help the Commission 
perform its task better, I think it is important to remember 
that the Commission has been entrusted with implementing the 
Telecommunications Act, a job that is unparalleled in scope and 
detail, since the enactment of the 1934 act itself. We must 
also remain cognizant that Americans today have the finest 
telecommunications system in the world. It is overall the most 
competitive, the most diverse, the most innovative 
telecommunications marketplace on the planet.
    The fact that this is the case is due in no small measure 
to the fine work that the agency and its staff performs. As I 
stated in our previous hearings on FCC reform, I believe that 
radical restructuring of the Commission itself at this time 
would be counterproductive. The last thing we should do right 
now is reverse the course of battling to demonopolize 
telecommunications markets and jeopardize or delay 
deregulation. After all, we are not going to be able to 
deregulate until we demonopolize.
    To break up monopoly barriers to competition, the 
Commission will need tools and resources; and competitors, both 
large and small, will need certain commonsense, consensus 
approaches to reform. The FCC are welcome, as they are in any 
government agency. I look forward to working with Chairman 
Tauzin in exploring how we can make progress together. And I 
thank you for holding this hearing, Mr. Chairman. I look 
forward to the testimony.
    Mr. Tauzin. I thank my friend. The Chair is now pleased to 
welcome the Chair of the full Commerce Committee, the gentleman 
from Richmond, Virginia, Mr. Bliley.
    Chairman Bliley. Thank you, Mr. Chairman. Today the 
subcommittee resumes its review of proposals to reform the 
Federal Communications Commission. I look forward to this 
discussion as it continues with its implementation of the 1996 
act.
    The FCC has been assigned substantial responsibility for 
ensuring that consumers enjoy the fruits of competition, but 
with that added responsibility comes an obligation to ensure 
that the public has confidence in the FCC's decisionmaking; 
more specifically, whether the FCC is engaged in open and 
transparent deliberations.
    The FCC is an agency of five unelected officials who, in 
theory at least, are independent of the political branches of 
government. Some have gone so far as to suggest that the FCC is 
even unaccountable to the will of the American people. It is 
therefore critical that this committee conduct vigorous and 
exacting oversight of the FCC. That is why this committee has 
pending inquiries into a number of recent key decisions made by 
the FCC. The FCC is vested with serious responsibilities in 
this area of competition, deregulation, and consolidation. But 
I intend to ensure that the FCC remains accountable to this 
committee.
    Let me also take this opportunity to raise my concerns with 
the recent ruling by the FCC on subsidies distributed pursuant 
to the Universal Service Fund. I noticed that on Thursday of 
last week, the Commission took action to actually double the 
amount of subsidies for the largest telephone companies like 
the Bell companies and GTE. This action raises a number of 
critical questions: Why are subsidies s for these large 
incumbents increasing when they should be withering away as 
competition develops? By how much will consumers' bills 
increase to pay for these carriers subsidies? If the American 
people are being asked to carrier subsidies, how can they be 
assured that they, and not the large carriers, will benefit 
from them?
    These are important questions to which I hope the 
subcommittee receives answers today. These subsidies are 
increasingly difficult to justify as we transition to a 
competitive market. The FCC has a heavy burden of proof when it 
takes action to actually expand this subsidy program. Moreover, 
consumers should know and understand the extent of subsidies 
that are embedded in their monthly phone bills. I have been in 
politics a long time, both as a mayor, and now as a Member of 
Congress. And my experience has taught me that politicians and 
regulators increasingly look to telephone services as a source 
of tax revenue. Whatever one thinks about telephone taxes and 
carrier subsidies, we owe it to the American taxpayers to 
inform them about these taxes and subsidies.
    That is why I, along with Chairman Tauzin, have introduced 
H.R. 3011, the Truth in Telephone Billing Act of 1999. This 
bill would require carriers to inform consumers about each and 
every telephone tax, regardless of whether the tax is a flat 
fee or assessed on a permanent basis.
    I urge my colleagues to join us in cosponsoring H.R. 3011. 
Thank you, Mr. Chairman, and I yield back the balance of my 
time.
    Mr. Tauzin. The Chair thanks the chairman of the committee 
and yields to the gentleman from Minnesota, Mr. Luther for an 
opening statement.
    Mr. Luther. No, thank you.
    Mr. Tauzin. The gentleman from Ohio, Mr. Sawyer.
    Mr. Sawyer. Thank you, Mr. Chairman. Personally I am 
grateful to you and the leadership of this subcommittee for 
having this hearing today. I am particularly glad to see 
Chairman Kennard and his colleagues taking serious steps in 
developing a reform proposal that will put the Commission into 
its own digital age and making it easier for businesses and 
consumers to deal with the Commission. The efforts to promote 
competition in all markets by eliminating barriers to entry 
into domestic and international markets is important, as is the 
enforcement of rules and regulations. I am convinced consumers 
can benefit from this if done properly. I am also glad to see 
the Commission has given serious consideration to consumers by 
setting up a Consumer Information Bureau and a Consumer 
Advisory Board.
    The work that you envision in the reform that you bring 
before us is important. I have to tell you that this last week 
has been frustrating for me. I keep getting dunned over my cell 
phone by my provider for services for which I have not yet been 
billed, and when I called them back to try and straighten it 
out I got put on hold literally for an hour. It was wonderful. 
I put it on hold and the music really filled the office with a 
lot of joy, but it was an expensive way, I suspect, to provide 
that kind of service. As my colleague from California says it 
is a telephone, not a radio.
    In any event, I think there is much that can be done to 
benefit consumers. This committee has discussed the issue of 
modernizing the FCC for some time. I think probably in many 
ways it has been a good thing that the 1996 act has had the 
opportunity to play itself out in the real world and we can get 
some practical experience with the way it is working and then 
begin to address the kinds of matters that you bring before us 
today. In that regard, let me simply say again in closing, 
thank you to the chairman and to our ranking member and to our 
witnesses today.
    Mr. Tauzin. I thank the gentleman.
    [Additional statements submitted for the record follow:]
   Prepared Statement of Hon. Michael G. Oxley, a Representative in 
                    Congress from the State of Ohio
    Mr. Chairman, thank you for calling this morning's hearing.
    I want to welcome the commissioners and commend them for their 
testimony. I also want to commend the Commission for the effort put 
into internal reform of the FCC since we last met on this subject in 
March of this year.
    At the March hearing I said that I believed that FCC reform was one 
of the most important telecommunications issues before the Committee 
and that I believed comprehensive reform was possible this Congress. 
While I still believe reform is important, the passage of seven months 
has not enhanced the viability of the effort.
    That is not to suggest that there hasn't been some good work done 
in the interim. Congressman Gillmor's task force developed a range of 
excellent proposals for restructuring and refocusing the Commission, 
including many proposals on which I believe the Committee could find 
consensus if it set itself to the task. But if we are going to take a 
serious run at even a consensus reform effort, we had better get 
started. The recommendations of the task force and the commissioners 
would be an excellent place to start.
    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.
    If FCC modernization is to be an attainable goal this Congress or 
even in the next Congress, we must stay focused on restructuring and 
not get sidetracked in old fights over telecommunications policy. There 
is no surer way to kill reform than to reopen those disputes.
    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.
    Mr. Chairman, I also want to take a moment to praise the Commission 
for its hard work on CALEA, the digital wiretap legislation. My thanks 
to each of the commissioners on behalf of the men and women of law 
enforcement. The order demonstrated great fairness and an appreciation 
of the requirements of public safety, in my opinion, and I hope that 
the Commission will dedicate itself to its timely implementation.
    Finally, Mr. Chairman, I'd like to highlight a few especially 
noteworthy items from the testimony I reviewed. I believe Commissioner 
Powell makes very important points with respect to the relationship 
between competition and deregulation, and the need to presumptively 
favor deregulation. I also found his thoughts on curtailing duplication 
with other government agencies insightful. Any reform effort ought to 
begin there.
    Commissioner Ness's emphasis on enhancing the Commission's 
technical resources, especially as they pertain to international 
representation, is well taken. Such wise investments are sure to 
benefit U.S. consumers and workers in the long run.
    Finally, I always appreciate Commissioner Furchtgott-Roth's 
admonition that the Commission stick to implementing the law as 
written. I never get tired of hearing it, even if some of the other 
commissioners do.
    Thank you again, Mr. Chairman. I yield back.
                                 ______
                                 
Prepared Statement of Hon. Cliff Stearns, a Representative in Congress 
                       from the State of Florida
    Mr. Chairman: Thank you for holding this hearing on the Federal 
Communications Commission's reform proposal.
    I also would like to thank Congressman Gillmor, chairman of task 
force responsible for undertaking the daunting task of reforming the 
FCC for the work he has done.
    Since the FCC was last reauthorized in 1991, I find this hearing to 
be much needed and timely, particularly during an era in which segments 
in the telecommunications sector often change in the blink of an eye. 
As Commissioner Powell put it, Commissioners ``have to read the paper 
every day to know what we all will be doing in the next 24 hours.''
    I would also like to thank Chairman Kennard, Commissioners Ness, 
Powell, Furchtgott-Roth, and Tristani for appearing before the 
subcommittee today.
    Mr. Chairman, the FCC has started the journey down the long road of 
reform. My concern is that it takes the off-ramp before reaching its 
final destination.
    The commission has taken some little steps in the right direction 
toward reform. Last August, the FCC adopted several provisions from my 
legislation removing onerous restricts on broadcasters. The commission 
relaxed its local TV and radio ownership rules, its attribution rules, 
and national TV cap calculations.
    However, it continues to hold on to vestiges of protective-
regulation from a time passed, by not increasing the broadcast 
ownership cap, or allowing for cross-ownership by broadcasters and 
cable and newspapers.
    I have read Chairman Kennard's ``strategic plan'' for reorganizing 
the FCC for the 21st century. The Chairman's own proposal is indication 
of much needed reforms. The question remains, can the FCC be left to 
manage its changes by itself.
    I am left to answer no. The results of the FCC's attempt at 
streamlining and competition are less than deregulatory. Just look at 
how it has initiated its 1998 biennial regulatory review as mandated by 
congress in the Telecommunications Act of 1996.
    Section 11 of the Communications Act requires the commission to 
review all of its regulations to determine whether the regulations are 
necessary, and whether such regulations should be repealed or modified 
in the public interest as a result of meaningful economic competition. 
To date, the FCC has under taken less than 35 proceedings as part of 
its biennial regulatory review.
    For example, though the commission relaxed its television duopoly 
and one-to-a-market rules, it failed to repeal or deregulate its daily 
newspaper/radio cross-ownership rule, which generally prohibits the 
common ownership of a daily newspaper and radio station in the same 
community. The FCC decided not to consider newspapers as a voice in its 
duopoly rule. It did however, count daily newspapers with more than 5% 
circulation as a voice in the new one-to-a-market rule. If newspapers 
are either so insignificant so as not to count at all, or only counted 
if their circulation exceeds an arbitrary percentage, why should they 
be subject to a total ``shut out,'' in the broadcast license 
marketplace?
    In fact, the FCC has increased, rather than decreased, its 
regulatory intervention. And I fear that unless checked, it will be the 
FCC controlling and shaping the marketplace, rather than competition 
and consumers'' desires. According to the heritage foundations 
calculations based on data provided by the General Accounting Office, 
``from March 1997 until March 1999, the FCC promulgated 497 rules. This 
is almost exactly the total number of rules promulgated by the 
Department of Defense, Veterans Administration, Department of State, 
Department of Justice, and the Department of Education combined during 
the same period. Incredibly, in fiscal year 1998, no other Federal 
agency produced as many major rules as had the FCC,'' which published 
more than a quarter of all Federal agency major rules. And this is 
after Congress passed the Telecommunications Act of 1996 to deregulate 
the telecommunications industry. Is this deregulation?
    I agree with Chairman Kennard that reorganizing and restructuring 
the FCC for the 21st century is a formidable task, akin to Chairman 
Kennard's description of ``trying to build a 747 while in flight.'')
    But Mr. Chairman, after reading the FCC Chairman's proposal, I am 
left wondering whether these proposals are meaningful acts of 
deregulation and streamlining, or just an act of repackaging, with a 
new name, new title, ready to regulate in the 21st century.
    What will the need for the FCC be in the 21st century? Chairman 
Kennard has a good idea. But is that what we need? According to 
estimates, the telecommunications industry now accounts for one-sixth 
of the U.S. economy. There are many examples of rampant competition all 
around us. Just look at the rate consumers now pay for long-distance. 
In many areas, consumers now have more than one choice in their local 
phone provider.
    Mr. Chairman, the monopolies of the past that the FCC was trusted 
to regulate, no longer pose a threat. I believe with substantive 
congressional reform of the FCC, the FCC in the near future will have a 
hard time justifying its existence.
    Much like how the Civil Aeronautics Board was disbanded after 
airline deregulation in the 70's. I foresee the day when the FCC will 
be nothing more than a foot-note in text-books.
    Mr. Chairman, let me close by saying that I look forward to working 
with you and the congressional FCC reform task force to ensure that the 
``FCC-747-airplane'' Chairman Kennard speaks of, has its seats removed, 
engines stripped, and is rebuilt into a hang glider. Then can we truly 
say that we have a reformed and streamlined Federal Communications 
Commission.
                                 ______
                                 
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming
    Thank you, Mr. Chairman, for holding this very important series of 
hearings on FCC reform.
    During the Subcommittee's hearing in March we heard from FCC 
Chairman Kennard, who had just released his strategic plan for 
restructuring and streamlining the Commission's functions and 
management.
    Commissioner Powell, in his testimony at the time, built on 
Chairman Kennard's plan by proposing additional ways in which the FCC 
could become more efficient and meet the demands of its customers.
    There were several points to Commissioner Powell's testimony that 
struck me as being necessary before the FCC could move full force into 
the next millennium.
    Specifically, Commissioner Powell highlighted the need for the FCC 
to limit the rules it administers. Congress stressed the need--in the 
1996 Telecommunications Act--to deregulate, when necessary, the 
telecommunications industry.
    Furthermore, Congress provided appropriate tools for the FCC to use 
to move toward deregulating this vibrant industry.
    The telecommunication's industry is moving and evolving at 
breakneck speed. To be effective, the FCC must evolve and move with the 
same speed as the industry it regulates.
    One avenue that I believe the FCC should utilize more is their 
forbearance authority under Section 10 of the Act.
    I commend Commissioner Powell's foresight on the issue of 
forbearance and quote from his March 17 statement before this 
subcommittee, ``. . . the FCC must become a dramatically more efficient 
place. A decision that comes too late, might as well not have been made 
at all.''
    Commissioner Powell's quote provides for a great transition to the 
next issue I would like to address: the FCC's role in approving 
mergers.
    There is no lack of controversy surrounding the FCC's role in 
reviewing telecommunication mergers.
    When FCC reform legislation is before us, this subcommittee must 
address the Commission's propensity to duplicate the role other federal 
agencies already play when considering mergers.
    Any role the FCC plays, whether it be in advocating the public 
interest or otherwise, must not duplicate the role of the Department of 
Justice or the Federal Trade Commission.
    Duplication of roles is time-consuming and unnecessary. 
Telecommunication companies are unduly burdened by these delays and it 
causes them and their customers valuable time and money.
    There are several more issues that I would like to address, but in 
the interest of time and to ensure that we hear from our distinguished 
panel in a timely manner, I will ask a few questions during my 5 
minutes and submit several more for the record.
    Again, thank you Mr. Chairman for holding this important hearing. I 
also want to thank Chairman Kennard and the Commissioners for taking 
time out of their busy day to be here.
    I yield back the balance of my time.

    Mr. Tauzin. Seeing no other members requesting time, let me 
now turn to the important work of this hearing, and this is to 
hear from the Chairman of the Commission and the other 
Commissioners on this important topic. Before I introduce you, 
Mr. Kennard, let me thank you publicly for representing the 
Commission so admirably before the High-Technology Conference 
in Louisiana. When was it, a week and a half? Time passes so 
strangely lately. But to all of you, the Chairman did an 
extraordinary job representing the Commission at a conference 
attended by almost 1,400 citizens, and deeply concerned about 
this fast-moving pace of technology changes in their lives. I 
want to thank you for that.
    I always want to thank each of you for the submittals you 
personally made and the communications you have made and the 
assistance you have given Paul in the efforts he has undertaken 
on behalf of the task force; and finally, to engage my friends 
on the other side of the aisle and encourage you to literally 
think about forming a comparable task force that we might link 
the two together. We are not going to get this thing done 
unless we are all cooperating across not only party lines, but 
across the agency's structures.
    Let me now welcome the Chairman of the Federal 
Communications Commission, Bill Kennard, for an opening 
statement. Bill?

