Year 2000 Computing Crisis: Telecommunications Readiness Critical, Yet
Overall Status Largely Unknown (Testimony, 06/16/98, GAO/T-AIMD-98-212).

Pursuant to a congressional request, GAO discussed: (1) the nation's
telecommunications infrastructure; (2) the risks facing the nation if
critical components of that infrastructure are not year 2000 compliant
by the turn of the century; (3) federal government actions relating to
national, international, and governmental telecommunications
infrastructure; and (4) present issues that must be addressed.

GAO noted that: (1) major disruption in the service provided by the
public telecommunications network can affect millions of users and cause
massive financial losses; (2) the consequences of not resolving year
2000 problems in the telecommunications infrastructure are broad-based
and potentially disastrous; (3) telecommunications problems can affect
virtually all network components--switches, routers, private branch
exchanges, and Internet servers--all of which must be assessed and
tested; (4) compounding the risk is the global nature of today's
telecommunications, which rely on seamless connections among widely
scattered and widely diverse networks; (5) in light of the potential
risks involved, the federal government has recently begun to address the
year 2000 readiness of the telecommunications sector; (6) the government
is undertaking telecommunications initiatives from three perspectives:
national, international, and governmental; (7) key federal initiatives
are in their early stages on a national, international, and governmental
level, and critical issues remain to be addressed; (8) given the
inarguably critical nature of the telecommunications services to the
functioning of the nation, coordinated oversight is essential; (9) in
order to gain confidence that the telecommunications infrastructure will
be ready for the next century, accountability must be established; this
includes a broad strategy as well as specific milestones and defined
accountability; and (10) several major issues must be addressed: (a)
obtaining information on the readiness status of various segments of the
telecommunications industry for the next century; (b) establishing a
mechanism for obtaining such readiness information on a regular basis;
(c) setting milestones for achieving year 2000 compliance; (d)
disseminating readiness status information to the public and Congress;
and (e) developing--in conjunction with the private sector--contingency
plans to ensure business continuity, albeit at reduced levels, in the
event that not all telecommunications systems are fully operational on
January 1, 2000.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-AIMD-98-212
     TITLE:  Year 2000 Computing Crisis: Telecommunications Readiness 
             Critical, Yet Overall Status Largely Unknown
      DATE:  06/16/98
   SUBJECT:  Risk management
             Telecommunication industry
             Systems conversions
             Computer software verification and validation
             Strategic information systems planning
             Accountability
             Interagency relations
             Information systems
             Information resources management
             Systems compatibility
IDENTIFIER:  GSA Year 2000 Program
             FTS 2000
             Federal Telecommunications System 2000
             
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Cover
================================================================ COVER


Before the Subcommittee on Oversight,
Committee on Ways and Means,
House of Representatives

For Release on Delivery
Expected at
3 p.m.
Tuesday,
June 16, 1998

YEAR 2000 COMPUTING CRISIS -
TELECOMMUNICATIONS READINESS
CRITICAL, YET OVERALL STATUS
LARGELY UNKNOWN

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

GAO/T-AIMD-98-212

GAO/AIMD-98-212T


(511461)


Abbreviations
=============================================================== ABBREV

  ATIS - x
  CIO - x
  DFAS - x
  DLA - x
  DOD - x
  FAA - x
  FCC - x
  FTS2000 - x
  GSA - x
  HHS - x
  IRS - x
  LSSC
  NRC - x
  OMB - x
  PBX - x
  SEC - x
  SSG - x
  USDA - x
  VBA - x
  Y2K - x

============================================================ Chapter 0

Madam Chairwoman and Members of the Subcommittee: 

We are pleased to join you today to discuss the computing crisis
posed by the upcoming change of century, and its implications in one
critical area:  telecommunications.  As you know, the year 2000
presents a particularly sweeping and urgent challenge for entities in
this country.\1 For this reason, in February 1997 we designated the
Year 2000 problem as a high-risk area\2 for the federal government,
and have published guidance\3 to help organizations successfully
address the issue.  Since that time we have issued over 45 reports
and testimony statements detailing specific findings and
recommendations related to the Year 2000 compliance of a wide range
of federal agency systems.\4 The common theme has been that serious
vulnerabilities remain in addressing the federal government's Year
2000 readiness, and that much more action is needed to ensure that
agencies satisfactorily mitigate Year 2000 risks to avoid
debilitating consequences. 

