FCC CHAIRMAN WILLIAM E. KENNARD
ANNUAL CONVENTION OF THE
NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS
NOVEMBER 10, 1997
(As prepared for delivery)
It is a great honor for me to be able to deliver my very first speech as FCC Chairman to NARUC's Annual Convention. I am delighted that NARUC asked me to be here today.
Being in Boston, I am reminded of Tip O'Neill, who used to tell the story of his first campaign for public office. He was a senior at Boston College and he ran for a seat on the Cambridge City Council.
The day after the election, his neighbor told him she voted for him -- even though he hadn't asked her to.
Tip said, "I've lived across the street from you for eighteen years. I shovelled your walk in winter. I cut your grass in the summer. I didn't think I had to ask."
She said, "Tip, people like being asked."
So thank you for asking me here today -- to make my first speech in my new job. There is perhaps no organization that is more important to the FCC in meeting the challenges that we face in the next few years than NARUC, and I am delighted and thankful to be here.
I am also thankful to those members of NARUC's leadership who reached out to me during the confirmation process to help educate me on your perspectives on a number of important issues. My longtime friend, Russ Frisby, Bob Rowe, Lynn Butler, Cheryl Parrino and Julia Johnson, in particular. And of course, Peggy Welsh and Brad Ramsey of NARUC's Washington office. I thank you for your help.
I would also like to congratulate Bruce Ellsworth on a very successful tenure as President of this organization. Bruce, you've kept a steady hand at the helm through rough seas and you should be proud of your achievements.
And congratulations to Lynn Butler upon taking the gavel from Bruce. Lynn, we are both taking on new jobs, and I'll say to you what a lot of people have been saying to me these past few months: I can't imagine why you want to take this on, but if this is what you want, congratulations and I hope you enjoy it. Lynn, you've been a wonderful friend to the FCC during my tenure as General Counsel, and I couldn't be more delighted that we are embarking on this new challenge at the same time.
And what a challenge it is -- the challenge to replace monopoly regulation with competition. It will be remembered as a pivotal time in the history of telecommunications.
At another pivotal time in history -- 1942 --- Winston Churchill went before Parliament to announce that the British had won the Battle of El Alemain. Now, this was a crucial time during World War II. The Allied forces had won their first major victory against the advancing Nazis. The tide had begun to turn. And the British people felt -- for the first time -- a sense of hope that the War could be won. Churchill went to Parliament and said that the world had come to "the End of the Beginning."
I believe that we have reached a similar place in telecommunications. We have reached the end of the beginning of our journey from monopoly regulation to competition.
Here, at the end of the beginning, much has been accomplished. The states have handled hundreds of arbitrations over interconnection agreements. The FCC wrote new rules on interconnection, universal service, and pricing levels and structures for access charges. States are addressing these same issues, and in addition, states have actually set prices for interconnection and network elements between competing carriers.
Much has been accomplished. We all know that there is much to be done. But the theme that runs throughout all of these efforts is that they all require that the states and federal government work together.
Cheryl Parrino once likened the Telecommunications Act of 1996 to an arranged marriage between the states and the federal government. That reminds me of a story about another marriage. About a husband and wife. The husband becomes very ill so he and his wife go to the doctor. And after examining the husband, the doctor takes the wife aside and says, "Ma'am, I am sorry to have to tell you this, but your husband is very, very sick. And I am afraid that you are the only one who can save his life."
The wife says, "Doctor, what must I do to save my husband's life?"
The doctor says, "Well, you must see that he gets lots of rest every night. Wake him
gently each morning and fix him a hot breakfast. Send him off to work with a kiss. Make sure
he comes home for lunch everyday. Greet him at the door with a kiss and have a hot healthy
meal ready for him. Then you must do the same each evening at dinnertime. Relieve him of all
household chores. And each evening, rub his back before he falls off to sleep."
So the husband and wife are on their way home from the doctor's office, and the husband
says, "So what did the doctor tell you about my condition?"
She looks at her husband and says, "I'm sorry, baby, but you ain't gonna make it."
Well, I think we will make it. I believe that by working together -- state commissioners
and federal commissioners -- we can make this transition from monopoly to consumer choice
work for the American people.
The Telecommunications Act of 1996 calls upon each and every one of us to make this
transition work for the American public. All of us, state commissioners and federal
commissioners, share the common bond of dedicating our lives to serving the American people.