  STATEMENTS OF HON. WILLIAM E. KENNARD, CHAIRMAN; 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. Thank you 
for those kind words. It is a pleasure to be here, to appear 
again before the subcommittee. As always, I look forward to 
working with all the members of the subcommittee. In 
particular, I look forward to having a discussion with you, 
Congressman Sawyer, to learn more about that problem you are 
having with your cellular telephone provider. We will try to 
get that straightened out for you if we can.
    I have submitted written testimony for the record, which I 
will summarize briefly. As Chairman Tauzin pointed out in his 
opening statement, we are clearly living in extraordinary times 
in the telecommunications industry today. We are seeing 
glimpses of a very exciting future where the telephone 
companies will deliver movies, and cable television operators 
will carry phone calls, and hopefully we will get both over the 
airwaves.
    I would like to take this opportunity to briefly update you 
on some of the data that we have been compiling at the FCC on 
the unbelievable economic growth that we are seeing in the 
telecommunications industry. Economic indicators are up across 
the board. Over the past 3 years alone, revenues in the 
communications sector have grown by $140 billion, climbing to a 
revenue level of $500 billion in 1998. That represents an 
increase of 160,000 jobs in this sector.
    And if you look at specific industries, we just see 
phenomenal growth. In the wireless industry in particular, 
capital investment has quadrupled since 1993 for a cumulative 
total of $60 billion through 1998. Now over 80 million 
Americans have a mobile phone compared to only 16 million just 
5 years ago.
    In the long distance marketplace, by the end of 1997, there 
were over 600 long distance carriers in America. We have seen 
prices for interstate long distance continue to drop 
dramatically by approximately 35 percent since 1992. Prices for 
international calls have fallen by around 50 percent. In fact, 
over 50 billion more minutes in long distance and international 
calls were made in 1998 than 1996.
    In the local phone sector, we are starting to see the 
fruits of our procompetitive policies. There are now at least 
20 publicly traded competitive local exchange carriers or CLECs 
with a total market capitalization of $33 billion. That 
compares with only 6 CLECs with a market capitalization of $1.3 
billion at the time of the passage of the 1996 act. In the 
first quarter of 1999 alone, almost a million CLEC access lines 
were installed.
    In the cable sector, operators have invested nearly $8 
billion per year since 1996, constantly upgrading their 
systems. By the end of the year we anticipate that 65 percent 
of homes passed by cable will have been upgraded, bringing more 
channels, enabling additional services, and in particular, 
high-speed Internet access.
    The cable television industry is getting into the broadband 
world. It is starting to drive competition for high-speed 
Internet access. We hope that by the end of this year, there 
will be at least 1\1/2\ million cable modem subscribers in the 
United States.
    So obviously the entire telecommunications industry is 
strong, it is vibrant, it is moving at breakneck speed. As I 
think we all recognize, we must also have an FCC that changes 
along with the industry and remains relevant to changes in the 
marketplace.
    The 1996 act established a blueprint for restructuring the 
industry, reorganizing the industry along competitive lines. 
The FCC's Strategic Plan is the work plan for carrying out the 
blueprint that you wrote in the 1996 act.
    We have put a lot of work into this Strategic Plan. It is 
not a unilateral proposal. We reached out to lots of our 
stakeholders. We reached out to industry, consumer groups, the 
academic community, State and local governments, organizational 
experts.
    And I was interested, Mr. Chairman, to hear that you were 
concerned that the industry was not being forthright with you 
in coming forward with recommendations. It has been my 
experience as Chairman of the FCC that the telecommunications 
industry for the most part is not a shy or retiring lot. They 
are not shy about communicating their concerns to us. They 
certainly did that in our forums. They communicate, I know, to 
you and to the press oftentimes. But I would just reiterate the 
importance that you stress of complete candor and openness in 
dealing with the industry, because we really need to hear from 
them as we move ahead with this plan.
    We have held a number of forums seeking input and much of 
the input we received focused on how the FCC should be 
restructured because of really three principal developments in 
the industry: competition, convergence, and globalization.
    There is a great deal of consensus among our stakeholders 
that the FCC should focus on what its core missions should be 
in the future, and these are, (1), universal service and 
consumer protection and information, one category; (2), 
enforcement and promotion of competitive markets both 
domestically and internationally; and (3) spectrum management.
    And so the Strategic Plan we presented to you really 
focuses on how the FCC should be organized to further those 
three principal core missions.
    After we presented our Strategic Plan to you in August, we 
convened another forum and brought all our stakeholders 
together again. I would say that they were generally 
complimentary about the plan. I think that the one thing that 
we heard almost universally is the need for the FCC to move 
ahead quickly on implementation, something that you mentioned 
in your opening, Mr. Chairman. Last week, we held an FCC senior 
management meeting to plan the next steps and keep the momentum 
going.
    Now some have told us, including you, Mr. Chairman, that 5 
years is too long. I wanted to comment on that. First of all, 
the reason why we picked 5 years for our Strategic Plan is 
because that is consistent with the requirements of the 
Government Performance and Results Act. That act, as you know, 
requires government agencies to set forth a 5-year blueprint or 
strategic plan for reinventing themselves. So we selected 5 
years. But I don't want anyone to think that 5 years is the end 
point; that is, that we have to wait for 5 years to get all the 
benefits of this plan.
    We are rolling this plan out as we speak. In fact, today I 
am very pleased to announce that we are setting up the 
Enforcement Bureau and the Consumer Information Bureau, which I 
know you all heard about, to become effective on November 8, 
and we are very proud that we have done the work to get those 
two new bureaus in place. And I thank the members of this 
committee for supporting us in that effort.
    In thinking about our Strategic Plan, Mr. Chairman, I was 
reminded of one of the first meetings that you and I had when I 
first became Chairman of the FCC. We talked about this issue, 
how we would reform the FCC for the next millennium, and I 
remember at that time we talked about reorganizing the FCC 
along functional lines, and that was an idea that you were 
talking about then. And if you look at our Strategic Plan, it 
calls for a reorganization of the agency along functional 
lines, as we talked about when we first met a few years ago.
    I also wanted to take this opportunity to publicly thank my 
colleagues at the Commission for their support and work not 
only in helping to develop this plan but also their support in 
a number of key areas. Commissioner Ness has been doing 
outstanding work on international issues and with regard to 
digital television. Commissioner Furchtgott-Roth has provided 
some excellent suggestions to us on the Biennial Review, 
constantly pushing us to be more aggressive in our Biennial 
Review responsibilities. Commissioner Powell has shown 
tremendous leadership in handling the Y2K issue for the 
Commission and for the country and for providing very good 
analysis on our competition issues. And, of course, 
Commissioner Tristani has been a true leader in the V-chip area 
and has shown really unwavering commitment and courage in 
fighting for consumer issues.
    So I feel very honored to chair this important agency at 
this time, with a group of such stellar colleagues, and I would 
be remiss if I didn't mention how blessed all of us are to be 
able to work with an extraordinary staff at the FCC. We can 
write strategic plans until the cows come home, but if we do 
not have a staff that is dedicated and professional and 
hardworking, it is just so much paper. We have a lot of work 
ahead, but I am confident that if we continue to work together 
as an agency, as colleagues, and also with the fine FCC staff, 
we will be able to create an FCC for the digital age that will 
make us all very proud. Thank you.
    [The prepared statement of Hon. William E. Kennard 
follows:]
   Prepared Statement of Hon. William E. Kennard, Chairman, Federal 
                       Communications Commission
    Thank you, Chairman Tauzin, Ranking Member Markey, and Members of 
the Subcommittee for the opportunity to appear before you today to 
discuss the new FCC for the 21st Century.
    This hearing presents a welcome opportunity to further the dialogue 
that we began last March when my colleagues and I testified before this 
same Subcommittee on the future of the Federal Communications 
Commission (FCC).
    In March, I told the Subcommittee the era of convergence--an era in 
which phone lines will deliver movies, cable lines will carry phone 
calls, and the airwaves will carry both--necessitates a radically 
restructured FCC. I told you that in a world where old industry 
boundaries are no longer and competition is king, we need a New FCC.
    I am proud to report we have taken important steps towards 
restructuring the Commission. As you know, this past August, I 
submitted my five-year draft strategic plan to Congress which I intend 
to serve as our blueprint for change. This plan builds upon the 
conceptual framework that I proposed in March.
                            five-year vision
    In five years, we expect United States communications markets to be 
characterized predominantly by vigorous competition that will greatly 
reduce the need for direct regulation. We also expect that the advent 
of Internet-based and other new technology-driven communications 
services will erode the traditional regulatory distinctions between 
different sectors of the communications industry. The FCC's primary 
goals of promoting competition in communications, protecting consumers, 
and supporting access for every American to existing and advanced 
communications services will remain paramount. What will change are the 
means and mix of resources necessary to achieve these goals in an 
environment marked by greater competition and convergence of technology 
and industry sectors.
    In this new environment, the FCC must focus on sustaining 
competitive communications markets and protecting the public interest 
where markets fail to do so. As I said in March, our core functions 
will include: i) universal service, consumer protection and 
information; ii) enforcement and promotion of competitive markets 
domestically and worldwide; and iii) spectrum management.
    As a result, a number of the FCC's current functions and regulatory 
structures no longer will be necessary. The FCC as we know it today 
will be very different both in structure and mission. Increased 
automation and efficiency will enable the FCC to streamline its 
licensing activities, accelerate the decisionmaking process, and allow 
the public faster and easier access to information. The FCC will be a 
``one-stop, digital shop'' where form-filing and document-location will 
be easy and instantaneous.
    Over the next five years, the FCC must wisely manage the transition 
from an industry regulator to a market facilitator. The enactment of 
the Telecommunications Act of 1996--and the establishment of a new pro-
competitive, deregulatory model for communications policy--necessitates 
a reassessment of our core policy functions, structure, and processes. 
New competitors and technological innovation are currently transforming 
communications markets, but history has shown that markets that have 
been highly monopolistic often do not naturally become fully 
competitive. History has also shown that domestic markets that have 
been protected from foreign competition do not naturally open to global 
competition.
    Therefore, during this crucial period of transition, the overall 
strategic objective of the FCC must be to continue to promote 
competition, open markets, and technological innovation, while also 
continuing to protect and empower consumers as they navigate the new 
world of communications. At the same time, the Commission must 
significantly revamp its functions, processes, and structure to meet 
the challenges of a rapidly progressing global information-age economy 
and an evolving global communications market.
    Today, we see tantalizing glimpses of the competitive, deregulated 
telecommunications marketplace that Congress had in mind. Many markets, 
such as mobile wireless and wireline long distance markets, are already 
quite competitive, and many--but by no means all--of the fundamental 
prerequisites for fully competitive, deregulated local 
telecommunications markets are now in place. In many markets, consumers 
are receiving the benefits of competition through lower prices, greater 
choices, and better quality service.
    This is not to say, however, that fully competitive markets are 
inevitable. Vigorous enforcement of the fundamental prerequisites for 
competitive markets and expeditious dispute resolution will remain 
necessary for some years to come. Consumers must also become familiar 
with the myriad new communications options and providers available, as 
well as the new demands which emerge from the advent of increased 
competition. Consumers do not yet have the benefit of experience in 
addressing the challenges of a communications marketplace that looks 
and functions like other competitive industries. We must continue to 
ensure, therefore, that the momentum toward competitive markets moves 
forward on a technology-neutral basis, that we continue to cultivate 
public support for this change, and that all Americans benefit from the 
communications revolution.
                   development of the strategic plan
    The March report served as the conceptual framework for the 
Commission's senior managers to meet and discuss the implications of 
the changing communications marketplace for the FCC and for the 
American people. From these discussions, we developed the framework of 
this Strategic Plan, including our draft vision statement, goals and 
major objectives. Next, senior executives from each of our Bureaus and 
Offices were asked to review their organization's functions, determine 
if they were still essential to the agency's key missions as determined 
by senior management, and provide specific policy initiatives and 
performance measurements for the next five years.
    We gathered extensive input from our stakeholders to help us 
develop this strategic plan. We held forums seeking the views of 
general industry, consumer, state and local government representatives, 
academic and organizational experts, and our employees on the FCC's 
role in the 21st century. Much of the input we received from our 
stakeholders focused on how competition, convergence, globalization, 
and the Internet are currently affecting the communications 
marketplace, and will continue to do so in the future. Interestingly, 
there was a good deal of consensus from our stakeholders about the 
FCC's proposed core functions, as set forth in our March 1999 report.
                           the strategic plan
    The underlying premise of the plan is that the FCC must 
significantly restructure and streamline its functions, processes, and 
organizational structure to better serve the American people in the new 
millennium. Competition and convergence of technologies and industries 
require that we comprehensively transform our functions, processes, and 
structure to become a faster, more functional, and flexible agency.
    As a result of our discussions and forums, we identified four 
critical goals to carry out our core mission. For each of these goals, 
we established specific objectives and policy initiatives that need to 
be implemented to achieve these goals fully. To assess whether we are 
on track in achieving these goals, we then established specific 
performance measurements to be achieved within five years on key 
dimensions such as industry outcomes, consumer benefits, and Commission 
output. These five-year overall performance measures will serve as the 
primary indicia of progress toward the Commission's long-term vision of 
fully competitive communications markets and our transformation into a 
model agency for the Digital Age. Finally, we are also taking various 
actions in the short term. For while our blueprint for change is for 
five years, we are taking immediate steps in all areas to facilitate 
the eventual achievement of our four major goals.
(1) Create A Model Agency For The Digital Age.
    Our first goal is to create a model agency for the digital age. 
This means that as we promulgate policies conducive to advances in the 
information age, we must lead the way in electronic government. Across 
the agency, we must invest in new technology that will allow us to be 
as responsive to the public as possible. Specifically, we must continue 
to automate our processes and to make more information available to the 
public electronically and on an interactive basis.
    A comment that we heard over and over at our forums was that we 
need to find ways to get the FCC's work done faster and reduce the 
levels of review in the agency. We need to be a faster, flatter, and 
more functional agency in order to promote industry progress rather 
than impede its momentum.
    Some sectors of the telecommunications market move so fast that by 
the time a public notice on a proposed rule is issued, and comments are 
gathered, the market has bypassed the conditions that gave rise to the 
proposed rule in the first place. The regulatory process is 
incremental. The market process is not. The regulatory process, by 
definition and by law, has to be linear and methodical, to provide due 
process. The market process, by contrast, is chaotic and nonlinear, 
and, because of that, very often unpredictable.
    The historic model for a regulator, is top-down, command-and-
control, with chiefs, bureaus and support staff. The model for a market 
facilitator, the model we are moving to, is a flatter and more fluid 
organization. Its work units are smaller and more responsive. This is 
possible because much of the governance--the microdecision-making--is 
passing from the FCC to the market. More governance from the 
marketplace means less government from the FCC.
    The FCC is currently structured along the traditional 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 along functional rather than technology lines will put 
the FCC in a better position to carry out its core responsibilities 
more productively and efficiently. There was consensus in each of the 
public forums and in many of the other comments we have received that a 
reorganization along these lines would not only be more efficient, but 
is a necessary prerequisite to competition and convergence. This is not 
an easy task and I look forward to detailed discussions with you and 
our other stakeholders on the best way to move forward on this 
reorganization. We took a huge step forward with Congress's recent 
approval of our new Enforcement and Consumer Information Bureaus.
    As we move toward a faster, flatter, more functional agency, we 
must also invest in our employees and capitalize on their integrity and 
wealth of expertise. It is the employees who have made the Commission a 
unique and vital organization and who will be at the forefront of 
defining how the FCC of the future responds to the dynamic changes in 
today's communications industry. Moreover, we must minimize workplace 
disruption that may result from restructuring efforts through staff 
retraining, reassignment, and other methods. We must ensure that we 
have a critical mass of trained personnel and that we empower our staff 
to embark upon strategic thinking with clear policy direction.
(2) Promote Competition In All Communications Markets.
    Our second goal is to promote competition in all communications 
markets. Entry barriers (legal, economic, or operational) in 
communications markets are antithetical to the development of robust 
competition. Elimination or reduction of such barriers enables new 
competitors to enter communications markets easily and enhance consumer 
choice. We must also focus on the international marketplace and seek 
additional market opening commitments from other countries.
    As competition becomes a reality, deregulation must occur. 
Eliminating outdated rules will play an important role in accelerating 
the transition to fully competitive markets. Consumers ultimately pay 
the cost of unnecessary regulation. Thus, one of our primary objectives 
must be to deregulate as competition develops and to substitute market-
based approaches for direct regulation. This will be a central tenet of 
our 2000 Biennial Review. In addition, we must resist imposing legacy 
regulations on new technologies. Our goal should be to deregulate the 
old instead of regulating the new.
    An undesirable by-product of the rise of competition in various 
telecommunications markets has been an increase in fraudulent practices 
by certain providers of telecommunications services. In the fast-paced, 
newly developing world of communications competition, we must be able 
to respond swiftly and effectively to complaints that companies are 
taking advantage of other companies or consumers. Effective use of the 
Commission's enforcement resources is critical to ensure full 
implementation of the Communications Act and the Commission's rules 
designed to open communications markets to competition, and enhance 
choice for consumers. Effective enforcement is also essential to 
maintain public support for deregulation.
    Competitive markets work only when consumers have the information 
required to make informed choices. The creation of the new Consumer 
Information Bureau will provide consumers a one-stop shop for obtaining 
the information they need to make wise choices in a robust and 
competitive marketplace.
(3) Promote Opportunities For All Americans To Benefit From The 
        Communications Revolution.
    Our third goal is to promote opportunities for all Americans to 
benefit from the communications revolution.
    Congress has long recognized the importance of this goal and 
codified it in Section 1 of the Communications Act of 1934. The statute 
states that the purpose of the Act is to ``make available to all the 
people of the United States, without discrimination . . . a rapid, 
efficient, Nationwide, and worldwide wire and radio communication 
service . . . at reasonable charges.'' Where competition cannot ensure 
such access, the FCC will continue to take action to support and 
promote universal service and other public interest policies.
    As the nation's communications sector continues to undergo 
unprecedented growth, we must ensure that Americans of all backgrounds 
have the opportunity to benefit, not only as consumers of 
communications services, but also as employees or owners of 
communications businesses. In particular, we need to open the doors of 
opportunity to women, minorities, and small-scale entrepreneurs across 
all communications industries. This goal is critical to preserving 
diversity of viewpoints and a vibrant democracy, and to ensuring that 
all Americans are able to take advantage of the dynamic 
telecommunications market.
(4) Manage The Electromagnetic Spectrum (The Nation's Airwaves) In The 
        Public Interest.
    Our fourth and final major policy goal is to manage the use of the 
electromagnetic spectrum, the Nation's airwaves, in the public interest 
for all non-Federal government users, including private sector, and 
state and local government users. Fundamental to this mandate is the 
difficult task of advancing the pro-competitive goals of the 
Communications Act, while at the same time ensuring that other public 
interest goals are met. Competing demands and changing technologies 
make spectrum management a unique challenge. Since spectrum is a finite 
public resource, it is important that it be allocated and assigned 
efficiently to provide the greatest possible benefit to the American 
public. It is also important to encourage the development and 
deployment of technology that will increase the amount of information 
that can be transmitted in a given amount of bandwidth. To meet these 
challenges, the Commission must constantly strive to improve the way it 
both allocates and assigns spectrum. As part of this effort, the 
Commission must privatize functions where possible and promote an 
active secondary market to ensure that spectrum is being used for the 
highest value end use.
    The past few years have seen tremendous growth in information 
technology, particularly in the wireless industry. As markets become 
more competitive and new services are introduced, demand for spectrum 
will increase. The Commission must seek new methods to make spectrum 
available and ensure that it is put to its highest value use. 
Increasing the supply of spectrum will decrease the cost of using 
spectrum and thereby expand the output and lower the price of spectrum-
based services. It will also create new opportunities for competitive 
technologies and services for the American public.
                            external factors
    A number of external factors will affect our ability to achieve our 
vision of fully competitive communications markets in five years. The 
fortitude with which the FCC and the states enforce the pro-competition 
mandates of the 1996 Act will continue to be a significant factor. 
Whether or not litigation delays the introduction or implementation of 
key FCC and state decisions is another factor. Our success will depend 
on whether previously monopolized communications markets are 
successfully opened up so that new entrants can compete in those 
markets.
    Nonetheless, a range of additional external factors--some of which 
can be influenced by FCC actions, and others which largely cannot--may 
affect the continued development of competition in communications 
markets. For example, convergence-driven competition depends heavily on 
investments in new technology by incumbent and new communications 
providers. The breadth and depth of long-run consumer demand for new 
services remain unknown and therefore may also impact the development 
of competition.
    The prospects for competitive communications markets are 
significantly affected not only by national developments, but also by 
developments in world markets. The opportunities for United States 
telecommunications companies can be more fully realized if other 
countries join us in fostering competition in their communications 
marketplaces. Market access restrictions in foreign counties 
significantly impede U.S. companies' ability to compete on a global 
scale.
    Finally, the Commission's ability to carry out its vision is 
largely dependent on adequate resources from Congress to carry out 
critical activities. In many cases, the FCC will need to redeploy 
existing budget and staff resources to address changing priorities. In 
addition, many of the initiatives listed in the plan to reinvent 
ourselves as a model agency for the digital age may require 
Congressional approval and continued adequate funding. Additional 
resources also may be required for new initiatives, for example in the 
areas of universal service, enforcement of disability access 
provisions, enforcement of slamming/cramming rules, electronic 
government, alternative dispute resolution, and spectrum management, 
all of which ultimately will result in a more effective and efficient 
organization. Our success is tied directly to our ability to maintain 
critical staffing levels and fund ongoing and new initiatives.
                               next steps
    We look forward to working with Congress, industry, consumers, and 
all our stakeholders to refine our Draft Strategic Plan. It is a work 
in progress and we are committed to ongoing discussions and additional 
input. Our goal is a blueprint for change that we can all be proud of 
and commit to as we enter the new millennium.
    We plan to conduct ongoing reviews of our goals and objectives to 
ensure that they accurately represent our highest priorities, even as 
the communications marketplace continues to evolve. In addition, we 
will conduct ongoing reviews of our policy initiatives and programs to 
ensure their effectiveness, and we will continuously assess our 
progress toward achieving the performance measures proposed in this 
plan.
                               conclusion
    Congress provided the blueprint for competition by passing the 
Telecommunications Act of 1996. This strategic plan is intended to 
provide a roadmap to guide the FCC's transition from an industry 
regulator to a market facilitator.
    The FCC was created to serve the public, and now it has recommitted 
itself to serve the public in a new century, in a new fashion.
    We have a lot of critical work in front of us: local competition 
rules, universal service reform, access reform, BOC entry into long 
distance, promoting the deployment of high-speed Internet access, 
consumer protection measures such as truth-in-billing, and opening up 
more spectrum for new services.--to name just a few. I am committed--
and the FCC's staff are committed--to taking on all of these challenges 
as well as reinventing the FCC. For, in the end, both will better serve 
our customers--the American people.
    The changes that we propose are not trivial. The FCC, in five 
years, will be unrecognizable to those of us who know it today. It will 
be re-made for a new century and for a rapidly changing industry. But 
no matter how much it changes, the FCC will remain committed to 
promoting competition, fostering the growth of new technology, and 
bringing the opportunities inherent in the telecommunications 
revolution to all Americans.
    And I mean all Americans. As I have reiterated time and time again, 
this Information Age must be the age of inclusion. No one should be 
left behind.
    Thank you for your time. I'd be pleased to answer any questions.

    Mr. Tauzin. Thank you very much, Mr. Chairman.
    Let me make one correction for the record. My comments 
regarding the industry was not that they were not forthcoming 
with ideas and suggestions. They have been. They have been very 
candid about that. My concern is when they talk about problems 
they have with the rate, they don't want to go public. They do 
it all off the record, confidentially, because they are 
concerned about consequences. That is not a good comment. That 
is what I meant. We need to examine them more thoroughly and 
find out why that is so.
    I thank the Chairman for his comments.
    Mr. Tauzin. Let me now welcome Commissioner Susan Ness to 
the hearing and ask Ms. Ness if she has comments.

                  STATEMENT OF HON. SUSAN NESS

    Ms. Ness. Thank you, Mr. Chairman. I welcome the 
opportunity to appear before you today to hear your thoughts on 
FCC reform and to proffer my views on Chairman Kennard's 
excellent proposal, A New FCC for the 21st Century. As you 
said, Mr. Chairman, and as Mr. Kennard elaborated, the 
marketplace is literally changing before our eyes. Commercial 
deployment of the Internet and deployment of IP protocol 
technology have fundamentally and irreversibly transformed 
markets. Technological advances have spawned a stunning array 
of innovative products and services. Competitors are beginning 
to offer bundles of voice, video and data services at enticing 
prices. Reforms embodied in the 1996 Telecommunications Act and 
in the WTO Telecom Agreement have spurred global competition, 
resulting in plummeting prices for wired and wireless 
intrastate and international telecommunications.
    The FCC has embraced these revolutionary changes, and the 
blueprint for FCC reform outlines a vision of a structurally 
and directionally reordered and streamlined FCC. I commend the 
Chairman and the FCC staff for their excellent work. I support 
the principal goals of the plan. I won't repeat them; they were 
already discussed by the Chairman. But I did want to comment on 
a few specific proposals.
    First, I support the notion of reorganizing the Commission 
along functional lines. The Commission's current structure 
invites industry-specific analysis which runs counter to our 
desire to achieve cross-industry competition. Use of 
multibureau task forces to work on items and our Spectrum 
Coordinating Committee helped to alleviate some of that 
problem. Nonetheless, reorganization along functional lines 
should facilitate a cross-pollinization of policy ideas. I 
recognize however, that we are still implementing an act which 
is organized along industry lines.
    Second, wireless technology is going to be a major 
component of future services, and I strongly support the 
exploration of innovative spectrum allocation and assignment 
mechanisms to promote efficient spectrum use, including where 
appropriate private band plan managers. Also, flexibility is 
key to ensure that licensees can respond quickly to consumer 
demands. And new technologies such as software-defined radio 
and ultra-wideband have tremendous potential; and we need to be 
able to explore those possibilities in a new spectrum 
environment. I therefore especially applaud proposals to 
strengthen the technical and spectrum-planning expertise of the 
Commission. It takes very seasoned engineers to be able to 
understand what is happening as we try to have spectrum sharing 
to facilitate efficient use.
    Therefore, the addition of technologists at the Commission 
is going to be extremely helpful. This is particularly true in 
the international arena where we are working with our 
regulatory partners abroad to promote spectrum efficiency and 
global competition.
    Finally, I enthusiastically support the establishment of a 
consumer advisory panel and the consumer information bureau. 
These will help inform our thinking as we endeavor to serve the 
public interest. All too often we see that consumers are absent 
from the mix of folks that come before us. They are a critical 
component that I would like to see involved on a day-to-day 
basis.
    While the proposed Strategic Plan is an excellent road map, 
the true road test will come as we address each matter before 
us. We must ask ourselves whether intervention truly is 
necessary or whether we can avoid regulation; how we can 
narrowly tailor our regulations when we do intervene; and how 
we can creatively use our tools for the allocation and 
assignment of spectrum. Ultimately it is our successful answers 
to these questions that will determine how rapidly Congress's 
vision of a competitive and deregulatory communications 
marketplace is fulfilled, and it is only then that the American 
public will truly reap the benefits of the proliferation of new 
services and convergence that will characterize the new 
millennium.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Hon. Susan Ness follows:]
     Prepared Statement of Hon. Susan Ness, Commissioner, Federal 
                       Communications Commission
    Mr. Chairman and Members of the Subcommittee, I appreciate the 
opportunity to appear before you today.
    I welcome this opportunity to address proposed reforms to the 
Federal Communications Commission as we greet the new Millennium. In 
particular, I am pleased to discuss with you my views on FCC Chairman 
Kennard's strategic plan--``A New FCC for the 21st Century.'' This 
ongoing dialogue between our authorizing subcommittee and the FCC is 
especially important as we proceed to reform our agency based upon the 
growing competition and convergence in the communications industries.
                        the changing marketplace
    The marketplace is literally changing before our eyes. Advances in 
technology have produced enormous benefits to consumers. Services that 
did not exist ten, five or even two years ago now permit instantaneous 
contact between co-workers, family, and friends. These same services 
provide for immediate receipt of news and information anywhere in the 
world, and ready access to extensive data files wherever they are 
stored.
    Cable companies now are launching telephone service and Internet 
access; telephone companies are deploying high-speed lines for the 
delivery of video services and data; satellites are blanketing the 
country with video, voice and data services; palm sized devices are 
providing two way wireless delivery of voice and data, including 
connections to the Internet; and broadcasters are exploring ways to 
enhance the airways with interactive information services.
    Wireline, wireless, cable and satellite service providers are 
offering--or are contemplating offering--bundles of voice, video, and 
data services. Mergers and joint ventures are forming--and dissolving--
at a dizzying pace, as companies hedge their bets and struggle to find 
a competitive niche in a rough and tumble marketplace.
    Prices for many services have plummeted as competition takes hold. 
Where wireless calls recently cost 30 to 50 cents a minute with hefty 
roaming fees, the development of competitive nationwide cellular and 
PCS networks has prompted the offering of buckets of wireless minutes 
with nationwide rates as low as 10 cents per minute. Long distance 
calls that cost 25 cents per minute in 1996 have been replaced with 
campaigns by competing carriers touting five cents per minute. Sports 
and movies that recently were found only on broadcast networks and 
cable systems now are delivered to our homes by direct broadcast 
satellites and power companies.
    The Telecommunications Act of 1996 and the World Trade Organization 
Basic Telecommunications Agreement (whose core principles reflect 
concepts embodied in the Act) have spurred many of these changes. 
Another big driver of change has been the commercial deployment of the 
Internet--coupled with the development of Internet protocol 
technology--which has revolutionized the dissemination of information 
and literally transformed commerce, creating a new and thriving 
marketplace that defies geographic boundaries and traditional market 
structures.
    The implications of the Internet and Information revolution for 
telecommunications policy are profound. At the FCC, we are anticipating 
and responding to these tumultuous changes. Chairman Kennard's 
strategic plan outlines a vision of a structurally and directionally 
reordered and streamlined Commission for the 21st Century. I commend 
the Chairman and the staff for their fine efforts in developing a 
comprehensive and responsive plan.
                the general goals of the strategic plan
    Pursuit of the Strategic Plan's four principal goals should ensure 
that new services at lower prices reach the market as expeditiously as 
possible.
1. FCC Reform
    First, I agree that we must reform the agency to act faster and 
more responsively to requests from licensees and the public. Licenses 
must be issued in timely fashion with less paperwork; actions on 
requests to provide service must be taken without undue delay. Lengthy 
processing times and cumbersome procedures hamper innovation and 
competition. Reorganization along functional lines--bringing together 
FCC policy experts from each of the industry sectors--will enable us to 
comprehend better marketplace trends and be more responsive.
2. Promote Competition
    Second, it is critical that we continue to promote competition and 
swiftly eliminate rules that intrude in competitive markets and that do 
not provide tangible benefits to consumers. As a general matter, new 
services should not need new authorization; and we should remove any 
rate regulations, service restrictions, and record-keeping and filing 
requirements that no longer serve the public interest. Our forbearance 
authority and biennial reviews are excellent tools.
    Where service providers violate our rules, we must take swift and 
deterrent action. Speedy enforcement is critical, especially where 
violations are aimed at disadvantaging competitors or defrauding the 
public, including practices like slamming or cramming.
3. Access to Affordable Telecommunications by All Americans
    Third, I agree that we must continue our efforts to ensure that all 
Americans--including those living in rural and high cost areas, those 
with low incomes, those with disabilities, and those living on Indian 
Reservations--have access to quality basic and advanced 
telecommunications services at affordable rates. In the last few years 
we have taken steps to enable consumers with low incomes or who live in 
high-cost rural areas to receive telephone service at affordable 
prices. We have acted to extend telecommunications services to 
classrooms, libraries and non-profit rural healthcare facilities. As we 
move into the new millennium, we must continue these efforts to 
implement your vision as embodied in the law.
4. Efficient Management of the Spectrum in the Public Interest
    Finally, and perhaps crucial to the three goals just discussed, we 
must develop new ways to manage Spectrum. Spectrum planning must create 
opportunities for multiple service providers, including new entrants, 
as mandated by the Act. We must seek ways to manage the nation's 
airwaves more efficiently, as an increasing number of innovative and 
competitive services make their way to the marketplace. And as the 
Commission's representative to the World Radio Conferences in 1995 and 
1997, I am acutely aware that, through early high-level government 
participation in the international planning and negotiation process, we 
can make a significant difference in the opportunities that are 
available both for U.S. industry abroad and American consumers at home.
                specific proposals in the strategic plan
    I would now like to highlight some of the specific proposals in the 
Strategic Plan that are designed to implement these four principal 
goals:
1. Increasing Technical Expertise
    First, I strongly support those aspects of the plan that are aimed 
at strengthening the technical and spectrum planning expertise of the 
Commission. Some of the Commission's most productive actions in the 
recent past have included the authorization of newer and more efficient 
spread spectrum technologies and the establishment of allocations for 
shared spectrum.
    The FCC's ability to assess technology and efficiently manage the 
non Federal government use of the spectrum will be increasingly 
important in the new millennium, and will be enhanced by the proposals 
in the plan. These proposals emphasize recruitment of high-quality 
staff knowledgeable about the communications marketplace. Chairman 
Kennard has proposed to strengthen the technical capabilities of the 
Commission by hiring more engineers and technologists, and to re-
establish an entry-level engineering training program, a proposal I 
welcomed in my testimony before you last March.
2. Innovative Spectrum Policies
    Second, I strongly support the proposed exploration of innovative 
spectrum assignment mechanisms to promote efficient use of the 
spectrum. The use of more flexible allocations and relaxed service 
rules will enable competitors to respond more rapidly to changes in the 
marketplace and will create value for consumers and other users.
    Further development of the auction process will continue to 
increase the effective and orderly licensing of services. Facilitating 
the ability of licensees to aggregate and disaggregate frequency by 
fostering a secondary market for spectrum is an innovative approach, 
worthy of consideration. I am also interested in exploring our ability 
to combine auctions and the use of private band managers and 
coordinators in an effort to privatize as much as possible the site 
specific licensing that is desirable in many services and in congested 
channel bands. Finally, we must examine technological breakthroughs, 
including software defined radio, ultra-wideband, and other spectrum-
efficient methodologies, which could fundamentally change the way in 
which we allocate spectrum nationally and globally.
3. Enhancing Global Competition
    Third, I applaud the Chairman's proposal to work with regulators 
from other countries to promote full implementation of existing WTO 
commitments and to resolve outstanding spectrum issues at the upcoming 
World Radiocommunications Conference. U.S. consumers will benefit 
greatly from the further reduction of entry barriers in foreign 
communications markets and the development of global standards that 
encourage competition and innovation in wireless and satellite 
services.
    I have long been concerned about the adequacy of resources for our 
international representation in spectrum planning and negotiation, as 
well as our ability to encourage opening of foreign telecommunications 
markets. I am pleased that the Chairman has made a priority of 
adequately identifying, coordinating, and advocating our international 
interests, and I hope that the other U.S. agencies as well as Congress 
will support this effort.
4. Streamlining the FCC
    Fourth, I support the Chairman's efforts to find ways to speed up 
the Commission's adjudication and rulemaking processes. Consumers and 
carriers alike will benefit from faster Commission actions made 
possible by expeditious treatment of petitions seeking reconsideration 
or review of decisions, greater use of alternative dispute resolution 
mechanisms and the accelerated docket, as well as generally improving 
the staff's ability to resolve complaints against carriers.
    As I noted previously, I support the proposal to organize the 
Commission along more functional lines. Indeed, we have already headed 
down that path, with the establishment of the Enforcement and Consumer 
Information Bureaus.
    As part of this effort, it is my hope that we can explore new 
techniques to build industry consensus on issues that come before the 
Commission. Industry-driven solutions to problems generally expedite 
the resolution of issues pending before the Commission--provided that 
consumer interests are also represented at the table.
5. Ensuring the Public Interest is Served
    In that context, I am pleased to see the proposed establishment of 
a consumer advisory committee. Commission actions have a profound 
effect on the public. Unfortunately, the public generally is woefully 
underrepresented in our proceedings. I hope that this modest proposal, 
coupled with efforts to beef up consumer information, will help us 
better to assess what is in the public interest.
                               conclusion
    The proposed Strategic Plan is an excellent blueprint for the FCC 
as we enter the new millennium. The real challenge, however, in 
reforming the Agency remains. As we address each decision before us, we 
must ask ourselves: When should we intervene and when should we avoid 
regulation? How can we narrowly tailor our regulations when we do 
intervene, and then reduce their burden, as markets grow more 
competitive? How do we creatively use our tools for the allocation and 
assignment of spectrum? How can we most expeditiously meet the needs of 
our consumers?
    Ultimately, it is our successful answers to these questions in each 
instance that will determine how well and how rapidly Congress' vision 
of a competitive and deregulatory communications marketplace is 
fulfilled. And it is only then that the public will truly reap the 
benefits of the proliferation of new services and convergence that will 
characterize the new millennium.
    Thank you for the opportunity to testify before you today. I am 
happy to answer your questions.