We have made many recommendations to the executive branch to reduce
the risk of Year 2000-induced disruptions of critical services. 
Among these, we recommended that the Chair of the President's Council
on Year 2000 Conversion develop a comprehensive picture of the
nation's Year 2000 readiness.  This effort would include identifying
and assessing the risk of the nation's key economic sectors,
including those posed by telecommunications. 

The readiness of the telecommunications sector is one of the most
crucial concerns.  No onelarge corporation, small business,
government agency, family, or individualis immune from the potential
disruption of vital telecommunications services.  The United States,
with almost half of the world's computer capacity and 60 percent of
Internet assets, is the world's most advanced--and most
dependent--producer and user of information and telecommunications
technologies.\5 In particular, such technologies have helped fuel the
growth of the U.S.  economy and have enabled major improvements in
the nation's infrastructure.  As a result, telecommunications service
providers and their public- and private-sector customers have a lot
at stake; the potential losses and disruptions that could accrue from
noncompliant telecommunications systems could be staggering. 

My testimony today will (1) describe our nation's telecommunications
infrastructure, (2) discuss the risks we face if critical components
of that infrastructure are not Year 2000 compliant by the turn of the
century, (3) describe federal government actions relating to
national, international, and governmental telecommunications
infrastructure, and (4) present issues that must be addressed. 


--------------------
\1 For the past several decades, automated information systems have
typically represented the year using two digits rather than four in
order to conserve electronic data storage space and reduce operating
costs.  In this format, however, 2000 is indistinguishable from 1900
because both are represented only as 00.  As a result, if not
modified, computer systems or applications that use dates or perform
date- or time-sensitive calculations may generate incorrect results
beyond 1999. 

\2 High-Risk Series:  Information Management and Technology
(GAO/HR-97-9, February 1997). 

\3 Year 2000 Computing Crisis:  An Assessment Guide
(GAO/AIMD-10.1.14, September 1997), which includes the key tasks
needed to complete each phase of a Year 2000 program (awareness,
assessment, renovation, validation, and implementation), and Year
2000 Computing Crisis:  Business Continuity and Contingency Planning
(GAO/AIMD-10.1.19, March 1998 [exposure draft]), which describes the
tasks needed to ensure the continuity of agency operations. 

\4 A listing of our publications is included as an attachment to this
statement. 

\5 Critical Foundations:  Protecting America's Infrastructures
(President's Commission on Critical Infrastructure Protection,
October 1997). 


   THE TELECOMMUNICATIONS
   INFRASTRUCTURE
---------------------------------------------------------- Chapter 0:1

The telecommunications infrastructure comprises the public
telecommunications network; the Internet; and the millions of
computer systems for government, defense, commercial, and personal
use.  The public network includes a complex web of interconnected
networks operated by local and long-distance carriers, cellular
networks, and satellite services.  The Internet is a global network
of networks interconnected by routers\6 using a common set of
protocols.\7 Significant portions of the Internet rely on services
provided by the public telecommunications networks. 

The rich array of reliable telecommunications services is made
possible by a complex web of highly interconnected networks supported
by switches\8 and other telecommunications devices.  Along with
national and local carriers and service providers, other important
links in the chain are the equipment manufacturers and suppliers and
customers, some of whom have specific telecommunications devices
installed on their premises, such as private branch exchanges
(PBX),\9 and voice mail systems.  The key is connectivity:  all of
the pieces must work together. 


--------------------
\6 Routers are devices that direct messages.  Routers receive packets
of information from computers or other routers on the network; they
then send these packets to their destinations based on "addresses" at
the beginning of the packets and a road map of the other computers
and peripherals on the network. 

\7 Protocols are a set of procedures for establishing and controlling
data transmission. 

\8 Switches are electronic or mechanical devices that allow
connections to be established as necessary and terminated when there
is no longer a session to support. 

\9 A PBX is a telephone switch located on a customer's premises that
primarily establishes voice-grade circuits between individual users
and the public switched telephone network.  A PBX also provides
switching within the customer premises local area. 