As we, the public's stewards, proceed to implement that statute, I believe we should be guided by
three fundamental principles: competition, community and common sense.
Competition is the cornerstone. Many people argue over the best way to get there, but the
need for competition is beyond question. During the weeks before I was confirmed by the
Senate, not one Senator or member of Congress pulled me aside to extol the virtues of natural
monopoly. The era of monopoly is over.
This is true whether you are buying a car, a pizza, a microwave, or a cellphone. Choice is
the engine of our democracy and our economy. And in no area do the American people demand
it more than in telecommunications. That's our job.
But choice cannot reach only businesses downtown. Choice ultimately must be available
to all Americans, at work and at home, in our cities and in our rural communities.
The second principle is community. The American people want competition and choice,
but they want more. They want communications technologies to help build communities -- all
communities. Whether you live in a bustling metropolitan area, a rural community, or a
distressed inner city, communications technology should provide you and your community with
the same opportunities and the same benefits.
We cannot allow the information highway to bypass rural America.
We cannot allow the Information Age to benefit some Americans more than others.
The American people are counting on us to ensure that the communications revolution
includes everyone -- particularly America's children.
By the year 2000, sixty percent of the jobs in the country will require computer skills.
That's three years away. We must help to ensure that all of America's children are prepared to
compete in the Information Age.
You know, there's a story of a man who gets lost in the desert. And as he wanders
through the desert, he comes upon a Bedouin who is loaded down with goods. The man is lost
and desperate, so he asks to buy some water.
The Bedouin says, "Sorry, I don't sell water, I sell coats. I can sell you any kind of coat
you want -- cashmere, wool, tropical blend."
The man stumbles on. He's becoming parched and desperate. He comes upon yet
another Bedouin loaded down with goods. He says to the Bedouin, "Please sir, please, can you
sell me some water."
The Bedouin says, "No can do. Don't sell water. But I can sell you a necktie. See all
those neckties? I've got silk ties, wool ties, knit ties -- anything you want."
The man moves on, lonely and afraid. The sun is scorching hot. At last, he comes upon a
beautiful oasis, rising from the sand dunes. There is a beautiful palace there, and beyond a
guarded gate, he sees a beautiful fountain of sparkling water. He staggers up to the guard and
says, "I'm dying of thirst, sir, please let me in to have a drink!"
The guard says: "Sorry, sir, but you need a coat and tie to get in."
In the smorgasbord of 21st century jobs, the coat and tie that will get American workers
access to the American Dream is telecommunications.
That is our business.
We cannot leave our nation's children unprepared to make it in the economy of the
The third principle is common sense. As Chairman of the FCC, I will strive to ensure
that the FCC always acts with common sense. Common sense means writing rules that are clear
and understandable and deal with real problems. It means finding practical solutions to
problems. And it means forging a relationship between the FCC and the states that allows us to
Let's be candid -- acting alone, the FCC cannot deliver the choice and universal service
promised by the 1996 Telecom Act. It's always been true that the Act's success at delivering
both choice and universal service for all Americans depends on your actions.
The Act will succeed as you arbitrate and enforce the right rules. And it will fail if you
don't. In some areas, the FCC can help with its own rules, and in some areas our role is to give
advice and guidance.
Of course, for many of you, passage of the Act only ratified your own views and work.
After all, many of you began the process of creating local telephone competition even before
there was real hope that the 1996 Telecom Act would actually pass. Illinois, Michigan, New
York, Florida, California, and many other states pioneered laws to open up local telephone
And you all continue to do so.
It is the states that set prices for interconnection and network elements between
It is the states that in the first instance are grappling with the issues of how to create the
pro-competitive infrastructure for competition that, in telecom-speak, is called "OSS".
And it is the states that will ultimately receive and carry the greatest burden for
adjudicating disputes between competing carriers.
These are difficult problems. And common sense requires that we work together to find
the best solutions.
Have we seen eye to eye on every issue raised by the 1996 Act? No, we haven't.
Have we had our differences on jurisdictional questions? We have.
But should we let these differences slow the momentum toward competition? Common
sense says, No. We simply can't afford to slow the delivery of competition to the American
I look at it this way. The statute gives each of us pieces of the puzzle to solve.
