[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
MANAGEMENT PRACTICES AT THE FEDERAL COMMUNICATIONS COMMISSION: THE
CHAIRMAN REPORTS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
OCTOBER 6, 2000
__________
Serial No. 106-274
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
U.S. GOVERNMENT PRINTING OFFICE
75-014 WASHINGTON : 2001
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio
Carolina ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
LEE TERRY, Nebraska THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
HELEN CHENOWETH-HAGE, Idaho (Independent)
DAVID VITTER, Louisiana
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
James C. Wilson, Chief Counsel
Robert A. Briggs, Chief Clerk
Phil Schiliro, Minority Staff Director
------
Subcommittee on Government Management, Information, and Technology
STEPHEN HORN, California, Chairman
JUDY BIGGERT, Illinois JIM TURNER, Texas
THOMAS M. DAVIS, Virginia PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon MAJOR R. OWENS, New York
DOUG OSE, California PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin CAROLYN B. MALONEY, New York
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
J. Russell George, Staff Director and Chief Counsel
Earl Pierce, Professional Staff Member
Bryan Sisk, Clerk
Trey Henderson, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on October 6, 2000.................................. 1
Statement of:
Feaster, H. Walker, III, Inspector General, Federal
Communications Commission; Adam Thierer, research analyst,
Heritage Foundation; and Jeffrey Eisenach, president,
accompanied by Randy May, director of communication studies
and senior fellow,......................................... 2
Kennard, William E., chairman, Federal Communications
Commission; Ronald S. Stone, chief information officer,
Information Technology Center; and Mark Reger, chief
financial officer.......................................... 36
Letters, statements, etc., submitted for the record by:
Eisenach, Jeffrey, president, the Progress & Freedom
Foundation, prepared statement of.......................... 24
Feaster, H. Walker, III, Inspector General, Federal
Communications Commission, prepared statement of........... 6
Kennard, William E., chairman, Federal Communications
Commission, prepared statement of.......................... 38
Thierer, Adam, research analyst, Heritage Foundation,
prepared statement of...................................... 17
MANAGEMENT PRACTICES AT THE FEDERAL COMMUNICATIONS COMMISSION: THE
CHAIRMAN REPORTS
----------
FRIDAY, OCTOBER 6, 2000
House of Representatives,
Subcommittee on Government Management, Information,
and Technology,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 12:32 p.m., in
room 2247, Rayburn House Office Building, Hon. Stephen Horn
(chairman of the subcommittee) presiding.
Present: Representatives Horn, Walden, Turner, and Owens.
Staff present: J. Russell George, staff director and chief
counsel; Earl Pierce, professional staff member; Bonnie Heald,
director of communications; Bryan Sisk, clerk; Elizabeth Seong,
staff assistant; George Fraser and Trevor Petigo, interns; Trey
Henderson, minority counsel; Jean Gosa, minority clerk; and
Earley Green, minority assistant clerk.
Mr. Horn. A quorum being present, the Subcommittee on
Government Management, Information, and Technology will come to
order.
Today's hearing is the subcommittee's 90th hearing in this
Congress during which we've covered a wide range of issues. We
successfully prodded the executive branch departments and
agencies to prepare their computers for Y2K, we highlighted
government agencies' inability to balance their books, and
we've examined the government's efforts to protect Federal
computers from malicious attacks.
Today's hearing touches on all of those areas and more. We
will examine management practices at the Federal Communications
Commission. The Commission was established by the
Communications Act of 1934. Since its inception, the FCC has
been responsible for interstate communications systems from the
early days of radio, then television, and now satellite and
cable communications.
The Commission oversees the licensing of approximately 3
million companies and station owners. Its five members are
nominated by the President and confirmed by the Senate. To help
ensure the nonpartisan role of this independent commission, no
more than three members can be members of the same political
party.
In 1994 the FCC began auctioning off frequency spectrums.
These auctions have brought $15.3 billion to the U.S. Treasury.
Last year alone, the FCC collected more than $1 billion from
the auctions. But as in most business propositions, the auction
process has not been trouble free.
For example, 5 years ago, NextWave Communications Inc. won
a bid gaining rights to the use of a spectrum, agreeing to pay
$4.7 billion for the airwave frequency. After making a down
payment of $500 million, the company declared bankruptcy. That
case resulted in a protracted court battle delaying resale of
the spectrum, which is now thought to be worth about $18
billion.
We're interested in learning more about the extent of this
type of problem. We want to examine the management practices
and the challenges facing the Commission in the increasingly
complex world of communications.
I welcome our witnesses today. I look forward to your
testimony. And I yield now to the gentleman from Texas, the
ranking member, Mr. Turner.
Mr. Turner. Thank you, Mr. Chairman.
Clearly, the FCC is a very important Federal agency, with
very significant responsibilities that deserve the oversight of
the Congress. And in our effort in carrying out our
responsibility as a subcommittee to give that oversight, we are
here today to hear from the witnesses before us.
The FCC has as its primary goal, as I understand it, the
promotion of competition in communication, protection of
consumers, and to support access for every American to the
existing and future communications services.
The purpose of our hearing today is to be sure that the FCC
has the necessary tools, the resources, and the management
practices in place to accomplish those very important goals.
So we are looking forward to hearing from each of our
witnesses. And I thank the chairman for calling this hearing
today so that we might have the opportunity to carry out the
responsibility we have of oversight of this agency.
Mr. Horn. I thank the gentleman.
And now for the witnesses, if you have not been a presenter
before us, this is an investigative committee. We do ask you to
be sworn in. We do have your very fine papers, and if you would
like to summarize, we would appreciate it in, say, 5, 7
minutes. Then that gives us more time for questions.
So if you will stand and raise your right hands.
[Witnesses sworn.]
Mr. Horn. The clerk will note that the three presenters
have affirmed the oath.
And we now begin with the first of them. H. Walker Feaster
III, Inspector General, Federal Communications Commission.
Mr. Feaster.
STATEMENTS OF H. WALKER FEASTER III, INSPECTOR GENERAL, FEDERAL
COMMUNICATIONS COMMISSION; ADAM THIERER, RESEARCH ANALYST,
HERITAGE FOUNDATION; AND JEFFREY EISENACH, PRESIDENT,
ACCOMPANIED BY RANDY MAY, DIRECTOR OF COMMUNICATION STUDIES AND
SENIOR FELLOW, THE PROGRESS & FREEDOM FOUNDATION
Mr. Feaster. Thank you, Mr. Chairman. Mr. Chairman, Ranking
Member, I appreciate the opportunity to appear before you today
to discuss the accomplishments of the FCC's Office of Inspector
General and to share with you those activities that have aided
the FCC's efforts to enhance its efficiency and effectiveness.
It is especially rewarding to Inspectors General when the
Congress of the United States takes an interest in our
continuing efforts to improve Federal programs and operations.
The FCC's Office of Inspector General was established in
1989 as a result of the amendments to the Inspector General Act
of 1978. The office is staffed with nine people and has an
annual budget of approximately $1.1 million.
During my years as IG, my approach has been to focus on
major issues of agency-wide significance. This approach has
resulted in audits, investigations, and related activities in
the areas of information technology, procurement and contract
administration, financial management and program management. In
order to better familiarize you with our efforts, I will
briefly review some of the very significant activities.
In 1992, the Commission engaged in an agency-wide effort to
modernize its automated systems. By 1994, the FCC had equipped
all of its employees with personal computers and connected
these computers internally via an intranet and to the world via
the Internet. This effort served as the backbone of a system
that has allowed the Commission to meet the challenges that
must be faced on a day-to-day basis.
The Commission also invested heavily in automated systems
that permit its customers to interact with the Commission using
computer technology. In response to this major commitment of
resources and as the Commission grew more dependent on
automated systems technology, my office commenced work in
selected critical areas. We initially focused on the physical
and environmental security of computer systems.
As our reliance on computers grew, our concern about the
external security to the network increased. In 1998, my office
began working with individuals from the Information Technology
Center and the Commission's bureaus and offices to develop a
systems development life-cycle model. This will give the
Commission a standard model to use as it develops its computer
systems in the future.
My office has also done considerable audit work related to
Y2K conversion. We provided the chairman independent
assessments of the Commission's progress toward the successful
conversion to the year 2000.
In summary, my office has been an active participant in the
Commission's evolution to technology-based organization. The
Commission has made substantial progress in the management and
security of its computer systems. However, based upon the
findings in the recently concluded fiscal year 1999 financial
statement audit, additional efforts must be undertaken to bring
the Commission into full compliance with the OMB Circular A-
130, requirement for a comprehensive security plan. It also
needs to accelerate its efforts to develop and test its
computer contingency plans.
Like many other agencies in the Federal Government, the FCC
has expanded its use of contractors to meet its many needs in
lieu of hiring additional staff. Since 1997, my office has been
routinely conducting floor checks, selected voucher reviews,
and incurred cost audits to monitor the Commission's
administration of contract funds. It is my belief that the risk
in this area has been significantly reduced through extensive
efforts by the management and my office.
In the mid-1990's, the FCC made a major commitment to
improve the financial operations of the Commission. Recognizing
this change, my office began to look at the critical components
of the Commission's financial system. In 1998, we conducted a
special review of the Commission's existing collection system.
Of major significance is the Commission's commitment to
improve its financial management has been the completion of a
financial statement audit for fiscal year 1999. The result of
this audit was the issuance of a qualified opinion on the
financial statement. This qualification involved property,
plant, and equipment documentation and unfunded liabilities.
I am quite pleased by the progress that the Commission is
making in the area of financial management. While the efforts
of my office have identified a significant number of issues
that must be dealt with in the years and months ahead, it is my
view that the Commission's commitment to improved operation in
this area remains firm. My office will continue to monitor the
implementation of our recommendations from various audits we
have completed in the past. We are currently conducting an
audit of the fiscal year 2000 financial statement and related
reports to test the policies and procedures that have been put
in place as a result of our recommendations.
One of the statutory functions of my office is to conduct
and supervise audits and investigations related to program
operations. During the fiscal year we have increased the scope
of our activities to include selected operating programs that
will require additional oversight. We have currently three
projects under way in this area. The first is a special review
of the management of nonpublic information, the second is an
audit of the operational effectiveness and efficiency of the
Commission's national consumer center, and the third project is
an audit of the FCC's performance as it seeks to fully address
the requirements of the Government Performance and Results Act.
The results of these activities and audits will be
available to the Congress and FCC management in fiscal year
2001.
