The Telecom Act at Three: Seeing the Face of the Future
William E. Kennard
Chairman, Federal Communications Commission
Comptel 1999 Annual Meeting and Trade Exposition
February 8, 1999
The Telecom Act at Three: Seeing the Face of the Future
Thank you, Lyle, for that kind introduction. Wow! This is one helluva party. I can't tell you how happy I am to be here with you today to celebrate the third anniversary of the Telecommunications Act of 1996. I can't tell you how happy I am to be celebrating.
And you should all know that Lyle is not just a great party planner. As chairman of Comptel, he has been one of the most forceful and committed advocates for competition that I have seen. I want to thank you, Lyle, for your terrific year as chairman of the board of Comptel. You should be very proud of what you've accomplished.
Now, for those of us in the telecom community, there is one native of Baltimore whose name is said in the same revered tones usually used for Cal Ripken - that is Russell Frisby.
I have known and admired Russ for almost 20 years. Russ has distinguished himself at the state, local, and federal levels, before city councils and the Supreme Court, at the FCC and in private practice. He is a friend and a great ally to have in a tough fight. I feel very fortunate to be able to work with him.
Now, I want to make some news today. I have a breakthrough announcement about one of the most important telecom mergers of our time. This merger affects everyone in this room. I have studied this merger, and after much thought I believe that this merger is very pro-competitive.
So, I am happy to announce my approval to the merger between Comptel and ACTA.
Congratulations. Russ promised that this merger would be great for me because it would mean a bigger audience.
I want to thank you all for inviting me here to your conference in Atlanta. I do have to say that sharing the podium with Newt Gingrich is a little scary. Not only does he have wonderful oratorical skills and an incisive view of the future. But he also has the home court advantage.
One hundred twenty years ago, President Rutherford B. Hayes installed the first phone in the White House. He called it, "one of the greatest events since creation." For the first phone call, Hayes rang Alexander Graham Bell who was sitting in a room 13 miles away.
The historic words that Hayes spoke are words that have reverberated throughout the ages to politicians and public officials all over the country. He said, "Please speak more slowly." Good advice, isn't it? I'll try to follow it.
Well, we meet today on the third anniversary of the passage of the Telecommunications Act of 1996, the most important legislation affecting this industry ever passed.
The Telecom Act is the foundational document for a world where monopoly has been replaced with competition, where uniformity of service has been replaced with a multitude of choices, and where the technologies enjoyed by the privileged are available to us all.
The Act is three years old. A good time to judge our progress. On one hand, three years is not a long time. We will be judging this law for many years to come.
On the other hand, as you have seen with your own children, by three years old, the child has changed from a baby to a little person, in whose face one can see the shape of the adult that the child will become.
At its third birthday, the Telecom Act is in a similar place. We can already see the benefits that it has brought us. And we can see the shape of the new competitive world yet to come.
By every measure, the telecommunications industry is thriving. Since the passage of the Telecom Act, the communications sector of our economy has grown by over $140 billion. Stock values are up and rising.
The revenues of new local service providers more than doubled in 1997, and they almost doubled again in 1998. And this growth has meant new jobs for approximately 25,000 more Americans in the first year of the Act alone.
Your industry has been a key ingredient of this growth. One-fourth of our country's economic growth has come from the information technology sector. You have enriched our nation and enriched our lives. For this, you should all be proud.
This growth has touched the lives of almost every American. Now, average American families across this nation have a choice of a vast array of high-tech communications services, services that now cost less.
Taking a call while driving to work or at a ballgame is the norm today for the 61 million Americans who now have mobile phones. And they use those phones to make calls that cost 40 percent less than three years ago. Calling friends and family across this nation has gotten cheaper and cheaper as the choice of providers has risen and the market has moved from monopoly to competition.
Sending an instant message to a relative half way around the world is routine for the 25 million households now on-line.
And as more and more Americans go on-line, so has American commerce. In 1998, 26% of retailers had a website, over three times the number in 1996, and it is estimated that they did over $10 billion in sales. It is no surprise, then, that last year, for the first time, data traffic eclipsed voice traffic on phone lines.
The telecom industry is changing, changing fast, and changing for the better. And this is happening because of one thing and one thing alone: competition.
When figuring out what sort of telecommunications framework to establish for our country as it entered the 21st century, Congress wisely reached back to a value as old as America itself: choice. The idea that once given an array of options, individuals can best decide what is best for them. Thus, Congress gave the FCC the tools to break open monopoly markets to competition.
Other countries tried different things. In Great Britain, they decided to clone the monopoly they already had. The result: a duopoly. Better than a monopoly. But as you all know, not really competition, and not good enough.
In New Zealand, they took another route. They turned to the court system for the answer, deciding to let the antitrust laws open markets. The result? Their markets got bogged down in an ocean of litigation. They are now only just recovering from this decision.