Too often lately we have both been focused too much on who gets to solve which pieces
of the puzzle, and too little on fitting all the pieces together -- or even identifying the pieces.
Let's leave these disputes to the courts, and move on to the task of identifying the pieces
and putting the puzzle together, so we can devote our limited resources to delivering on the
promise of competition for the American people.
Where the courts have said that the FCC holds the piece of the puzzle, we at the FCC
should turn our attention to providing advice on what the piece is and where it goes. That's just
Now, if there is a piece of the puzzle that we both hold, we can at least do more to discuss
in advance what it is and where it goes. Respectful debate is healthy. It can ensure that we both
stay focused and find areas of common ground.
When the states and federal government do find common ground, it makes for a very
A Magna Carta for Competition
Almost 800 years ago the English barons forced King John to meet at Runnymede and
negotiate a set of principles dividing powers. That was the Magna Carta.
Today, I'd like to propose that we set out to create a Magna Carta for competition. Our Magna Carta should not just be limited, however, to grand principles that are
indisputable only because they are vague. We need first to define the problems we are tackling,
and then move on to outline the solutions to those problems. If all of us, or at least most of us,
are diagnosing the same diseases, we will be much closer to agreeing on cures.
We need a Magna Carta for Competition. A blueprint, if you will, which sets forth our
Here are a few of the problems and challenges that we face.
First, interconnection requirements.
All of us would agree that we are unlikely to see competition -- choice for consumers --
arrive anytime soon if new entrants cannot easily exchange traffic with incumbent telephone
companies. A carrier that cannot interconnect with the largest network that presently serves
nearly 100% of the population will never meaningfully get off the ground.
Second, unbundled network elements.
One of the Telecom Act's potentially most powerful provisions is its requirement that
incumbent telephone companies lease portions of their networks to competitors. Congress
learned this technique from you. Several states had already begun requiring unbundling of
I think we would also all agree that the greater the costs that must be sunk before you can
begin operating and gaining customers, the higher the barriers to entry will be. That's why it is
critical that competitors be able to lease parts of the incumbent phone company's network and be
able to obtain services for resale at adequate wholesale prices. It is easier to invest in facilities if
you already have the customers and the revenue stream to justify the investment.
Most states have reached the same conclusion on pricing that the FCC did -- that forward
looking economic cost-based prices are the most pro-competitive prices. There is much more we
could learn from each other about how these principles should be implemented. But we have to
implement these principles in a way that will accelerate choice for all Americans.
Again, I am not talking about jurisdiction, or second-guessing. I am talking about
reasoned discussion, reasonable judgments and persuasion. Common sense.
I believe that there are other areas where we could all benefit from shared experience and
For example: non-recurring charges.
That's an issue we all need to address. Are there ways to minimize the extent to which
non-recurring charges become barriers to entry? The Commission tried some innovative
approaches in its Bell Atlantic/NYNEX Order. I understand that New York in particular, and
possibly other states, have been studying the issue of non-recurring charges.
As a related issue, we all must grapple with how best to interpret the statutory directive to
provide unbundled network elements "in a manner that allows requesting carriers to combine
such elements in order to provide such telecommunications service." Does this mean that an
incumbent telephone company can significantly raise its rivals' costs of entry?
Then there is the question of creating not just fierce competition but fair competition.
How do we create the infrastructure for exchanging customers smoothly? How can we ensure
that competitors purchasing interconnection facilities, leasing network elements, or buying
services for resale can get these facilities and services up and running in a competitively non-discriminatory manner? Will a competing carrier be able to get the information it needs to order
services or elements, or to send out its bills? Will those services or elements be delivered on time
and reliably? If the service or element breaks, will it be fixed? States across the country have
been tackling these incredibly difficult operating support systems questions -- and forging
innovative and pro-competitive solutions.
Let me mention three more areas where we should work together.
I think we all agree that the current system has to end. Implicit subsidies penalize the
incumbents in the low cost markets, and discourage entry in high cost markets. But the subsidies
also cannot disappear -- to do that would threaten to isolate rural America, rural medical patients,
and our schoolchildren from having full access to the information and communications
revolution. We must move the implicit subsidies into competitively neutral, explicit subsidies.
Enforcement -- not who, but how.