   SERVICES VITAL TO THE NATION
   DEPEND UPON RELIABLE
   TELECOMMUNICATIONS
---------------------------------------------------------- Chapter 0:2

Telecommunications are critical to the operations of nearly every
public- and private-sector organization.  All other major sectors
rely on it:  banking and finance; health, safety, and emergency
services; transportation; utilities; and manufacturing and small
business.  For example, it (1) enables the electronic transfer of
funds, (2) is essential to the service economy, manufacturing, and
efficient delivery of raw materials and finished goods, and (3) is
basic to responsive emergency services. 

The federal government depends on the telecommunications
infrastructure to deliver a wide range of services.  Many agencies,
including those in the Department of the Treasury and Department of
Health and Human Services (HHS), rely on both their private networks
and on the public telecommunications network to conduct
mission-critical business.  For example, the route of an electronic
Medicare payment may traverse several networks--those operated by the
HHS, Treasury's computer systems and networks, and the Federal
Reserve's Fedwire electronic funds transfer system.  Seamless
connectivity among a wide range of networks and carriers is essential
nationally and internationally. 

Recent nationwide telecommunications failures remind us of our
dependence on telecommunications--and the fragility of complex
communications systems.  On April 13, 1998, a software error in a
single switch caused a major carrier to fail nationwide.  According
to press reports, during the 24-hour outage, the carrier's corporate
customers were unable to complete critical network-based business;
retailers were unable to authorize credit card payments; and
financial institutions could not complete electronic transactions. 

Another failure occurred on May 19, 1998, when a communications
satellite went into an uncontrolled spin after failure of a control
system.  The satellite's failure disrupted the operations of credit
card authorization services, paging services for 80 to 90 percent of
all pagers in the United States, and the distribution of television
programs.  While these failures were not caused by a Year 2000
problem, they illustrate the degree to which we depend upon reliable,
available, interoperable telecommunications. 

Major disruption in the service provided by the public
telecommunications network can affect millions of users and cause
massive financial losses.  The cost of disruptions and outages caused
by noncompliant computer or telecommunications systems was discussed
in a recent study of the potential impact of Year 2000-related
foreign exchange settlement failures.\10 According to the study, the
market costs of a single major bank's inability to settle its trades
could reach $3.3 billion in a single week.  Business dependence on
the public telecommunications infrastructure is particularly evident
in the retail and financial sectors, where financial transactions
with a combined value in the billions of dollars are made every day. 
Businesses and financial institutions rely heavily on
telecommunications networks to participate in the global payments
system, to exchange information with trading partners and regulatory
agencies, and to manage their internal control systems and
sophisticated computer equipment. 

The consequences of not resolving Year 2000 problems in the
telecommunications infrastructure are broad-based and potentially
disastrous.  For example, if critical telecommunications systems
fail: 

  -- The Internal Revenue Service would be unable to receive
     electronic tax returns or process electronic tax refunds. 

  -- HHS would be unable to make electronic Medicare payments. 

  -- Financial institutions and brokerages would be unable to process
     financial transactions and trades. 

  -- The manufacturing and retail sectors would be unable to manage
     inventories. 

  -- Air travel would have to be severely curtailed because air
     traffic control systems would fail. 

  -- Credit card transactions would be hindered if communications
     links with point-of-sale systems fail. 

  -- Emergency services would suffer if 911 calls were not properly
     and promptly routed. 

  -- International voice and data services would be disrupted. 

Telecommunications problems can affect virtually all network
components--switches, routers, PBXs, and Internet servers--all of
which must be assessed and tested.  Compounding the risk is the
global nature of today's telecommunications, which rely on seamless
connections among widely scattered and widely diverse networks. 


--------------------
\10 Sustaining Stable Financial Markets Through the Millennium,
Computer Sciences Corporation. 


   FEDERAL ACTIVITY RELATED TO THE
   YEAR 2000 READINESS OF THE
   TELECOMMUNICATIONS SECTOR
---------------------------------------------------------- Chapter 0:3

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


      NATIONAL INITIATIVES
-------------------------------------------------------- Chapter 0:3.1

On February 4 of this year, the President's Council on Year 2000
Conversion was created, with the mandate to cooperate with
private-sector operators of critical national and local systems,
including telecommunications, in addressing the Year 2000 crisis. 
The council's recently established telecommunications working
group--chaired by a Federal Communications Commission (FCC)
commissioner--held its first meeting on April 29, 1998; membership
includes representatives of the Departments of Agriculture, Commerce,
Defense, and State; FCC; the General Services Administration (GSA);
and the National Science Foundation.  The group reports that it is
developing a strategy and an action plan to address the key issues
facing the telecommunications sector.  These include raising industry
awareness of the problem and disseminating information on best
practices and contingency planning. 

