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"Telecommunications @ the Millennium: The Telecom Act At Four"

"Hot Links To An Open Society"

An Address by
Chairman William E. Kennard
Federal Communications Commission
to the
National Press Club
Washington, D.C.
February 8, 2000

(As Prepared for Delivery)


Thank you, Jack, for that introduction, and I thank the National Press Club for the opportunity to address your members.

Four years ago today, President Clinton stood in the Library of Congress, and with the stroke of a digital pen signed into law the Telecommunications Act of 1996. On that day, he said that the new law would "enable the age of possibility in America to expand to include more Americans." He called the new law "revolutionary" and said that it would "bring the future to our doorstep."

Today, on the fourth anniversary of the Telecommunications Act, I am pleased to report that the Act is working.

The American telecommunications consumer today has more choices of providers and services, at faster speeds and at lower prices, than ever before. This is truly the beginning of a new era in which high-speed, broadband access will be as ubiquitous as the dial tone is today.

And the 1996 Act has had a direct hand in bringing about this new age. Because of the Act, Americans are using telecommunications services in their daily lives now more than ever. And most important, the Act is helping to transport our economy into the digital Information Age.

Today I want to review our progress. I want to outline how the Act is working, and how it will bring even more exciting benefits to the American public in the future.

I also want to talk about some of the benefits of the Act that you do not hear enough about: how the Act is working to bring technology to our schools and libraries; how it is ensuring that people with disabilities are full participants in the digital economy; and how it is working to connect the poorest, most remote regions of our country.

Last week I was in Europe for a round of meetings with my counterparts in government.

Meeting with my foreign colleagues is always an interesting experience for me. There is often an interpreter at these meetings, and at the start of the meeting the interpreter will say, "His excellency, the minister, is pleased to meet you. He is honored that the esteemed Chairman of the Federal Communications Commission has sent his youngest son to meet us."

They think I'm a kid.

But seriously, what I find most interesting about these meetings is how my perspective changes when I see America through the eyes of others.

A year ago, when I visited Europe, I set out to explain how the Telecommunications Act of 1996 was creating the conditions for competition in our telecommunications sector.

Last year, they listened politely.

This year, they took notes.

The difference is that this year countries around the world have awakened to the miracle of the American model for unleashing competition in telecommunications. The networks we have created in this country are the envy of the world. And the whole world is watching.

In fact, in one meeting, one of the French ministers preempted me.

Even before I could outline the core of my agenda for 2000 - - what I call the ABCs: Access, Broadband and Competition - - - he leaned toward me, as if we were about to share a state secret, and said:

"I would like to hear more about your A-B-C's."

I thought he was reading my mind.

It turned out he was just reading my speeches . . . on the Internet.

That experience told me that all of us are truly living in a global chat room.

And the fundamentals of creating consumer benefits through competition, embodied in the 1996 Act, are being replicated around the world.

Why? Because competition in the United States is delivering more telecommunications services at lower prices and creating unprecedented investment and job growth in every sector of the communications industry: in wireless, wireline, local and long distance, video and, of course, the Internet.


These results are due to the wisdom of the Act, as passed, and also due to the implementation of the Act by the FCC.

The core features of the Act are that it ended the monopoly franchise of the traditional local telephone companies, and it gave the FCC the power to break open these local markets to competition.

The Commission has gone to great efforts to implement the Act in a manner that is balanced and fair, while it is also aggressively pro-competitive.

The local telephone monopoly is 100 years old in this country, and it is a $100 billion market today. It takes enormous effort to inject competition into it.

Moreover, it takes a strong, independent agency that is technology neutral and that can stay focused while a constant hurricane of special interests swirls around it.

Senator Hollings likened our effort to trying to take a drink out of a fire hose.

Over the last four years, the Commission has been prudent in its restraint as well as in its actions.

The Commission wisely withheld regulation of most advanced services, while making sure that certain features, such as the ability of one company to deliver broadband to the home over the same line that another company is using to provide basic telephone service, are available to all competitors and incumbents alike.

Similarly, we refused to apply legacy-style regulations to the new service of cable access to the Internet, relying instead on market incentives to keep multiple paths open to the Internet.

At the same time, we have employed the Act to aggressively open up the local telephone service market to competition.

And the results are impressive.

I am releasing a report today, entitled "Telecommunications @ the Millennium: The Telecom Act Turns Four," that summarizes this phenomenon.

Here are the results.

Wireless Competition

Wireless competition has exploded across the country.