Another major responsibility of an Inspector General is to
conduct investigations of alleged misconduct on the part of
government employees, contractors or other recipients of
government funds. Over my years as IG, my office has been
involved in a wide variety of allegations. Our caseload runs
about 20 to 30 cases a year, and it has included, for example,
employee theft of supplies, misuse of computer equipment,
attorney misconduct in a proceeding, abuse of authority by
senior officials, improper conduct by employees related to a
contract award, and operating a business on government time and
with government equipment.
It is important to note that in all our inquiries and
investigations, the rights of employees are fully protected.
When conducting interviews, employees are given the appropriate
legal warnings, depending upon the situation. During the
interview, they are permitted to be accompanied by a union
official, a private attorney, or an individual of their choice.
We also protect the information gained in the interview process
to the fullest extent of the law.
In closing, I'd like to thank you for the opportunity to
review the operations of my office with you. I believe that the
Office of Inspector General has had a meaningful impact upon
the operations of the Commission. We have met the challenge
that you, the Congress, have set before us in the law that
established my office. My staff and I will work vigorously to
build upon this foundation.
I will be glad to answer any questions you might have.
Thank you.
Mr. Horn. Thank you very much.
[The prepared statement of Mr. Feaster follows:]
[GRAPHIC] [TIFF OMITTED] T5014.001
[GRAPHIC] [TIFF OMITTED] T5014.002
[GRAPHIC] [TIFF OMITTED] T5014.003
[GRAPHIC] [TIFF OMITTED] T5014.004
[GRAPHIC] [TIFF OMITTED] T5014.005
[GRAPHIC] [TIFF OMITTED] T5014.006
[GRAPHIC] [TIFF OMITTED] T5014.007
[GRAPHIC] [TIFF OMITTED] T5014.008
Mr. Horn. We now go to the second presenter, Adam Thierer,
research analyst, the Heritage Foundation.
It sounds like we have a vote, but let's proceed for at
least 5 minutes, and then we will just have to go and be in
recess and vote and come back.
Mr. Thierer. Mr. Chairman, Ranking Member and members of
the committee, thank you for having me here today to testify on
the urgent need for reform in the Federal Communications
Commission.
I have worked on several projects related to FCC reform,
both on my own at Heritage and with other public policy
research organizations and academic experts in my 10 years at
the Heritage Foundation. But I'll stress that my remarks here
today are mine, and mine alone, and not those of the Heritage
Foundation or any other organization.
Let me begin with a few brief words on why it is absolutely
essential that Congress take steps to reform and downsize the
Federal Communications Commission. And I'll begin with what I
believe is a shocking paradox, which is that we live in an age
of deregulation, but the FCC is larger and more powerful than
ever before.
Mr. Chairman, as you know, Congress took important steps
under the Telecommunications Act of 1996 to deregulate this
important marketplace. Yet, while companies in this industry
have been forced to begin a demanding transition to a
competitive market, nothing has been done to simultaneously
ensure that the FCC reforms itself or downsizes in any serious
way. In fact, FCC spending and staffing are at all-time highs.
The FCC has requested total gross budget authority in
fiscal year 2001 of almost $280 million and total staffing of
1,971 FTEs. By comparison, 10 years ago, FCC spending stood at
$108 million and staffing was 1,734 FTEs. In other words, the
FCC's budget has essentially doubled over the past decade and
the agency has hired roughly an additional 250 bureaucrats over
the same period.
I should stress that this is a situation almost without
precedent both domestically and internationally. Domestically,
when other important industries such as airlines and trucking
were deregulated, the agencies which oversaw those industries
were forced to downsize and in many cases were eliminated
shortly after deregulation was pursued. This has not been the
case with FCC as telecom has been deregulated.
On the international front, other countries pursuing
telecom liberalization have tended also to greatly curtail or
even end outright the meddling of their regulatory authorities
within the affairs of industry. Again, this has not been the
case with the FCC in America.
Frankly, this situation is now becoming somewhat
unbearable. There is simply no development within the
telecommunications marketplace that is not scrutinized under
the FCC's regulatory microscope. No major decision or
development in this sector goes forward without the FCC somehow
casting judgment on the matter.
I would suggest that this sort of intrusive behavior is
inconsistent with the intentions and framework that Congress
set forward in the Telecom Act of 1996, and while many FCC
officials will claim that the bulk of their increased workload
is because of the deregulatory activities they've pursued, one
is forced to ask, does the FCC really need to take any steps to
achieve deregulation? Why can't they just step aside and stop
micromanaging the day-to-day affairs of this fast-paced sector?
Congress should indeed reject this logic that some FCC
officials seem to put forward that only they can make this
marketplace competitive through their vigilant oversight and
constant micromanagement of the affairs of this sector. The
logical retort to that is simple. If FCC oversight is so
virtuous, then indeed why is it that the least regulated
sectors, such as cellular phones and Internet services, are the
most competitive and fastest growing? Moreover, when Congress
downsized and abolished previous regulatory agencies, they did
so because they knew competition, real competition, would not
blossom so long as companies could come to Washington and plead
their case for special treatment with captured regulators.
Real competition will develop only when companies stop
competing within the Beltway for the allegiance of regulators
and start competing in the marketplace for the allegiance of
consumers. This, more than any other reason, explains why there
is such an absolute, essential need for Congress to begin
taking steps to reform and downsize the FCC soon.
So what should Congress do to rectify this situation? A
simple question deserves a simple answer, and I'll outline for
you, in closing, a very reasonable and short and simple
strategy to do so. Let's call it the ``cut and peel'' strategy.
First, set the objectives. The ``cut'' part of this would
be maybe three simple goals or objectives such as, say, first,
a 30 percent reduction in funding; second, a 30 percent
reduction in staffing; and third, perhaps the consolidation of
the FCC's 16 existing bureaus and offices into, say, three
streamlined divisions or units.
And, again, you should demand that these goals or
objectives be achieved over the next 3 years. So with this sort
of 30/30/3/3 framework in mind, you should then demand that the
FCC achieve these objectives by shedding some of their
responsibilities, or redundant powers, that they currently
still enforce. This is the ``peel'' portion of the ``cut and
peel'' strategy.
I'll give you four specifics to close: One, spin off
antitrust oversight functions to the Department of Justice or
the Federal Trade Commission, who already has the expertise and
authority to do so, whereas the FCC doesn't; second, transfer
and consolidate all spectrum management authority and
responsibilities within the NTIA within the Department of
Commerce; third, transfer international regulatory
responsibilities to the Department of State or Department of
Commerce, which are in a better position to deal with global
trade and investment issues; and fourth, devolve universal
service responsibilities to the State and local level, who are
in a better position to target assistance to those most in
need.
Mr. Chairman and members of the committee, to conclude, may
I be so bold as to suggest that is not an unreasonable plan,
especially viewed in light of the fact that the FCC has
received a fairly lengthy reprieve from oversight and
downsizing in the past 5 to 10 years. I think the time has come
to rectify this situation, and this sort of simple ``cut and
peel'' strategy, I believe strikes the right balance.
Thank you, Mr. Chairman and members of the committee for
the opportunity to testify.
Mr. Horn. Well, we thank you.
[The prepared statement of Mr. Thierer follows:]
[GRAPHIC] [TIFF OMITTED] T5014.009
[GRAPHIC] [TIFF OMITTED] T5014.010
[GRAPHIC] [TIFF OMITTED] T5014.011
[GRAPHIC] [TIFF OMITTED] T5014.012
Mr. Horn. We now have three members who need go over to the
floor to cast their votes, so we will be in recess for probably
around 10, 15 minutes.
[Recess.]
Mr. Horn. We are now out of recess and we have our third
presenter, Jeffrey Eisenach, president of the Progress &
Freedom Foundation.
Mr. Eisenach. Mr. Chairman, thank you for having me here
today. Let me begin by noting that while I serve as the
president of the Progress & Freedom Foundation, the views I
express are my own and do not necessarily represent those of
the Foundation, its board or its staff.
I would note that we at the Progress & Freedom Foundation
have dedicated ourselves to studying the digital revolution and
its implications for public policy. Our 7-year history has been
spent studying the telecommunications marketplace, and the
Federal Communications Commission in particular.
Here with me today is our director of communication studies
and senior fellow, Randy May, who is leading a major and
comprehensive study of the FCC, looking at its role in
deregulation and the need for continued deregulation and FCC
reform.
Now, the FCC oversees what is arguably the most important
and vibrant sector of the American economy. I brought with me
today and made available to the members of the subcommittee
something that we publish every year called ``The Digital
Economy Fact Book,'' which is just a compendium of statistics.
You'll find, Mr. Chairman, that one of the things that it shows
is that the telecommunications sector is in a state of
transformation from a marketplace characterized by scarcity and
monopoly to one of abundance and competition.
In passing the Telecommunications Act, the Congress tasked
the FCC with implementing a new policy framework consistent
with that transformation. The vision of the Telecommunications
Act was clear. It aims to replace monopoly with competition and
to impose the discipline of the marketplace in lieu of
government regulation.
In short, it says to the Commission: Facilitate the
transition to competition and when you're done, deregulate.
But deregulation is a task for which this commission, at
least, has turned out to be poorly suited. As Adam Thierer
noted, the Commission is larger than 5 years ago when the act
was passed. It's also--and I'm going to talk a little bit about
the extent to which it is--vastly more intrusive into the
affairs of the marketplace than it was 5 years ago.
Some examples: In its review of the mergers under its vague
public interest standard, the Commission engages in what is
essentially an exercise in ``designer regulation'' with
separate and unequal regulatory regimes imposed on similarly
situated firms through conditions which are supposedly
voluntary, but in fact are necessary if the merger is going to
be permitted to go forward under a very vague set of criteria.
The Commission has refused to forbear from regulating in
the local service marketplace for broadband services, and it's
now poised to impose common carrier-type regulations on
broadband Internet offerings by cable service. It is now
looking even at extending itself into the arena of digital
broadcasters.
Under this Commission, under this administration, and under
the Telecommunications Act, the Commission has now become a
social policy agency, something for which I think it's ill-
suited. Administering what its former chairman, Reed Hundt,
called the largest national effort for K through 12 education
in our Nation's history, namely the so-called E-Rate program.
This continuing mission creep would be less troubling if
the Commission had a better track record of implementation, but
its track record in that regard in fact is poor. As I
mentioned, in its review of mergers under the public interest
standard, the Commission is able to avoid all of the
requirements of the Administrative Procedures Act which applies
only to industry-wide rulemakings.