In addition to its role on the council, within the past 2 months FCC
has established a Year 2000 Internet web site, formed a task force to
coordinate the activities of FCC bureaus to provide Year 2000
information for consumers and industry, and coordinated an outreach
effort to state public utility commissions.  Its specific national
efforts are focusing on raising the Year 2000 awareness of companies
under its jurisdiction, monitoring the status of Year 2000 readiness
of the telecommunications sector, and helping telecommunications
users obtain information from individual telecommunications service
providers needed for testing. 

As part of this campaign, FCC in late April sent letters to over 200
telecommunications service providers, industry associations, and
other interested organizations, advising them of the seriousness and
potential impact of the Year 2000 problem and asking them to share
information about the Year 2000-compliance status of their services
with FCC, others in the telecommunications industry, and the
public--including making such information available on the Internet. 
FCC is also contacting additional service providers and equipment
manufacturers, and is working with industry associations to reach the
hundreds of small and midsized telecommunications service providers. 

The Securities and Exchange Commission also has an initiative to
gather information on companies' Year 2000 activities.  In October
1997 and January 1998, the Commission urged public operating
companies (which would include those in the telecommunications
sector) to disclose their anticipated costs, problems, and
uncertainties associated with the Year 2000 issue. 


      INTERNATIONAL INITIATIVES
-------------------------------------------------------- Chapter 0:3.2

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


      GOVERNMENTAL INITIATIVES
-------------------------------------------------------- Chapter 0:3.3

Year 2000 actions concerning the federal government's
telecommunications networks have been initiated by the Chief
Information Officers (CIO) Council's\11 Year 2000 Committee, GSA, and
federal agencies.  The CIO Council Year 2000 Committee has a
telecommunications subcommittee to focus on telecommunications issues
in addressing the Year 2000 problem.  This subcommittee, chaired by
GSA, has adopted a Year 2000 telecommunications compliance program
that lays out a framework, including milestones, for agencies to use
in addressing telecommunications issues.  This compliance program
also focuses on enhancing partnerships with industry to identify Year
2000-compliant products and services, develop test methodologies and
processes, perform collaborative testing of network elements/systems,
and share compliance information and test results.  The subcommittee
is also addressing contingency planning for telecommunications. 

In addition to its role chairing the Subcommittee on
Telecommunications, GSA owns, manages, or resells consolidated
telecommunications services to federal agencies throughout the United
States; it controls about 25 percent of all federal
telecommunications services.  GSA's Year 2000 program addresses three
service areas:  Federal Telecommunications System (FTS 2000)\12
services, other federal telecommunications services, and commercial
services.  In the FTS 2000 area, GSA plans to complete assessment of
Year 2000 compliance by this September, renovation by March 1999, and
validation and testing between April and December 1999.  In the other
federal services area, GSA is supporting agencies in hardware
testing, is conducting Year 2000 telecommunications working group
meetings with agency representatives, and is managing its Year 2000
web site.  In the area of commercial services, GSA plans by March
1999 to conduct interoperability testing between government systems
and network service providers. 


--------------------
\11 The CIO Council comprises CIOs and Deputy CIOs from 28 large
federal departments and agencies, two CIOs from small federal
agencies, agency representatives from the Office of Management and
Budget, and the Chairs of the Government Information Technology
Services Board and Information Technology Resources Board. 

\12 FTS 2000 is a nationwide telecommunications network providing
long-distance voice and data services to federal agencies. 