    Mr. Tauzin. Thank you very much, Ms. Ness.
    The Chair is now pleased to welcome the Honorable Howard 
Furchtgott-Roth for an opening statement.

           STATEMENT OF HON. HAROLD W. FURCHTGOTT-ROTH

    Mr. Furchtgott-Roth. Thank you, Mr. Chairman. It is good to 
be home. It is good to be back in this chamber where I spent 
many a day and many fond memories of this place.
    I have a prepared statement that I would like to submit for 
the record, AND I would just like to make a few other comments.
    Mr. Tauzin. Without objection, all written statements are 
part of the record.
    Mr. Furchtgott-Roth. Thank you, Mr. Chairman.
    This room is part of the Commerce Committee and it is part 
of Congress. This meeting here today, this hearing, it is about 
Congress, it is about congressional oversight far more than it 
is about the FCC. I recall that Congress has hearings that you 
can put in two general categories: oversight and legislative. 
We have these oversight hearings in part for Congress to learn 
from the agencies, but in large part also for the agencies to 
learn from Congress. I am very much looking forward to learning 
from you all today.
    The Commission has enormous responsibilities. We do some 
things well, we do some things maybe not quite so well. We have 
heard about a few of them today. I am sure we are going to hear 
about more as we go forward.
    Much has been made about the organizational structure of 
the FCC. I must say there are scores of Federal agencies around 
Washington. I doubt there is anyone who can describe in any 
detail how each of these is organized. They are all organized 
in different ways, and I don't think there is anyone who could 
say that how well each of these agencies performs its duties 
that is related in any predictable way to how well it is 
organized.
    Organizational structure matters, but what matters more is 
having the Commission follow the law as it is written. If there 
are problems in how the Commission is executing the law, they 
will not be cured by organizational changes. If the Commission 
is doing something well, that performance will not be 
substantially degraded by organizational changes.
    Chairman Kennard and the FCC staff have invested a lot of 
time and have come up with a very fine and well-thought-out 
product and a Strategic Plan. It has not yet come before the 
Commission for a vote. It is an interesting plan, one that I 
think has a lot of merit, one that I don't know that I would 
agree with everything in it, but I certainly recognize the very 
fine quality of it, and one that frankly the Commission under 
section 5(b) of the act could implement on its own, but as a 
Commission as a whole.
    Finally, I would like to note that I share many of the 
committee's concerns this morning, particularly those of 
Chairman Bliley, on transparency process, and I welcome the 
oversight of this committee. Thank you, Mr. Chairman. I look 
forward to the remainder of the hearing.
    [The prepared statement of Hon. Harold W. Furchtgott-Roth 
follows:]
  Prepared Statement of Hon. Harold W. Furchtgott-Roth, Commissioner, 
                   Federal Communications Commission
    Chairman Tauzin, Congressman Markey, distinguished Members of this 
Subcommittee, thank you for the invitation to testify on ``Federal 
Communications Commission Reform for the New Millennium.''
    Chairman Kennard, the Bureau chiefs, and representatives of the 
Office of Plans & Policy have, I am sure, worked hard on this 
Chairman's Draft Strategic Plan. Parts of this document have real 
merit. I am equally sure, however, that if I were asked to cast a 
formal vote to adopt this Plan as that of the Commission's, I would 
have real issues with the document as written. A brief review of the 
Plan reveals that it includes as ``key policy initiatives'' some 
matters that are controversial and about which Members of this 
Committee have expressed serious concern.
    At this point, however, allow me to make a more general point about 
FCC reform and the direction in which it should be headed: plans for 
internal agency restructuring are well and good. Under section 5(b) of 
the Communications Act, ``the Commission'' as a whole can reorganize 
the agency in order to promote its proper functioning. I am skeptical, 
however, that organizational restructuring alone can do much to improve 
the efficiency--much less the policy positions--of the Commission.
    The federal government consists of scores of agencies, no two of 
which have identical organizations, and each of which changes 
organizational structure from time to time. No review of these federal 
agencies--or of private business organizations, for that matter--would 
show that organizational structure is the primary criterion that 
distinguishes efficient from inefficient agencies, or that separates 
those agencies that adhere closely to the law and Congressional intent 
from those that do not. When a member of Congress objects to the 
processes or decisions of a government agency, organizational structure 
is rarely the primary target of his or her frustration.
    The most important ``reform'' that could occur at the agency--i.e., 
the one that would go the furthest toward curing the institutional 
deficiencies for which it is sometimes criticized--would be for the 
Commission to simply follow the law as Congress has written it. If we 
concentrated on executing the tasks clearly assigned to us by Congress, 
and in doing so followed the guidance provided by the statute--as 
opposed to initiating our own regulatory schemes without statutory 
direction to channel them--we would do better by all involved.
    It is my firm belief that Congress--not the Federal Communications 
Commission--makes the basic decisions about federal telecommunications 
policy. Indeed, if Congress did not make those fundamental policy 
choices, we would be faced with an unconstitutional delegation of 
authority. These legislative choices are spelled out in the 
Telecommunications Act of 1996 and in the Commission's enabling 
statute, the Communications Act of 1934. Taken together, these statutes 
establish the limits of the Commission's power in implementing 
Congressional mandates and define the substance of those mandates.
    The Telecommunications Act of 1996 gave the Commission the great 
responsibility of implementing the dramatic changes effected by the 
Act. The role of the Commission was, in many respects, fundamentally 
altered by the Telecommunications Act of 1996.
    Those changes have been largely for the better. Four years ago, 
regulation at the federal, state, and local levels was based on a 
framework that placed businesses in discrete regulatory categories. 
Businesses were pigeonholed by their operations, and limitations on 
their activities by line of business, by territory, and by customer 
class were defined by those identities. A broadcaster was a 
broadcaster, and nothing else. A local exchange carrier was a local 
exchange carrier, and nothing else. And so on.
    Regulation meant that competition was, at best, managed by 
government agencies and, at worst, illegal. Consumers paid a high price 
for this form of regulation: higher prices than necessary; lower 
quality than necessary; fewer choices than necessary; and less 
innovation than necessary.
    Advances in technology and changes in the law, however, have worked 
to the advantage of consumers in the past few years. It would be wrong 
to attribute all of the benefits of lower prices, new services, new 
innovations, and improved service quality to changes brought on by the 
Telecommunications Act of 1996. But it would be equally wrong to assert 
that the increased competition made possible by that Act has meant 
nothing.
    I have not always agreed with the Commission's interpretation of 
specific sections of the Act. Commission rules and interpretations 
have, in my opinion, been at times much broader than the relevant 
statute, and thus in excess of statutory authority and unlawful under 
the Administrative Procedure Act. In some instances, the Commission has 
simply failed to implement the law. But where the Commission has acted 
in accordance with the directives and limits of the statute, I believe 
the American public has been well served. And where we have not 
implemented the law as written, consumers could have been better off.
    There are those who say that the Telecommunications Act of 1996 has 
failed. I disagree. There are those who say that simply restructuring 
the FCC will remedy any possible shortcomings of the Act. I disagree.
    I think that we need to finish the job that we have started but 
have yet to complete. We should implement faithfully the 1996 Act by 
its terms, and neither reinvent, embellish, nor nullify it.
    The Act describes itself as both ``deregulatory'' and ``pro-
competitive.'' I believe that it can and must be both. Indeed, the 
theory of the Act, as evidenced by its various provisions, is that 
deregulation--not more regulation--is the best way to promote 
competition. I believe that we have yet to implement the Act in a way 
that achieves these twin goals. If we did that--and only that--Congress 
could spend less time on oversight and reform of the FCC.
    This Committee and its Members have invested much in this Act. I 
hope that you will continue to insist on its full and proper 
implementation. Such implementation--more than anything else--will 
bring the agency's processes in better line with Congressional intent 
and thus ultimately with the democratic process.

    Mr. Tauzin. Thank you.
    The Chair is now pleased to welcome the Honorable Michael 
Powell, Commissioner for the FCC.

               STATEMENT OF HON. MICHAEL K. POWELL

    Mr. Powell. Thank you, Mr. Chairman, and to the members. I, 
too, want to commend Chairman Kennard's leadership in 
developing his Strategic Plan. Its vision is laudable and 
consistent with the goals of the 1996 act. And I generally 
support the goals of the plan to make the agency faster, 
flatter, and more functional, for such actions are critically 
important to meeting the challenges of a vigorous, innovation-
driven marketplace. I am pleased that many of the areas 
discussed in our testimony last March are considered in the 
draft plan, but I believe that the plan alone will not 
completely obviate the need for Congress to consider the 
parameters of the Commission in a period of rapid change in the 
industry.
    In the first instance, as we know, Congress sets the 
Commission's mission. It is our duty to implement specific 
statutory direction before any discretionary authority. This 
simple priority principle to me should stand at the summit of 
any Commission plan.
    As to the general goals of the draft plan, I would like to 
note two particular areas of my role as Defense Commissioner 
that I believe should be featured as well, flowing from section 
1 of the act. In addition to those core functions, we must 
include protecting public safety and the national security. 
These statutory objectives continue to be important as the FCC 
confronts a variety of challenges relating to reconciling 
commercial and governmental interests which are becoming 
increasingly difficult in a world of digitalization.
    In addition, I would like to express my limited concern 
that the plan takes a fairly long-term view of our mission and 
priorities over a 5-year period. What form the communications 
market will have taken by then is anyone's guess, and one must 
be a bit skeptical that any restructuring along that time 
horizon will unfold as planned. While a long-range Strategic 
Plan has merit and some value in setting our proximate course, 
it is perhaps going to be more important to work on specific 
priorities calibrated to shorter timeframes.
    The more significant challenge is to transform the vision 
so well articulated in the plan into daily operations. For 
example, I continue to believe that the Commission would be 
well served to enumerate, clearly and widely communicated, a 
set of priorities on an annual basis. This would help focus the 
Commission's work for the coming year and create greater 
regulatory certainty for the marketplace.
    I also believe the FCC needs to make quicker, more timely 
decisions. While automated tools are appropriate for the bulk 
of the routine non-controversial work that we do, we also need 
to endeavor to find ways to accelerate decisions involving 
complex transactions and important policy questions. I am 
interested in the proposal to consolidate the agency's various 
functions. However, in light of the current structure of the 
organic statute itself along technical lines, I do caution us 
not to expect revolutionary changes in analysis or outcomes of 
our decision by that simple structure change.
    The regulatory objectives of the draft plan, to my mind, 
fall a bit short. The draft repeatedly remarks that we 
deregulate as competition develops. Undoubtedly that is true in 
some quarters, but I also have to express my strong belief that 
significant deregulation is a prerequisite ingredient for 
developing competition in many areas and not always just a 
reward to industry after the government determines competition 
has emerged to its satisfaction.
    I believe that the plan's deregulatory component could be 
and should be strengthened to more presumptively favor 
deregulation and place greater burdens on the Commission to 
justify retaining certain rules.
    For the most part, Chairman Kennard's draft Strategic Plan 
can be executed by the Commission and its most highly regarded 
staff without congressional intervention. However, the list of 
modest legislative recommendations attached to the plan could 
help facilitate its implementation, and I would urge some 
consideration of them.
    Thank you for having me today. It is always an honor and a 
pleasure and I look forward to your questions.
    [The prepared statement of Hon. Michael K. Powell follows:]
  Prepared Statement of Hon. 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 discuss ``Federal 
Communications Commission Reform for the New Millennium'' and Chairman 
Kennard's draft ``strategic plan.''
    I will start by stating that I wholeheartedly support Chairman 
Kennard's efforts and commend his leadership in developing this draft 
strategic plan. The ``vision'' that the draft plan has of ``vigorous 
competition that will greatly reduce the need for direct regulation'' 
is laudable and consistent with Congress' intent in drafting the 1996 
Act. I, therefore, generally support the goals of the plan and its 
commitment to make the agency ``faster, flatter and more functional.''
    In my testimony this morning, I would like to highlight for the 
Subcommittee some of the elements of the draft plan, and, of course, 
talk briefly about the few areas that may need further consideration by 
both the Commission and Congress.
    In March, when we were last here to testify on FCC reauthorization, 
I submitted 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 better align the agency 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 am pleased that many of 
these areas are considered in the Chairman's draft plan, but I believe 
that it alone will not completely obviate the need for Congress to 
monitor and perhaps modify the agency in response to rapid change in 
the industry and to ensure that Congress' pro-competitive, deregulatory 
vision, embodied in the 1996 Act, is realized.
           i. the commission's mission, goals and objectives
    A must-do for any organization--from the smallest to the largest--
is to establish goals and objectives that are measurable and 
achievable. Congress sets the Commission's mission and goals in the 
first instance. In my mind, it is our duty to implement specific 
statutory direction, before, or concomitant with, any discretionary 
authority. This simple priority principle should stand foursquare at 
the summit of any Commission plan.
    I believe, generally, that the draft strategic plan covers the 
broad areas that should guide our work in coming years. However, I 
would point out two areas that I believe are important and derive from 
Section 1 of the Act, but are omitted in the present draft: (1) the 
promotion of safety of life and property and (2) the national defense.
    As the ``Defense Commissioner'' responsible for the FCC's emergency 
preparedness, security and national defense matters, I have asked the 
Chairman to include up-front in the plan these important statutory 
goals. These issues are becoming more acute and more challenging as 
competition and deregulation drive greater commercial activity. While I 
intensely encourage new entry and applaud innovative business models, 
these interests do not always coincide with governmental interests in 
law enforcement and national security. I would alert the Congress to 
the growing challenge of reconciling these competing interests. Some of 
these challenges include fulfilling the spectrum needs of federal, 
state and local public safety entities; ensuring that law enforcement 
continues to have the necessary tools at its disposal in the digital 
age; balancing the competing demands for spectrum by governmental and 
non-governmental institutions, particularly in international forums; 
and safeguarding critical national security and defense assets.
    With an expansive and complex statute it is difficult to compress 
into one sentence and four enumerated goals the purpose of the FCC 
``for the 21st Century.'' I congratulate Chairman Kennard for his 
attempt to do so. Such an endeavor, however, necessarily produces a 
document of lofty generalities. The more significant challenge is to 
translate this strategic vision into an operational plan, detailing the 
means for reaching the objectives and the resources for doing so. My 
only caution here is that it is always more difficult to execute a plan 
than to craft one, and I have some concerns that the goals in this 
strategic plan are overly optimistic and some of its numeric targets 
potentially unhelpful.
    I think the Chairman's draft strategic plan includes some 
appropriate implementation steps and ways to measure our results. He 
has also put in place a top-notch team of FCC managers and 
professionals to implement these steps. My limited concern, however, is 
that the plan takes a fairly long-term view of our mission and 
priorities (5 years). What form the communications market will have 
taken by then is anyone's guess, and one must be a bit skeptical that 
any restructuring along that time horizon will unfold as planned. While 
a long-range strategic plan has some value in setting an approximate 
course, it is perhaps more important to work on specific priorities 
calibrated to shorter timeframes.
    For example, as I testified in March, I continue to believe that it 
would be useful for the Commission to enumerate clearly and widely 
communicate a set of annual priorities. I would favor a more structured 
process by which the Commission formally develops and publicly reports 
its priorities for the upcoming year to help focus the work of the 
Commission and create greater regulatory certainty. To assist in this 
and other managerial challenges, I would consider creating a 
professional management position in the Commission, dedicated to 
operational matters.
    Let me now offer a few observations regarding specific subjects 
covered in the draft plan.
            ii. some highlights of the draft strategic plan
A. Internal Procedures
    In the effort to improve internal procedures, we should be 
centrally focused on drastically improving efficiency. In a market 
guided by ``Internet'' time, the FCC needs to make quicker, more timely 
decisions. This is why I fully support our current and future efforts 
to modernize and automate many of our functions. The FCC is focused, 
rightly, on becoming a ``model agency for the digital age.'' I have 
been very impressed by the various automation efforts, including the 
spectrum auction bidding system and the Wireless Bureau's ``ULS'' 
project. Automated tools are appropriate for the bulk of the routine 
and non-controversial work. At the same time, however, we need to find 
ways to accelerate decisions involving complex transactions and 
important policy questions. Here, more than any other area, a decision 
that comes too late, might as well not have been made at all.
    Therefore, I am encouraged by the draft plan's proposals to 
eliminate multiple levels of review, making the agency faster, flatter 
and functional. We must be structured to render decisions quickly, 
predictably, and without imposing needless costs on industry or 
consumers through unnecessary delay. In this regard, while I agree with 
the proposal to act on certain petitions for reconsideration within 60 
days of the record closing, I would suggest the same expedited 
treatment of applications for review of actions taken on delegated 
authority, as well.
    Finally, I am very pleased to see that the Chairman will 
restructure the Office of the Secretary to facilitate management of 
Commission proceedings and to ensure Commissioners adhere to timetables 
and voting procedures. I also anticipate that the Secretary will be 
instrumental in facilitating the Bureaus' disposal and release of 
pending matters.
B. Structural Changes
    The Chairman's draft plan clearly recognizes (as almost everyone 
has) that the Commission is currently organized around industry 
segments that increasingly are less relevant as convergence strains and 
eliminates their unique technical distinctions. I generally concur with 
the Chairman's proposals to reorganize the agency along functional 
rather than technological lines. I supported the consolidation of 
dispersed functions into the new Enforcement and Consumer Information 
Bureaus and I look forward to these new bureaus getting started soon.
    I am very intrigued (but not yet sold) by the second phase proposal 
to consolidate the FCC's policy/rulemaking and authorization of 
service/licensing functions. A single policy/rulemaking bureau may have 
some merit. For one, it will increase the field of view of management, 
hopefully in a way that harmonizes our decisions across industry 
segments. However, given the depth and breadth of our policy/rulemaking 
responsibilities, a single bureau overseeing these functions could 
prove too large and unwieldy. Moreover, because the Communications Act 
continues to categorize industries based on technology, a consolidated 
bureau, while appearing functional, may in fact collapse into a ``mini 
FCC'' with separate divisions charged with particular sections of the 
Act. This subject requires the fullest consideration, but I caution one 
not to expect revolutionary changes in the analysis or outcomes of our 
decisions as a consequence of this type of organizational change.
C. Deregulatory Initiatives
    I regret that the deregulatory objectives of the draft plan fall 
short of my expectations. It seems that one of the core principles 
articulated in the plan is that we ``deregulate as competition 
develops.'' As I have written several times, I am of the view that in 
many instances, deregulation is a necessary pre-requisite to 
competition developing. I have often observed a hesitancy to 
deregulate, under the belief that competition has not yet fully 
developed or matured. The assumption is that regulation is removed only 
when it has been rendered superfluous because of competition. In some 
areas, this may be true. But, this approach fails to recognize the 
interrelationship between regulations and the development of 
competitive markets. Regulations often distort market incentives or 
inhibit efficient entry and competition. Deregulation, then, is not 
just desert, served after competition comes out of the oven. It is a 
necessary ingredient to the competition dish.
    Although I will not get into the details of the dispute over these 
core beliefs, I generally see deregulation (whether in the form of 
forbearance, streamlining or a biennial review) more as a means of 
facilitating competition through the elimination of burdensome 
regulatory requirements. It is not a reward to hold out to industry, 
after the government determines that there is enough competition to 
grant relief. I would suggest that the plan's deregulatory component be 
beefed up to shift our paradigm for handling forbearance requests and 
the next biennial review toward a presumption in favor of deregulation 
and an obligation to re-justify regulations that are retained, with the 
burden to do so resting with the Commission.
    1. Forbearance--The draft plan says that the Commission will 
``consider additional areas that may be appropriate for forbearance,'' 
claiming that we have already engaged in substantial forbearance. I 
cannot concur with this favorable view of our forbearance record. The 
true tale is not in the numbers (no matter how well massaged), but how 
meekly we have wielded the powerful forbearance tool. Yes, we have 
swatted a few gnats, but very few dragons. I think Congress expected us 
to be much more aggressive. Indeed, I believe Congress intended that 
when we are faced with a petition to forbear that we should have to 
fully justify a decision that leaves the rules on the books. If we 
cannot, the rule should fall. The burden rests with us.
    2. Biennial Review--The Biennial Review requirement of Section 11 
of the Act, like Section 10, is a very important provision enacted in 
1996. I share some of Commissioner Furchtgott-Roth's concerns about the 
Commission's first biennial review and, as I recall, Chairman Kennard 
responded favorably to Commissioner Furchtgott-Roth's ideas for the 
Year 2000 review. I am also very pleased that Chairman Kennard's draft 
plan calls for ``an aggressive'' biennial review next year, citing 
wireless as an area where competition has clearly emerged and where 
most regulation has become unnecessary. I can only add to the thoughts 
of my colleagues on this score by emphasizing that I expect that we 
will take on the burden of justifying the rules that we keep and to 
grapple head on with the statutory public interest test of ``meaningful 
economic competition.''
D. Duplicative Functions
    As I testified in March, it is very important to address areas 
where Commission authority and activities overlap with those of other 
government agencies. While such governmental overlaps may be desirable, 
they should at least be complementary (or supplementary) rather than 
simply duplicative. I am glad that the draft plan provides that we will 
continue efforts to coordinate with other federal agencies (and with 
state and local governments) and, especially, to improve coordination 
with the Federal Trade Commission and the Departments of Justice, 
Commerce and State to ensure that our respective functions are more 
complementary. However, some of the FCC's functions must be thoroughly 
evaluated in the context of the overlapping duties of other federal 
agencies and state and local jurisdictions.
    1. Merger Review--For example, merger review is the topic of 
several pending bills and of much interest lately as we see a pace of 
strategic consolidation in telecommunications and media markets like we 
have never seen before. The FCC's review of major transactions should 
be generally limited to those areas in which we can claim primary 
expertise. While I believe that there is room to preserve a 
complementary role for the FCC in the review of mergers, we need to 
have some disciplined procedures and limiting principles to ensure the 
rapid processing of such transactions, to preserve the rights of the 
parties and to avoid duplication with other authorities. I have 
articulated in more detail some of these limiting principles and have 
criticized our current process in recent public statements, which I 
would be pleased to pass on to the Subcommittee.
    Chairman Kennard's plan (which is not yet part of the strategic 
plan) to set up an intra-agency transactions team in the Office of 
General Counsel may be a promising proposal. I fully support efforts to 
make the FCC's merger review process more predictable and transparent. 
But we need more than a new box on the organizational chart. We need 
much more significant consideration of two areas for revision: (1) we 
must institute a clearly articulated review process replete with timing 
benchmarks, and (2) Congress and the Commission need to reevaluate the 
applicable merger standards to limit duplication and guard against 
extraneous conditions. I look forward to considering a proposal along 
these lines.
    2. Other Areas--Let me briefly address other areas that overlap 
with other governmental institutions: consumer protection, equal 
employment opportunities (EEO) and political campaigns. First, one 
focus of the draft plan is rightly on consumer protection. For, as we 
have seen in the slamming area, competition tends to bring out of the 
woodwork those that try to cheat consumers for a fast buck. We must, 
within our authority, be vigilant in keeping the cheaters at bay. At 
the same time, we must recognize that there are other agencies and 
jurisdictions that have similar authority and some judgment might be 
made as to which is best positioned to administer certain issues.
    We must also examine whether all aspects of the Commission's EEO 
program should remain separate from the Equal Employment Opportunity 
Commission and the federal, state and local civil rights authorities. 
Although there is some advantage to having the FCC involved because of 
its unique relationship with certain industries, in times of tight 
resources and many other priorities at the FCC, we must ensure that the 
FCC's and EEOC's respective roles remain complementary and not 
duplicative. By deferring some aspects of this program to the expert 
civil rights agency (as the Commission has done in certain respects 
under memoranda of understanding with the EEOC), we are in better 
position to justify the government's role in promoting employment 
opportunities in the dynamic and growing communications industry.
    Finally, with an election year soon upon us, the FCC will be facing 
more pressure to enforce and even expand the political obligations of 
broadcast licensees. There are unquestionably problems in our electoral 
system, but I shiver at the suggestion that the Communications 
Commission ought to play a central role in such matters without 
comprehensive direction from Congress. Unbridled discretion to affect 
campaigns by three of five unelected regulators is unwise. Moreover, 
the FCC lacks the knowledge or expertise to properly balance electoral 
interests or to weigh the effects on existing election law. I would 
leave that to the Federal Election Commission, if anyone.
                    iv. legislative recommendations
    Many of the concerns I have raised, in addition to many other 
significant issues such as broadband access and inter-LATA data relief, 
may demand Congress' attention over the coming months. However, I 
recognize the difficulty of enacting major FCC reform initiatives so 
soon after passage of the 1996 Act. In the near term, less 
controversial legislative tweaks that support the Commission's efforts 
to reform itself and become more efficient may be beneficial.
    For the most part, Chairman Kennard's draft strategic plan can be 
executed by the Commission and its most highly regarded staff without 
congressional intervention. However, the list of modest legislative 
recommendations attached to the plan will surely help facilitate its 
implementation. I generally support them and I will briefly commend the 
Subcommittee's attention to a couple.
    First, the proposal to exempt the Commission from the Government in 
the Sunshine Act should be considered. I recognize that at first blush, 
it seems fantastic to support less openness. But the fact is that the 
Sunshine Act not only has failed in its purpose, it may have had the 
opposite effect. The notion that substantive decisions are debated by 
Commissioners in public meetings and voted after such deliberation is 
fiction. The press of business requires that most items be voted on 
circulation. Moreover, even the votes at open meetings are ceremonial, 
the decision having been debated and determined in advance. The 
Sunshine Act, in fact, impedes efficient decision-making. Because three 
Commissioners may not discuss a substantive matter (except at a public 
forum), questions are filtered through and among layers of Commission 
staff and then are communicated back and forth to the Commissioners. 
This produces a lengthy and often chaotic decision-making process. Our 
decisions certainly should not be cloaked in the shadows, but they are 
presently being scorched by sunshine.
    Second, the Chairman's legislative proposals that would provide 
flexibility to restructure our operations also deserve attention. For 
example, ``voluntary separation incentives'' or employee ``buyouts'' 
would facilitate further staff downsizing and redeployment, to be more 
responsive to the ongoing industry convergence and more conducive to a 
functional organizational structure. Additional flexibility to hire 
outside experts and consultants would allow the Commission to attract 
talented experts to augment our current staff's expertise.
    Third, I favor the Chairman's proposals to strengthen our 
enforcement assets, including those that toughen penalties for 
violation of the Communications Act and FCC rules and that provide for 
speedier judicial review of Commission forfeiture orders.
                             v. conclusion
    I look forward to continuing to work with Members of Congress and 
with my colleagues on the many challenges ahead. 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 as envisioned by the 1996 Act.
    Thank you for your attention.