The Commission often fails to meet deadlines and is often
engaging in creative interpretation of its statute. This leads
to not only Congress but also the courts having to step in and
do the agency's job in areas as arcane as reciprocal
compensation and as central to the agency's mission as the
implementation of unbundling and resale requirements of the
local telephone loop.
And I do need to say, Mr. Chairman, I would hope that all
of the members of this subcommittee would take a moment to read
the book by former Chairman Reed Hundt.
And I gather this book is available free at
www.Reedhundt.com. It is a book that everyone should look at
because, as someone who formerly served as chief of staff in an
independent regulatory agency, I believe it contains a series
of admissions that suggest that the Commission has been far
more involved and insensitive to political concerns than is
appropriate for an independent regulatory agency; and I just
think that is something the subcommittee should be aware of.
Now comes the Commission with its 5-year draft strategic
plan, which essentially asks the Congress to sign off on a
broad new mission for the agency. It's not clear exactly what
that mission is. The Commission talks of becoming a ``market
facilitator.'' It is not clear why in a competitive marketplace
this particular market needs its own facilitator. Many markets
seem to behave just fine without their own industry-specific
regulators. But it is the Commission's position, I guess, that
it does need to have such a function.
And at the same time, the Commission comes forward with no
proposals, at least no substantial proposals, for limiting its
authority or reducing its activities.
I respectfully submit, the Commission could and should take
a different tack. In my opinion, the advent of competition in
the communications marketplace should result not in a larger
and more powerful regulatory agency, but in a scaling back of
both the cost of the agency and its intrusion into decisions
better made in the private sector. In the report we release in
December, we will present some comprehensive recommendations
for how to do that.
In summary, it seems to me there are four suggestions that
I would offer for this subcommittee's consideration, for the
consideration of Congress in general: First of all, the
Commission should be required to make explicit the criteria it
uses to judge the public interest, starting with its
application of the public interest standard to the license
transfers involved in mergers. If the Commission is reviewing
license transfers as such, then it should limit its
deliberations to the direct implications of those transfers.
Conversely, if it is going to engage in a broader antitrust-
like merger review, it ought to do so using its authority under
the Clayton Act.
Second, the Commission should get out of the social policy
arena, and that includes transferring the functions of the E-
Rate program over to the Department of Education, which would
be in a better position to run them.
Third, Congress should undertake a comprehensive
examination of the Commission's structure. Proposals have been
made to reorganize the Commission along less stovepipe,
industry-specific lines to reflect convergence. That's
something the Commission should do, and Congress should assist
in and insist on. Also, I think Congress should consider
additional approaches to streamlining the agency and would
agree with what Mr. Thierer said with respect to off-loading
some of its functions to other kinds of agencies and looking at
alternative structures.
Fourth, and keeping in mind that the strategic plan
presented by Chairman Kennard, at least all of the versions
I've seen to date are still labeled ``draft,'' Congress should
insist on a draft 2. Rather than focusing on creating new
missions and expanded responsibilities, draft 2 ought to point
the way to the smaller and less expensive and less powerful FCC
that one would think would be the natural consequence of
telecommunications competition and deregulation.
Mr. Chairman, thank you very much.
[The prepared statement of Mr. Eisenach follows:]
[GRAPHIC] [TIFF OMITTED] T5014.013
[GRAPHIC] [TIFF OMITTED] T5014.014
[GRAPHIC] [TIFF OMITTED] T5014.015
[GRAPHIC] [TIFF OMITTED] T5014.016
[GRAPHIC] [TIFF OMITTED] T5014.017
Mr. Horn. Well, we thank you. That's very helpful, all
three of you.
We are now going to go to questions for this panel. And we
are going to have 5 minutes per person, alternating between the
majority and the minority.
Let me start in with Inspector General Feaster if I might.
What's your view of the FCC's initiatives to improve its
financial management operations and accounting systems?
Mr. Feaster. I believe since they made the commitment
several years ago to improve the systems, they've gone a long
way, as we pointed out in our fiscal 1999 financial statement
audit. They've been successful in improving conditions to date.
But they do have some areas that need improvement. The
statement was qualified on the basis of getting ahold of the
property and plant and equipment accounts in a more accurate
manner, and implementing procedures to do that.
There are a lot of things that they need to do, but it is a
multiyear solution to the problems we have identified in that
audit. We are currently conducting a fiscal year 2000 financial
statement audit in which we will review their progress toward
these goals.
Mr. Horn. Chairman Kennard's testimony notes that the year
2000 failure caused difficulties with an electronic complaint
processing system. What was the magnitude of that failure?
Mr. Feaster. I--I'm not familiar--my guess----
Mr. Horn. The Y2K bit.
Mr. Feaster. They basically went through the Y2K without
any major failures that I know about. We looked at the critical
systems and they made the process.
The only thing I can think of is perhaps the Oscar system
which----
Mr. Horn. Well, the chairman will be here, of course, but
this is from his formal statement on page 6, the beginning
paragraph, where he says ``Because of difficulties caused by an
electronic complaint processing system that was not Year 2000
compliant and lack of staff resources, the inventory of
informal complaints at one point grew to 154,000 pending
cases.''
I just wondered if you as Inspector General have looked in
on that or you have made a contract with a consulting firm to
try and sort it all out.
Mr. Feaster. That was the Oscar system, sir, which is the
system that would process these complaints. I was recently
briefed by the acting chief of the Consumer Information Bureau,
and I believe the chairman can testify that significant
progress has been made in reducing those complaints to a number
of about 36,000 to 39,000 complaints that are currently
pending. So in the past 6 months, the complaints have been
reduced.
Mr. Horn. Let me move on. If you have any comments on these
questions, all of you, we would welcome your thoughts. How many
companies still have not paid for their spectrum auction bids
and how much is outstanding? Inspector General, what's your
view of the situation?
Mr. Feaster. We did a nontax delinquent debt study that I
think you had a great interest in seeing done on a
governmentwide basis.
Mr. Horn. That's right, because there's billions of dollars
that the taxpayers are losing.
Mr. Feaster. $13 billion or--lots of billions.
Mr. Horn. $13\1/2\ just for Medicare. It gets up to several
hundred billion.
Mr. Feaster. What is the old saying, as soon as it starts
adding up? Something like that.
Mr. Horn. Senator Dirksen's famous words, ``Pretty soon
it's real money.'' Now we're into the trillion age. Poor
Senator Dirksen, he wouldn't----
Mr. Feaster. It boggles my mind the number of zeros. But I
think there are one or two companies that own a significant
amount of the debt of that $13 million, or whatever the actual
number is involved in that, and one of them is in litigation
and I think trying to get some legislation passed. I think the
chairman could address that a lot better than I could. I don't
know where they stand right at the present moment.
Mr. Horn. Well, if you have some thoughts on it when you
get back to the office, we will reserve a letter or something
and put it in the record at this point.
Mr. Feaster. Yes, sir.
Mr. Horn. Have you discovered any case of fraud or abuse of
the spectrum auctions?
Mr. Feaster. We had some tangential issues related to the
conduct of contractors that were providing support to the
spectrum auctions group. We did not--and one of the contractors
ended up going to jail for 18 months and was fined a
significant amount--well, $40,000, a significant amount of
money to me, anyhow. But we found nothing in the spectrum
auctions process that was a problem.
Mr. Horn. Well, if again you change your mind on that,
we'll have a letter at this point in the record.
I've used my 5 minutes. I now turn to Mr. Turner for his 5
minutes.
Mr. Turner. Thank you, Mr. Chairman. Mr. Feaster, you heard
both of our other witnesses offer certain suggestions,
recommendations for streamlining of the agency. What's your
views on the suggestions that they made?
Mr. Feaster. That's a hard one. One of the ways an
Inspector General gets into trouble is to make comments on
stuff he has not studied, and I haven't looked at that issue. I
believe it is more of a discussion between--within and between
members of the public groups like this and the Congress.
I've been at the Commission since 1974, not in this
capacity, and I've seen the Commission grow in both size and
responsibility. New programs have come in. Spectrum auctions is
one of those programs where a substantial amount of effort is
put into collecting and dealing with the actual auctioning of
spectrum. So I think my official position is I have no comment
on that since I haven't done extensive work in that area.
Mr. Turner. Well, from your vantage point as Inspector
General, do you see any areas within the agency that you think
could be pared down or they could operate more cost
effectively?
Mr. Feaster. I guess two comments I'd have on that. One, I
think the move toward a functionally oriented commission is the
right move. In the past in my other positions I've advocated
that type of structure and the Commission has taken steps to do
that in the enforcement area and in the consumer information
area.
I think that helps meet the rising demand. The public keeps
wanting information and services from the Commission. I think
we average a million hits a day on our Web sites. There's a
constant demand for information and services from the
Commission by the public. So I don't see the workload
decreasing. What the Commission has tried to do is use
computers to meet that workload. We have a substantial
investment in the computer area and we are constantly involved
with the Chief Information Officer to review the use of
computers and the security of computers, an area that I know
that the chairman and the committee are interested in.
So I can't come up with any areas that are really, as you
suggested, may be bloated. I think the demands of the
Commission are ever growing.
Mr. Turner. Thank you. One of the comments that you made,
Mr. Eisenach, was the recommendation that you said the
Commission should get out of the social policy arena as
expeditiously as possible. And what you cited in that regard
were Federal education programs should not be run by the FCC
but by the Department of Education and that universal service
programs should be further targeted, not further expanded.
I'd like for you to expand on your thoughts there. I know
those are important programs and have a lot of benefits,
particularly in areas of the country like I represent. Why do
you feel so strongly about transferring that function?
Mr. Eisenach. Well, two really separate issues, both
related in the sense that they are both related to social
policy or social policy-like programs. With respect to the e-
rate, you have a program which is intrinsically and inherently
an educational program. Its purpose and design is to facilitate
the use of computers, the availability of computers in
America's schools.
The focus in that program of course is on the hardware. One
of the things that I think happens by having it at the Federal
Communications Commission, as opposed to some place like the
Department of Education with a broader view, is that the
program has not been easily integrated, for example, with
programs for training teachers, which is an essential part of
bringing technology in a more useful way into the classroom.
I think that an agency like the Department of Education
which has the ability to integrate and balance the use of
technology in the classroom would be in a better position to
manage that well.
The separate issue goes to the funding of that program and
whether it is best funded by imposing what are essentially
taxes on telecommunications services as opposed to a broader
funding source like the general revenues of the Federal
Government. I think we would all agree that there is some role
for the government in that, and I'm not getting into the
question of whether we're spending too much or too little. It
may be too little for all I know. But with respect to the
source of funds, telecommunications taxes, are extremely
regressive and extremely harmful to people's ability to get on
the Internet because they affect Internet access.