   ISSUES SURROUNDING YEAR 2000
   TELECOMMUNICATIONS READINESS
---------------------------------------------------------- Chapter 0:4

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


      NATIONAL ISSUES
-------------------------------------------------------- Chapter 0:4.1

The federal government is uniquely positioned to publicize the Year
2000 computing crisis as a national priority; take a leadership role;
and identify, assess, and report on the risks and necessary
remediation activities associated with the nation's key economic
sectors, such as telecommunications.  Accordingly, in an April 1998
report, we recommended that the President's Council on Year 2000
Conversion

     establish public/private partnership forums composed of
     representatives of each major sector that, in turn, would rely
     on task forces organized along economic sector lines to help (1)
     gauge the nation's preparedness for the Year 2000, (2)
     periodically report on the status and remaining actions of each
     sector's Year 2000 remediation efforts, and (3) ensure the
     development of contingency plans to assure the continuing
     delivery of critical public and private services.\13

In disagreeing with this recommendation, the Chair of the Conversion
Council stated his belief that the council needs to be a catalyst,
facilitator, and coordinator.  He did, however, establish five new
working groups--telecommunications among them; while not providing
specific guidelines or expectations, the Chair told them to focus on
developing a coordinated outreach plan and establish communications
with public and private parties within each sector, and to monitor
the Year 2000 readiness of each sector. 

Given the inarguably critical nature of telecommunications services
to the functioning of our nation, coordinated oversight is essential. 
In order to gain confidence that our telecommunications
infrastructure will be ready for the next century, accountability
must be established; this includes a broad strategy as well as
specific milestones and defined accountability. 

We see several major areas that must be addressed:  (1) obtaining
information on the current readiness status of various segments of
the telecommunications industry for the next century, (2)
establishing a mechanism for obtaining such readiness information on
a regular basis, (3) setting milestones for achieving Year 2000
compliance, (4) disseminating readiness status information to the
public and the Congress, and (5) developing--in conjunction with the
private sector--contingency plans to ensure business continuity,
albeit at reduced levels, in the event that not all
telecommunications systems are fully operational on January 1, 2000. 


--------------------
\13 Year 2000 Computing Crisis:  Potential for Widespread Disruption
Calls for Strong Leadership and Partnerships (GAO/AIMD-98-85, April
30, 1998). 


         CURRENT STATUS
------------------------------------------------------ Chapter 0:4.1.1

Based on data from industry associations and telecommunications
companies, FCC has compiled general information on the status and
activities of various segments of this sector.  In late April of this
year, the agency asked the telecommunications industry for Year
2000-compliance information; however, as of last week, FCC was unable
to provide us with information on the current status and anticipated
readiness dates in areas such as satellite, cable, broadcast, and
wireless services.  As a major example, FCC could not provide us with
data on when major interexchange (long distance) and local exchange
carriers were expecting to be Year 2000 compliant. 

Because FCC did not have such data readily available, we attempted to
obtain Year 2000 milestone information from the major interexchange
(long distance) and local exchange carriers.  We focused on these 12
carriers because they hold key positions within the
telecommunications sector and account for over 90 percent of the
market.\14 We obtained this information from the carriers' World Wide
Web sites, or through telephone interviews with carrier
representatives. 

Table 1 provides a summary of the information we gathered.  The table
shows that most major carriers expect to achieve Year 2000 compliance
of their networks by December 1998, although for some it is either
later than that date or we were unable to obtain this information. 
The table also shows that most major carriers plan to be fully
compliant--including support systems--by mid-1999. 



                                Table 1
                
                  Year 2000-Compliance Status of Major
                      Telecommunications Carriers

                           Date expected to be Year 2000 compliant
                        ----------------------------------------------
Service providers       Network services\a      Support services\b
----------------------  ----------------------  ----------------------
Interexchange carriers
----------------------------------------------------------------------
AT&T                    December 1998           June 1999

Excel                   (did not respond)       (did not respond)

Frontier                December 1998           December 1998

MCI                     December 1998           June 1999

Sprint                  December 1998           June 1999

Worldcom                April 1999              April 1999


Local exchange carriers
----------------------------------------------------------------------
Ameritech               January 1999            January 1999

Bell Atlantic           July 1999               (not specified)

BellSouth               December 1998           December 1998

GTE                     December 1998           December 1998

SBC                     December 1998           December 1998

Sprint                  December 1998           June 1999

US West                 June 1999               June 1999
----------------------------------------------------------------------
\a Network services are key systems and network elements affecting
customer services. 

\b Support services are services and systems supporting carrier
operations. 

