Deputy General Secretary Luan, Ambassador McCann, Deputy Assistant Secretary
Kinney, ladies and gentlemen: It is a great pleasure this morning to participate in this historic
dialogue between the United States and Vietnam on Telecommunications and Information.
As the Commissioner who has often represented the FCC in the Pacific Rim area, it is a
special pleasure to welcome all of you to Washington D.C. Your timing is perfect, as the
cherry blossoms are just beginning to bloom.
This day offers the opportunity for both of us to exchange information and learn
about each other's systems. We all know how critical telecommunications is to the
commercial and economic infrastructure of all nations. It is my hope that this day marks the
beginning of renewed communications between us on telecommunications policy.
My task today is to give you a brief overview of my agency, the Federal
Communications Commission or FCC. I will begin by describing the FCC's structure,
discussing some of the essential principles of the FCC's regulatory policy, and finally turn to
some key international issues where the FCC has played a role.
The Structure of the Commission
The Federal Communications Commission or FCC was established by Congress in
the Communications Act of 1934. The FCC is an independent federal agency funded by and
responsible to Congress. The FCC is charged with regulating interstate and international
communications by radio, television, wire, satellite, and cable.
I note that the state public utilities commissions have jurisdiction over intrastate
communications issues. We work together closely with our state counterparts.
The FCC is directed by five Commissioners appointed by the President and confirmed
by the Senate for staggered 5-year terms. Right now, we have only four Commissioners
because one of the seats is vacant. By law, we are a bipartisan commission, meaning the
Commissioners represent both major political parties.
The Commissioners hold regular monthly agenda meetings. These meetings are open
to the public. In addition, the FCC occasionally holds open en banc hearings on special topics
of interest. Last year, for example, we had en banc hearings on spectrum management and
political broadcasting issues.
The FCC has a staff of about 2,000 employees. Our staff is divided into six bureaus, which are organized according to the industries we regulate.
In general, the FCC regulates telecommunications through two mechanisms: (1)
rulemaking proceedings; and (2) the processing of applications for licenses or adjudications.
Rulemaking proceedings are used to issue or amend regulations affecting an entire service, a
whole class of licenses, a technology, or the structure of the industry. By contrast,
applications or adjudications typically concern individual licensees or small groups of
To avoid conflicts of interest, all FCC Commissioners and employees are prohibited
from having a financial stake in any telecommunications company.
You might wonder how the FCC makes policy decisions? First, the FCC must follow
the law. Last year, our lawmakers passed a historic new law called the Telecommunications
Act of 1996. This Act revised our communications law to make clear that competition and
deregulation are the key guiding principles for the U.S. communications industry. Thus, a
sixty-year tradition of telecommunications monopolies has been replaced by open competitive
markets and deregulation. Right now, the FCC is busily implementing the new law by
issuing new rules and regulations, after public comment and consultation with the state
commissions, other federal agencies, consumers, and interested parties.
Second, the FCC must make judgments about how to apply the law to particular
circumstances. We always issue written decisions explaining why we have decided to take a
particular path and setting forth our reasoning.
Speaking for myself, I constantly bear in mind that our regulations have a very real and
direct impact on our licensees' businesses. Too much regulation can be very burdensome and
impose unnecessary delays and costs that in turn are passed to consumers. Because of this, I
believe that any regulation we impose should be as simple and pragmatic as we can make it.
I also think that the FCC must regularly review its regulations to ensure that our rules
continue to make sense in the current market environment. If not, I think these rules should
Technology is also advancing rapidly in the telecommunications and information
arenas. Our regulations must be flexible enough keep up with such advances. In the past, I
have worked with communications clients whose very livelihoods depended on "winning in
the marketplace" through creative service or equipment offerings. They developed those
offerings by being on the cutting edge of technology. I do not think government regulation
should frustrate that entrepreneurial spirit.
However, I also believe that even flexible regulation must provide some certainty to
the industry. That is, the FCC's rules should be clear and known to all in advance. I believe
that this regulatory certainty is critical to creating an environment that encourages private
investment. Private sector actors will not seriously consider major investments if the
regulatory environment is perceived as uncertain.
Consideration of Global Impacts
In making FCC policy, I also believe it is important to consider the global impacts of
all our decisions. Given that the U.S. plays an important role as a world leader in the
communications field, I believe that the FCC can and should play an important role abroad
by doing four things: First, by assisting in efforts to open closed markets to U.S.
telecommunications companies; second, by encouraging interoperability of global
communications systems; third, by promoting fair, nondiscriminatory and reasonable
interconnection; and finally, by urging the private sector construction of a Global
International Role of the FCC:
Accounting Rate System Reform
One example of how the FCC plays a role in global telecommunications is our
substantial commitment to achieving reform of the international accounting rate system. The
FCC believes that the current accounting rate system sets prices for international service that
do not reflect the true economic cost to carriers of providing the service. We believe that
lowering these rates will encourage greater use of the telecommunications network and more
competition among telecommunications providers.
As a result, the FCC is committed to developing settlement rate policies that reflect
diverse national market structures, more flexible policies for competitive markets, and
stronger measures to reduce accounting rates in monopoly markets. To advance our reform
efforts, we also support new services such as international simple resale, country-direct and
call-back services, as alternatives to the accounting rate system.
During the process of reforming the accounting rate system, we recognize the potential
adjustment problems for foreign carriers that could result from an immediate shift to more
cost-based settlement rates. Accordingly, the FCC has proposed a transition schedule for
negotiating settlement rates within the benchmark ranges that is based on a country's level of
economic development. Under this schedule, countries at a more basic level of
telecommunications development would have a longer period to reach the benchmark ranges.
We would also be flexible beyond this transition schedule where countries demonstrated an
actual commitment to introducing competitive reforms.
Another example of the FCC's international role is the recent completion of the
World Trade Organization agreement on Basic Telecommunications. There, many nations of
the world endorsed a blueprint for the construction of the Global Information Infrastructure.
In the WTO agreement, 65 countries have bound themselves to the Reference Paper
embodying a world vision of free competition, fair rules, and effective enforcement.
The FCC plays a number of roles in the WTO process. The FCC provided technical
expertise to support the US Trade Representative and the Executive Branch during the
negotiations. The FCC will also be the agency responsible for implementing much of the
agreement through rule changes. Finally, we hope that the rest of the world can benefit from
our experience in developing regulation for a highly competitive domestic
The FCC believes that both of these initiatives, the accounting rate system reform and
the WTO agreement, will benefit all telecommunications carriers and consumers. Both
initiatives will increase the impact of market forces on global telecommunications. This
should lead to lower prices that will stimulate additional demand for international services,
expand market size, and increase revenues of both U.S. and foreign carriers.
It has been a great honor to help begin this dialogue between our two countries. Later
today, FCC staff members will provide additional information about our current activities. I
hope this exchange of information and views continues in the future. I wish you all the best
in today's events.
Thank you very much.