On the universal service issue, this is obviously a very
controversial and an extraordinarily complex set of programs.
But the long and short of it I would say is the need to focus
that assistance on people most in need and not to be
subsidizing the rural rich, if you will, the Ted Turners in
Wyoming or Aspen, CO, who are benefiting from those subsidies
as much as your constituents who may need them much more.
Mr. Horn. We now turn to Mr. Walden for 5 minutes for
questioning.
Mr. Walden. Thank you, Mr. Chairman. I don't know that I
will use the full 5 minutes but I do appreciate the opportunity
to be here today and address the panel.
I would at the outset of my questions, just for full public
disclosure and disclaimer, say that I am a licensee of the FCC.
We have owned and operated radio stations in Oregon since 1986
and my family before that dating back to 1967, and actually in
Oregon broadcasting to 1934, I think is when my dad got his ham
license. So we have been in the business a long time. So it is
with some concern that I come here and discuss some of this.
But it is also with hands-on understanding of being on the
receiving end of the FCC, both the good and areas where I think
there might be some room for improvement.
Mr. Feaster, I have a question for you. Your testimony
talks about the civil monetary penalty program. Do you think
that small businesses suffer more from those penalties compared
to large corporations? I don't know if you have that schedule
in front of you, but as I recall, the penalty for literally
having something out of order in the file for the public file
can be a $5,000 penalty. I don't know if all of our committee
files are kept in exact order, but I doubt the penalty would be
$5,000 if they weren't.
Mr. Feaster. The civil monetary penalty study we did we
were looking more into the processes and procedures of
recording the fines and more the financial aspects of it and
really did not do any work in terms of the potential impact on
small business type operations. I can't make that judgment.
Mr. Walden. How does this finding, set of civil
forfeitures, civil monetary penalties for the types of things
that are being dealt with, how do they stack up against other
agencies? Can you speak to that at all? I know you are probably
specific to this one.
Mr. Feaster. I really can't--I haven't done any comparison.
I do know that the base schedule as set by statute--by
congressional statute and from that a subschedule was developed
as it breaks down to various offenses. I haven't had any
complaints by broadcasters, for instance, about the unfairness
of their--the enforcement actions taken against them. But I'm
not sure that they would use my office as a vehicle.
Mr. Walden. I was going to suggest they may not even know
to go to an IG, for example.
Mr. Feaster. People tend to find us when they have a
problem. We get a lot of complaints about telephone type bills
which we don't really handle. But they tend to find us. A lot
of times we are the first contact they have, other than our
information center in Gettysburg, and we refer them to the
proper people to talk to.
Mr. Walden. I'd like to commend the Commission and its
staff for the work they're doing in improving and developing
the Web site. I think that is and can be a very useful tool. I
think there are some areas where there is room for improvement.
I myself have obviously used it and it may just be my Explorer.
I don't know, I sometimes have been frustrated with things that
haven't been updated and I think that is probably a problem for
all of us with our Web sites, but I know some of the
information did not seem to be updated as regularly. Weren't
they in a transition period?
Mr. Feaster. Yes, sir, and they made significant progress
in that area. In fact the CIO is sitting back in the back row
right now about the oversight of that.
Two things, the Web site was rated very highly in a study
recently done. We also have just completed work in checking on
the accessibility of the Web site to disabled individuals and
although we haven't released the report yet, in draft it looked
very good. So I think in those two areas, they are improving in
overall access and specialized access.
Mr. Walden. Let me ask anybody on the panel that may want
to respond, does the FCC have statutory authority to regulate
content on private Web sites, to regulate what is on there and
what is not?
Mr. Thierer. I do not believe they do without some sort of
clear congressional statutory approval to do so. There may be
some general authority they could try to construe under the
mass media responsibilities, but I doubt that would wash with a
court. I do not think it would work, no, because Web sites are
not licensed and that's the difference.
Mr. Feaster. I don't think so. I'm not a lawyer.
Mr. Walden. That's two of us.
Mr. Eisenach. I would just say briefly, one of the things I
touch on in my testimony is the existence of this very vague
and undefined public interest authority at the Commission,
which is ultimately the authority that the Commission relies on
in many and to some extent in all of its activities. That
authority is as broad as three FCC commissioners find the
public interest to be on a given day.
Mr. Walden. I have expended my time. Thank you very much,
gentlemen. Thank you, Mr. Chairman.
Mr. Horn. We now turn to the gentleman from New York, Major
Owens, for 5 minutes and that will be the last round. The other
questions will be submitted to all of you and if you don't
mind, fill them in and we will put them at this point in the
record. And then we will have a chance to have the chairman,
Mr. Kennard, who is here. Major Owens, all yours for 5 minutes.
Mr. Owens. One quick question to the Inspector General.
Recent audits have indicated improvements need to be made in
the FCC's collection system. Would you say we have made some
strides toward making those improvements? Many Federal agencies
like the Department of Agriculture have a history of allowing
corporations and private interests to get away with murder with
respect to paying their debts. Decades go by and they don't pay
large amounts. Corporations and the corporate culture in
general might have begun to see government in this way in
general and not want to pay their debts or fees, etc. What is
the situation with collection?
Mr. Feaster. A couple of points. One, the collection system
itself, there will be a new collection system I am told by
January 2001. We did an audit of the old system and found
problems. They've made minor changes to that to address the
problems, but they will have a new collection system the
beginning of the calendar year.
Also, the chief financial officer is conducting an
aggressive program of following up on past years' nonpayments
of regulatory fees to make sure that nobody has the ability to
skip paying a required fee to the government.
Mr. Owens. This rides herd on the auction payments as well?
Mr. Feaster. Both the auction payments and on regulatory
fees also. And we have continuing discussions almost on a
weekly basis about regulatory fee collection and auction
payment fees, so this is part of the--we will be reviewing this
portion of the financial statement in our 2000 audit of the
financial statement. So we will be looking at those areas
specifically.
Mr. Owens. Do you have any concrete recommendations about
what other steps might be taken?
Mr. Feaster. I think we've had this discussion in the past
with them and they have basically implemented a very aggressive
program. They have two approaches. One, the new collection
system will more accurately record fees, and two, there is a
system called CORES, which will be making sure we have very
tight links between our licensees and the financial
transactions that they do make to make sure that everybody is
paying their fair amount and required amount.
Mr. Owens. Thank you. Mr. Eisenach, you mentioned the e-
rate, and I would like for you to expand a little on that. I am
reminded of the picture on the front page of the New York Times
today of the folks in Yugoslavia rebelling, people rising up
and seizing their own destiny and their own government. If we
tamper with the e-rate at this point, we will have the teachers
and the students and a whole lot of people out there rising up
against any efforts, I assure you, to lessen the impact of e-
rate or make it weaker. And it seems to me a proposal to move
the administration of it to the Department of Education would
certainly weaken the effort because what you have--we have gone
through a stormy set of skirmishes with the big corporations in
the telecommunications industry, some have even gone to court
and we have had Members of Congress who have threatened the
agency and all kinds of things have happened as we pursue the
implementation of the e-rate, and we finally came out and it
has been implemented now and you can't take it away from the
people.
It seems to me that it is mainly a communications matter
for one, and not education. But for two, there is a need for
some power in terms of making the giants who resisted having e-
rate implemented in the first place, making them to continue to
stay in line and saving the e-rate from any counterattacks that
might develop out there.
You know, I admire the Department of Education. I think it
is one of the most important functions of government. But it is
one of the weakest agencies in terms of its clout right now.
Could you elaborate on your proposal to move the e-rate to
the Department of Education?
Mr. Eisenach. I've recently had the opportunity to listen
to FTC Commissioner Orson Swindle speak on unrelated matters.
He said that all government programs have three things in
common, a beginning, a middle, and no end.
I think what you just said, Mr. Owens, suggests why. I
think it is very difficult to reform or modify programs once
they are put in place, and I think even those with the best of
intentions are subject to that problem.
Mr. Owens. Sometimes that is good. We don't want the e-rate
and Social Security to come to an end.
Mr. Eisenach. I understand that. I think from a larger
perspective--and I would not want the perfect to be the enemy
of the good--there is a general consensus that there is a role
for the Federal Government in helping to see to the
implementation of Internet availability in our Nation's
schools. But at the same time, I think that there are good
government reasons for moving that program where it could be
integrated with the programs of the Department of Education.
Mr. Horn. Time is up on this, and we are sorry about that.
We'll probably ask the chairman the same thing. But I want to
thank all three of you for coming here and giving us a
perspective which raised some very interesting questions, and
we will be in touch with you in terms of some of these
questions to put them in the book and in the record. So thank
you very much for coming.
We'll now ask the chairman of the Federal Communications
Commission to come forward.
We welcome you. This is the first time he's testified
before this subcommittee. Chairman Kennard, I understand you
had some scheduling conflicts and I appreciate your effort to
join us today, and I think you know, since this is an
investigating committee, we will swear you in and your aides
too. Anybody that will talk and get on the record. It doesn't
matter how deep. I have seen the Pentagon come in here with 15
people.
[Witnesses sworn.]
Mr. Horn. Mr. Chairman, did you take the oath?
Mr. Kennard. Yes, I said ``I do.''
Mr. Horn. The clerk will note that the chairman and his
aides have accepted the oath. And please proceed any way you
would like. We prefer not to hear what we have already read,
but we would like a summary. If you want to emphasize a
particular paragraph, but this way there will be a chance for
the members of the panel on both sides to ask questions and we
won't be here forever. Thank you.
STATEMENT OF WILLIAM E. KENNARD, CHAIRMAN, FEDERAL
COMMUNICATIONS COMMISSION; RONALD S. STONE, CHIEF INFORMATION
OFFICER, INFORMATION TECHNOLOGY CENTER; AND MARK REGER, CHIEF
FINANCIAL OFFICER
Mr. Kennard. Thank you very much, Mr. Chairman, thank you
for the opportunity to appear before this subcommittee today.
With me I have two very important members of the senior
management at the FCC. To my left is Mr. Ron Stone, who is our
Chief Information Officer; to my right is Mark Reger, who is
our Chief Financial Officer. Both of these gentlemen are
responsible for areas that are within the jurisdiction of this
committee, and I know that they will be able to provide a
number of the details that you're seeking.