Source:  Individual carriers.  We did not independently verify this
information. 

In addition to the individual carrier information shown in the table,
some interoperability testing is planned.  This laboratory-based
testing, sponsored by the Telco Year 2000 Forum and by the Alliance
for Telecommunications Industry Solutions (ATIS), is scheduled to
begin later this year and continue throughout 1999.  The
forum-sponsored testing will focus on interoperability between local
exchange carriers, while the ATIS-sponsored tests will focus on
common equipment interoperability between a local exchange carrier
and a long-distance carrier. 


--------------------
\14 According to FCC, there are over 1,300 companies that provide
local telephone service in the United States.  More than 700 firms
buy access from these companies. 


         RECURRING STATUS
         INFORMATION
------------------------------------------------------ Chapter 0:4.1.2

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


         MILESTONE SETTING
------------------------------------------------------ Chapter 0:4.1.3

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


         INFORMATION DISSEMINATION
------------------------------------------------------ Chapter 0:4.1.4

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


         CONTINGENCY PLANNING
------------------------------------------------------ Chapter 0:4.1.5

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


      INTERNATIONAL ISSUES
-------------------------------------------------------- Chapter 0:4.2

Little is known about the Year 2000 readiness of foreign
telecommunications carriers and their ability to continue to provide
telecommunications services after December 31, 1999.  In September
1997, the Gartner Group conducted several surveys to determine how
companies around the world were dealing with the Year 2000 problem. 
The study did not focus on the telecommunications sector; however,
its findings provide an indication of the overall Year 2000 readiness
of the various geographic regions of the world.  According to the
study, "[t]hirty percent of all companies have not started dealing
with the year 2000 problem.  Small companies, health care
organizations, educational institutions, and many companies in 30
percent of the world's countries are at a high risk of seeing year
2000 mission-critical failures due to a lack of readiness."\15 A more
recent survey focusing on foreign telecommunications service
providers was conducted by the International Telecommunication Union;
its results are not yet available. 

FCC has also noted that Year 2000 issues have not received the same
level of attention abroad as in the United States, with the exception
of the United Kingdom.  This was confirmed by the results of the
State Department's initiative to assess the Year 2000 readiness of
foreign carriers.  As shown in table 2, the department received
information from 113 countries, updated through March 1998.  Of
those, 25 countries (22 percent) expected to be compliant by this
December; 26 countries (23 percent) expected to be compliant by
December 1999; 33 countries (29 percent) stated that they were
addressing the Year 2000 issue but were having problems; and 29
countries (26 percent) were unaware of or had not begun to address
the problem.  The State Department is continuing its activities to
determine the Year 2000 readiness of its foreign posts, and is
developing contingency plans to ensure continuity of diplomatic
telecommunications services. 



                                     Table 2
                     
                          Year 2000-Compliance Status of
                        International Post, Telephone, and
                               Telegraph Companies

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

The World Bank is reporting similar findings.  In an informal survey
of foreign Year 2000 readiness conducted this month, only 18 of 127
countries (14 percent) had a national Year 2000 program; 28 countries
(22 percent) report working on the problem; and 16 countries (13
percent) report only awareness of the issue.  No conclusive data were
received from the remaining 65 countries surveyed (51 percent).  The
World Bank is now planning to appoint a field Year 2000
representative for each country. 

The Year 2000 readiness of international telecommunications networks
and carriers is clearly an area of concern.  All sectors of the
global economy depend upon reliable communications networks to handle
billions of dollars in financial transactions.  Current and ongoing
information to monitor the compliance status of foreign carriers
would, therefore, allow the federal government and the private sector
to identify troubled regions and develop contingency plans for
ensuring the continuity of vital telecommunications services. 


--------------------
\15 Year 2000-World Status (Gartner Group, Document #M-100-037,
November 25, 1997). 


      GOVERNMENTAL ISSUES
-------------------------------------------------------- Chapter 0:4.3

Without compliant telecommunications, federal agencies will be unable
to provide basic services to the American public.  However, many
major departments and agencies do not yet know the Year 2000
compliance status of their own telecommunications networks and
services.  In fact, many federal agencies are just beginning to
assess the readiness of their telecommunications.  As of last month's
quarterly reports to OMB, only 11 of 24 major federal agencies
reported that they had completed inventories and/or assessments of
telecommunications.  The Department of Agriculture, for example, does
not expect to complete its telecommunications inventory until next
month--a critical assessment task that should have been completed
last summer. 