    Mr. Tauzin. Thank you commissioner Powell.
    Finally, but certainly not least, Commissioner Gloria 
Tristani for an opening statement.

                STATEMENT OF HON. GLORIA TRISTANI

    Ms. Tristani. Thank you, Mr. Chairman. I am delighted to be 
here.
    I generally support the draft Strategic Plan released by 
Chairman Kennard last August. It is a thoughtful and forward-
looking proposal that provides a good road map for preparing 
the FCC for the new millennium.
    I won't repeat the specific points made in the Chairman's 
report, but I would emphasize one particular issue and make a 
couple of points of my own.
    First, I completely agree with the Chairman that consumer 
protection should remain one of the Commission's core 
functions. In particular, I agree that we should have a zero-
tolerance policy for perpetrators of consumer fraud such as 
slamming. The problem of slamming is rampant and it is the 
FCC's job to stop it.
    I would also like to join the comments of my fellow 
commissioner, Susan Ness, in saying that we need to have more 
consumer input in our decisions. Consumer voices are very 
rarely heard at the Commission.
    Second, while I fully support the goals and key policy 
initiatives set forth in the chairman's report, I am not 
convinced that some of the 5-year goals described in the report 
are achievable. For instance, I am not convinced that despite 
our best efforts we will be able to increase market penetration 
for basic telephony service in rural and underserved areas to 
94 percent in 5 years, or that in that timeframe advanced 
services will be available to 90 percent of American homes.
    Finally, as we move into the new millennium, I would 
emphasize the Commission's continuing statutory role in 
ensuring that the public airwaves are used in the public 
interest. For far too long, the FCC has permitted the public 
interest standard to lapse into a vague, undefined, and 
therefore unenforced, standard. I believe it is time for the 
Commission to rectify that by defining and enforcing meaningful 
public interest obligations. Again I am delighted to be here 
and I look forward to your questions.
    [The prepared statement of Hon. Gloria Tristani follows:]
   Prepared Statement of Hon. Gloria Tristani, Commissioner, Federal 
                       Communications Commission
    I'm pleased to be here today to discuss the structure and mission 
of the Federal Communications Commission as we move into the 21st 
century.
    I generally support the Draft Strategic Plan released by Chairman 
William Kennard last August. It is a thoughtful and forward-looking 
proposal that provides a good road map for preparing the FCC for the 
new Millennium. As Chairman Kennard's Report proposes, the FCC can and 
should: (1) create a model agency for the digital age; (2) promote 
competition in all communications markets; (3) promote opportunities 
for all Americans to benefit from the communications revolution; and 
(4) manage the electromagnetic spectrum (the nation's airwaves) in the 
public interest.
    I won't repeat the specific points made in the Chairman's Report. 
But I would emphasize one particular issue and make a couple points of 
my own.
    First, I completely agree with the Chairman that consumer 
protection should remain one of the Commission's core functions. In 
particular, I agree that we should have a zero tolerance policy for 
perpetrators of consumer fraud, such as slamming. The problem of 
slamming is rampant, and it is the FCC's job to stop it. Last December, 
we promulgated new anti- slamming rules that, in concert with our 
aggressive enforcement actions against slammers, would drastically 
reduce the frequency of slamming. Unfortunately, the FCC's anti-
slamming rules have been stayed by the courts. The sooner meaningful 
anti-slamming rules become effective, the sooner we can begin moving 
toward the Chairman's aggressive goals for reducing slamming complaints 
over the next five years.
    Second, while I fully support the goals and key policy initiatives 
set forth in the Chairman's Report, I am not convinced that some of the 
five-year goals described in the Report are achievable. For instance, I 
agree that we must increase market penetration rates for basic 
telephony service in rural and under-served areas (currently under 50 
percent). But I am not convinced that, despite our best efforts, we 
will be able to bring those numbers up to the national average of 94 
percent in five years. In my opinion, a more realistic number would be 
something on the order of 75 percent. Similarly, given the current pace 
of deployment, I am not convinced that advanced services will be 
available to 90 percent of American homes in five years. I am 
especially concerned about the current pace of deployment in rural and 
other hard-to-serve areas.
    Finally, as we move into the new Millennium, I would emphasize the 
Commission's continuing statutory role in ensuring that the public 
airwaves are used in the public interest. I do not believe that this is 
simply a question of whether the airwaves are being used efficiently, 
but whether they are being used in a manner that benefits the public. 
For too long, the FCC has permitted the public interest standard to 
lapse into a vague, undefined--and therefore unenforced--standard. I 
believe it is time for the Commission to rectify that. We ought to 
define and enforce specific, meaningful obligations that licensees must 
meet, especially as we move into the digital world. Or if such 
obligations do not exist, we should say so. Licensees deserve to know 
the standards to which they will be held accountable, and the American 
public deserves to know the benefits it is entitled to expect for the 
use of its spectrum.

    Mr. Tauzin. Thank you very much, Ms. Tristani.
    Let me recognize members now for a round of questions, and 
the Chair would start by recognizing himself.
    First of all, Mr. Chairman, you all mentioned speed 
matters. The technology that the FCC oversees is moving at an 
incredible pace, and yet what we see at the FCC is if you are 
given 180 days to do something you take 180 days.
    Mr. Powell, you mentioned the concern for that. I want to 
hit on that a little harder. If there is a time limit provided 
in the statutes, the FCC takes it all. If there is no time 
limit in the statute, there is even greater concern about how 
long it takes to process matters. For example, there is no time 
limit at all on license transfers, and therefore merger reviews 
under the Commission are timeless. They could go on forever.
    One of the big concerns we have is that if speed matters in 
this world of high technology, what is the Commission going to 
do in its plans to shorten the time for all these reviews and 
considerations of applications that come before the Commission?
    Mr. Kennard. It is a very good question. As I stated 
earlier, when we convene all our stakeholders, this is an issue 
that continually comes up. In the plan there are a number of 
ways that we seek to address it. One is we are imposing some 
deadlines on ourselves for petitions for reconsideration, 
applications for review, some of the more routine pleadings 
that come before us. One of the things, however, that we have 
to be cognizant of is the due process rights of people who come 
before us. We are subject to the Administrative Procedure Act 
and we have to make sure that everybody has an opportunity to 
be heard.
    Mr. Tauzin. Can I jump in here for a second? One of the 
things that has been pointed out to me that kind of surprised 
me, I didn't realize it was true, that only two of you can talk 
to each other at a time.
    Mr. Kennard. Yes.
    Mr. Tauzin. The law prohibits you to communicate as we 
communicate with each other in the legislative process, to seek 
counsel of one another and to come to a consensus. You are 
unable to do that so you have to rely upon staff to go through 
all this stuff and to bring your recommendation. By the time 
you get it, it is pretty well cooked, isn't it?
    Mr. Kennard. That is exactly right. That is because, of 
course, the Government in the Sunshine Act. It was a very well-
intentioned piece of legislation; but unfortunately, the 
unintended consequence is that we have difficulty 
communicating, and it makes for a game of telephone at the FCC 
when we are communicating----
    Mr. Tauzin. One to one.
    Mr. Kennard. Exactly.
    Mr. Tauzin. Another good example is I have been fascinated 
recently, I have even talked to one of the inventors of the 
ultra-wideband technology. One of your colleagues has called 
for a rulemaking. It has been 9 years that the Commission has 
been considering regulatory approval also of different 
applications of this technology. And it is amazing. If it is 
real, it is amazing in terms of its ability to see persons, 
buildings, to provide rescue, earthquakes, land mine 
protection, safety at airports. I can go on and on and on about 
all the incredible benefits of that technology if it is real, 
and yet it is 9 years and we haven't had a rulemaking on it. I 
think you get my gist.
    It is pretty frustrating when that is a result of maybe the 
inhibitions of the agency's capacity to talk to one another and 
to collaborate and maybe move some of these things forward. If 
speed matters in this technology, it could be critically 
important in solving many of the last-mile problems of 
broadband communications. For example, why would we not want to 
have a rulemaking on it and get moving on it and literally 
short-circuit a 9-year process? Mr. Kennard?
    Mr. Kennard. I couldn't agree with you more. One of the 
things that we have to recognize is that the FCC is an under-
resourced, overworked agency. Ultra-wideband is a good example. 
We have just a limited number of quality engineers that we can 
throw at a problem like that.
    Mr. Tauzin. Let me see if I can save you some time then. 
What did the repeal of section 221(a) of the 1934 act mean to 
you guys and gals? Section 221(a) was the authority route to 
review mergers. In 1996 Congress repealed, specifically 
repealed, the legislative authority to review mergers. A lot of 
your time is spent reviewing mergers. What did that repeal mean 
to you, and did it mean nothing?
    Mr. Kennard. I would like to address that question 
specifically and the overall question of mergers. One is, 
Congress didn't repeal the responsibility of the agency to 
ensure that license transfers are only granted if they serve 
the public interest. We have experienced in the last 3\1/2\ 
years since the act was passed an unprecedented wave of mergers 
and consolidation in this industry. We have never seen anything 
like it in every single sector of the communications industry. 
So you can imagine the kind of strain it puts on the agency.
    Now, notwithstanding that strain, I am proud to say that we 
have been able to grant most of these license transfers and 
assignments in very quick fashion. In fact, the overwhelming 
majority of license transfers that come before the FCC are 
handled in less than 6 months.
    Mr. Tauzin. My time is expired. I will let you comment a 
lot more on it and perhaps submit something in writing. But 
before I yield, let me just ask you if any one of you want to 
respond to the question I asked. What was the meaning at the 
Commission in the way you viewed what we do, how I talked about 
the relationship of Congress and the agency created by Congress 
to carry out our policy, what was the meaning of Congress 
repealing the specific authority that allowed you to review 
mergers? If it had no meaning, tell me that. If you think it 
had some meaning, what was it? Anyone?
    Mr. Kennard. Again, I would just reiterate that we have a 
statutory obligation to review license transfers to make sure 
they serve the public interest.
    Mr. Tauzin. I heard that. I am asking you what do you think 
Congress meant when they repealed that section? Did it have no 
meaning at all? Were you ignoring it because you thought you 
had authority in other areas to review mergers? Did it have no 
meaning? Was there no message in that repeal? Why did we do it 
if it was meaningless is what I am asking. Why would you think 
it meant nothing, if you are the agency commissioned by 
Congress to carry out legislative policy?
    Mr. Kennard. Perhaps from your perspective, it didn't go 
far enough.
    Mr. Tauzin. It didn't go past this diocese, apparently, is 
what I am concerned about. Nobody heard it. Nobody read it as 
meaningful.
    Ms. Ness. My recollection--and I may be thinking of a 
different change in the statute--but my recollection was that 
this eliminated the preclusive effect of the Commission 
electing to exercise its merger authority; under the old law, 
the Commission's action precluded DOJ or the FTC from 
exercising its authority to review mergers involving Bell 
operating companies. Again, I may be wrong, I may be focused on 
a different section--but I believe that is what the change in 
the statute did.
    Mr. Tauzin. My information is specifically repeal the 
authority to review mergers. I would love if you--I need to 
pass it over--if you would give it some thought and come back 
to us in writing as to what at all that repeal meant to you, 
and that will give us an idea of how we legislate and how you 
receive our legislation for the future as we go through this 
reform effort.
    [The following was received for the record:]

               the effect of the repeal of section 221(a)
    Section 221(a) of the Communications Act provided for Commission 
hearings when telephone companies sought permission to consolidate, 
acquire, or transfer control over their properties. If the Commission 
determined that the proposed transaction was in the public interest, 
antitrust scrutiny was precluded.
    In the Telecommunications Act of 1996, Congress eliminated section 
221(a) as part of an ``antitrust savings clause'' for the express 
purpose of permitting antitrust review of telephone company mergers.
    The Congress, however, did not eliminate or modify Commission 
review of telephone company mergers under the Communications Act. To 
the contrary, the Conference Report on the Telecommunications Act of 
1996 expressly noted that:
        ``[This] repeal would not affect the Commission's ability to 
        conduct any review of a merger for Communications Act purposes, 
        e.g., transfer of licenses. Rather, it would simply end the 
        Commission's ability to confer antitrust immunity.'' Conference 
        Report, at 201. (Emphasis added.)