I'm pleased to present testimony concerning the management
of information technology and financial operation activities of
the Federal Communications Commission. The FCC is an
independent regulatory agency with regulatory responsibilities
for interstate communications activities of the wireless,
wireline, satellite and radio and television broadcast
industries. We have a total agency staff of 1,975 full time
equivalents and a fiscal year budget of $210 million.
Principally, our mission is guided by the Communications
Act of 1934. Its mission is to promote competition, protect
consumers and provide access for every American to existing and
advanced communications services.
As you know, Mr. Chairman, the last few years have been a
time of momentous change in the telecommunications industries
here and around the world. And so they have been a time of
change in the administration and management of the FCC. We have
continued to work hard to keep up with the pace of change by
expanding and enhancing our information technology program,
both internally and in the electronic filing systems available
to the public. We've also made many improvements to the
agency's financial management systems to oversee the wide range
of congressionally authorized revenue generating programs now
within the agency's purview.
In the area of financial management, the Commission
completed its first ever audited financial statement for fiscal
year 1999. We are very proud of that financial audit. We did it
on a voluntary basis. It's not required of our agency to do so,
but we felt that it was important, given the many revenue
generating activities that we are now in, including auctions
and our extensive fee program, that we have a high degree of
fiscal discipline at the agency.
I have a pretty extensive oral statement here, but in the
interest of time and as a concession to the shortness of life,
I will not read my entire statement. But I will sum up what I
think are the principal challenges that are facing the agency
today.
These markets are transitioning from an era of monopoly
regulation to competition. This is not just something that's
happening in the United States, it is in fact a worldwide
movement. We have been charged by the Congress with introducing
competition in these markets. The competition is now the
organizing principle of our law and policy in this area and the
entire world is watching what we are doing at the FCC. It makes
it a profoundly important time for us, because the world is now
waking up to the power of the Internet and e-commerce.
As Congressman Owens well knows the importance of
technology in uplifting our people, educating our children,
improving health care, and we know that the best way to get
these benefits to the public is through an open competitive
telecommunications marketplace. We have been charged at the
agency with making that happen. And we have been quite
successful, I believe, in intervening with a strong regulatory
hand where necessary to pry open historic monopoly markets and
force incumbents to deal with new entrants, new competitors,
but at the same time easing off the hand of regulation in areas
where we see the markets becoming more competitive.
So you can see we have attempted to create a careful
balance: intervening where there are blocked arteries or
bottlenecks, but easing off where we see competition
developing, like in the long distance marketplace or in the
wireless marketplace.
At the same time, we have been very reluctant to regulate
in areas that are new and innovative and dynamic, like the
Internet. We have been very forceful in articulating that the
Internet has been an area of fertile innovation and it has
grown precisely because there has not been a lot of government
micromanagement and regulation.
On our management side, the things that we are most proud
of is the successful implementation of our auction program, our
Web site, which has recently been rated very highly. The
Taubman Public Policy Center rated over 1,800 government Web
sites around the country. We were No. 4. And we get about 1
million hits a day. As I travel around the country, I am
finding that because we have converted a lot of our processes
to electronic filing and because we have a very high quality
Web site, people are able to interact with the agency around
the country and, indeed, around the world without having to
have a presence in Washington. That is very, very important.
Congressman Walden, you talked about your family background
in broadcasting. As I am sure you know, now broadcasters around
the country can file applications with us electronically,
communicate via e-mail with our staff, and it has been a very,
very satisfying thing to see.
With that, Mr. Chairman, I will conclude my prepared
opening remarks, and I would be happy to answer any questions
that the subcommittee may have. Thank you.
[The prepared statement of Mr. Kennard follows:]
[GRAPHIC] [TIFF OMITTED] T5014.018
[GRAPHIC] [TIFF OMITTED] T5014.019
[GRAPHIC] [TIFF OMITTED] T5014.020
[GRAPHIC] [TIFF OMITTED] T5014.021
[GRAPHIC] [TIFF OMITTED] T5014.022
[GRAPHIC] [TIFF OMITTED] T5014.023
[GRAPHIC] [TIFF OMITTED] T5014.024
[GRAPHIC] [TIFF OMITTED] T5014.025
[GRAPHIC] [TIFF OMITTED] T5014.026
[GRAPHIC] [TIFF OMITTED] T5014.027
[GRAPHIC] [TIFF OMITTED] T5014.028
[GRAPHIC] [TIFF OMITTED] T5014.029
[GRAPHIC] [TIFF OMITTED] T5014.030
Mr. Walden [presiding]. Thank you, Chairman Kennard. I am
going to fill in for Chairman Horn while he goes to vote and
then we will trade places. I have a couple of questions I
wanted to ask and then I will turn to my colleagues, who may
have questions as well.
One, I just want to draw your attention to something I hope
that you will work on, and I guess I am drawing on my
background, which I guess is what makes a legislative body a
good thing to have people of different background, because some
of us are actually on the ground, on the receiving end, and
that is not necessarily the cost, the regulatory fees, but just
the process you have to go through to fill out the forms and
apply.
I remember calling my Senator when I did not think I was
going to be in this process certainly a couple of years ago,
after spending many hours going through the notice and all of
the forms, trying to figure out which code I needed to put in
which box at which point and then being referred to something I
couldn't find, and this was probably predating some of your
Internet improvements on your Web site.
The thing that has always struck me is you have 9 days to
get it in. You cannot pay your bill before September 11th, I
think, this year and it had to be there before September 20th.
I cannot imagine in my business telling my clients, you have a
9-day window and I am going to fine you 25 percent if you are
late in your payment, and expect to have anybody do business
with me. Now, I do not have a choice. I need your license, so I
am your humble servant.
I guess I always wanted to ask that question. I always
wanted to be in that position where I could, and so I am here.
I am curious, why that closed window? Why not let people file
it ahead of time? Why that 9-day window to have every
broadcaster in America to pay their bill.
Mr. Kennard. The mandatory fee program, as you know, is
mandated by the Congress, and every year we have to go through
a process of establishing what the regulatory fees are going to
be for the year. What we try to do is give people as much
notice as we can early in the year of what we think the fee
structure will be so that they can prepare to make these
payments, and then once the fee structure is established,
usually in the fall of the year, we go through a process of
having to collect the money in fairly short order.
It is an issue that I am glad you brought to our attention
and it is something that I will focus on and see if there is a
way that we can make it easier on our licensees.
Mr. Walden. Because this does come out August 2nd this
year. But I have just never seen an agency that would not
accept your money earlier. You know what I mean? So anyway, I
throw that out there. I know you have made a lot of
improvements and I commend you on the Web site. The ability to
download a lot of forms and do a lot of this work is a
tremendous asset. I mean I shudder sometimes at the thought of
24-hour government and what it can really mean, but I also
appreciate the fact that in the middle of the night I can pull
up all kinds of information, technical and otherwise, and be
able to continue to move on in terms of business.
Let me turn to some other policy issues. Does your agency
have plans to introduce new regulations or guidance affecting
religious broadcasters between now and the end of the year?
Because that has obviously been one I have gotten a lot of mail
on, a lot of interest in.
Mr. Kennard. First of all, in response to your earlier
issue, my Chief Financial Officer has just informed me that we
would be happy to accept your money earlier if you would like
to send it in before the September deadline.
Mr. Walden. Well, and I appreciate that, but your own rules
say I can't.
Mr. Reger. No, actually, it sets up a fee window by when
you can pay, but you may pay that any day after the public
notice is released. You wouldn't know the amount until the
public notice is released each year in the congressional
review.
Mr. Walden. Really. Well, you are going to cost Federal
Express a lot of money then, because----
Mr. Reger. May I also tell you, sir, that there were 2 new
Web sites available to you this year that allow you to pay
electronically and both of those were up to try to help people
not send their payment----
Mr. Walden. Right. Because this says the fee payments must
be received by the Commission during the period beginning
September 11 and ending September 20.
Mr. Reger. Yes. But this year for the first time you could
send it in any day after the public notice and we were set up
to accept and take your payment.
Mr. Walden. OK. It is interesting, because that is the one
from August 2. Good to know.
Back to religious broadcasting policy. Any plans to do
anything new between now and the end of the year?
Mr. Kennard. Not at this time. We addressed this issue
earlier in the year, the very controversial clarification of
our policies in this area, so I don't anticipate that we will
be addressing it again.
Mr. Walden. OK. I think we will need to recess, because I
need to go vote, being the only one left not to. So I will put
the committee in recess and we will return. Thank you.
[Recess.]
Mr. Horn [presiding]. Mr. Chairman, where are we, with us
having to get over there to vote, where are you on your
statement?
Mr. Kennard. I have given my opening statement, Mr.
Chairman, and I received some initial questioning from Mr.
Walden.
Mr. Horn. I see. OK. Sorry about that. We have had a series
of votes, but that has to be done around here.
Mr. Kennard. Quite all right.
Mr. Horn. And of course, if you have this jurisdiction, I
suspect, over little beepers, if you could sort of neutralize
the ones on Capitol Hill, we could hold more hearings.
Mr. Kennard. I think we could help you with that.
Mr. Horn. That is democracy.
Was Mr. Walden doing the questioning?
Mr. Kennard. Yes, sir.
Mr. Horn. OK. Well, I might intervene a little bit with
that. We have a few questions in general. There was an article
in the folder you had. How has the Commission prepared itself
to prevent another NextWave debacle in its spectrum auction
program? That is one of our concerns, so we would appreciate
your comments.
Mr. Kennard. Certainly. When Congress authorized the FCC to
conduct spectrum auctions in 1993, the statute specifically
directed the FCC to experiment with different auction
methodologies. One of those methodologies was allowing small
businesses to get installment payments in order to ease the
financial burden that they would encounter in these auctions.
It was a very well-intentioned effort to ensure that when we
went to the auction regime, we would not inadvertently create
an environment where small businesses could not participate.
So, in one of our first major auctions for what we call the
C-block PCS auction, we extended credit in effect to small
businesses. Some of them overbid, got overextended, and that is
the problem we ran into.
Since that time, we have not extended installment payments.
We have come up with other methodologies to create incentives
for small businesses like bidding credits. So I don't
anticipate that particular problem will reoccur.
Mr. Horn. You heard, I think, some testimony on the e-rate
business in terms of, should it be in the Department of
Education, should it stay in the Federal Communications
Commission? What are your feelings on that?
Mr. Kennard. Well, I strongly disagree with the notion that
the e-rate program should be moved to the Department of
Education. Here is why.