-------------------------------------------------------- Chapter 0:4.4

In closing, let me reiterate that the importance of the
telecommunications infrastructure in the successful functioning of
our nation cannot be overemphasized; it is the linchpin of our
economy and critical citizen services.  Yet the telecommunications
industry faces a massive challenge to make sure that it can finish
the Year 2000 job in time.  While the federal government must take a
stronger, more active oversight role to help ensure that this central
sector is prepared, much of the responsibility inevitably lies with
the industry and other countries around the world. 

Madam Chairwoman, this concludes my statement.  I would be pleased to
respond to any questions that you or other members of the
Subcommittee may have at this time. 

GAO REPORTS AND TESTIMONY ADDRESSING THE YEAR 2000 CRISIS

Year 2000 Computing Crisis:  Actions Must Be Taken Now to Address
Slow Pace of Federal Progress (GAO/T-AIMD-98-205, June 10, 1998). 

Defense Computers:  Army Needs to Greatly Strengthen Its Year 2000
Program (GAO/AIMD-98-53, May 29, 1998). 

Year 2000 Computing Crisis:  USDA Faces Tremendous Challenges in
Ensuring That Vital Public Services Are Not Disrupted
(GAO/T-AIMD-98-167, May 14, 1998). 

Securities Pricing:  Actions Needed for Conversion to Decimals
(GAO/T-GGD-98-121, May 8, 1998). 

Year 2000 Computing Crisis:  Continuing Risks of Disruption to Social
Security, Medicare, and Treasury Programs (GAO/T-AIMD-98-161, May 7,
1998). 

IRS' Year 2000 Efforts:  Status and Risks (GAO/T-GGD-98-123, May 7,
1998). 

Air Traffic Control:  FAA Plans to Replace Its Host Computer System
Because Future Availability Cannot Be Assured (GAO/AIMD-98-138R, May
1, 1998). 

Year 2000 Computing Crisis:  Potential For Widespread Disruption
Calls For Strong Leadership and Partnerships (GAO/AIMD-98-85, April
30, 1998). 

Defense Computers:  Year 2000 Computer Problems Threaten DOD
Operations (GAO/AIMD-98-72, April 30, 1998). 

Department of the Interior:  Year 2000 Computing Crisis Presents Risk
of Disruption to Key Operations (GAO/T-AIMD-98-149, April 22, 1998). 

Year 2000 Computing Crisis:  Business Continuity and Contingency
Planning (GAO/AIMD-10.1.19, Exposure Draft, March 1998). 

Tax Administration:  IRS' Fiscal Year 1999 Budget Request and Fiscal
Year 1998 Filing Season (GAO/T-GGD/AIMD-98-114, March 31, 1998). 

Year 2000 Computing Crisis:  Strong Leadership Needed to Avoid
Disruption of Essential Services (GAO/T-AIMD-98-117, March 24, 1998). 

Year 2000 Computing Crisis:  Federal Regulatory Efforts to Ensure
Financial Institution Systems Are Year 2000 Compliant
(GAO/T-AIMD-98-116, March 24, 1998). 

Year 2000 Computing Crisis:  Office of Thrift Supervision's Efforts
to Ensure Thrift Systems Are Year 2000 Compliant (GAO/T-AIMD-98-102,
March 18, 1998). 

Year 2000 Computing Crisis:  Strong Leadership and Effective
Public/Private Cooperation Needed to Avoid Major Disruptions
(GAO/T-AIMD-98-101, March 18, 1998). 

Post-Hearing Questions on the Federal Deposit Insurance Corporation's
Year 2000 (Y2K) Preparedness (AIMD-98-108R, March 18, 1998). 

SEC Year 2000 Report:  Future Reports Could Provide More Detailed
Information (GAO/GGD/AIMD-98-51, March 6, 1998). 

Year 2000 Readiness:  NRC's Proposed Approach Regarding Nuclear
Powerplants (GAO/AIMD-98-90R, March 6, 1998). 

National Weather Service:  Budget Events and Continuing Risks of
Systems Modernization (GAO/T-AIMD-98-97, March 4, 1998). 