    Mr. Tauzin. Let me yield to the gentlelady from California, 
Ms. Eshoo.
    Ms. Eshoo. Thank you, Mr. Chairman. I am glad you took some 
extra time because it is always instructive to hear you press 
your questions, so I look forward to the answer from the 
Commission.
    I have two questions, the first of Chairman Kennard, and 
the area of any of the Commissioners. And I want to get the 
questions out because usually if you do them one at a time, you 
only get an answer to the first question and run out of time on 
the second.
    Chairman Kennard, in your statement you mentioned that the 
FCC needs to recognize itself along a functional rather than 
technological basis. I think you are saying that the current 
FCC bureau's cable common carrier, may not apply to the 
emerging telecommunications field, especially with cable 
operators who are now offering telephone services and telephone 
companies who are offering cable services and all of them 
offering Internet service.
    What structure do you envision for the FCC and what sign 
posts will you employ to guide you in making these structural 
changes? Maybe to rephrase my question, when will you know the 
time is right to overhaul the current regulatory structure at 
the FCC? So that is my question of you.
    Let me get this other one in for any of the Commissioners. 
Many of us have heard from a number of the new entrants in the 
telecommunications field about the many intercarrier disputes 
they continue to have. Chairman Kennard mentioned that the new 
Enforcement Bureau will be functional in November. Do you 
believe that a definite timeframe for FCC review of these 
disputes should be implemented? We will start with Chairman 
Kennard.
    Mr. Kennard. Thank you. You raised an issue that really 
goes to the heart of our Strategic Plan for the future. That 
is, it is really being thrust upon us because of the 
convergence in the industries with which we deal. What we have 
attempted to do is lay out a blueprint for reorganizing the FCC 
along functional lines, because we are finding that the 
traditional bureau structure has severe limitations.
    That being said, though, we have to recognize that the act 
itself is still organized for the most part along industry 
lines. You have title II dealing with the telephone industry; 
title VI, cable; title III, broadcast. And so we are in effect 
trying to reorganize in some senses ahead of our statutory 
authority. Commissioner Powell has made some interesting 
observations about that in the past.
    Nevertheless, I think we have to charge ahead, because the 
industry is changing. Convergence is happening. We have laid 
out a plan for reorganizing along functional lines here in our 
Strategic Plan. We took the first major steps with the 
inauguration of these two new functional bureaus, Enforcement 
and Consumer Information. The plan calls for completing our 
reorganization over a period of time so that by, I believe, 
January 2003, we hope to have completed this functional 
reorganization.
    I think it is important, though, to address the concerns of 
some who have asked why is it going to take you so long to make 
this happen? I think we all need to be aware of the cost of 
restructuring an agency like the FCC, a small, under-resourced 
agency, when we are being bombarded every day with mergers and 
petitions and court appeals. We have to have sensitivity to our 
employees.
    If we were to reorganize the agency completely structurally 
overnight, I am afraid that the place would grind to a dead 
halt. So I think that what we have here is a Strategic Plan 
that is reasonable and that lays out this restructuring over 
time.
    Ms. Eshoo. Do you have timeframes around the functions?
    Mr. Kennard. Yes. They are outlined--in the plan. We 
indicate when we are going to take the next steps. The next 
step will be to preview the creation of a Video Competition 
Bureau which would merge our Mass Media Bureau with our Cable 
Bureau.
    Ms. Eshoo. Great. Thank you.
    My second question, to any of the Commissioners?
    Mr. Furchtgott-Roth. Ms. Eshoo, I will be happy to respond 
to your second question. Many CLECs do have many disputes with 
incumbent local exchange carriers. Most of those disputes take 
place under section 252 and State jurisdiction. They are not 
necessarily FCC jurisdiction.
    There are some disputes under section 251, and I think one 
thing that Chairman Kennard's leadership has brought us very 
well is the ``rocket docket'' to provide for expedited review 
of certain disputes. This was an experiment that we started, 
oh, goodness, 9, 10 months ago, and I think it has been fairly 
successful so far.
    Ms. Eshoo. I am not so sure I understand your answer.
    I know I don't understand your answer. What I was asking 
was, given what I described, do any of the Commissioners 
believe that there is a definite timeframe for FCC review of 
the disputes, if that should be implemented, a definite 
timeframe around the disputes? And I don't think that was 
addressed in your answer. If it was, I missed it.
    Mr. Furchtgott-Roth. Ms. Eshoo.
    Ms. Eshoo. Maybe it just can't be answered. Maybe you don't 
know yet. If that is the case, then maybe that is what should 
be said.
    Mr. Furchtgott-Roth. Ms. Eshoo, I am happy to try again.
    Ms. Eshoo. Good.
    Mr. Furchtgott-Roth. The point I was making is that most of 
the disputes between CLECs and incumbent local exchange 
carriers are not under Federal jurisdiction. They are under 
State jurisdiction.
    Ms. Eshoo. And the others, what about the others?
    Mr. Furchtgott-Roth. We have implemented something that is 
popularly referred to as the ``rocket docket,'' that is an 
expedited review process for these types of complaints.
    Ms. Eshoo. So there is--you are saying that there is a good 
timeframe around it because they are expedited expeditiously?
    Mr. Furchtgott-Roth. For some of the disputes, it requires 
the agreement of the parties. I won't say that they are all 
being handled that way, and I am sure there are some that are 
probably taking a lot longer than they should.
    Ms. Eshoo. Thank you. Anyone want to add anything to that?
    No? Thank you, Mr. Chairman.
    Mr. Tauzin. I thank the gentlewoman.
    The Chair recognizes the vice chairman of the committee, 
Mr. Oxley. With the indulgence of members, Mr. Oxley has to sub 
for the chairman of the O&I hearing, and with your concurrence, 
Mr. Oxley is recognized.
    Mr. Oxley. I thank you, Mr. Chairman.
    Let me begin by asking about this Satellite Home Viewer 
Act. All of you know this is in conference and we are getting 
close, hopefully, to an agreement.
    One of the issues that remains to be resolved is whether 
Congress should direct the FCC to modernize the signal 
reception standard, which has been in effect since 1952, and at 
least in my estimation doesn't meet consumers' expectations 
today as to what is really an effective picture. I also 
recognize that Congress must be careful not to jeopardize free, 
over-the-air broadcasting.
    Mr. Chairman, if Congress were to authorize the FCC to 
modernize its signal reception standard, are you confident you 
could devise a standard that satisfies consumers' expectations 
while also ensuring that localism will continue?
    Mr. Kennard. I think we could. I think that the FCC took a 
stab at this before Congress passed legislation when we tried 
to update our definition of the grade B signal contour for 
television stations, to try to deal with this very difficult 
problem that consumers face with the advent of the satellite 
industry.
    Obviously, if you pass legislation and direct us to take 
another stab at it in the context of a new and updated 
Satellite Home Viewer Act, we will do the best we can. I am not 
an engineer so I can't definitively say what the outcomes would 
be, but I commend you for taking on this issue legislatively, 
and we will certainly do everything we can to make it 
successful.
    Mr. Oxley. I appreciate it. Surely, the technology has got 
to be better today than it was in 1952 in virtually every area, 
and I would think that that would be most helpful.
    Let me turn my next attention to the WorldCom/MCI merger, 
which was approved in September 1998. And I supported that 
merger, and I think many members of the committee did as well, 
and the Commission found that it was not likely to lead to 
anticompetitive effects.
    Was part of the assumption of approving that merger, at 
least the public interest aspect that you had jurisdiction 
over, was that based on the fact that the Bell companies would 
soon enter the long distance market and compete in the long 
distance area?
    Mr. Kennard. We certainly looked at that issue. I don't 
think that that was dispositive of our decision in that case. 
When we evaluated the MCI/WorldCom transaction, we looked at 
the various markets that those companies were engaged in, 
consumer long distance, the Internet backbone, and evaluated 
each of those market segments to see whether that particular 
transaction would serve the public interest, and we were able 
to conclude that it would.
    Mr. Oxley. Do any of the other Commissioners have any 
comments on that?
    Mr. Furchtgott-Roth. Mr. Oxley, if I might.
    Mr. Oxley. Yes.
    Mr. Furchtgott-Roth. I think some of this goes to Chairman 
Tauzin's question about the merger review itself. The issue 
involved in the WorldCom/MCI before the Commission was not a 
review of a merger. It was simply the transfer of licenses, and 
my personal view of that is that it in no way implicated issues 
outside the license transfer and therefore it in no way 
implicated other matters before the Commission, such as you 
just described.
    Mr. Oxley. So the issue of future competition really was 
probably a role for the Justice Department as opposed to the 
FCC; is that correct?
    Mr. Furchtgott-Roth. The specific question you raised about 
whether RBOC entry into long distance--it certainly did not 
affect my judgment on that particular set of license transfers.
    Mr. Oxley. Thank you.
    Commissioner Powell, in the recent proceeding on cable 
ownership limits, the Commission provided some relief on 
attribution rules but failed to raise the ownership limit above 
30 percent for video subscribers. I am perplexed. Given the 
trend toward convergence, it makes no sense to have a 30 
percent cap for cable, 35 percent for broadcasters and none 
whatsoever for telcom. Shouldn't these caps be harmonized or, 
better yet, abolished in favor of simple reliance on the 
antitrust laws?
    Mr. Powell. I personally absolutely agree that there is a 
severe need for government to try to harmonize its perspectives 
on structural caps and competitive policy, but what gets 
complicated is that the caps or the structural limitations like 
that derive from different provisions with different 
objectives.
    When one reads the statutory history and the text from 
which the cable horizontal structure limitation applies, you 
are struck by the degree to which the legislative history 
emphasizes not competitive structural principles but principles 
such as diversity and program access markets, which arguably 
can be limits substantially lower than antitrust or competitive 
policy would suggest.
    The numbers--the amount of concentration that results at 
that level in a number of markets is relatively modest or minor 
from a competitive structural perspective; but when you 
introduce additional notions which are more visceral and vague, 
like a congressional interest in diversity, which may be 
valuable, and want a prophylactic bright line number to be 
associated with it, it tends to drive the structural cap lower 
than it otherwise might be. In other contexts, we are not 
necessarily constrained by those additional legislative 
considerations and there tend to be compromises that result in 
different caps.
    Do I think it is defensible? On a going-forward basis, it 
is going to be very difficult to maintain because you are 
biasing particular business models and technologies. You are 
saying that if you use this service, this type of technology 
for convergent services, and you happen to have a little of 
this, you are more constrained than another competitor who is 
using a different infrastructure and different model, and I 
think that we will have a great deal of difficulty with that on 
a going-forward basis.
    Mr. Oxley. Thank you.
    Thank you, Mr. Chairman.
    Mr. Tauzin. I thank the gentleman.
    The gentleman from Ohio, Mr. Sawyer, is recognized.
    Mr. Sawyer. Thank you, Mr. Chairman.
    Let me return to the question that our chairman had posed 
to the Commission chairman regarding merger reviews. Am I 
correct in understanding the line of response that you had 
begun to go down was that while you understood the difference 
between what was suggested in the 1996 act in terms of merger 
review, that the whole business of license transfer remains an 
active part of your responsibility. And, although it may look 
like a merger review because it is inherently a part of the 
activity that is in itself a merger, that you are nonetheless 
not discharged from that responsibility to oversee questions of 
license transfer which are an inherent part of that? Is that 
correct? Am I correct in saying that?
    Mr. Kennard. Yes, that is very well said. We have an 
obligation to make sure that every one of these license 
transfers serves the public interest. It would be foolish, in 
my view, when you have an industry that is completely 
restructuring, that we would completely ignore the public 
interest impact of these transactions on consumers, the rates 
that they pay, their ability to get access to competing 
programming sources. I mean, that is a bedrock, fundamental 
responsibility under the Communications Act. It always has been 
since 1934.
    That did not change in 1996. We still have that obligation. 
When I travel around the country and talk to consumers, they 
are concerned about consolidation in these markets. They want 
to know what the FCC is doing. So we have invoked our public 
interest authority under the act to make sure that they are 
protected in the context of these mergers.
    Mr. Sawyer. In your original answer you began to go in a 
direction that was not the focus that the chairman wanted to 
put on his particular question but it was of interest to me, 
and that was with regard to the typical time lines that license 
transfer reviews entail. You were starting to say that 
typically it takes 6 months or less. Could you talk a little 
further about the direction you were beginning to go and then 
talk about the exceptions to that and the reasons for those 
exceptional cases?
    Mr. Kennard. Certainly.
    Mr. Sawyer. Mr. Chairman, let me mention also that I don't 
think my light was turned on when I began my questioning. Thank 
you.
    Mr. Tauzin. The gentlemen is correct. The Chair is 
adjusting accordingly.
    Mr. Sawyer. I appreciate it. Thank you.
    Mr. Kennard. Thank you, Congressman.
    In the overwhelming number of cases, these transactions are 
approved or disposed of by the FCC within 6 months. We take 
longer when we have a merger involving very complex issues of 
market structure. We have to recognize that in the wake of the 
1996 act, we are being presented with transactions that were 
not possible before, and they are involving a complete 
restructuring of this industry, and they are presenting novel 
questions of first impression at the agency. That requires 
oftentimes that we take more time.
    Now, one of the things that we are attempting to do is, as 
we get more experience with these large transactions, to give 
the public a better sense of certainty about timing. That is 
why I announced about a month ago that we are going to charge 
our General Counsel's Office with coming up with a merger 
review team which will coordinate the efforts of the various 
bureaus.
    Mr. Sawyer. I assume you mean the license transfer team?
    Mr. Kennard. Yes, a license transfer team, correct.
    And the General Counsel will be charged with coordinating 
these license transfer reviews to make sure that the public has 
some sense of certainty about the timing and about when they 
can expect a decision and what the role of public input will 
be.
    Mr. Sawyer. Let me ask you just one further question. In a 
time of continuing convergence, can you talk just briefly about 
how you intend to define functional distinctions?
    Mr. Kennard. Well, we are, of course, guided first and 
foremost by the act, and the 1996 act went a long way in 
providing the Commission specific statutory definitions for 
various services. And we are finding that as the market charges 
on and as technology changes, some of those definitions are 
being challenged.
    Mr. Sawyer. Yes.
    Mr. Kennard. And so we are continually trying to fit new 
services into various definitions and that is really the 
challenge of convergence, particularly when you have different 
services regulated in a different way because of the 
definitions under the act. We hope that a more functional 
approach at the FCC will at least ensure that people in the 
agency are communicating better and the public has a better 
sense of what to expect.
    Mr. Sawyer. Mr. Chairman, I suspect I have used my 5 
minutes and appreciate your flexibility with that regard. Thank 
you.
    Mr. Tauzin. I thank the gentleman. The Chair now recognizes 
the gentleman, Mr. Gillmor, for a round of questions.
    Mr. Gillmor. Thank you very much, Mr. Chairman.
    Commissioner Ness mentioned, so I guess I would direct this 
to her as well as the Chairman, about working with regulatory 
agencies in other countries. And my question is, from your 
experience, are there any other countries you think might be 
worth emulating that are doing things better or right?
    Ms. Ness. There are a number of countries that have engaged 
in innovative approaches based on their own regulatory 
structures. For example, we have had very recent meetings with 
OFTEL, regulatory commission of the United Kingdom, and have 
found some of the solutions that they have been grappling with 
to be particularly helpful.
    Many other countries are looking to us for our experience 
with unbundling. For example, the European Union is trying to 
work with its member States to encourage greater competition 
within the member States, and one of the issues that it has 
been addressing is the unbundling issue. We tend to approach 
things a little bit differently.
    We are looking at instituting ``calling party pays'' here 
in the United States. That is something that has been generally 
implemented in Europe, and is the basis for the wireless system 
in Europe. It seems to be working pretty well there and in 
South America. So we are talking with our colleagues to get 
their ideas and to share our experiences with them.
    Mr. Gillmor. But there is nobody where we would look at 
them and say, hey, they are doing it right, we ought to try to 
do it that way, in your opinion?
    Ms. Ness. There were----
    Mr. Gillmor. Or maybe they are over there looking and 
saying, boy, we ought to do it. The FCC does it.
    Ms. Ness. Often they look to the U.S. as a model. It 
depends on how complex a system they want. For example, we have 
the fortune of having oversight authority over not just 
telecommunications but also broadcasting, and a number of 
countries are examining that structure because of convergence 
issues. So we tend to be a little bit further along than many 
of the other countries, who are first grappling with 
privatizing a telecommunications company that was government-
owned. But there are some new ideas; different approaches where 
we may very well share ideas and benefit from their experience.
    New Zealand is one country that has adopted a much more 
deregulatory structure. It is certainly a much smaller country, 
a lot less complex, and it has found that it keeps having to 
threaten to regulate in order to achieve some of the reforms 
that it was hoping to achieve.
    Mr. Gillmor. Has my time expired, Mr. Chairman, or did you 
forget to push the button?
    Mr. Tauzin. The gentleman's time has almost expired. The 
gentleman may proceed.
    Mr. Gillmor. All right. Let me just ask you a quick 
question. It has been reported that Office of Personnel 
Management rules preclude effective utilization of staff. Has 
that realistically been a problem?
    Mr. Kennard. What rules? I am sorry, Congressman Gillmor. I 
didn't get the question.
    Mr. Gillmor. Office of Personnel Management rules, that 
that has caused a problem in the effective utilization of 
employees. Has that been a problem?
    Mr. Kennard. Well, I think that anyone managing a 
government agency doesn't have the tools that people in the 
private sector have, and that is a function of OPM and the 
Civil Service rules. We can't give the same incentives. We 
can't pay people the same amount. We can't fire people as 
easily. So, sure, it is a constraint.
    I mean, one thing that would be very helpful is if we could 
get buyout authority from Congress, because one of the things 
that we are attempting to do in order to implement this plan is 
to redeploy our resources so they are more relevant to what is 
happening in the marketplace. It would be very, very helpful if 
Congress would give us authority to be able to buy out some 
employees that don't have necessarily the skills that we need 
to facilitate competition in this new environment.
    Mr. Gillmor. Thank you.
    Thank you, Mr. Chairman.
    Mr. Tauzin. The Chair thanks the gentleman and the Chair 
now recognizes the gentlewoman, Ms. Cubin, for a round of 
questions.
    Mrs. Cubin. Thank you, Mr. Chairman.
    The first question I want to ask is of Chairman Kennard. I 
have not seen the text of last week's order on universal 
service, but I understand that Wyoming will receive an 
incremental $3 million in high-cost support. I wondered what 
specific requirements will be included in the Commission's 
order to ensure that this incremental support flows to 
Wyoming's ratepayers.
    Mr. Kennard. Well, the order that we adopted last week, 
does provide authority for the State regulators to certify how 
that additional support is going to be used, and we insist that 
any additional support must be used to serve universal service 
needs of the State. So we will rely in the first instance on 
our colleagues at the Wyoming State level to make sure that 
that money is used appropriately.
    Mrs. Cubin. Thank you.
    Commissioner Furchtgott-Roth, the FCC voted 4-to-1 to 
approve this new way of determining universal service subsidies 
for large- and medium-sized phone companies, and you voted 
against the plan so obviously you don't believe it is the best 
way to determine subsidies. I just wondered why not, and what 
do you think would be the best way?
    Mr. Furchtgott-Roth. Mrs. Cubin, I have spoken about this 
often. I have written quite a bit about it. The Commission has 
adopted an extraordinarily complex cost model to allocate funds 
for universal service. My background is as an economist. I have 
worked with cost models during much of my professional career. 
This is one of the most complicated, if not the most 
complicated, cost model I have seen used in government. It is 
built--it has taken some time to build and it is supposed to be 
reflecting a technology that is changing far more rapidly than 
our capacity to imitate.
    I am troubled by the complexity. It is a model that changes 
very quickly. It is something that is not transparent and 
obvious to consumers. It is very difficult to explain to the 
people of Wyoming exactly why they are getting this amount of 
money as opposed to some other amount of money.
    I would have preferred a much simpler approach; rough 
justice, if you will. But I think it is better to be 
approximately right than exactly wrong, and I think that this 
model is exactly wrong.
    Mrs. Cubin. Thank you.
    This question or statement, or whatever, I would like 
anyone who feels like they would like to respond to it to 
respond to it. The recent explosion of mergers in the 
telecommunications industry obviously has had a major impact on 
competition and economic development, not only in Wyoming but 
all across the Nation. I am a cosponsor of Chip Pickering's 
legislation which has been introduced to establish time limits 
for FCC review of mergers and acquisitions, because, you know, 
we all are very concerned about the timeframe in approving 
these.
    And here is something that happens that I would like you to 
respond to, because you as a Commission hold up approving 
mergers based on, quote/unquote, an agreement with the 
companies that are merging, and that might be--you have to 
increase your prices. In the case of television, it hasn't been 
increasing the programs. But I guess the point I am trying to 
make is that you leverage certain policies based on approving 
mergers. And so what gives you the authority to do that?
    I mean, shouldn't Congress be the one that makes that 
decision, or those policy decisions? I mean, they might be very 
good policies or they might not be good, depending on how you 
look at the issue, but nonetheless shouldn't those sort of 
things be up to the Congress?
    Mr. Kennard. They absolutely should be up to the Congress, 
and when we look at these transactions I believe it is our 
responsibility to fulfill our mandate from Congress to ensure 
that they serve the public interest. Now, that means ensuring 
that no merger can be approved if it would undermine the 
fundamental goals of the 1996 act.
    So most of the inquiries that we undertake when we look at 
these transactions have to do with ensuring that this 
consolidation is not going to undermine your fundamental goals 
to bring competition to the marketplace.
    Mrs. Cubin. Well, it seems to me that the FCC is using your 
authority over the mergers and license transfers in a way that 
achieves your own policy objectives. Like another chairman 
might choose to use as leverage for different objectives, like 
I said, the example of increasing the payments. I know you are 
saying it is for the public good, but when it comes to a policy 
question like that, that is your opinion of the public good and 
the Congress should be setting that policy.
    Mr. Kennard. Well, what we typically do, Mrs. Cubin, is 
make sure that when we evaluate these transactions they are not 
undermining what we believe are the goals of the 1996 act. In 
delegating to the Commission authority to review these 
transactions, we have to use our best judgment as to how they 
would further the congressional goals, and we typically do this 
consistent with the act and the Administrative Procedure Act, 
which requires that we develop a record. We certainly don't do 
this in a vacuum. We often hold public hearings. We develop 
records. We hear from everyone who has an interest in these 
particular transactions, and we hear oftentimes from many, many 
Members of Congress.
    So I really view our role as one of pulling together all of 
this information and making our best judgment as to how the 
public interest will be served.
    Mrs. Cubin. Well, I knew that is what you would say but I 
think we need to just talk about it. I will give you a call.
    Mr. Kennard. Love to.
    Mrs. Cubin. Thank you.
    Mr. Tauzin. The Chair thanks the gentlewoman.
    The gentleman, Mr. Stearns, is recognized for a round of 
questions.
    Mr. Stearns. Thank you, Mr. Chairman. I just ask unanimous 
consent to make my opening statement a part of the record. I 
didn't get it in.
    Chairman Kennard, welcome. The question I have is under 
your ``Promote Opportunities for Americans to Benefit from the 
Communications Revolution,'' you state that the 5-year 
performance measure goal is to have 100 percent of our schools 
and libraries connected to the Internet. And I guess my 
question is, is it fair to assume that once 100 percent of the 
schools and libraries are wired to the Internet and the E-rate 
program has fulfilled the objectives of providing universal 
service under the section, will it be sunsetted then?
    Mr. Kennard. I think the funding requirements will 
certainly change. The E-rate is administered pursuant to 
Section 254 of the 1996 act. So we would not have unilateral 
authority to sunset it, but we certainly are setting the 
funding levels for that program to accord with demand. So I 
would expect that once we get the schools and libraries wired, 
then the funding requirements would change. There would be, for 
example, many fewer requirements for money for internal 
connections to wire the schools. There would be some residual 
needs to maintain the system and also to provide the capacity, 
because that is funded from the discount matrix, but I think 
the funding requirements would certainly change.
    Mr. Stearns. Commissioner Furchtgott-Roth, your comments. I 
think the question is many Members of Congress would just like 
to see if this thing is going to be sunsetted or is this going 
to ultimately just continue on and on?
    Mr. Furchtgott-Roth. Mr. Stearns, as you know, I have 
written about this extensively. I have grave doubts about the 
legal underpinnings of the program as it is currently 
constituted. I think the chairman is quite right that the 
demand might change once there is 100 percent. But let me point 
out that a teeny, tiny, insignificant portion of the funding 
right now goes for what could conceivably be called really 
internal wiring. Most of the money right now goes for very 
complicated, sophisticated computer equipment, and I don't know 
whether the demand for that will ever go away.
    Mr. Stearns. Is this complicated computer equipment at the 
libraries, or where is it?
    Mr. Furchtgott-Roth. Oh, anywhere you can put it, Mr. 
Stearns.
    Mr. Stearns. I think what you are saying is this money is 
not going for the library and schools but it is going for more 
sophisticated equipment elsewhere?
    Mr. Furchtgott-Roth. Well, the computer equipment, let me 
be clear, probably is physically located in the libraries and 
the schools, but the point is that even once there is 100 
percent connectivity to the Internet----
    Mr. Stearns. You will still need this?
    Mr. Furchtgott-Roth. [continuing] people may still want to 
upgrade.
    I have asked, I am not sure whether I have gotten a clear 
answer, whether schools that receive a lot of money for routers 
and servers in the first year, whether or not some of the 
funding in the second year is for similar equipment. I don't 
know at this point.
    Mr. Stearns. Are you saying that you think that not only 
would it not be sunsetted but this clearly could--the money, it 
would just be an ongoing government spending program and we see 
another, what people call entitlement, which I generally like 
to use as government spending?
    I mean, from what you are saying, it seems like this will 
be an ongoing government spending program. Is that your honest 
appraisal of what we have here?
    Mr. Furchtgott-Roth. That is one possible outcome.
    Mr. Stearns. Okay.
    Mr. Kennard. Would you allow me to clarify the record on 
one point?
    Mr. Stearns. Sure. Yes, sir.
    Mr. Kennard. I just wanted to make clear that E-rate 
funding does not go for certain hardware in schools. It doesn't 
go to pay for actual PCs or software, the computer hardware. 
The computer equipment that I believe Commissioner Furchtgott-
Roth was referring to were the routers and servers.
    Mr. Stearns. The servers and routers, I understand.
    Mr. Kennard. That equipment.
    Mr. Stearns. But after you do that, it should be done. It 
shouldn't be continuing to go on and on, because you can make 
the argument that, well, these routers and servers are obsolete 
after 5 years or 2 years, and we have to get new ones, and 
pretty soon this little program, well intended, is going to 
cost more and more and go on indefinitely. I think the FCC 
should try and make a commitment to sunset this program somehow 
because you are taking taxpayers' money to do it.
    Mr. Kennard. Well, again, we don't have unilateral 
authority to sunset it. A lot of the expenses that are being 
incurred today do go for the inside wiring piece of the 
program. It is not an insignificant amount of money. As I 
recall, it is 40 or 50 percent of the funding requirements.
    Mr. Stearns. Commissioner Furchtgott-Roth, would you like 
to comment on that?
    Mr. Furchtgott-Roth. Mr. Chairman, with all due respect, I 
believe that the categories that the Commission has adopted 
make it appear that it is for internal connections, but if you 
go and look behind what is actually under internal connections 
it is primarily computer equipment such as routers and servers.
    If you look at the amount that is actually for, say, 
coaxial cable or fiber within the schools, I think that is a 
very small portion of what is being called internal 
connections, or at least that is what I have been told.
    Mr. Stearns. Do you think that the authority under section 
254 of the 1996 act didn't allow the FCC to sunset this 
program? I mean, do you have the authority to sunset this 
program, in your opinion?
    Mr. Furchtgott-Roth. Mr. Chairman, I think that section 254 
is quite clear, that the Commission is to establish discounts 
for the provision of telecommunications services to schools and 
libraries. No, sir, I do not believe we have the authority to 
sunset those discounts.
    Mr. Stearns. So not----
    Mr. Furchtgott-Roth. That is for what I would consider to 
be the discounts on telecommunications services and advanced 
services, which clearly would include services; but whether 
that includes the purchase of very sophisticated computer 
equipment, that is what I have substantial doubts about.
    Mr. Stearns. Okay. Thank you, Mr. Chairman.
    Mr. Tauzin. I thank the gentleman.
    The Chair is now pleased to recognize the ranking minority 
member, Mr. Markey, for a round of questions.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    Mr. Tauzin. Mr. Markey, let me extend your time just a 
second and ask unanimous consent to submit questions from our 
colleague, Congressman Ed Towns, for the Commissioners to 
respond to in writing. Without objection, it is so ordered.
    The Chair will ask general consent that any members who may 
wish to submit questions in writing might do so and we will ask 
the Commission to respond within the next 30 days. Is there any 
objection? Without objection, it is so ordered.
    The Chair now recognizes my friend, Mr. Markey.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    As Mr. Bliley mentioned earlier last week, the Commission 
adopted new universal support mechanisms for America's largest 
local phone companies. The result of the FCC's action is that 
subsidies will increase. What is happening that prompts an 
increase?
    The subsidies aren't for small, rural companies. They are 
destined for some of the largest companies in America, in a 
booming economy, in an industry that was supposedly becoming 
ever more efficient. Universal service issues are always 
complex. They are frustrating, but it is a little 
counterintuitive to hear that universal service reform means a 
subsidy increase.
    It makes me a little fearful of what reform might bring to 
access-charge reform, or to high-cost rural funding.
    Now, Chairman Bliley and Chairman Tauzin have introduced a 
Truth in Billing Act that requires all taxes and fees to be 
clearly stated on consumers' bills. I have introduced what I 
have titled The Rest of the Truth in Billing Act, which would 
require that not only the fees be listed but also the 
subsidies.
    My question to all of you is, where do you think we are 
heading generally with universal service, and whether we will 
ever be able to list subsidy levels or make the subsidy 
portable to other competitors without accurate information on 
the economic costs of providing service and the subsidy needed 
to ensure universal service?
    Competition helps in some areas, without question, but will 
it help us everywhere? Can we get--here is my question: Can we 
get a State-by-State breakdown of subsidizers and recipient 
States, for the record, of last week's decision?
    Mr. Kennard. We can certainly provide that information for 
you, Mr. Markey, on the interstate side of the ledger. The 
Federal jurisdiction is responsible for only about 25 percent 
of the universal service funding obligations, so we have all 
that data and we could provide that.
    [The following was received for the record:]

    On October 21, 1999, the Commission adopted a new forward-looking 
support mechanism to provide high-cost universal service support to 
non-rural carriers. At that time, the Commission also made it clear 
that current support levels would remain unchanged for some time under 
a ``hold harmless'' provision. Specifically, under this provision, non-
rural carriers will not receive less support from the new mechanism 
than they would have received from the current mechanism.
    This new forward-looking mechanism provides support to non-rural 
carriers in certain high-cost states. The Commission announced in 
October 1999 that the states in which non-rural carriers are expected 
to receive forward-looking universal service support included Alabama, 
Kentucky, Maine, Mississippi, Vermont, West Virginia, and Wyoming.
    On November 2, 1999, the Commission's Common Carrier Bureau 
released the attached Public Notice and spreadsheet listing the 
estimated annual support amounts to be provided to both rural and non-
rural carriers in each of the 50 states, the District of Columbia, and 
Puerto Rico. The support amounts shown in the spreadsheet are estimates 
based on procedures and data available at the time of release. It 
should be noted that the reform of high-cost universal service support 
is an ongoing process, and support amounts are subject to review and 
revision.
[GRAPHIC] [TIFF OMITTED] T1037.001