The e-rate program is a part of our universal service
policies, which the FCC has administered for decades. Those
policies are largely responsible for the fact that in our
country, we have the highest telephone penetration of any
country in the world. On average, 94 percent of Americans have
access to a phone. That is because the FCC, over time, has
administered policies, known as universal service, to ensure
that people in rural areas get phone service, as well as low-
income people and people in inner city areas. The e-rate is an
extension of that policy. It was an extension that was mandated
by the Telecommunications Act of 1996. So it is really part of
the core of the Commission's responsibilities to ensure that
the phone network reaches all people.
Now, of course, the phone network is not just delivering
voice telephony, it is delivering voice on the Internet. So our
responsibility appropriately is to ensure that those networks
reach all people.
Mr. Horn. You know, I believe that this subcommittee has a
great interest in making sure the loans that have been made to
various agencies come true and are fulfilled and put the money
back into the Treasury to help the next generation. So I am
curious how much money is owed to the FCC from its spectrum
auctions and what is being done to collect those amounts?
Mr. Kennard. Well, if memory serves, we have collected
about $15 billion in the auction program and about $5 billion
is outstanding. Most of it owed by one company: NextWave. We
have worked very, very hard to advocate that the U.S. Congress
change the statute so that it is clear that if someone defaults
in the payment of moneys owed us in a spectrum auction, that
the FCC can immediately reauction the license. We had planned
to reauction the NextWave spectrum, if you will, December 12th,
and we are--unfortunately, it has taken some time, because the
statute was not entirely clear and there has been litigation in
the bankruptcy courts and the appellate courts. But that
clarification would be very, very helpful in ensuring that the
American public get the value of the spectrum.
Mr. Horn. Have you sent a recommendation from your office
through the Office of Management and Budget which would clear
it on behalf of the President to the Congress so that the
relevant committees can act on that?
Mr. Kennard. Yes, in fact, we have. Beginning I believe in
1997, we have sent up language that would fix this problem
every year since then, and we have worked with OMB and the
relevant committees, the Commerce Committee and the Budget
Committee in the Senate.
Mr. Horn. And it has not gotten anywhere?
Mr. Kennard. No. It is always very controversial. In fact,
it is controversial as we speak. There are efforts to try to
address this issue through our appropriations bill at this
time.
Mr. Horn. Well, I see I have 30 seconds on the 5, so I will
maintain that later. I now yield to my colleague, the gentleman
from Texas, Mr. Turner, the ranking member on the subcommittee.
Mr. Turner. Chairman, welcome to our committee.
Mr. Kennard. Thank you.
Mr. Turner. We appreciate you being here.
I come from an area in rural east Texas that by and large
has found itself on the wrong side of the digital divide, and I
was curious as to what the FCC is doing to address the gap
between those who have access to the information highway and
those of us who do not. I do not want to be in a position to
have to look back and think that the information highway passed
us by and that all we have is a dirt onramp that we cannot use
too well. So what hope do we have in rural areas of the country
to be sure that we can have the same access that everyone else
has?
Mr. Kennard. There is a lot that is being done. The FCC is
very, very focused on this issue. We have a very, very
aggressive program. I will highlight some of the things that we
have been doing.
One is we are reevaluating our universal service programs
on an ongoing basis to find ways to ensure that the phone
network reaches all people. Every year we send a report to
Congress on advanced services to make sure that as the network
improves and starts rolling out such things as broadband access
that people in rural areas are not on the wrong end of the
digital divide. We are also focusing on populations and areas
that are particularly at risk. Just last week, we had the first
ever conference here. We pulled together over 100 leaders of
tribal governments to assist them in finding ways to ensure
that people living on tribal lands and Indian reservations are
not left behind.
This is the most at-risk population. I mentioned before
that 94 percent of Americans have a phone, but if you look in
some tribal lands, the percentage on average drops to 50
percent. And on some reservations, like the Navajos, for
example, it is below 20 percent. We just have to rectify that
situation.
We are also aggressively promoting wireless technology,
satellite and terrestrial wireless as ways to extend access
into rural and remote areas, because those technologies are
often more efficient in delivering phone service in remote
areas.
So it is a huge agenda for us at the FCC and there are a
number of policy things that we have adopted or have ongoing.
Mr. Turner. Are some of the European countries ahead of us
in developing the wireless Internet?
Mr. Kennard. This is a raging debate. We have taken a
different approach in the United States. The Europeans have
sort of, a philosophical difference. They imposed a uniform
standard early on. They have a more coordinated government
industry policy. We went a different way.
I tend to believe that our approach ultimately is the best
approach, because we put our faith in the marketplace and
ultimately we have more innovation in our marketplace. I think
that the benefits of that will be seen as the next generation
of wireless services come on board, what we call third
generation wireless.
Mr. Turner. One other issue that I wanted to briefly ask
you about. This issue probably generated more mail in my office
over the last year or so than any other one subject, and that
is being in a rural area where it is hard to receive a
television signal by an antenna. We have a lot of very unhappy
constituents who have been upset with the fact that they are
not able to receive a signal and that, of course, the law we
passed, the Satellite Home Viewers Improvement Act, mandated
the FCC to develop a new signal strength model for determining
whether satellite owners are eligible to receive distant
broadcast networks from their satellite provider.
But I want to know how the FCC is making progress toward
developing that new model, because I still hear some complaints
from satellite owners that they are not being provided access
through some of the signals they think they should be and, in
many cases, have been turned down when they make application to
receive those signals.
Mr. Kennard. Well, as you know, Congressman, the statute,
the Satellite Home Viewer Improvement Act, established some
pretty tight statutory deadlines for the FCC to implement that
law. We are in the process of doing that. The precise issue
that you reference, the redefinition of the so-called grade B
contour, that proceeding is under way, and I am confident we
will meet our statutory deadline on it. We have sought comment
on it. I believe the deadline is toward the end of this year,
and we will meet it.
Mr. Turner. Do you think that is going to resolve the issue
once you do that?
Mr. Kennard. It is hard for me to say at this point whether
it will have 100 percent resolution. I think the more difficult
problem is, as oftentimes in our area, we deal with some very
litigious parties, and there are lots of rumblings that the
Satellite Home Viewer Act is going to be challenged in court
and that could hold us up. But I think fundamentally Congress
was very wise in passing that act, because this whole area of
the law was antiquated and really needed to be updated, and it
is my hope that we will have a solution.
Mr. Turner. Thank you.
Thank you, Mr. Chairman.
Mr. Horn. Thank you. The gentleman from New York, Mr.
Owens, 5 minutes for questioning.
Mr. Owens. Mr. Secretary, I first want to salute you,
congratulate you, and thank you and your predecessor, Reed
Hundt, and the Clinton-Gore administration for operating with
policies and initiatives that let the American people know that
the airwaves belong to all of us. For too long, it appeared
that the airwaves were the property of an elite group that got
there first and they ran things pretty much as they saw fit.
In the process of making certain that the airwaves serve
all the people, you have taken some steps that have been quite
controversial and have met quite a bit of opposition. Two of
those steps are the establishment of the e-rate and the
implementation of e-rate, and the second is the latest edition
of low power radio stations. Could you bring us up to date as
to where the opposition to the e-rate is now in terms of court
cases that are still being pursued out there and what kind of
impediments are you experiencing, and do the same in the case
of the low power radio.
Mr. Kennard. Certainly. First of all, Congressman, I want
to thank you for what you just said about our efforts at the
FCC. But I think it also should be noted for the record that we
were not alone in those efforts, and you, sir, in particular,
were instrumental in making the e-rate happen. You were one of
the early supporters of the program. I recall you came to the
FCC and were the first Member of Congress to testify in support
of the e-rate program. So I think that is an accomplishment
that we should both share.
The e-rate program itself, as you pointed out earlier, has
really been recognized around the country as being very, very
important to the next generation of Americans. It has literally
touched the lives of about 40 million American schoolchildren,
will wire 1 million classrooms to the Internet by the end of
this year, and people are recognizing that. We were successful
in beating back the major constitutional and statutorial
challenges to the e-rate. Our main challenge now is to continue
to operate the program in a well-managed way and we are working
very hard on that.
Mr. Owens. There are no lawsuits still in process?
Mr. Kennard. No. No major challenges. The most major
challenge was an attack on the e-rate in the 5th Circuit and we
prevailed.
Low power FM is a newer program. It was an initiative that
I championed to try to allow community-based organizations an
opportunity to use the public's airwaves to speak to their
communities, churches, schools, nonprofit groups, in an effort
to give a little piece of the airwaves back to the people. We
adopted rules implementing low power FM in January and opened
opportunities for these groups to file applications. We have
received I believe about 1,200 applications.
There is an effort to kill the program legislatively.
Congress passed legislation in the House earlier in the year
that would, in effect, kill low power FM. Similar legislation
has been offered in the Senate. There is also an effort to try
to kill the program through the appropriations process.
I think it would be very, very unfortunate, because there
are literally thousands and thousands of churches and schools
and nonprofit community-based organizations that need an outlet
to use the public's airwaves to speak to their communities and
low power FM will do that. It will do it in a time when there
is increasing consolidation in the airwaves and fewer
opportunities for mom and pop radio stations and small church
stations. So it is a very, very important program for the
Nation.
Mr. Owens. I think before you cited Indian reservations as
one example of a special situation that would be helped by low
power stations. Is it possible that we can get some special
consideration for certain foreign languages--groups that do not
speak English, but have large populations say in places like
Brooklyn, NY, that has a large Haitian American population? The
older people speak Creole and I even have a Pakistani
population. For those kinds of groups, is it possible to get
some kind of special consideration in the allocation of low
power stations?
Mr. Kennard. Well, the program is designed for just those
types of populations. The unfortunate thing is that in some of
our larger metropolitan areas, the airwaves are already so
congested that there are not that many opportunities to squeeze
in new low power licenses. But around the country I have talked
to many, many foreign language groups, I have talked to Creole-
speaking Haitians in the south Florida area and Spanish
speaking populations in the Southwest, and some of our tribal
leaders who want to get low power FM stations to broadcast in
foreign languages. So it is a very, very important population
that this service could serve.
Mr. Horn. Thank you.
We now yield 5 minutes to the gentleman from Oregon, Mr.
Walden.
Mr. Walden. Thank you, Mr. Chairman. I want to followup on
both LPFM and LPTV. Can you tell me what your views are on LPTV
and what the Commission's plans are now and for the rest of
this year and early next year, if you are going to take any
regulatory initiatives in this area or if you have undertaken
any already or considered any?