Year 2000 Computing Crisis:  Federal Deposit Insurance Corporation's
Efforts to Ensure Bank Systems Are Year 2000 Compliant
(GAO/T-AIMD-98-73, February 10, 1998). 

Year 2000 Computing Crisis:  FAA Must Act Quickly to Prevent Systems
Failures (GAO/T-AIMD-98-63, February 4, 1998). 

FAA Computer Systems:  Limited Progress on Year 2000 Issue Increases
Risk Dramatically (GAO/AIMD-98-45, January 30, 1998). 

Defense Computers:  Air Force Needs to Strengthen Year 2000 Oversight
(GAO/AIMD-98-35, January 16, 1998). 

Year 2000 Computing Crisis:  Actions Needed to Address Credit Union
Systems' Year 2000 Problem (GAO/AIMD-98-48, January 7, 1998). 

Veterans Health Administration Facility Systems:  Some Progress Made
In Ensuring Year 2000 Compliance, But Challenges Remain
(GAO/AIMD-98-31R, November 7, 1997). 

Year 2000 Computing Crisis:  National Credit Union Administration's
Efforts to Ensure Credit Union Systems Are Year 2000 Compliant
(GAO/T-AIMD-98-20, October 22, 1997). 

Social Security Administration:  Significant Progress Made in Year
2000 Effort, But Key Risks Remain (GAO/AIMD-98-6, October 22, 1997). 

Defense Computers:  Technical Support Is Key to Naval Supply Year
2000 Success (GAO/AIMD-98-7R, October 21, 1997). 

Defense Computers:  LSSC Needs to Confront Significant Year 2000
Issues (GAO/AIMD-97-149, September 26, 1997). 

Veterans Affairs Computer Systems:  Action Underway Yet Much Work
Remains To Resolve Year 2000 Crisis (GAO/T-AIMD-97-174, September 25,
1997). 

Year 2000 Computing Crisis:  Success Depends Upon Strong Management
and Structured Approach (GAO/T-AIMD-97-173, September 25, 1997). 

Year 2000 Computing Crisis:  An Assessment Guide (GAO/AIMD-10.1.14,
September 1997). 

Defense Computers:  SSG Needs to Sustain Year 2000 Progress
(GAO/AIMD-97-120R, August 19, 1997). 

Defense Computers:  Improvements to DOD Systems Inventory Needed for
Year 2000 Effort (GAO/AIMD-97-112, August 13, 1997). 

Defense Computers:  Issues Confronting DLA in Addressing Year 2000
Problems (GAO/AIMD-97-106, August 12, 1997). 

Defense Computers:  DFAS Faces Challenges in Solving the Year 2000
Problem (GAO/AIMD-97-117, August 11, 1997). 

Year 2000 Computing Crisis:  Time Is Running Out for Federal Agencies
to Prepare for the New Millennium (GAO/T-AIMD-97-129, July 10, 1997). 

Veterans Benefits Computer Systems:  Uninterrupted Delivery of
Benefits Depends on Timely Correction of Year-2000 Problems
(GAO/T-AIMD-97-114, June 26, 1997). 

Veterans Benefits Computers Systems:  Risks of VBA's Year-2000
Efforts (GAO/AIMD-97-79, May 30, 1997). 

Medicare Transaction System:  Success Depends Upon Correcting
Critical Managerial and Technical Weaknesses (GAO/AIMD-97-78, May 16,
1997). 

Medicare Transaction System:  Serious Managerial and Technical
Weaknesses Threaten Modernization (GAO/T-AIMD-97-91, May 16, 1997). 

USDA Information Management:  Extensive Improvements Needed in
Managing Information Technology Investments (GAO/T-AIMD-97-90, May
14, 1997). 

Year 2000 Computing Crisis:  Risk of Serious Disruption to Essential
Government Functions Calls for Agency Action Now (GAO/T-AIMD-97-52,
February 27, 1997). 

Year 2000 Computing Crisis:  Strong Leadership Today Needed To
Prevent Future Disruption of Government Services (GAO/T-AIMD-97-51,
February 24, 1997). 

High-Risk Series:  Information Management and Technology
(GAO/HR-97-9, February 1997). 


*** End of document. ***