Wireless technology will carry more than ten percent of all U.S. voice traffic this year, as cell phones migrate from the executive suite to the home and the shopping mall and the teenager's pocket.

In 1993, there were 15 million wireless phones in America. Today, there are 80 million.

Since 1994, the average wireless bill has dropped 40 percent, and subscribership has increased four-fold. Seventy-five percent of Americans have a choice of five or more wireless carriers.

What does this mean? It means that millions of Americans are safer on our highways. It means that millions of American parents sleep easier because their kids can call them from anywhere, at anytime.

Long Distance Competition

In the long distance market, competition has been growing steadily since divestiture of AT&T in 1984.

Domestic long-distance rates dropped nearly 56 percent in real terms since 1984, saving consumers about $200 billion. Some companies are offering services for as low as five-cents-a-minute.

What does this mean for consumers? It means that long distance service is no longer a high-priced, carefully rationed service in most American households. Like it was when I was a kid and we were only able to call my grandmother long distance once a week on Sunday for 15 minutes.

It means that today in America, parents can afford to give their kids in college personal 800 numbers. It means that millions of American businesses pay less for long distance than ever before.

And FCC policies have driven down the cost of international calling rates as well, by 27% from 1996 to 1999. In 1997, an AT&T call to Japan cost 47-cents-a-minute. Today it costs 16 cents.

This means that millions of Americans who call friends and relatives abroad can stay in touch at a fraction of the cost.

Local Telephone Competition

Competition in the local phone market is growing. Our biggest challenge in the coming months is to accelerate competition in this sector. Too many Americans still have only one choice in local residential phone service. But the data show encouraging trends.

Already about 130,000 cable customers get telephone service from their cable company. Some predict that by 2005, nearly 50 percent of all American households will have this option, a direct benefit of the 1996 Act.

The Telecom Act has created a whole new industry - companies created to compete against your traditional local phone company. It is an alphabet soup of new carriers, called CAPs and CLECs and DLECs. In the past year, the number of new competitive local phone companies operating their own networks doubled from about 150 to over 300. These companies are adding about a million lines a quarter.

Local competition is where long distance competition was 20 years ago, but the local market will reach the same competitive level as today's long distance market much more quickly.

Video Competition

In video competition, cable rates are still too high, and we need more competition, but there are encouraging signs. Late last year Congress passed an important law to allow satellite carriers to carry local programming, making satellite delivery more competitive with cable.

Here again, the trend is encouraging. Our report documents that two out of every three new video subscribers now get their video from non-cable sources, such as satellite.

The Internet

By creating the conditions for new investment in our networks, the 1996 Act accelerated the growth of the Internet. In 1992, there were fewer than five million on-line users in the United States. In 1996 there were 27 million. Today, there are 80 million. No communications technology has grown faster in the history of the world. That growth would not have been possible without the pro-competitive environment created by the 1996 Act.

Internet traffic is doubling every 100 days.

Over 40 percent of American households have Internet access.

In 1998, the U.S. Internet economy was a $633 billion market, accounting for nearly 8% of the nation's economy and 4.8 million jobs.

And electronic commerce, which will be 90 percent business-to-business, is projected to be a trillion-dollar activity in the next three to five years.

Already, directly or indirectly, through our information and telecommunications sectors, the Internet is linked to one-third of our nation's economic growth, decreasing costs, and contributing to the lowest level of inflation in many years.

But these figures do not, of course, adequately express what it is like

to live in America at the dawn of the Internet.

We file our taxes over the Internet. We apply for jobs over the Internet. We check the movie times and reserve seats of airplanes over the Internet. We even fall in love and get married over the Internet. (Although no one has determined what the divorce rate is.)

And the Internet as we know it is only about six years old. The 1996 Act helped to make the Internet as we know it possible, and the Internet is all about new possibilities.

As we build on the success of the 1996 Act, I want to talk about some of the possibilities.

The Broadband Internet Age

Our challenge now is to build on the success of the 1996 Act in a way that keeps the engine of competition and innovation humming, and that allows markets to transition to the next stage

That next stage is about investment in the infrastructure that will make the Internet go faster, and that will usher in the Broadband Internet Age.

Americans are excited about the Internet, but they are ready for it to

speed up. The average Internet user spends 25 hours a year waiting for websites to download.

Most Americans access the Internet through one device: the desktop PC. That will change with the Broadband Internet Age.

The Internet will migrate out of the PC, and be integrated into many more aspects of our daily lives: into handheld devices like Palm Pilots, into our cars, and even into our appliances.