Mr. Kennard. Certainly. It is very interesting that you
raise low power television, because I have studied the history
of the creation of that service in the early 1980's, and all of
the same arguments that are being used to try to kill low power
FM were used against low power TV, that we didn't need it, that
it would--that the stations couldn't survive financially if
they got these licenses; that it would create interference
problems for the incumbents. Fortunately, the FCC prevailed and
created a low power television service for the country, and
that service today is still alive and thriving. It is a
wonderful little microcosm of diverse programming on the
airwaves. It covers, as you know, local high school football
and basketball games, local news, foreign language programs.
Congress recognized in the last Congress the value of low
power television and it specifically granted some of those
stations what we call class A status, which basically gives
them a stay of execution as we convert to digital television.
So that has been a very important service. It is sort of ironic
that at the same time Congress was preserving and protecting
low power TV, there were efforts to kill low power FM, which is
an effort to basically do the same thing for the country, but
on the radio side.
Mr. Walden. My question was, does the Commission have any
plans to do anything additional with LPTV?
Mr. Kennard. No, not other than implementing the
legislation to give LPTV stations class A status. That is the
major proceeding. There may be other smaller waivers or
proceedings.
Mr. Walden. No new initiatives on LPTV?
Mr. Horn. No major initiatives, no.
Mr. Walden. I just have a question on LPFM, because I know
the struggle the Commission has gone through since 1995 when
the rules were put in place, or thrown out by the courts in
terms of how you decided among competing applications for
broadcast licenses, and that led to the whole process of
Congress saying, you know, you have to do it by auction. So
really, it was a financial entry fee that would make the
decision.
I am just curious on a couple of things on LPFM, how you
are going to select among competing applications, what criteria
you will use and how that will meet a constitutional test when
the criteria that the Commission used to decide among competing
commercial licenses couldn't meet that test. Second, will LPFM,
and I have not read your rules on this, but will they have the
same requirements for public file candidate access, community
issues, all of those that other broadcast licensees have in the
community, and do you have the staff to monitor that?
Mr. Kennard. I believe we do. To answer your question, this
is a noncommercial service, so it is a very different licensing
procedure than we use for the commercial side. The commercial
side, as you know, Congress changed this statute in 1997. So we
have to auction those licenses.
Mr. Walden. Right.
Mr. Kennard. We don't like to auction noncommercial
stations. So we have established criteria to make sure that we
have a way of deciding from between competing applicants.
Essentially, we look to ensure that those are local community-
based organizations, that they will operate on a noncommercial
basis, and I am confident, given our experience with the
decades of history with our noncommercial licensing procedures,
that is a lawful and constitutional way of selecting.
Mr. Walden. So you will have the ability to do that?
Mr. Kennard. Yes.
Mr. Walden. OK. Will they have to meet the same
requirements? I mean it is the public's airwaves that we are
dealing with here. Will they have the same requirements for
candidate access, people who want to access the public, like
other broadcasters do, even public broadcasters?
Mr. Kennard. The requirements are modified in recognition
of the fact that these are noncommercial stations, so their
mission is to provide a noncommercial service. So we don't have
the same tensions as you do on the commercial side where we are
always struggling to make sure that the profit mode does not
interfere with the licensee's ability and performance in
serving the public interest.
So to answer your question, the public interest
requirements are different because it is a noncommercial
service.
Mr. Walden. And are those specific requirements spelled out
in your regulations?
Mr. Kennard. Yes, they are. If you want additional detail,
I would have to provide the rules for you.
Mr. Walden. I understand. It is just an issue that I run
into as I talk to fellow broadcasters; it is just a lot of
change coming.
Mr. Horn. You have 30 seconds coming from me that I did not
use last time, so go ahead.
Mr. Walden. Well, I think that really covered--no new rules
planned on LPTV between now and the end of the year, and I want
to make sure I understood on the religious broadcasting issue
that was just an issue earlier this year, and you are not
planning on doing anything between now and the end of the year.
Mr. Kennard. No, not on the programming issue, no.
Mr. Walden. OK. I think that covers it, Mr. Chairman. Thank
you.
Mr. Horn. I will now yield myself 5 minutes.
Mr. Chairman, in your testimony, you noted you had reduced
the backlog of complaints from 154,000 to 39,000. What
procedures does the FCC have in general for handling
complaints? How does it work?
Mr. Kennard. It varies somewhat, depending on the nature of
the complaint. The backlog that you mentioned, this 154,000
backlog is basically what we call informal consumer complaints.
This is somebody that has a problem with the phone company, a
consumer, and they write the FCC a letter, and this backlog
piled up over many, many years. This is the first time that we
have basically reduced that backlog. We have really in effect
eliminated it since 1987. Even though there is still a pending
backlog of 39,000, of that number, 30,000 have been referred to
the carriers. So we are waiting for their response.
So this is a really significant accomplishment for the
agency in eliminating that backlog. We have backlog reduction
plans throughout the agency. It is hard for me to answer your
question, because the procedures sort of vary, depending on the
type of complaint that is filed.
Mr. Horn. What is the role of the commissioners in deciding
some of these complaints? Is this strictly a staff effort, or
are there certain things that are really tremendously important
that are left to the commissioners?
Mr. Kennard. Most of these complaints are handled on
delegated authority, unless a complaint raises a new and novel
question of law, in which case the Commission would have to
deal with it. But I can't even remember in my tenure as
chairman and previously as general counsel where an informal
consumer complaint was kicked up to the Commission to deal
with.
Mr. Horn. And what do they do then? Do they follow various
policies that the general counsel's office has, or is it
Commission policies?
Mr. Kennard. It is Commission policy.
Mr. Horn. OK. What is your view on the recent initiatives
to outlaw the use of cellular phones in automobiles? That is
popping up all over America.
Mr. Kennard. Well, I really don't have a view that I can
express on these various State law efforts. I do know that at
the FCC we do have standards to protect the public health.
There are standards that are incorporated in our rules. We do
testing to make sure that manufacturers comply. It is an area
we have devoted a lot of time to recently, and we have put some
new testing equipment in place. But I am really not prepared at
this time to give you a view on the various State law efforts.
Mr. Horn. Do you have a cellular phone in your car?
Mr. Kennard. Yes. I have two in my car, as a matter of
fact.
Mr. Horn. You have two in your car. Well, there was an old
joke around here about how Senator Dirksen finally got a
cellular phone of the age and he said, let's see what Senator
Johnson is doing, and of course Johnson was a very powerful
majority leader, and so he got the Johnson car and the driver
said, oh, I am sorry, he is on the other line. So when you get
all of these lines in the car, I just wonder if we could get it
so the people could again get their hands on the steering wheel
and not doing this. I saw one joker the other day which was
putting the hand over here and going. I don't know, maybe he
has a tin ear or something. But it just seems to me you ought
to get the speaker phone or something in the car and not have
to hold it.
Mr. Kennard. It is always a good idea.
Mr. Horn. Just so you don't have to keep your hand all over
it, or get, as we have in computers, just press a button and
the whole thing is done. But I think they are real, without
question, a real nuisance. Now, if you are in bumper to bumper
traffic on the San Diego freeway, which I will be on in a few
hours, that also is a problem. You just see people looking
around every which way, not that that will stop them, but they
seem to be a real nuisance. But they are necessary when you
need them for getting a tow truck.
The Federal Communications Commission has seen a lot of
disparities in minority and women ownership. Have we really
looked at that to the degree to which you get minority and
women ownership in the FCC licensing process? And if so, what
are you doing to get women and minorities with licenses?
Mr. Kennard. It is a very good question and something that
I have devoted a lot of time and resources of the agency in
addressing during my tenure. The main challenges we face is
that this is an era of consolidation, and it is harder for new
competitors of whatever color or gender to get a foothold in
many of these markets. They are consolidating.
We have worked very hard, both in our licensing process
historically and also in some of the things that we are
preparing to do, to try to remedy this issue.
A number of the things that we have done is basically help
small and minority companies to get information about how to
get into these businesses. We have an Office of Communications
Business Opportunities that reaches out to small businesses to
help provide them information. I am always working with
industry leaders----
Mr. Horn. Excuse me. On that point, is there any
relationship to the Small Business Administration? Because that
would provide some money.
Mr. Kennard. Well, we are not a grantmaking organization.
We do coordinate with the SBA and they participate in our
conferences. In fact, at the end of this month, we are having a
presentation by the SBA to all of our senior managers on how to
sensitize the agency to becoming more attuned to small business
issues, which has been a problem in the past.
Later this month, or in November, we plan to roll out a
major set of studies on market entry barriers for minority and
women-owned businesses in the communications arena, and I think
that is going to be a very, very significant look across the
board at some of the unique barriers that minority companies
face when they are trying to get into these businesses.
Mr. Horn. I now yield 5 minutes to the gentleman from New
York, Mr. Owens.
Mr. Owens. I have no further questions.
Mr. Horn. OK. I thank the gentleman.
Let me go back to a few rather technical ones.
You heard part of the testimony of the previous panel. What
was your reaction to the call for an FCC reorganization?
Mr. Kennard. Well, I think it is a good call. In fact, we
are in the process of reorganizing the FCC as we speak. A year
ago, I submitted a strategic plan to the Congress. It was a 5-
year strategic plan that basically calls for a very significant
overhaul of the FCC to reorganize the agency along functional
lines, come up with new and innovative ways to eliminate
backlogs, convert to a paperless agency. We have proceeded to
implement that. I have created two new bureaus, a consumer
information bureau and an enforcement bureau, which are the
first steps in implementing that plan. Today, in fact, we are
having a senior management retreat where we are taking stock of
where we are in our progress toward implementing that plan.
So as I said in my opening statement, the agency has got to
change. The markets that we deal with are changing dramatically
with convergence and other issues, and we are trying to keep
up.
Mr. Horn. In books on public administration, they talk
about whether it should be a single agency with an
administrator or a commission with a variety of viewpoints. How
do you feel about that, being chairman of the situation? Would
you like to just be the single administrator and get rid of all
your colleagues?
Mr. Kennard. Some days I do. But actually, if you look
around the world, some of the countries that have used a single
administrator find that sometimes that approach does not work
that well. In the United Kingdom, for example, our counterpart
agency there, OFTEL, has had a single administrator for years
and they are moving toward a more multi-member commission.
The fact is that multi-member agencies often are more
cumbersome almost by definition because you have to coordinate
the views of more people, but I have found as chairman that the
interchange and dialog between the other commissioners really
is helpful, and I think overall we come up with better policies
by working with one another to try to come up with a consensus
view.