Whatever the scope of claims that are within our respective jurisdictions, we need a set of
best practices for timely, fair and sure resolution of complaints.
Finally, rural America.
We have all heard reports of loops that are of such poor quality that they can't even
support a 2400 baud modem. 2400 baud! Compare that with the nearly 56 kilobits per second
performance you get in areas with up-to-date networks and off-the-shelf modems. That puts you
in the information Dark Ages. Instead of the information superhighway, it's the information dirt
We need to exchange the information we have on the state of our networks -- where there
are superhighways, two lane roads and dirt roads -- so that we can improve our understanding of
the rural infrastructure and find ways to ensure that the Internet really can be reached and used by
There are many different ways we can pursue a Magna Carta for competition, some of
them formal and some informal. I would like to see us pursue greater informal joint information
sharing on all the topics we have of interest.
But we will also need to forge especially close relationships as we move forward on the
proceedings that move quickly under tight statutory deadlines. The FCC must decide one
pending 271 petition by the end of the year, and another by early February. The Commission
also has pending before it LCI's petition for rulemaking on reporting requirements and
performance standards for operational support systems and interconnection.
We also must finish work this spring on a means for calculating the forward looking
economic cost of providing universal service.
The Commission will address the difficult issues of under what circumstances pricing
flexibility for interstate access charges is appropriate. This is a question of when, not whether,
greater pricing flexibility should be permitted.
We also must move forward on access reform for non-price cap carriers.
We also all face the difficult task of separations reform.
And we will, in the coming months, open an inquiry into the state of access to advanced
telecommunications across the country, especially in rural America. And we will be looking to
see whether there are additional ways to promote deployment of those advanced services.
Each of these proceedings will be an opportunity for us to work together to build a new
blueprint for competition in telecommunications: a Magna Carta for Competition. I am
confident that if we work together, we can succeed.
The Magna Carta became the blueprint for movements that changed the course of history.
Our own American revolution, born in this very city, was a revolution descended from that great
I must admit though, as I begin my term as Chairman of the FCC, I have spent less time
thinking about English history than about personal histories -- the history of my own family.
My father grew up in Los Angeles, and from the time he was a little boy, he dreamed of
designing buildings. He fought in Europe in World War II, and thanks to the GI Bill, he went to
college and became an architect. He loved to design buildings that brought people together. He
loved to design churches and synagogues, hospitals, libraries and housing projects. He loved to
build buildings that in turn built communities. And much of his work involved rebuilding
communities in California destroyed by the riots. In his life, he won many awards for using
architecture to improve communities, especially lower income communities. He always believed
that one's work should be weaved into the fabric of building communities that reach out to
everyone of all colors, leaving no one behind, and promoting values that enrich our souls -- not
just our pockets.
My mother grew up in Tulare, California, a small rural farm community in California's
agricultural core. She grew up playing with the children of migrant workers, and from them she
learned to speak Spanish at the same time that she learned English. She also learned from them
lessons that shaped the course of her life. After college, my mother earned an advanced degree
in bilingual education and devoted her professional life to teaching English to the huge
population of non-English speaking students in the Los Angeles School District.
I remember growing up and watching the joy that my mother gained from helping those
kids from around the world learn English, so that they would have a fair chance to enjoy the
wonderful opportunities of our country.
My mother learned early in her life the value of breaking down barriers to
communications. She learned the power of communications to bring people of different
backgrounds together. She saw intuitively the link between being able to communicate and
achieving success in our society.
Two very different stories.
But what I remember about both was how much they enjoyed their work.
There's a story about Christopher Wren, the great English architect, who went up to three
workmen on one of his projects and asked them what they thought they were doing.
The first one said, "Laying bricks."
The second said, "Making a wall."
The third said, "Building a cathedral."
My parents never thought they were just designing a building or teaching a class. They
believed they were building community.
And so are we. All of us in government share that commitment.
Competition. Community. Common sense.
The world is watching. If we can truly demonstrate that it is possible to achieve robust
competition and meet universal service concerns, we will demonstrate to the world that there is
nothing to fear from open markets.
If we can be guided by common sense when it comes to the issues that divide us, we will
open the door not only to an explosion of growth and choice in telecommunications products at
home, but around the world.
That's how we build the brightest telecommunications future for America. I am confident
that we will.
Thank you for having me here today. I look forward to working with you.