[GRAPHIC] [TIFF OMITTED] T1037.002

    Mr. Kennard. We are not privy to all the State information. 
To get to the other aspects of your question, though, universal 
service and access charge reform are part of a big puzzle that 
we have been grappling with, as you know, since the 1996 act 
was passed.
    It is somewhat of an evolutionary process. We have been 
implementing reform of both access changes and universal 
service in stages. Last week, we took a cut at it for the 
nonrural companies. It was significant for our competition 
policies because it put universal service funding for the 
nonrural companies on a forward-looking cost basis, which is 
important for competition.
    It takes another step toward making universal service more 
explicit so it can become portable, as you recognize.
    I think the next stage of universal service must be to make 
sure that it is technology neutral. You point out in your 
remarks that competition in technology is changing this 
marketplace, and I think that there are providers out there who 
can provide our universal service needs more efficiently than 
the wire line carriers. We have got to have a system to make 
sure that the most efficient providers, be it a wireless 
carrier or satellite carrier, has access to that subsidy money, 
because that will be best for consumers.
    Mr. Markey. Could I continue a couple of seconds, Mr. 
Chairman?
    Mr. Tauzin. The Chair will grant the gentleman additional 
time. Without objection, so ordered.
    Mr. Markey. So just up in my own region, we might subsidize 
an area of Maine, for example, which used to be part of 
Massachusetts until the Compromise of 1820 and they broke it 
off to let Missouri in as a State, the Missouri Compromise, 
based upon cost models of what it might cost a traditional 
local phone company like Bell Atlantic to serve that area, yet 
Bell Atlantic Mobile with cellular service might serve the same 
area for a fraction of the cost. What is the service that we 
are subsidizing?
    Mr. Kennard. Well, the Commission defines, pursuant to your 
directive, what the baseline universal service needs are, and 
that particular service is subsidized. My own view is that 
historically there has been somewhat of a bias toward 
subsidizing the traditional wire line carriers. But as wireless 
becomes much more useful to consumers, as many consumers start 
to look to wireless for a substitute for wire line services, 
you get all the digital bells and whistles on your wireless 
phone, and wireless can be used more efficiently, particularly 
in rural areas. I think then we ought to start shifting our 
focus and make sure that the wireless carriers are part of the 
subsidy approach.
    Mr. Markey. I was in Framingham, Massachusetts, in my 
district yesterday morning, in the poorest part of this 
community. We have had 5,000 or 6,000 Brazilians move in in the 
last 10 years, and it qualifies for the full E-rate subsidy, 
and the community has decided that they would build a brand-new 
school in this community, incented in part by the E-rate, 
knowing that much of the service and the equipment could, in 
fact, be installed to help these children gain access to the 
skill set they are going to need.
    Every corridor, each poster is in Portuguese and in 
English, and as they teach using these computer technologies, 
they help to bring these kids along.
    As we know, 50 percent of all of the children in the United 
States are going to be minorities by the year 2030. That is 
only from 1969 to today, not that long, I think, from most of 
our perspectives. We don't think of that as a long time ago.
    So it is important that we continue, I think, to emphasize 
how important it is to make sure that every kid gets access to 
these skills, because clearly we are going to depend upon these 
younger people to pay for the Social Security and Medicare 
Trust Fund for all of us when we are in our old age, and they 
have got to get access to it.
    Mr. Tauzin. What do you mean?
    Mr. Markey. It is a good program.
    And I think it is also important for people to understand, 
because a lot of people in rural America, I think, get a little 
bit ticked off about the E-rate program fee when they see it on 
their bill. And I think it might help them a lot if they could 
also see on their bill, perhaps my father could see on his 
bill, that he is subsidizing to the tune of 20 bucks or 200 
bucks some rural consumer's ability to really get phone service 
at all.
    And I think as long as everyone understands the slosh that 
goes on as part of this telecommunications policy, they could 
easily see that perhaps the rural Americans are the greatest 
beneficiaries of this universal service program, and that just 
adding in a little bit here that helps the poorest children get 
access to a skill set that is indispensable to our Nation's 
ability to be able to democratize access to information and 
ultimately to capital in our society is working today.
    It is demonstrable, this great happiness I find in most 
communities, all communities in my district, in terms of kids' 
ability to get it. I personally want to congratulate the FCC on 
implementation of the E-rate program.
    I know definitively that there is no sunset authority in 
the legislation and that will just have to be a battle we have 
here in Congress if anyone wants to wage it, but it necessarily 
invokes, then, all the subsidies that go to rural America to 
give them low-cost phones. If we do believe in free market 
economics, then we might as well go for it all the way. If we 
are going to stop subsidizing poor children, we might as well 
subsidizing wealthy farmers as well, because that is exactly 
what our program in America today makes possible.
    I thank you, Mr. Chairman.
    Mr. Tauzin. I thank the gentleman.
    The Chair will ask the indulgence of the committee. The 
Chair will have to leave in just a minute and leave the 
committee in Mr. Gillmor's hands.
    With the indulgence of the committee, I would like to put 
two questions on the record, without objection.
    The first, Mr. Chairman, regards the freeze that has been 
issued on the issuance of licenses commonly known as MAS, M-A-
S, the multiple address systems. It is the licensing of the 
capacity of utility networks to monitor their utility and 
railroad networks.
    My understanding is that public safety radio services are 
exempt from auctions, but the Commission has put a freeze on 
these licenses because you are considering whether the agency 
should auction these licenses in the future.
    I have sent you communications on it, but it is a public 
safety issue that I would appreciate very much if you all would 
focus on it and respond to the committee, because we are 
getting some concerns expressed from public utility groups 
about the safety of their systems without these capacities.
    The second thing is something we have all been kind of 
kicking around here, that I wanted to also put in the record 
and get your response to.
    Chairman Kennard, you announced indeed that the agency has 
received congressional approval to create the new enforcement 
and consumer information bureaus. As we are looking at the law, 
I think it is 5B, it indicates, generally speaking, that from 
time to time as the Commission may find necessary, the 
Commission shall organize its staff into integrated bureaus to 
function on the basis of the Commission's principal workload 
operation.
    There seems to be very clear authority in the law for you 
to create new bureaus, dismantle old ones, reconfigure your 
bureaus according to workload, and it goes on to further give 
you the right, as you deem necessary, to provide legal, 
engineering, accounting, administrative, et cetera, services to 
those bureaus.
    Why in your plan do you refer to congressional approval in 
the creation of bureaus? Do you need congressional approval? 
And if so, when?
    Mr. Kennard. Yes. It is my understanding that we have to 
get approval from our appropriators whenever we reappropriate 
funds to establish a new bureau or a large organizational unit, 
and so we always talk to both the Appropriations Committee and 
also the Commerce Committee so that everyone is informed. That 
is what we did in this instance.
    Mr. Tauzin. So you have authorized authority?
    Mr. Kennard. Yes.
    Mr. Tauzin. You are simply concerned that the appropriators 
have some language in the appropriations bill that makes you go 
back to them?
    Mr. Kennard. Yes. It is required by statute, section 605 of 
the Appropriations Act.
    Mr. Tauzin. You are tougher than we are.
    The Chair will now put Mr. Gillmor in the chair and yield 
to the gentleman, Mr. Shimkus, for a round of questions.
    Mr. Shimkus. Thank you, Mr. Chairman.
    Chairman Kennard, I would like to follow up just on that 
last point. Would the appropriation requirement for the growth 
of new bureaus necessitate a larger piece of the appropriation 
pie, or is that just for reorganization within the current 
budgetary boundaries?
    Mr. Kennard. As I understand, it is the latter. Whenever we 
reprogram funds to fund a new bureau or a large organizational 
unit, we have to get approval from our appropriators.
    Mr. Shimkus. Thank you. I have been around long enough now, 
you know my consternation with the E-rate and the billing, and 
really I kind of agree with my colleague from Massachusetts 
that we ought to have truth in billing and shine the light of 
day and let the public understand. That would help our 
discourse here in the public forum as people understand what 
the universal service fund is, and breaking it out.
    You know, I can go back to my poor rural farmers, based 
upon commodity prices this year, and debate that.
    I think he brings up a good point that I would be receptive 
in addressing and shining the light of day on the universal 
service fund to debate what the E-rate is, what the assistance 
to rural America is.
    I would love to hear the Portuguese being spoken with a 
Massachusetts accent. I am sure he is probably taking language 
studies now for all of those new Portuguese, or actually 
Brazilians who speak Portuguese. Excuse me.
    Mr. Markey. Will the gentleman yield?
    Mr. Shimkus. I will.
    Mr. Markus. Every time the gentleman hears Theresa Heinz, 
who is Portuguese, married to Senator John Kerry, you are 
hearing a Boston accent with a Portuguese twist to it.
    Mr. Shimkus. Well, I haven't run in those circles yet but I 
look forward to it.
    Mr. Markey. Me neither. Me neither.
    Mr. Shimkus. Let me just ask, going back to the Telecom 
Act, and of course we use that to establish your valid position 
that the E-rate has been established based upon the Telecom Act 
and section 254. I wanted to use that to segue into broadband, 
where broadband is not addressed. And I wish the chairman could 
have stayed because I am trying to get your position on the 
chairman's broadband bill because I am of the position that 
what consumers really need, we need multiple pipes with 
multiple choices. I think that is what the chairman brings to 
the table with his legislation, and I would ask the chairman to 
respond first and then if anyone else would like to chime in 
after that, that will be my question to the dias.
    Mr. Kennard. Certainly. Well, I know there are a number of 
bills that are pending that address this area, and we as a 
Commission have not taken a position formally on any of the 
legislation. We typically serve in our role as the expert 
agency to provide information and expertise to assist all of 
the proponents of the bills. As a general matter, it has been 
the policy of the Commission to try to promote as many 
incentives as we can for broadband deployment.
    I personally believe that we should create a little oasis 
for broadband, where any company that wants to deploy broadband 
should be able to do it in an unregulated environment or a 
significantly deregulated environment, because I believe that 
the American public need these broadband services. It is 
important for electronic commerce. It is important for our 
country to maintain its dominance as the world leader in the 
Internet.
    So I encourage this policy debate about broadband and we 
will certainly commit to do everything we can to help from our 
end.
    Mr. Shimkus. But it is your impression--and obviously this 
was not addressed in the 1996 act so we really need to talk 
about it legislatively in the forum, is that correct?
    Mr. Kennard. I think that people make arguments that it is 
or it isn't covered by the 1996 act. I think it is fair to say 
that the explosion of broadband wasn't expressly contemplated 
in the act, but a lot of technologies aren't contemplated in 
the act and we have to interpret the act in a way that 
accommodates them. We have done that historically.
    Mr. Shimkus. Do any of the other Commissioners want to add 
to this? If not, then, Mr. Chairman, I yield back my time. That 
is the only question I had.
    Mr. Gillmor [presiding]. The gentleman yields back. The 
gentleman from New York, Mr. Engel.
    Mr. Engel. Thank you, Mr. Chairman.
    Mr. Kennard, about 2 years ago, I think it was, you and I, 
and Mr. Powell was there as well, attended a hearing in 
committee that Jesse Jackson had put forth to talk about 
minority ownership, I believe it was of radio stations at the 
time, and the conclusion that was come to at that time was that 
there had been slippage.
    I am wondering if you can enlighten us as to the ensuing 2 
years, has there been a stoppage of that slippage or are we 
still on the same path?
    Mr. Kennard. I think, unfortunately, we still are on the 
same path. With the consolidation that we are seeing in the 
radio industry, it is harder for new entrants, small 
businesses, including minority and women-owned companies, to 
get a foothold in that marketplace.
    So I would encourage you and your colleagues to do 
everything you can to address that issue. There are some 
encouraging efforts underway. There is legislation that has 
been offered in the Senate by Senator John McCain to 
reinstitute the tax certificate policy. My colleague, Michael 
Powell, had a lot to do with that.
    We have encouraged the large group owners in the radio 
business to reach out a helping hand to small and minority 
businesses, and some of them have been receptive to that. But 
there is a lot more that needs to be done to try to at least 
get a little bit of a counter current going against this tide.
    Mr. Engel. The media obviously has tremendous influence in 
our day-to-day lives, and I believe the impact on this 
Information Age influence needs to be examined but it doesn't 
always promote accurate images. I introduced the Ethnic and 
Minority Bias Clearinghouse Act of 1999 to address this issue. 
Essentially what this legislation does, it would shed a good 
deal of sunshine on our media. It does not attempt to place any 
mandates upon broadcasters, but the legislation instructs the 
FCC to begin compiling data on complaints, grievances and 
opinions regarding radio and TV broadcasts in their depiction 
of ethnic and minority groups.
    So I would be interested in hearing the FCC's current 
capability to compile such relevant data, and I am wondering if 
any of the Commissioners would like to comment on the 
legislation.
    Mr. Kennard. I think that you put your finger on a very 
important issue for our society, and that is the way that 
minorities and women are portrayed in the mass media. From time 
to time we hear of incidents of literally racial, in my view, 
hate crimes perpetrated against minorities over the airwaves. 
We saw one recently in the Don and Mike Show involving just an 
outrageous attack on Hispanic Americans over the airwaves.
    We collectively as a society need to be monitoring this and 
we need to know what is happening on our airwaves. That is not 
to say that we are going to censor or we are going to intrude 
on anyone's First Amendment rights, but I believe that what you 
are doing is right, to try to get a handle on who is doing this 
and at least shed some light on these practices.
    Mr. Engel. Well, thank you. I just want to say for the 
record that I just received a letter from our former colleague 
Kweisi Mfume, who is now head of the NAACP, putting the full 
force of the organization behind this legislation, in support 
of it. I am really hoping that we can move it because I think 
it is very, very important. And I thank you for your 
sensitivity on the legislation.
    The FCC earlier this year released a study and conducted a 
forum on the impact of advertising practices on minority-owned 
and minority-formatted broadcast stations. I am wondering if 
you could elaborate on this study and what will happen now as a 
result of this study on this important issue.
    Mr. Kennard. We did issue a study in January which 
evaluated certain practices in the advertising industry 
affecting minority-owned stations and stations that serve 
minority audiences that appeared to be systematically 
undervaluing minority consumers. These stations were not 
getting their fair share of advertising dollars. This was sort 
of a preliminary study in nature.
    There is a lot more work to be done but it was my effort to 
try to shine light on a subject of great importance to minority 
consumers, and I am pleased to say that many in the advertising 
industry were listening and some advertising agencies stepped 
forward and wanted to know more about some of the practices we 
uncovered, and we will continue to shed light on this every 
chance we get.
    Mr. Engel. Obviously I need not tell you, but obviously--
because you are obviously doing it, but sometimes just holding 
the hearings and shedding light helps prompt people to move. It 
may not be done with legislation, but legislation is always, 
obviously, a possibility down the line if we don't see enough 
movement in that direction.
    Mr. Kennard. Thank you.
    Mr. Engel. If I may, I have just one final question, not on 
what I have been asking, but I would like to ask Commissioner 
Tristani. You mentioned before about the public interest 
standard with regard to the conversion to digital and you 
mentioned that the FCC should work to define it. I am wondering 
if you had--if you could share with us an opinion you would 
have on a definition of it?
    Ms. Tristani. It has something that certainly we should 
examine and, at the very least, I think we could talk about, 
when requiring broadcasters to produce local programming, some 
kind of local programming oriented to community issues. That 
certainly would be a good starting point. That is what 
broadcasting is supposed to be about, serving a local 
community.
    Mr. Engel, if I could add to one of your previous 
questions. I think the ethnic clearinghouse bill is an 
excellent idea. The Chairman, Chairman Kennard, alluded to a 
Don and Mike Show that ran August 8 in Albuquerque and I think 
59 other cities. It was a 12-minute segment that I heard where 
an Hispanic woman was treated in a manner that no American 
should be treated. It was the most racist, bigoted offensive 
and demeaning piece of radio that I have ever heard. And 
certainly we can't censor that, but we ought to be talking 
about how much of that is going on in America. It is just not 
right.
    Mr. Engel. We thank you and thank you for the comments. 
And, Commissioner Kennard, thank you as well. I think it is so 
important to focus on this and shed light, again, not to 
censure anything, but I think we need to understand what is 
going on, and, hopefully, people of goodwill can throw some 
cold water on that kind of thing.
    Before I yield back, Mr. Chairman----
    Mr. Gillmor. The gentleman's time has expired. I would ask 
the gentleman to wrap it up.
    Mr. Engel. I am wrapping it up. I just wanted to make a 
comment that Mr. Markey was talking about his district. I just 
want to remind Mr. Markey that he lost his bet to me on the 
Yankees and the Boston Red Sox, and Mr. Lewis is going to lose 
his bet to me on Atlanta and the New York Yankees.
    Thank you, Mr. Chairman. I forget what we bet by the way, 
but you lost.
    Mr. Gillmor. That was worth the extra time.
    The gentleman from Mississippi, Mr. Pickering.
    Mr. Pickering. Thank you, Mr. Chairman. I also want to 
commend you on the work that you have done on FCC reform.
    I am sorry that the gentleman from Louisiana left. Just as 
I felt the pain from Mr. Markey with the loss after a 
controversial call of the Boston Red Sox, I felt the pain for 
the gentleman from Louisiana as the LSU football program has 
struggled this year and recently lost to Mississippi State 
University after a controversial call. They are beginning to 
say in Louisiana that LSU is a drinking institution with a 
football problem.
    But to the subject at hand, Mr. Chairman, you talk in your 
testimony of being faster, flatter, more functional. You talk 
about radically restructuring the FCC as we move to competition 
and convergence. And so what I want to focus on in my 
questioning is how and when you get to the flatter, faster, and 
to the radical restructuring. You have a 5-year plan. When in 
your vision or in your view, when does that restructuring 
occur? Over what period of time? What triggers it?
    Mr. Kennard. It is ongoing, Congressman. We established 5 
years because that is the requirement that is imposed on all 
agencies by the Government Performance and Results Act of 1993 
that we come up with a 5-year blueprint. However, we are not 
waiting 5 years to implement our plan.
    We announced today the creation of two new bureaus which 
are an effort to eliminate duplication of efforts in our 
enforcement and consumer outreach areas. We are, in addition, 
continuing to streamline many of our functions within the 
agency. At the same time, we are trying to deal with all the 
myriad transactions and petitions and court cases that we have 
to deal with. So I really see this as an evolutionary process, 
but I share the sense of urgency of this committee that things 
are changing fast and we need to change fast with it.
    Mr. Pickering. Let me ask you your views on a possible 
benchmark that could trigger restructuring. As I understand it, 
the New York Public Service Commission has endorsed or 
recommended the approval of the 271 of Bell Atlantic. I assume 
that has been or will be submitted to the FCC in the near 
future. Could you see approval of 271s as a trigger to 
restructure, whether it is regionally or nationally, in some 
form? Because that really is the indication of competition and 
convergence, is it not? And once that has been implemented--I 
assume you are trying to balance two objectives: certainty and 
stability and the transition in the full implementation of the 
act where, as quickly as possible, one set has occurred 
restructuring to reflect the realities of the marketplace so 
you can be more appropriately structured and more responsive to 
the needs of those who are participating in the marketplace. 
Would an implementation of 271 be an appropriate trigger for 
further restructuring?
    Mr. Kennard. I think if the Commission were to approve a 
271 application, that would be an important benchmark. 
Certainly, it could indicate that in at least one State we have 
open markets and that the act is working to incentivize the 
opening of those markets. I don't know, however, if that would 
be the trigger that would signify a broad-scale reorganization 
of the Commission, because we have already committed to doing 
that and in fact, are rolling that out.
    I think that the 271 process is one that is showing some 
encouraging signs that the competitive vision that you outlined 
in the act seems to be working in some parts of the country as 
companies really do the hard work of opening up these markets. 
But I don't think the grant of one 271 application is going to 
be symbolic of anything beyond what I have said.
    Mr. Pickering. If you had a 271 for an entire region or 
for, say, two or three regions, would that then signify 
sufficient competition and convergence that it would then 
trigger a restructuring based on a competitive model of 
regulation versus the old. You talk about the new FCC, is it at 
that point that we should have the new structure, the new 
order, the new FCC?
    Mr. Kennard. I think that you have to look at this from the 
eyes of consumers. I think it would be wonderful if we were 
able to grant a regionwide 271 application, and that is 
something that we have been encouraging the industry to do, to 
look at this not just as a State-by-State process but as a 
region-wide process. But we have a fundamental obligation to 
protect consumers, and as long as some consumers are not 
enjoying the benefits of competition and choice, then we have 
got to make sure that we are doing everything we can to bring 
that to them. So I think it is an evolutionary process, and it 
is hard to say that at any given point we have reached 
nationwide competition. I think we have got to use our 
authority carefully to make sure that we are implementing such 
competition for all consumers.
    Mr. Pickering. Mr. Chairman, is my time up?
    Mr. Gillmor. The gentleman's time has expired, but we are 
winding down. If the gentleman wants to extend very briefly, he 
may.
    Mr. Pickering. Thank you, Mr. Chairman.
    Just one other question. You also said on page 7 of your 
testimony, more governance for the marketplace means less 
government from the FCC. You have your biennial review coming 
up in 2000. Can you give any examples of current regulations 
that you would propose or recommend to do away with, clean away 
the unnecessary, to use the forbearance authority granted to 
you? Can you give any examples of that?
    Mr. Kennard. Certainly I think we have received 19 
forbearance petitions. We have either granted in whole or part 
14 of them. We will continue to encourage the industry to file 
forbearance petitions so we can use our forbearance authority 
which is significant. I think, to be fair, there are some 
disagreements among the Commissioners about whether we have 
been aggressive enough in using our forbearance authority, and 
we will continue to work through those issues.
    Mr. Pickering. Would any of the other Commissioners like to 
respond to either of my questions, one on the trigger toward 
restructuring or the time to restructure and the forbearance?
    Mr. Powell. Congressman Pickering, I would just add, with 
respect to your 271 question, whether it is a trigger or not, 
it is certainly a watershed. A significant amount of time-
consuming effort at the Commission is dedicated to either 
issues deeply interrelated with the 271 prohibitions, awaiting 
271 relief, and when we reach that day in which those 
prohibitions have been lifted, there is a fairly substantial 
volume of questions and issues that will largely be mitigated 
or transformed. It will certainly be a moment of reflection for 
something. Whether it will be to execute a plan similar to this 
strategic vision or not, it certainly should substantially 
alter the pressures, particularly in the common carrier 
converged areas that the 271 prohibitions currently generate a 
lot of issues over.
    Mr. Pickering. Thank you.
    Mr. Furchtgott-Roth. Mr. Pickering, if I may just add on 
your second question about biennial review. That is coming up 
in 2000. The Commission has an obligation to review all--and I 
emphasize all--telecommunications regulations at that time. And 
I hope that this will be a comprehensive review.
    Mr. Pickering. Thank you, Mr. Chairman.
    Mr. Gillmor. The gentleman's time has expired.
    I am about to recognize the distinguished ranking member of 
the full committee, but I will have to leave, and I will be 
turning the chair over to Mr. Fossella, but before I do, I just 
want to follow up with one thing from my opening statement on 
behalf of both myself and Chairman Tauzin.
    I talked about the possibility of putting together a 
working group of our committee and the FCC--and, regrettably, 
the Chairman has stepped out temporarily--but is that an 
agreeable approach for the Commission or should I wait till the 
Chairman gets back to ask that? I think 4 of 5 is good enough.
    Ms. Ness. I would suspect that we would all be in agreement 
on that.
    Mr. Gillmor. Thank you very much.
    The gentleman from Michigan.
    Mr. Dingell. Mr. Chairman, I have a number of questions I 
wish to direct to the Chairman of the Commission. In his 
absence, I am going to be somewhat incapable of directing the 
questions to him.
    Mr. Gillmor. I would suggest that we take a very brief 
break until he returns, because it is my understanding he will 
be back momentarily, and you can start at that point.
    Mr. Dingell. I have a number of questions I know he wants 
to answer here.
    Mr. Sawyer. If I could, I had just a couple of observations 
I was going to ask about in a second round. I might fill the 
time, if you would be willing to undertake that.
    Mr. Gillmor. I think that would be very appropriate.
    Mr. Sawyer. Except for the fact that the Chairman is back.
    Mr. Gillmor. Very good. We have just recognized the 
distinguished ranking member, the gentleman from Michigan.
    Mr. Dingell. Thank you, Mr. Chairman.
    Mr. Kennard, members of the Commission, welcome to the 
committee.
    Mr. Kennard. Thank you.
    Mr. Dingell. Last month, the Commission issued its UNE 
remand order. Of particular note is that the FCC did not 
require telephone companies to unbundle network facilities used 
to provide high-speed Internet or broadband services to 
consumers. Congratulations on that decision. I infer from the 
decision that you believe that these advanced network 
facilities do not meet the necessary standards contained in the 
Communications Act as instructed by the Supreme Court. Is that 
true? Yes or no?
    Mr. Kennard. Yes.
    Mr. Dingell. It is. Very well. Members of the Commission, 
do you agree with that statement?
    Ms. Ness. Yes.
    Mr. Dingell. We don't have a nod button so you have got to 
say yes or no. Mr. Powell?
    Mr. Powell. Yes.
    Mr. Furchtgott-Roth. Yes.
    Ms. Tristani. Yes.
    Mr. Dingell. Mr. Kennard, from a competitive standpoint, is 
there any relevant difference in the market for high-speed 
Internet service whether it is provided through telephone line 
or cable wire or any other mechanism?
    Mr. Kennard. There are differences, yes.
    Mr. Dingell. What are those differences?
    Mr. Kennard. It is a difference in technology. It is a 
difference in regulatory structure.
    Mr. Dingell. But the guy who picks up the line, does he 
know any difference?
    Mr. Kennard. Are you talking about broadband?
    Mr. Dingell. I'm calling Chairman Kennard on broadband. Do 
I know any difference when I use one mechanism or another?
    Mr. Kennard. Most people who are using broadband are not 
picking up the phone. They are usually accessing a computer for 
Internet access or data services.
    Mr. Dingell. Whatever mechanism I use, do I know the 
difference?
    Mr. Kennard. You probably won't. There are some minor 
differences in the way that broadband is delivered, for 
example, over coaxial cable as opposed to ``digital subscriber 
line'' service or DSL.
    Mr. Dingell. But those are minor differences?
    Mr. Kennard. Yes.
    Mr. Dingell. From a competitive standpoint, are those 
differences major or minor?
    Mr. Kennard. I would say that they are minor differences in 
functionality. They are major differences, though, in 
regulatory structure that applies to the providers of those two 
services.
    Mr. Dingell. What you are saying is there are major 
differences to the bureaucrat but minor differences to the 
user; is that right?
    Mr. Kennard. Not necessarily to the bureaucrat, Mr. 
Dingell. They are pretty major differences in law in the 1996 
act. A provider of----
    Mr. Dingell. What the user sends and receives is pretty 
much the same, though, isn't it?
    Mr. Kennard. Correct.
    Mr. Dingell. Now, what is the argument--is there a strong 
argument treating the companies differently when they are 
providing essentially the same service?
    Mr. Kennard. There is clearly a disparity in the way these 
two industries are being treated as a regulatory matter. There 
is no question about that. It is a problem of convergence.
    Mr. Dingell. Cable is not regulated and the rest of them 
are; is that right?
    Mr. Kennard. Cable is regulated, but it is regulated 
differently.
    Mr. Dingell. Regulated differently. Now, does regulation of 
either type company seem wise and what would be the argument 
for one getting one kind of regulation and the other getting a 
different kind of regulation?
    Mr. Kennard. Well, I think the goal, to try to put this in 
context, is we have two industries that are rolling out, as you 
point out, functionally equivalent services, but they are 
regulated differently as a function of history.
    Mr. Dingell. Why should they be regulated differently when 
they are giving functionally equivalent service?
    Mr. Kennard. They shouldn't, but the question is, how do we 
get them both on an even keel?
    Mr. Dingell. Let's address that in a moment here.
    Now, in 1979, on September 17, you said, and I quote, 
basically we told the Bell companies we want you to get into 
broadband. We want you to deploy and compete. I envision a 
broadband oasis where anybody who wants to compete in this 
broadband marketplace and make the investment to deploy should 
be able to do so in an unregulated environment or a 
significantly deregulated environment. Is that a correct quote?
    Mr. Kennard. Yes. In fact, I reiterated it today.
    Mr. Dingell. Those have still been your sentiments?
    Mr. Kennard. Yes.
    Mr. Dingell. Now, this appears to be an area in which you 
and I can agree. I would note, Mr. Tauzin and I have a bill 
which would deregulate broadband services from the consumers' 
home to the central office for both telephone and cable 
companies alike.
    Can I assume then from your statement that you think that 
we should treat the deliverers of those two different 
services--of those two services identical in character by a 
different medium in the same fashion or not?
    Mr. Kennard. There is one very important complicating 
factor and that is the fact that those copper wires that are 
transmitting broadband over the telephone lines are also being 
used to transmit voice telephony, and that makes it quite 
difficult because the goal of the Telecommunications Act of 
1996, as I read it, is to make sure that there is competition 
not only in broadband but also in voice. And so we have been 
charged with ensuring that people who want to access those 
copper lines, those telephone lines for voice get access to 
them. If the telephone companies are providing broadband DSL 
over those same lines, it makes for a very complicated and 
difficult situation to put the two industries on an even keel. 
Ultimately, I think we should try to.
    Mr. Dingell. Why don't you just allow the marketplace to do 
that?
    Mr. Kennard. Well, that is one reason why I have advocated 
deregulation for both of these pipes, but I only think we can 
achieve that if we can get to a world of multiple broadband 
pipes. I think that the goal here should not be to try to 
impose new regulation on anyone but rather to try to develop 
ways to get out of this regulatory system for everyone. The 
only way we do that is to create incentives for more deployment 
not only on cable and DSL but also terrestrial broadcast and 
wireless telephony.
    Mr. Dingell. Can't you deregulate DSL and cable modem 
service without upsetting regulation of dial tone service?
    Mr. Kennard. I think it would be difficult because we 
have----
    Mr. Dingell. Why would it be difficult?
    Mr. Kennard. Because it is difficult to separate the copper 
wire use for voice and the copper wire use for DSL.
    Mr. Dingell. Let's look at this matter. Sprint, MCI, 
Worldcom and AT&T control about 75 percent of Internet traffic; 
isn't that right?
    Mr. Kennard. I can't quote you the exact figure.
    Mr. Dingell. Is that close?
    Mr. Kennard. I really don't know.
    Mr. Dingell. Does anybody know?
    Mr. Powell. It is close on backbone transport.
    Mr. Dingell. Close on backbone.
    Mr. Fossella [presiding]. The gentleman's time has expired.
    Mr. Dingell. If I were to say on backbone, would you----
    Mr. Fossella. The gentleman's time has expired.
    Mr. Kennard. That would be approximately correct, yes.
    Mr. Dingell. I do need some more time, Mr. Chairman.
    Mr. Fossella. You seek unanimous consent for more time?
    Mr. Dingell. I do.
    Mr. Fossella. Without objection.
    Mr. Dingell. Thank you, Mr. Chairman.
    Now, there is another part of the bill that Mr. Tauzin and 
I sponsored that allows the Bells to compete in Internet 
backbone traffic. Last summer, Mr. Chairman, you accused 
incumbent telephone companies of wanting interlateral relief 
because they want, and I quote, to throw out section 271 of the 
Telecom Act. I take it from that statement you believe that the 
Bells would have little incentive to meet the section 271 
checklist if they were granted interlateral data relief before 
then; is that correct?
    Mr. Kennard. I do believe that, yes.
    Mr. Dingell. Now, do you know how much revenue is derived 
from just long distance voice traffic in comparison to data?
    Mr. Kennard. I know that today in America the data traffic 
is increasing at a far greater rate than voice today.
    Mr. Dingell. What is it now?
    Mr. Kennard. Well, it varies carrier to carrier. Some 
carriers are moving about half of their traffic on their 
networks in the data area versus voice now.
    Mr. Dingell. Let's take MCI Worldcom and Sprint. Last year, 
in 1998, these two companies had combined revenues of $47 
billion. Seventy-three percent or nearly $35 billion of this 
amount came from voice or long distance. Only 12 percent came 
from data. Now, Mr. Chairman, with nearly $35 billion then up 
for grabs, I remind you that you have not even counted AT&T's 
voice revenue in this example. Do you still think that AT&T, 
the Bell companies have no incentive to get their 271 
applications approved? There is $35 billion out there. Is that 
not a measurable incentive?
    Mr. Kennard. At the same time, you have to look at what is 
happening in the long distance marketplace. Prices are 
plummeting as a result of competition, which is a good thing, 
but it does diminish to some extent the incentives for people 
to want to enter that business.
    But I think the fundamental point here, Mr. Dingell, is 
that it is important that the 271 job get done. That is, it is 
important that the vision that you had in the act to open these 
markets to competition, that that job get completed. And we 
have to create an environment that ensures that the Bell 
companies do the hard work of opening up these markets.
    Mr. Dingell. Let's look at this and assume your premise is 
correct. Once permitted to carry interlateral data traffic, the 
Bell companies have no incentive to comply with local marketing 
open requirements of the act. Now, doesn't the Commission have 
strict enforcement mechanisms at hand to ensure that section 
251 of the act is complied with?
    Mr. Kennard. Yes, of course.
    Mr. Dingell. Do the other members of the Commission agree 
with that?
    Mr. Powell. Yes.
    Mr. Furchtgott-Roth. Mr. Dingell, I would qualify that by 
saying that much of the implementation of section 251 is done 
through the State commissions in the section 252 process. They 
bear the primary responsibility also for enforcement of section 
252, and disputes under that go to Federal court.
    Mr. Fossella. The gentleman's time has expired.
    Mr. Dingell. Could I just ask one more question, Mr. 
Chairman? Why doesn't the agency then pursue the means that it 
has at hand to enforce the compliance with section 251 of the 
act?
    Mr. Kennard. But we have enforcement actions ongoing to 
enforce those provisions of the act. I think the----
    Mr. Dingell. What specifically are those?
    Mr. Kennard. Well, we have received complaints about 
violations of obligations under interconnection agreements. As 
Commissioner Furchtgott-Roth mentioned, though, and he is 
exactly right, a lot of this enforcement authority is in the 
hands of the States.
    Mr. Dingell. You have it, don't you, too?
    Mr. Kennard. We have some enforcement authority.
    Mr. Dingell. You already indicated you have broad 
authority.
    Mr. Kennard. We do.
    Mr. Dingell. You can't have broad authority and not much 
authority. You either have broad authority or you don't have 
authority. Why haven't you used it? You haven't told me what 
authority you have used or not used.
    Mr. Kennard. Well, we want to use more of our enforcement 
authority. That is why we are creating an enforcement 
division--an Enforcement Bureau rather--to consolidate our 
enforcement efforts. We get a lot of complaints from----
    Mr. Dingell. Mr. Chairman, remember I asked you to 
enumerate what you were doing in this area. So far you have 
said you are getting complaints. I understand that you are 
probably getting complaints, but you have not told me what----
    I ask unanimous consent to receive 3 additional minutes, 
Mr. Chairman.
    Mr. Fossella. If there is no objection from the gentleman 
on my left--I take that as a no. Without objection.
    Mr. Dingell. What enforcement actions have you taken?
    Mr. Kennard. Well, we have taken all manner of enforcement 
actions.
    Mr. Dingell. Obviously, with this number, you can tell me 
what they are. What are they?
    Mr. Kennard. We have received complaints under 253 of the 
act to preempt State and local authority.
    Mr. Dingell. I am asking about 251. That is the market 
opening requirements. What actions have you taken under 251? 
253 is interesting, but I have a limited amount of time.
    Mr. Kennard. I can't enumerate every enforcement 
proceeding. I would be happy to provide you a list of any 
enforcement proceedings we have ongoing.
    [The following was received for the record:]