Mr. Horn. Well said. Your colleagues will be smiling
tomorrow.
Mr. Kennard. Very politic answer, don't you think?
Mr. Horn. That is right.
The FCC's decision to allocate spectrum suitable for high
definition television was made with the expectation that
television stations would use the spectrum in a timely fashion
that would serve the American people.
Now, the transition to high definition television has been
extraordinarily slow. What is the consequence of this action to
the American people?
Mr. Kennard. It is one of the major challenges we face,
which is how do we ensure that the American public gets high
quality digital television service. It is a very complicated
issue involving a lot of different issues. But fundamentally, I
believe the problem is that the broadcast industry has not
really coalesced around a business plan for digital television,
so the market is not driving this conversion. If the business
model was clear, I don't think that we would have a
transitional problem.
Nevertheless, we are doing whatever we can on the public
policy side to expedite the transition by coming up with
interoperability standards; for example, goading the industry
along, trying to facilitate the development of these standards.
But it may be necessary for Congress to address this issue
again in the future, because this transition is important for
the American public and I, for one, am very impatient that it
has not happened.
Mr. Horn. I am going to yield to Mr. Walden, who has to
leave.
The gentleman from Oregon.
Mr. Walden. Thank you very much, Mr. Chairman. I just
wanted to make one other comment, or maybe two.
One is, I know many times when we are dealing with
constituents and in these hearings, one of the issues that
comes up is overzealous enforcement activities. I would just
like to commend the Commission that I think in the many years I
have been around this industry, it is a group of people with
the field staff who are generally more helpful than they are
punitive. They do come in and try and be helpful, and I commend
you for that, because I think that is to your credit as an
agency. Not all agencies follow that same process.
Mr. Kennard. Thank you.
Mr. Walden. I want to go back to your comment about women
and minority-owned entry, or minority access into the broadcast
industry, because it is difficult, and financing clearly has to
be one of the big issues. Because most of these sales on the
small side, the small communities, you end up having to carry a
contract when you go to sell. Congress has passed some
legislation recently that does not help in that respect in
terms of the tax policy.
But under your old rules that were I think thrown out by
the courts, it gave a preference to women and minority
participation as applicants. Those were thrown out. Is there
anything you can do, aside from LPFM, to give advantage to
minority populations and women?
Mr. Kennard. Absolutely. I think that the most significant
policy mechanism that we have ever had to create really
powerful incentives for the sale of broadcast stations to
minorities has been the tax certificate program. This is a
program that allowed the sellers of broadcast stations to defer
capital gains on the sale of the station if it was sold to a
minority-owned company. The program was initiated in 1978.
Unfortunately, it was repealed by Congress in 1995. But during
that period of time, the overwhelming majority of minority-
owned stations were made possible through the benefit of the
tax certificate policy.
Now, there have been efforts to bring that policy back, and
indeed expand it to some of the other technology areas like
wireless, for example. John McCain has been a very vocal
proponent of bringing back the tax certificate in the Senate,
as has Charlie Rangel in the House. I have been very
encouraging of these efforts, because I think that if we really
want to remedy this severe underrepresentation of minority-
owned stations in this field and indeed, not just broadcast
stations, but in the whole emerging telecom marketplace, we
need to work on creative tax incentives, to create incentives
for this to happen.
Mr. Walden. Mr. Chairman, I have to depart to another
meeting on a bill that is very important to my district, so
thank you for your courtesy and I thank the chairman for his
testimony.
Mr. Horn. You are quite welcome.
Mr. Kennard. Thank you.
Mr. Horn. Mr. Chairman, most Federal departments or
agencies are required to include a cost-benefit assessment and
rulemaking with an economic impact of more than $100 million.
The FCC is noteworthy because it does not regularly do so.
There is no doubt that many FCC regulations cause consumer and
provider impacts exceeding $100 million. Why aren't economic
studies conducted and published as part of the explanations
supporting most agency rulings?
Mr. Kennard. Well, actually, we do do a similar analysis.
We comply with the Regulatory Flexibility Act where we--and
also the Paperwork Reduction Act where we assess the impact of
all of our actions on small businesses. We do comply with the
Contract with America Act that requires that any of our
rulemakings which have an aggregate impact of I think over $100
million have to be reviewed by Congress, or at least there is a
period for congressional review.
Mr. Horn. What is the process for reviewing rules that have
been in effect for 5 years with the Commission? Does the
Federal Communications Commission formally review whether the
rules are appropriate, given the rapid change in consumer and
information technology in the marketplace?
Mr. Kennard. Well, in some cases, we commit to reviewing
rules after a set period of time. Some of our rules are sunset.
I think generally we should do more of that. We should either
sunset more rules or at least commit to reevaluating them.
We have one important tool. In the 1996 act, Congress
mandated that every 2 years we review all of our rules
involving the common carrier side of our actions. When I became
chairman, I expanded that, and I commenced a review process of
all of our rules that we undertake every 2 years. We are in the
process of doing that now. It is called our biennial review.
Every 2 years, we review all of our rules.
Mr. Horn. Can you name any major regulation where the FCC
has imposed a sunset date?
Mr. Kennard. Yes. I believe that one major rule is the
spectrum cap, which I believe would sunset after 5 years. We
also sunset rules, and it is really not a sunset, but a
modification of our rules in the area of set top box
compliance. I am sure there are more. If you would like a more
exhaustive list, I am sure I could provide it.
Mr. Horn. I just wanted to get a feel for how often that is
utilized. It does help us up here when we have to sunset
something and face up to renewing it. Hopefully we take a look
at it, the legislation, and make a more effective document than
we did 5 years before.
I have two more questions, and if you don't mind, we are
going to have a few to send you so that you can at your leisure
respond to at this point in the record.
Mr. Kennard. Of course.
Mr. Horn. So let me just ask my last two.
Considering the slow progress that some broadcasters have
shown in adopting the spectrum to actual consumer use, did the
FCC perform an economic cost-benefit analysis of alternate uses
for that spectrum before making the allocation, and when will
the FCC review that decision and analyze the public cost-
benefit of leaving the allocation as it is?
Mr. Kennard. Well, if you are referring to the digital
spectrum, which I believe you are, this was basically a
decision by the U.S. Congress in the 1996 act when Congress
gave to each commercial broadcaster, and noncommercial
broadcaster and television licensee an additional 6 megahertz
of spectrum to convert to digital, subject to a requirement
that it be given back to the government in 2006. Congress came
back in 1997 and created what is, in effect, a loophole in that
requirement by saying that broadcasters don't have to return
the spectrum until there is a certain level of penetration of
digital sets in the marketplace.
So this area is pretty much governed by statute and the FCC
doesn't have a whole lot of discretion in this area.
Mr. Horn. When I was heading a large university and we had
disaster exercises, let's say in Los Angeles County, where
there are 10 million people, 83 cities in it, there was a real
problem in getting communication. Now, we had heard there was a
lot of the bands in the East Coast and we didn't have them on
the West Coast. Has that problem been solved for emergency
vehicles and all that needs to be done to communicate with the
police department? It looks like everything is just going to be
jammed up if you try to get through. What is the FCC doing
about it?
Mr. Kennard. It is still a problem, but we have been making
some pretty significant strides. The most significant thing
that we have done is made more spectrum available for public
safety uses. Thanks to the Congress, we were able to reclaim
some spectrum and relicense it for public safety uses. We also
have established an advisory committee, which includes
representatives of the various public safety users around the
country, to try to come up with ways to more efficiently use
the spectrum and ensure that it is interoperable, so that
State, Federal and local law enforcement and public safety
officials can use it to communicate with one another. So we are
on top of that issue.
Mr. Horn. I am going to throw you a softball for the last
question. What do you envision as the role of the Commission in
the 21st century?
Mr. Kennard. That is a hard question, but one that we
answered----
Mr. Owens. One minute or less.
Mr. Kennard. One that we answered in our strategic plan
which we submitted to the Congress a year ago and that we are
continuing to update and work on.
Essentially, the challenge is to make sure that we are
facilitating a competitive marketplace at the same time we are
protecting consumers and making sure that the benefits of
information technology reaches all Americans. We have made a
lot of progress in that regard. There is a lot more work to be
done. But it is really exciting, because we are seeing so much
investment pouring into these industries and Americans waking
up every day to new uses of technology.
Mr. Horn. On your strategic plan, did you sit down with the
powers that be in the Commerce Committee to go over it with
them, or did they care?
Mr. Kennard. Oh, they certainly care. Yes, we did talk with
a lot of the key members of the Commerce Committee. But in
addition, we reached out to all of the key stakeholders. We had
public roundtables where we brought in groups of academics, and
then we brought in consumer advocates and advocates from the
disability community and minority entrepreneurs and we also
reached out to industry. It was really a very useful and
dynamic process. We even had forums where we had all of the FCC
employees come together and give us advice on how we should
change the agency for the future. It is very much a living,
breathing document that we are working on literally as we
speak.
Mr. Horn. The reason I ask is that this subcommittee has
basic jurisdiction on how the processes occur here between the
executive branch and the legislative branch, and when a
strategic plan is developed or a financial plan is developed,
what we would like to see is the political appointees such as
the chair and the commissioners who have been confirmed by the
Senate deal with the elected employees in the legislative
branch. Too often it is just our staff or Commerce's staff and
your staff, and I think it would be great if we could get the
people that have to go back to the people in one case, and who
are the wards of the President, who is duly elected by all of
the people, and I just think that we need to get away from
simple staff-staff contact, as bright as they all are on both
ends of the avenue. I just would like to see the Commissioners
sit around the table and sit down and say, hey, do we agree on
this as what we ought to be doing under the law. Because
sometimes silly things, as you know, are in the law, or they
are so broad that an agency does not know what it is supposed
to do.
Mr. Kennard. That is, I think, a very good suggestion.
Mr. Horn. Well, I have enjoyed this, and I thank you for
coming, and we will send you a few questions. You are still
under oath. Thank you very much.
I would like to thank the following people: J. Russell
George, staff director and chief counsel; Earl Pierce,
professional staff member; Bonnie Heald, director of
communications; Bryan Sisk, our clerk; Elizabeth Seong, staff
assistant; George Fraser and Trevor Petigo, interns. On the
minority side, Trey Henderson, counsel; and Jean Gosa, minority
clerk; and our court reporters, Joe Strickland and Julie Bryan.
This hearing is adjourned.
[Whereupon, at 2:45 p.m., the subcommittee was adjourned.]