One big challenge for the FCC is to make the airwaves available for this transition to take place. And that is why the Commission is pumping more spectrum into the market to make possible more wireless devices to access the Internet: wireless laptop computers; wireless Palm Pilots; and more wireless phones. An upcoming Commission auction this spring will make spectrum available for new wireless services by transitioning analog broadcasting spectrum to digital technology.

I envision a network of networks, with multiple broadband platforms, giving American homes the option of many digital services, including cable, DSL, wireless, satellite, and broadcast.

Already broadband technology is spreading. Today 1.7 million customers connect to the Internet at speeds at least 25 times faster than the standard modem. But this is just the beginning.


The Broadband Internet is changing our favorite mass medium - television.

No longer will television be a passive, one-way medium, although there will still be times when we want to sit and be entertained.

Rather, today's analog television is evolving into an interactive medium that has the digital agility of a computer, but the display quality of a movie theater. And, it will be able to be summoned on demand.

This combination television and computer will be a multimedia source of news, information and entertainment, and will offer viewers program choices and control that would have been unthinkable only a few years ago.

The power of this new technology is that it creates your own personal television.

I call it IPTV, for "Interactive Personal TV."

It is going to change the economic models for the broadcasting and cable television industries. They are becoming Internet companies, as well as digital video providers.

But right now you cannot buy an IPTV at Circuit City that will work with your cable TV system. The equipment manufacturers and the cable industry are at a standards impasse.

If they do not resolve their differences on their own, the Commission will. Consumers cannot wait much longer.

The Unappreciated Story

You know, it is a very exciting time for consumers today. Everyday, the newspapers report about how technology is changing our economy and our lives.

The headlines are filled with news about IPOs and Dot.Com companies and instant fortunes being made in the new digital economy.

This whole new economy, in fact, is being defined principally by its power to unlock the potential of markets, to transform retailing, to make businesses more profitable and to create unimaginable wealth for a privileged few in our society.

But I believe that this new economy means much, much more. This new economy should be defined, first and foremost, by its power to unlock the potential of all of our people -- by its power to educate our poorest children, to empower people with disabilities, to uplift rural and inner city communities and to repair and revitalize the fabric of our communities. Only then will America realize the true power of this new economy.

As the numbers in our report demonstrate, the Telecommunications Act has turned in a truly amazing economic performance.

But the significance of the 1996 Act is much more profound than facts and figures.

It is a family, held together because both parents have productive jobs in the new information economy.

It is a child at a terminal at an Indian reservation school, a hundred miles from anywhere, getting that first glimpse of a world at her fingertips.

Because of the vision of Vice President Al Gore, and the persistence of lawmakers like Senators Jay Rockefeller and Olympia Snowe and Bob Kerrey, and Congressman Ed Markey, we have the e-rate program, which has connected almost one million public school classrooms to the Internet and seventy percent of the schools under the Bureau of Indian Affairs.

The 1996 Act also is keeping communities intact because it allows small, store-front businesses to access global markets. By the power of telecommunications, these businesses can now reach out across continents and oceans and capture customers a dozen time zones away.

The Act also is the deaf person who is able to enjoy television because of closed captioning. The 1996 Act requires that, over the next decade, TV stations make their programs accessible through captioning.

Before I close, I would like to introduce two individuals who are examples of the success of the 1996 Act.

Pat Wallace is with the State of Maryland's Sailor Project, a program to bring the Internet to the state's libraries. She has been so successful in using E-rate funding to expand the libraries' bandwidth links to the Internet that use of the library web sites will double this year.

I also would like to introduce Teresa Hopkins, a Navajo tribe member who has worked extremely hard to increase telecommunications services to the Navajo reservations.

The 1996 Act is about opening up, not just markets for consumers, but also opportunities for health, education and making a living for all Americans.

Pat and Teresa are the real foot soldiers who are making the new digital economy work for all Americans.


What will communications leaders say from this podium a hundred years from now?

They will say that at the end of the twentieth century, a corner had been turned.

. . . that the dream of a network of competing networks became a reality.

. . . that high-speed connections to every American home were on the advance.

. . . and that the web of networks became a support system that lifted the American people to new levels of opportunity and openness.

They also will say that late in the 20th century a sleepy, backwater agency called the Federal Communications Commission, described by some as a New Deal dinosaur from the 1930's, came to life, reinvented itself, engaged the future and helped to launch our nation into the Broadband Internet Age.

Thank you.