    This responds to your request concerning the Commission's 
enforcement activities related to section 251 and the interconnection, 
local exchange market-opening requirements of the 1996 
Telecommunications Act.
    As a preliminary matter, I note that Commission staff through the 
use of the FCC's Accelerated Docket process has assisted in the 
informal resolution of numerous local competition-related grievances 
between carriers prior to the initiation of a formal complaint. To 
date, 16 grievances related to the market-opening requirements of the 
1996 Act were informally resolved using this process. The Accelerated 
Docket focuses on obtaining practical solutions to practical problems 
by requiring that the parties meet with Commission staff for supervised 
settlement discussions prior to the filing of a complaint. Staff 
focuses the parties on the issues truly in dispute and tables those 
matters of lesser importance. Commission staff then analyzes the 
relative strengths and weaknesses of the parties' arguments and 
communicates this analysis to the parties. It is often after this 
critical assessment that the parties move toward settlement. While it 
is somewhat difficult to quantify the number of successes in this area, 
Commission staff have been instrumental in resolving many of the 
disputes brought to it through these mediation processes. For example, 
as the attached press release illustrates, GST Telecommunications 
recently credited the Accelerated Docket process with resolving a Local 
Number Portability dispute with U S West Communications.
    The Commission staff also encourages settlement of formal 
complaints. In this regard, during the past year, parties settled the 
following formal complaints where an incumbent Local Exchange Carrier 
allegedly had failed to comply with the Sec. 251, interconnection, 
local market-opening provisions of the Act:

1) ACN v. PacBell and North County v. PacBell--ACN and North County 
        alleged that PacBell refused to make available the terms of an 
        interconnection agreement that PacBell had with another 
        carrier.
2) American Network v. U S West--American Network alleged that U S West 
        violated sections 201(a), 201(b), and 251 by requiring special 
        construction fees for coin trunk lines.
3) US Long Distance v. Southwest Bell Telephone--USLD alleged that SWBT 
        failed to provide resold services equal to that SWBT provided 
        to itself in violation of section 251.
4) Airtouch v. GTE--Airtouch contended that GTE failed to provide new 
        facilities in a non-discriminatory fashion as compared with 
        services GTE provided to itself.
5) Airtouch v. GTE Southwest--Airtouch asserted that GTE SW violated 
        sections 201, 202, and 251 by not providing certain services 
        and by engaging in wrongful billing practices.
6) RCN v. Bell Atlantic (several cases in multiple jurisdictions)--RCN 
        asserted that Bell Atlantic's refusal to provide voice mail 
        service for resale at any price violated sections 251(c)(4)(A) 
        and (B).
7) RCN v. NYNEX--RCN alleged that Bell Atlantic's refusal to provide 
        voice mail service for resale at any price violated sections 
        251(c)(4)(A) and (B).
    The following matters relating to an incumbent Local Exchange 
Carrier's failure to comply with the local market-opening provisions of 
the Act are pending before the Commission:

1) MCI v. Ameritech--MCI alleges that Ameritech has violated the ``opt 
        in'' provision of section 252(i), which allows CLECs to opt 
        into various provisions contained in previously approved ILEC 
        interconnection agreements.
2) MCI v. Bell Atlantic--MCI alleges that Bell Atlantic has violated 
        sections 202(a) and 201(b) of the Act by not allowing MCI to 
        combine access service and local transport, an unbundled 
        network element.
3) Enhanced Telemanagement, Inc. v. U S West--ETI alleges that U S West 
        has violated section 251(c)(4) of the Act, which requires ILECs 
        to resell retail services to CLECs, by refusing to provide 
        Centrex services for resale.
4) AT&T v. NYNEX--AT&T alleges that NYNEX improperly branded calls from 
        NYNEX's payphones in violation of sections 201, 251, and 271 of 
        the Act.
5) ACSI v. BellSouth--ACSI alleges that BellSouth's failure to provide 
        unbundled loops is in violation of section 251 of the Act and 
        their interconnection agreements.
6) MCI v. Pacific Bell--MCI alleges that Pacific Bell's ``winback'' 
        retention calls to customers who requested a change in their 
        local service is in violation of sections 201 and 251 of the 
        Act.
7) MCI v. Pacific Bell--MCI alleges that Pacific Bell's requirement 
        that a customer provide a letter of authorization prior to 
        releasing customer network configuration violates sections 
        201(b) and 251(c)(4) of the Act.
8) Paging Network v. BellSouth--Paging Network alleges that BellSouth 
        is unlawfully charging for the delivery of LEC originated local 
        traffic in violation of sections 201(b), 202(a), and 251(b)(5) 
        of the Act.
9) AT&T v. Bell Atlantic, MCI v. Bell Atlantic--Plaintiffs allege that 
        Bell Atlantic failed to abide by the Commission's Bell 
        Atlantic/NYNEX merger order in the setting of prices for 
        unbundled network elements.
10) MCI v. Bell Atlantic--MCI contends that Bell Atlantic failed to 
        negotiate performance measures for interconnection services in 
        good faith in violation of the Commission's Bell Atlantic/NYNEX 
        merger order.
    Finally, I would note that the Commission has not yet exercised its 
discretionary authority under section 503(b) to issue monetary 
penalties against an incumbent Local Exchange Carrier for conduct 
allegedly in violation of the section 251, local market-opening 
provisions of the Act.
                              News Release
                for immediate release--november 30, 1999
GST Telecommunications Reaches Settlement With US WEST Regarding Local 
                      Number Portability Complaint
    (VANCOUVER, Wash.) GST Telecommunications, Inc. (Nasdaq: GSTX), a 
leading Integrated Communications Provider (ICP) in California and the 
western United States, today announced it has reached a settlement with 
US West Communications regarding a complaint GST filed against the 
carrier earlier this year for its failure to implement Local Number 
Portability (LNP) in accordance with federal rules. Terms of the 
settlement are confidential.
    In June, GST filed a request with the Federal Communications 
Commission (FCC) to resolve the complaint on an expedited basis 
utilizing the ``Rocket Docket'' procedures adopted by the FCC to 
address cases or complaints which have an immediate bearing on 
telecommunications competition. By utilizing the Rocket Docket 
procedures, GST was able to expedite a settlement with US West. As a 
result, GST will suspend further pursuit of the formal complaint.
    ``We applaud the efforts of the Accelerated Complaint Resolution 
Branch of the FCC,'' stated Brian Thomas, vice president of external 
affairs of GST. ``The FCC established the Rocket Docket procedures to 
expeditiously solve carrier problems emerging as a result of a more 
competitive carrier environment. From GST's perspective the process 
worked the way it was intended, and further enhances the company's 
ability to compete effectively moving forward.''
    Local Number Portability allows customers to retain their existing 
phone numbers when changing to another local telephone service 
provider. LNP was mandated by Congress as part of the Telecom Act of 
1996 in order to level the playing field between the Incumbent Local 
Exchange Carriers, such as US West, and competitive exchange carriers, 
such as GST.
    GST Telecommunications, Inc., an Integrated Communications Provider 
(ICP) headquartered in Vancouver, Wash., provides a broad range of 
integrated telecommunications products and services including enhanced 
data and Internet services and comprehensive voice services throughout 
the United States, with a robust presence in California and the West. 
Facilities-based GST continues to focus on its western regional 
strategy by anchoring its next generation networks in local markets and 
connecting them via long haul fiber networks. Visit GST's Web site at 
www.gstcorp.com.
    For more information, please contact: GST Telecommunications, Lisa 
Miles (800) 667-4366

    Mr. Dingell. Have you laid in place any fines or penalties 
against the Bell companies?
    Mr. Kennard. Not that I am aware of.
    Mr. Dingell. That would be evidence that you were engaged 
in enforcement actions, would it not?
    Mr. Kennard. Yes.
    Mr. Dingell. If you have not initiated that kind of 
process, I just assume there is no market opening problem. If 
you have got a market opening problem, broad authorities that 
you could use on the Bell companies, you have not laid in place 
any fines or penalties on the Bell companies, I just assume 
that you have either no violations or that you are uninterested 
in that matter. Is that an incorrect assumption on my part?
    Mr. Kennard. I think you have to put this in context, Mr. 
Dingell.
    Mr. Dingell. No, no. You have got this broad authority. You 
have not used it. You are constraining the Bells in entering 
other areas, engaging in other competition, but you have not 
done anything to use your authority under 251. I must, 
therefore, assume either you are uninterested in it or that you 
have--or that you have not had any violations.
    I have asked you if you have had violations. You have not 
told me you were aware of any violations. I am therefore of the 
conclusion that you are either uninterested in the matter or 
that you have no violations.
    Mr. Kennard. Your assumptions are incorrect.
    Mr. Dingell. Why are they incorrect?
    Mr. Kennard. They are incorrect because it wasn't until 
January of this year that the FCC's authority to promulgate 
specific pricing rules in this area, for example, were upheld 
by the United States Supreme Court. These rules were in limbo 
for almost 3 years.
    Mr. Dingell. My $40 Cassio watch tells me that this is 
October 26. That is 10 months into the year. So I just assume 
that if you had diligent interest in this matter, you would, by 
October 26, 1999, after having been freed in January, have used 
those 10 months to either find some abuse or to, in fact, lay 
in place your authority of fines and penalties. You have not 
done so.
    My time is expired. I am left regrettably without time and 
without any evidence that you have either shown diligence or 
interest in this matter.
    Thank you, Mr. Chairman.
    Mr. Kennard. May I respond?
    Mr. Fossella. By all means.
    Mr. Kennard. First of all, Mr. Dingell, I will provide 
you--I am sorry that I don't have an enumeration of all our 
ongoing enforcement actions. I will provide them to you in 
writing so that you will have some confidence that we are 
enforcing section 251 of the act.
    Second, I would like you to know----
    Mr. Dingell. Remember, Mr. Kennard, we are talking about 
section 251. Not 253 or any of the other sections.
    Mr. Kennard. That is fine. We will give you information on 
251.
    Second, I want you to know----
    Mr. Dingell. Could that also include fines and penalties?
    Mr. Kennard. Yes, absolutely.
    Mr. Dingell. I assume that is the best evidence of 
diligence, is it not?
    Mr. Kennard. I would also like you to know----
    Mr. Fossella. Perhaps we could bring this outside 
somewhere.
    Mr. Kennard. I would also like you to know, Mr. Dingell, we 
are creating an enforcement bureau at the FCC. I have charged 
that bureau with enforcing section 251 as its top priority, and 
so we will be bringing to you many, many enforcement actions in 
the near term.
    Mr. Fossella. The gentleman's day has expired.
    The Chair recognizes himself for just a few minutes.
    For the Chairman or the Honorable Commissioners, it 
parallels I guess with what many have indicated today. That is, 
with the emerging competitive market speed, the regulatory 
process still in some people's mind grinding at precompetition 
speed, what would be wrong in your opinion with the statutory 
requirement mandating of the FCC to act on petitions, request 
for waivers, and applications within 90 days?
    And, second, if the Congress requires that a certain FCC 
action shall be completed within a certain time period, what 
happens if the FCC fails to act in a prescribed time period? 
Should there be sanctions, penalties, or consequences resulting 
from this failure?
    I welcome answers from any of the Commissioners.
    Mr. Kennard. I think you touched on an important issue and 
that is how are we going to get this agency to act faster on 
more matters. I think that putting a time limit on every agency 
action would not be a very productive solution because we are 
so inundated with petitions and requests and transactions, we 
have to prioritize, and that means that we have to address the 
issues of the greatest importance, be it enforcement or 
transactions or whatever first. That means that some things are 
going to get put at the bottom of the pile. It is the only way 
to manage any organization.
    I think that what we should do is have expected time lines 
on most categories of proceedings and work diligently to meet 
them. But I think that if we were to put a statutory time limit 
on everything the agency does, you would really elevate form 
over substance, and it would be a disaster.
    Mr. Fossella. Do any of the Commissioners have any 
difference of opinion?
    Mr. Powell. Not really difference of opinion. I actually 
believe that any honest managerial process needs the ability to 
shift priorities and resources for which a time constraint can 
limit. You also have the problem of reconciling different time 
limits that are adopted for different purposes but nonetheless 
rely on the same resources.
    The one thing that I also think everyone should consider as 
a caution is time limits can also produce bad decisions. I have 
observed in government just as often, under the pressure of the 
gun, silliness manifest itself rather than efficiency; and you 
can get an eleventh hour decision that must be done by tomorrow 
that gets done in a way that is counterproductive to the 
industry, markets and consumers. And so one should think long 
and carefully about where to appropriately introduce those 
timelines and where they might nonetheless produce not better 
decisions but actually a worse one.
    Mr. Fossella. Thank you.
    Ms. Ness?
    Ms. Ness. To the extent there are timelines, they should 
also reflect the need for the Commission to receive complete 
and accurate information from applicants or from the licensees. 
Consequently, if someone wanted to play it out until the end of 
the game, so to speak, by holding the ball and not providing 
the information, that should not work against the ability of 
the Commission to complete its review appropriately and in a 
timely manner.
    Mr. Fossella. Please.
    Mr. Furchtgott-Roth. Mr. Fossella, the Commission has had 
in the past many statutory deadlines. There are many in the 
1996 act. I recall at the time there was skepticism about 
whether the Commission could meet some very ambitious 
timelines. I think the Commission did. I am not sure that it 
resulted in bad decisions.
    There is also, and I don't have my handy copy of the act 
right in front of me, but I believe it is in either section 7 
or 8 of the act, a reference to public meetings and public 
meetings in part having as an objective to clear out issues 
that have been around for some period of time. And it may very 
well be 90 days already in statute. That is a lofty goal, an 
ambitious goal that the Commission often doesn't meet, but I 
think that the duty of an agency is to follow the law. And if 
Congress decides in its wisdom to impose deadlines upon the 
FCC, that we can and we will meet those deadlines.
    Mr. Fossella. Thank you.
    Mr. Sawyer has been waiting patiently. I will come back 
after Mr. Sawyer finishes to follow up on the other question 
that I had asked. The gentleman is recognized.
    Mr. Sawyer. Mr. Chairman, I appreciate your indulgence. I 
will take less than a minute. I just have three very brief 
observations.
    With regard to the matter that a number of the members of 
the Commission referred to that Mr. Engel brought up, an 
inadvertent mispronunciation suggested to me that there really 
is something that we can do. We may not be in a position to 
censor that kind of use of the air waves but we are all in a 
position to censure it, and I hope that we all will.
    Second, in the coming days the Commission will receive a 
letter from me and a number of colleagues asking you to look at 
the question of the so-called 211 universal hotline for 
community service. I believe it has enormous merit, not only 
for its own sake but in relieving inappropriate pressures on 
911 hotlines in ways that will benefit communities broadly in 
accessing services quickly that are most important in people's 
lives.
    And, third, with regard to the E-rate, there's been a great 
deal that has been said about E-rate, but the notion of 
building internal connections within schools has one additional 
application beyond connecting teachers and students with the 
outside world. It can be the single most important security 
device that we can put into a school, far more important than 
any metal detectors or guards that are put into schools. It 
connects teachers with one another and with the office in a way 
that all too often is sadly lacking in our schools. It is an 
expenditure, an investment for which there is virtually no cost 
if the interconnections are put into the school in the first 
place for learning purposes. I hope you will encourage that 
broadly as you counsel with schools with regard to the use of 
E-rate funds.
    I thank you, Mr. Chairman. I yield back whatever time I 
have.
    Mr. Fossella. The gentleman yields back.
    As a follow-up, the chairman recognizes himself for just a 
few more minutes, and then we will call this to an end.
    Just to follow up to the responses, if I am not mistaken 
the Department of Justice imposes certain statutory timelines 
on its decisionmaking. I have got a sense that perhaps 
statutory timeline results sometimes in bad decisions, in haste 
or just for the fact that you are up against this deadline. I 
am just curious as to whether, Mr. Powell, or the Chairman, if 
you have any thoughts on the Department of Justice--as to 
whether there are parallels that can be drawn between the two?
    Mr. Powell. There are parallels. The distinction is an 
important one because one I would favor and one I would 
caution. Prophylactic timelines that have no ability to be 
extended or have no ability to be benchmarked are a different 
thing.
    What the Department of Justice has, as it has under the 
Hart-Scott-Rodino Act, a number of mandatory periods in which 
certain things have to happen for the continuance of the 
investigation. Those kind of benchmarks I would wholeheartedly 
support.
    Many of the merger proposals coming out of both the Senate 
and this body, including Congressman Pickering's bill, 
recognize the notion of, for example, saying that in the first 
45 days of a petition for review, the Commission would be 
required to authorize further investigation. It would be the 
equivalent of the Department of Justice's Hart-Scott process. 
That is, it is a quick look and if in that period you don't 
find things that warrant a deeper investigation, the 
investigation is over, and the case is closed.
    If the bureau believes that issues merit continued 
consideration, it should have to get the vote of the Commission 
to do so. But if five responsible individuals were to vote that 
there are serious public interest issues necessitating a 
continuation of an investigation, I think that would have 
merit. What's missing in our process is that kind of guided 
limitation on a temporal scale which I think we need and I 
think are the right course for you to consider.
    Mr. Fossella. Which leads to the second part of the 
question I asked before. If certain actions are not completed 
within a certain time period as prescribed by law, is there any 
consequence that should result from that given the amount of 
capital and the speed at which these mergers are taking place 
and its implications in the capital marketplace and 
shareholders and ultimately consumers?
    Mr. Kennard. We do have timeframes on some of our 
decisionmaking in the tariffing area, for example, and for some 
formal complaints. We have statutory timelines where you have 
directed us to act within a certain period of time. And for 
some types of proceedings, that can be helpful.
    I think that what has happened in the last year is the 
agency has been inundated with these mergers. Most of them are 
being handled quite quickly. Some of them are very, very 
complex and difficult, and we are taking more time. And I think 
in many cases that is appropriate because, unlike the 
Department of Justice, when we issue a decision in a 
transaction, we have to write an order, we have to make sure 
that we have addressed the arguments of all the parties who 
come before us. We have to make sure that that order is 
comprehensive and will withstand judicial scrutiny. So that 
makes our review very, very different from the Department of 
Justice. And in very complex cases, it takes longer, and that 
is a fact of life. And, ultimately, I don't think that we 
should put consumers at risk in the interest of what might be 
an artificial time limitation.
    Mr. Fossella. I guess where my question is--asking 
unanimous consent for 3 additional minutes. Hearing no 
objection----
    If there is a prescribed time period as we often impose 
upon the private sector and folks in the private sector don't 
meet it, there is often a penalty to enforce that time period. 
I am just curious as to what, if any, penalties should be 
imposed upon something--an entity like the FCC if they do not 
comply with prescribed time periods?
    Mr. Kennard. Well, unlike the private sector, our mandate 
is to protect the public. And so if you are penalizing the FCC, 
for example, by forcing the transaction through when it hasn't 
been fully reviewed or there might be public interest 
ramifications, the only people that get hurt are consumers that 
we are trying to protect in our review.
    I think the answer here is to provide the Commission the 
resources it needs to make sure that we can deal with these 
market-restructuring issues and for the Commission to impose 
its own internal timelines in consultation, of course, with 
Members of Congress on what is reasonable. And that is a dialog 
for us to have that I would like to continue.
    Mr. Fossella. Ms. Ness?
    Ms. Ness. If I could add, I am the one surviving 
Commissioner who actually lived through all the implementation 
of the Telecom Act of 1996. We made great effort to comply with 
each and every deadline, we met every single deadline that was 
imposed upon us under the act. We continue to meet the 
deadlines that are imposed upon us. The intentions of the 
Commission I think are pure in attempting to meet those 
deadlines.
    Mr. Fossella. Thank you.
    Last question is, if I heard the Chairman correctly, you 
spoke to the process in the merger review. Some would suggest 
the repeal of section 221(a) was an ability--congressional 
signal to limit the review process or possibly to really leave 
it up to the Department of Justice or the FCC. Therefore, I 
would be curious to know the substantive aspects that the FCC 
performs in a merger review and what does it add or what does 
it look for specifically that the Department of Justice does 
not?
    Mr. Kennard. Well, it is a very difficult legal standard. 
The Department of Justice and Commissioner Powell can speak to 
this because he was chief of staff over there for a time.
    The Department of Justice operates with a different 
statutory obligation. It has the burden of proof to demonstrate 
that a merger would lessen competition.
    The FCC's mandate is different. The parties come before the 
FCC. They bear the burden of demonstrating that a transaction 
serves the public interest. So the burden is different. The 
legal standard is different.
    Because we have ongoing regulatory oversight, we are to 
make sure that no transaction will undermine our ability to 
regulate the industry and promote the pro-competitive thrust of 
the 1996 act. So we look at these transactions differently. 
That is not to say that there aren't some overlapping issues 
but fundamentally our thrust is very different from DOJ's.
    Mr. Fossella. Are there any other thoughts on that matter? 
Mr. Powell?
    Mr. Powell. I would just conclude by saying the Chairman is 
correct that the standards are different and there are 
different considerations. I am not so sure the Justice 
Department review is easier because they don't have to comply 
with the Administrative Procedures Act. They have to bring a 
lawsuit in Federal court and bear the burden of convincing an 
impartial judge of the merits of their case when they are 
posed, and that is a relatively significant exercise.
    The other thing I would say, in all candor, we shouldn't 
let the standards of the details overstate the significance and 
substantiality of the duplication. I know what horizontal 
merger analysis looks like. I know what vertical integrated 
merger analysis looks like. And I have worked on four or five 
of these at the Commission. The standards may be different but, 
in substantial measure, they are antitrust analyses, and they 
can come out differently because of the standard. They can 
choose or be directed to different kinds of conditions. But I 
just won't accept that the overwhelming majority of the 
analysis is not fundamentally different than the merger 
horizontal guidelines that are employed in other agencies.
    Mr. Fossella. So a lot of the work is duplicative?
    Mr. Powell. Sure. The same sort of analysis. Whether that 
duplication is a warranted governmental act is a question for 
you.
    Mr. Furchtgott-Roth. Mr. Fossella, the Commission receives 
petitions to transfer tens of thousands of licenses every year, 
tens of thousands of which only a small percentage receive some 
degree of close scrutiny. We have no consistent set of written 
rules about how we pull out some for close scrutiny and let the 
tens of thousands of others go through, some of which involve, 
frankly, mergers of enormous corporations. Moreover, once we 
have pulled a few license transfers out which are in every way 
identical to the tens of thousands which are unchallenged, we 
have no standards, no written standards, no written rules about 
how we will review them. It is a process that is made up as we 
go along.
    Very often, the standards that we use look all too familiar 
to being the market analysis review that is already done at the 
Department of Justice or at the Federal Trade Commission.
    I think it is correct that the Commission has an obligation 
to find license transfers that are in the public interest, but 
we do not have a consistent set of rules about how we reach 
that determination. I can't see any clear way that anyone on 
the outside applying for a license transfer at the Commission 
would know how their application is going to be treated, 
whether it is going to be treated the same as the tens of 
thousands that go through unscathed or whether they are going 
to be pulled aside, held up for months.
    Mr. Kennard. If I might respond, frankly, I don't think 
there is a lot of mystery here. We are charged with a public 
interest review that requires a public process. We seek 
comment, and to some extent the extent of our review is 
informed by the input that we get from the public. That being 
said, I think Commissioner Furchtgott-Roth has raised some 
valid concerns about our merger review process which we are 
attempting to address internally by trying to come up with some 
consistency of review in the General Counsel's Office, and at 
least have some overall coordination.
    But I think that if you were to consult with people who 
appear before the FCC and ask them if they have any expectation 
about when their transactions are going to be approved and how 
they are going to be handled, I think that there is a fairly 
high level of certainty about what to expect. Many of these 
licenses are routine, and they go through quite quickly. It is 
only the large transactions that involve novel issues of market 
structure that draw more public input that we need to address.
    Mr. Fossella. Ms. Ness, please.
    Ms. Ness. I would also add that it would be informative if 
you would look at the record of the mergers that we have 
approved. Why do I say that? Because so often parties on the 
outside have asked us to take this action or that action in 
conjunction with a merger. We have not gone in those 
directions. We have narrowly approached these mergers to ensure 
that we really were applying the public interest standard to 
effectuate the goals of the act but not go off in other 
directions. And so I think if you look at the record you will 
see that our efforts have been to open markets where further 
concentration might hinder competition.
    And then, finally, we should move faster. There is no 
question about it. Some of the proposals that you have heard 
put on the table today are ones that we ought to be working 
with, and I am sure collectively we will be able to do that.
    Mr. Fossella. I would just close and suggest that perhaps 
the Chairman and the Commissioners look at ways in which to 
facilitate the process. I would imagine you could create a 
system whereby you almost sign off on the Department of Justice 
criteria if you believe that they are satisfactory, which 
presumably they are, rather than have some of these applicants 
do the same exact work for just a different entity. After all, 
you all fall under the same leader, last time I checked.
    Ms. Ness. There is one problem with that, and that is our 
record is fully public. Department of Justice records are not 
made available to the public, and there are some issues 
involving privacy.
    Mr. Fossella. Perhaps there is a somewhere in between 
whereby the two could come together.
    If there is nothing else, this meeting is adjourned. Thank 
you very much for your patience.
    This subcommittee stands adjourned until 10 a.m. Thursday, 
when it will meet to conduct an oversight hearing on the 1-year 
anniversary of the Digital Millennium Copyright Act. Thank you 
very much for your patience.
    [Whereupon, at 12:36 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:

                  Federal Communications Commission
                                     Office of the Chairman
                                                   November 5, 1999
The Honorable Edolphus Towns
U.S. House of Representatives
2232 Rayburn House Office Building
Washington, D.C. 20515
    Dear Congressman Towns: This is in response to your letter of 
October 22, 1999 regarding the Telecommunications Development Fund 
(TDF).
    I share your commitment to TDF and your desire to ensure that the 
Fund is able to provide assistance to small telecommunications 
businesses to the maximum extent possible. In this regard, the 
Commission fully supports the legislative proposal submitted by TDF to 
amend the Telecommunications Act of 1996 so that TDF may be funded from 
interest earned on downpayments by auction winners as well as from 
interest on upfront payments by all auction participants.
    Current agency estimates indicate that over the past three years, 
at least $73 million in interest could have been generated from these 
spectrum auction accounts if the TDF amendment were enacted into law. 
Enactment of this amendment will help ensure that the TDF more fully 
meets its intended goals to ``promote access to capital for small 
businesses in order to enhance competition in the telecommunications 
industry; stimulate new technology development, and promote employment 
and training; and support universal service and promote delivery of 
telecommunications services to underserved rural and urban areas.''
    In my legal opinion, which was formed while I was General Counsel 
of the Commission, the proposed TDF amendment is necessary for the 
following reason. The current statute provides that: ``[a]ny deposits 
the Commission may require for the qualification of any person to bid 
in a system of competitive bidding pursuant to this subsection shall be 
deposited in an interest bearing account . . .'' with the interest 
thereafter directed to TDF. 47 U.S.C. 309(j)(8)(C). Pursuant to 
Commission regulations and auctions rules, the only deposits an 
applicant must make to become a qualified bidder are upfront payments. 
Downpayments are not required, or even calculated, until after the 
auction is completed and winners have been determined. Because the 
current statutory language is clear on this point, I do not believe 
that the Commission can adopt any other interpretation without an 
amendment to the legislation.
    I am glad to know that you are working to develop such an 
amendment. Please let me know if I can be of any further assistance in 
this highly worthwhile effort.
            Sincerely,
                                         William E. Kennard
                                                           Chairman
                                 ______
                                 
 Responses for the Record of Hon. William E. Kennard, to Questions of 
                           Hon. Barbara Cubin
    Question: In a January letter I asked the Commission to look into 
an issue regarding WyoMedia Corporation which filed an application for 
authority to construct a new television station on Channel 16 in 
Scottsbluff, Nebraska. Yesterday, my office received a reply from you 
(Chairman Kennard) telling me that you anticipate that the Commission 
will open the window very shortly for all ``freeze'' waiver applicants 
to amend their applications. Could you tell me specifically when that 
will happen? You may remember from my letter to you that WyoMedia filed 
its application in 1996. To me 3 years seems to be a unreasonably long 
time for an application review.
    Answer: On November 22, 1999, the Commission's Mass Media Bureau 
issued a Public Notice, DA 99-2605, ``Mass Media Bureau Announces 
Window Filing Opportunity for Certain Pending Applications and 
Allotment Petitions for New Analog TV Stations.'' The Public Notice 
announced a window filing opportunity through March 17, 2000 to allow 
persons with certain pending requests for new analog (NTSC) television 
stations to modify their requests, if possible, to eliminate technical 
conflicts with digital television (DTV) stations and to move from 
channels 60 through 69.
    This window is available for WyoMedia Corporation since its pending 
application seeks a new full-service NTSC television station on 
channels 2-59 at a location inside of the so-called ``TV Freeze Area.''
    Question: The recent explosion of mergers in the telecommunications 
industry have a major impact on competition and economic development 
not only in my home state of Wyoming but throughout the Nation. 
Recently, my colleague, Chip Pickering, introduced a measure to 
establish time limits for FCC review of mergers and acquisitions, and 
because I have long been concerned about the treatment of mergers in 
the telecomm industry, I am pleased to be a co-sponsor of the 
legislation.
    I am interested in the fundamental principle of fairness and 
timeliness in reviewing and approving mergers and avoiding 
extraordinary delays. I am interested to know, Mr. Chairman, from your 
perspective, how do you intend to remedy the concern that we all have 
on Capitol Hill with respect to the time consuming merger review 
process by the FCC? Is legislation necessary?
    Answer: I do not believe legislation is necessary to address the 
FCC's merger review process. Instead, I have asked the Commission's 
General Counsel, Christopher Wright, to organize an intra-agency merger 
transaction team that will be in place by January 3, 2000. This will 
streamline and accelerate the transaction review process.
    The new intra-agency transaction review team will establish 
deadlines for rapid processing of transfers of control associated with 
transactions. The goal will be to complete even the most difficult 
transactions within 180 days after the parties have filed all of the 
necessary information and public notice of the petitions have been 
issued. Finally, the new team will also work to make the transaction 
review process even more predictable and transparent, so that 
applicants know what is expected of them, what will happen when, and 
the current status of their application. This is also consistent with 
the Commission's current restructuring focus to transform the FCC into 
a more functional, faster and flatter organizational entity.
    Question: As a follow-up to the last question: with respect to my 
home state, Qwest Communications and US WEST filed joint applications 
for approval of their planned merger with the FCC and state 
commissions, including Wyoming, over two months ago. The companies also 
filed notifications of their transactions with the US Department of 
Justice and the Federal Trade Commission and received clearance to 
proceed with the merger in just three weeks.
    The timely replies of the DOJ and FTC show that this process can 
work quickly. When do you anticipate that the FCC will review this 
pending application? Can you assure me that the FCC will not prolong 
the process of this particular merger?
    Answer: Pursuant to the Communications Act, the Commission has an 
obligation to determine whether a proposed merger is in the public 
interest. In determining whether a merger is in the public interest, 
the Commission considers not only the competitive effects of the 
proposed merger, but also takes into account various factors including 
the effects of the merger on Congress' goals as stated in the 
Telecommunications Act of 1996. In other words, the standard used by 
the Commission differs from those used by the FTC and the Department of 
Justice. Under the Act, the Commission must determine whether the 
merger applicants have demonstrated that the proposed transaction, on 
balance, serves the public interest, considering both its competitive 
effects and other public interest benefits and harms. If our analysis 
reveals that the public interest harms of a proposed merger will 
outweigh its public interests benefits, the Commission may require the 
merging parties to comply with the conditions designed to ensure that 
the competitive promise of the merger is met. Further, the Department 
of Justice and the FTC review process allows a ``no action'' decision 
that requires no explanation (and no comment from interested parties.) 
By contrast, the Administrative Procedure Act and the Communications 
Act require full due process, including the right of interested parties 
to receive notice and file comment and the right of dissatisfied 
parties to seek judicial review.
    As you know, on August 19, 1999, Qwest and US WEST filed 
applications with the Commission requesting Commission approval for the 
transfer of control of licenses and authorizations held by subsidiaries 
of the two companies to merge with and into Qwest. The applications 
were placed on public notice on September 1, 1999; and many parties 
filed comments. In their reply comments, the applicants outlined a 
divestiture plan that they claimed would bring them into compliance 
with section 271. As you know, section 271 prohibits a Bell Operating 
Company from providing in-region, interLATA services before opening its 
local markets to competition. Given the importance of section 271 and 
its pro-competitive goals, on October 19, 1999, the divestiture plan 
also was placed on public notice. The pleading cycle is now complete.
    Accordingly, the Commission will carefully and expeditiously review 
the application filed by Qwest and US WEST. We hope to have a final 
decision on this merger during the first quarter of 2000.
    Question: You have stated for the record that the high speed data 
market is not an inherently monopolistic market. Would you say that 
this statement applies in rural areas like Wyoming?
    You have also stated that one of your highest priorities is to 
ensure that rural America has access to the same telecommunications 
services available to the large urban areas. We share that goal. Is 
there a legislative or regulatory solution that you see that would 
immediately address the ``digital divide''?
    Answer: I believe that, even in our most rural areas, we can not 
yet conclude that there is a natural monopoly in broadband services. 
Competition in all areas of telecommunications is still emerging and 
will continue to grow. There is facilities-based competition in the 
western part of Wyoming in areas served by US WEST and Silver Star 
Communications and there is resale of residential and business 
telephone service throughout the state. PCS wireless service has also 
been launched. In addition, Wyoming has infrastructure important to the 
development of competitive broadband services. Every community except 
two is served by digital switching equipment located in each respective 
central office and cable television is also available to 82 % of the 
homes in Wyoming. Satellite services are available throughout Wyoming, 
especially in thinly populated areas (and the cost of satellite-based 
services, unlike wire-based ones, is insensitive to distance). All 
these technologies are platforms for broadband.
    Of course, I share your concern about rural area access to advanced 
services. We are just beginning the second of our regular inquiries 
into the deployment of broadband to all Americans, and are giving 
particular attention to the question of how soon and whether 
competition will bring broadband services to rural areas. Early in the 
new year, we will issue a Notice of Inquiry on this issue and welcome 
your and your constituents input.
    It should also be noted that we are not required to rely entirely 
on market forces to bring broadband services to rural areas. Section 
706 of the 1996 Act provides that if broadband is not being deployed in 
a reasonable and timely fashion to all Americans, we and state 
regulators should use a variety of deregulatory and competition-
promoting techniques.
    Finally, I assure you of my commitment to ensuring that rural 
Americans share in the benefits of technological advancements in 
telecommunications services. To that end, I have asked the universal 
service Joint Board to speed up its review of the services that are 
eligible for universal service support, so that they may consider 
whether broadband services should be included. In addition, at the 
recommendation of NARUC, the FCC has created a Joint Conference with 
the states to facilitate the dialogue among state and federal 
regulators about how to bring advanced services to all Americans.
 Responses for the Record of Hon. William E. Kennard, to Questions of 
                           Hon. Michael Oxley
    Question: I wrote the Commission last month outlining our concern 
that the FCC has not acted on Internet LOAs, or letters of agency, to 
allow consumers to change pre-subscribed telecom carriers over the 
Internet. Twelve of my colleagues signed onto that letter. I understand 
the issue is linked to the slamming order, but our point was that 
Internet LOAs should be non-controversial and should be separated out 
and acted on promptly. Any chance of that?
    Answer: I share your interest in resolving the issue of Internet 
LOAs. As indicated, however, in my response to your recent letter 
regarding LOAs, we received comments from many interested parties on 
this issue but there is not unanimous agreement on whether Internet 
LOAs should be permitted. Several commenting parties expressed concern 
that submitting a carrier change using the Internet would not, by 
itself, provide sufficient consumer protection if it were not 
accompanied by additional verification. For example, most PUCs express 
concern with the security of Internet transactions and urge the 
Commission to use any safeguards possible, e.g., getting alternate 
forms of identification and verifying changes through three prescribed 
methods. Some suggest that Internet LOAs are fertile ground for 
slamming. Others suggest downloading LOAs from the Internet and sending 
hard copies to carriers. One consumer group is against Internet LOAs 
altogether. By contrast, others strongly support the use of the 
Internet to facilitate the submission of carrier changes. Because of 
the importance of this issue, and in light of the strong and varied 
sentiments in the comments, we intend to move as quickly as possible to 
evaluate and resolve the issue of Internet LOAs.
    Question: (for Commissioner Furchtgott-Roth) Congressman Stearns 
and I have written the Commission twice to voice concern over the FCC's 
proposed low power radio service. Our biggest concern is over the 
impact on current interference standards. Can the Commission assure the 
Committee that if it goes forward with the proposal there will be no 
weakening of current interference standards and no increase in 
interference with existing license holders?
    Answer: I share your concern over the FCC's proposed low power 
radio service. As I said when I dissented from the adoption of the 
proposed notice of rulemaking, the Commission can authorize extremely 
few new stations under existing interference rules. In order to create 
any real amount of new service, protection standards must be loosened 
so far as to eliminate third and even second adjacent channel 
safeguards.
    Accordingly, I regret that I do not think it is possible to say 
that there will be no weakening of current interference standards and 
no increase in interference with existing license holders. I fear that 
these license holders, as well as their listeners, will bear the brunt 
of the effects of this proposal. Moreover, any new low power stations 
would themselves likely receive interference from full power stations, 
potentially making the promise of their service illusory. In sum, this 
proposal is likely to create more harm than good on all sides, that is, 
for current broadcasters, their listeners, and even new low power 
stations.
 Responses for the Record of Hon. William E. Kennard, to Questions of 
                           Hon. Paul Gillmor
    Question: Private land mobile users have informed the Commission 
for years that their spectrum needs are not being met. What plans do 
you have to ensure their access to needed spectrum?
    Answer: Private land mobile users' communications requirements can 
be satisfied in a number of ways. One is through the reallocation of 
spectrum from other uses. The Commission is currently considering an 
industry proposal that includes a request for allocation of 6 MHz of 
the 746-806 MHz spectrum to be licensed to Band Managers. These Band 
Managers could coordinate spectrum for private use. This spectrum is 
being recovered from TV channels 60-69 as a result of digital 
television implementation. Also, in the Spectrum Policy Statement of 
November 22, 1999, the Commission said that it would consider 
establishing a new Land Mobile Communications Service in 10 megahertz 
of spectrum in the 1390-1435 MHz bands. While these bands are not 
contiguous, they are sufficiently close together to allow manufacturers 
to design cost-effective equipment. This band was also identified last 
year by the Land Mobile Communications Council as possibly being 
appropriate for limited allocation to private land mobile users.
    The use of new and more efficient technologies will also increase 
the amount of spectrum available for private land mobile users. For 
example, due to the Commission's ``refarming'' proceeding, the use of 
narrower channels has been interjected into spectrum designated for 
private services. Consequently, we are seeing an increasing capability 
to accommodate many more private licensees and users.
    Finally, the use of cellular and PCS systems is another way to meet 
some private land mobile users' wireless spectrum needs. New procedures 
and protocols are being developed for and incorporated into commercial 
systems that will benefit the private land mobile user.
    Question: In 1997, the Congress designated 24 MHz for public use in 
the 746-806 MHz band. There is presently a proceeding underway with 
respect to the auction of 36 MHz of commercial spectrum in the same 
band. What efforts will you undertake to ensure that both federal and 
municipal police, fire, and rescue services will be protected from 
harmful radio interference?
    Answer: In developing a band plan for this 36 MHz of spectrum, a 
primary goal of the Commission is to ensure that activation of services 
in these bands will not impair public safety operations through harmful 
interference. The Commission has under consideration several proposed 
band plans, including proposals to establish ``guard bands'', i.e., 
slices of spectrum adjacent to the public safety spectrum, that would 
be licensed to Band Managers who would be responsible for assigning 
frequencies and coordinating frequency use to avoid interference. 
Additionally, the Commission is also considering other proposals to 
license such guard bands for low power commercial uses.
    Whatever band plan is ultimately adopted by the Commission, let me 
assure you that my fellow Commissioners and I recognize the critically 
important role that public safety plays, and will protect public safety 
operations from harmful interference.
    I expect a decision on the aforementioned band plans to be adopted 
within the next few weeks.