Here in the United States, I believe that we have a better model. It's a model that recognizes that the transition to competition is needed, and it does not happen overnight. It requires hard work.
It's a model that recognizes that our shared aspirations for a strong community based on the value of equal opportunity are not entirely met by market forces. That we must have a strong, independent regulatory system to pry open markets and keep them open.
This system works. Your industry is proof of that. Consumers are discovering that it works every time they pick up the phone. And, thank goodness, we now know that the United States Supreme Court believes that it works too.
We would not have scored this victory if not for the help of people like you. I want to thank the terrific team at Comptel for consistently supporting our efforts in the courts.
But the time for litigation is past. It's time for consumers, not lawyers, to shape the outcome in this marketplace. It's time to bring the effort out of the courtroom and into the marketplace. It's time to end the legal uncertainties. It's time to move on.
Now that the courts have upheld most aspects of the FCC's implementation of the Act, we must ensure that the Supreme Court's recent decision produces momentum to the market-opening mandates of the Act. Not more delay. Not more confusion.
First and foremost, that means making sure that each of the three pathways to competition spelled out in the Act is open: facilities-based competition, resale, and unbundled network elements.
We know that the Supreme Court's decision requires the FCC to revisit one of these pathways -- the FCC's interpretation of which elements must be made available to competitors. We must not allow uncertainty on this point to slow the momentum toward competition.
So I am pleased to announce today that each of the regional Bell operating companies and GTE have agreed to fulfill their current obligations -- as set forth in existing interconnection agreements -- to provide unbundled network elements while the FCC revisits its interpretation of this key provision of the Act.
The law requires all of the stakeholders to cooperate. It requires parties to negotiate on interconnection and collocation. It requires state and federal regulators to collaborate. So the irony of this Act is that cooperation is the prerequisite to competition.
So I welcome these good faith gestures of the incumbent carriers. This pie is big enough for everyone to have a slice.
Second, now that the Supreme Court has given us greater clarity on these major outstanding issues, we must move forward immediately to settle any remaining ambiguities. So I am committed to finalizing the standard for the network elements by early summer. We've got to put this matter to rest. The marketplace needs stability.
And I will continue to link arms with my colleagues in the states to implement the Telecom Act in a fair, clear, and pro-competitive way. We now have three years of experience on which to build the future. It's a strong foundation, and together, we are going to complete the job that Congress gave us. And we will move quickly.
Make no mistake about it: the cost of delay is great. The cost of maintaining monopoly markets is great.
Last week, I saw an article in Time magazine which really brings this point home. In Europe, the high-speed phone lines that are the foundation of the Internet - are astronomically expensive. Companies are marking up cross-border links from 99% to 607%. They are extracting monopoly prices.
Prices are so high that many companies in Europe are routing their data traffic through this country even though they are sending information no further than the distance from here to Jacksonville, Florida. I'll bet they are using some of the companies in this room. That's a good thing for them, but it's not so good for the European economy.
One executive called it "a drag on the whole industrial growth of Europe."
Compare this to our country. Because of companies like yours, we are building the information infrastructure that enables all of us to boost our efficiency and build on our prosperity.
Is it any wonder that we are now enjoying the longest peacetime expansion of our economy in history?
This Act is working. Thanks to you. You have been on the front lines, battling to open markets and bring choice to American consumers.
More and more choices are being made available to the American people, and competition is what is bringing it to them. Competition is our future, and it is my priority to nurture it during this third year and in the years to come.
But like raising any child, this will take a lot of work. And this year, there is much to be done.
This year, we must focus on the challenge of bringing high-speed, broadband Internet access to all Americans.
Right now, of the 25 million US households who are on-line, about half a million have cable modems linking them to the Internet, and only about 50,000 households have DSL service.
Today, virtually every American who wants to download a movie or a new CD finds that the world-wide wait is longer than the wait at the mall.
E-commerce will do great things for our economy. But we can only realize its full potential, if all Americans have high-speed access to the Internet.
We need to create an environment in which advanced services, like the Internet, can flourish. To do this, we will move ahead with the new rules under Section 706 of the Act to make sure that the incumbent's network is open for the introduction of competitive services.
This year, we also must take steps to continue our transformation from monopoly to competition.
We need to reform access charges in a way that is pro-competitive.
We need to devise a universal service program that is competitively neutral. It's only bias should be to favor the most efficient provider with the most cost-effective technology. Consumers must be the principal beneficiaries of universal service, not telephone companies.
And we need to get that reciprocal compensation order out very soon.
As we bring greater clarity to the rules, we must enforce them with vigor. I am committed to making enforcement mean something at the FCC. Already, I've announced that we plan to create an Enforcement Bureau at the FCC.
And last year, we created what we call the "Rocket Docket" -- a way to handle complaints much more quickly. Because we know that for competitors like you, justice delayed is justice denied. Already, by speeding up the enforcement process, our Rocket Docket has brought the warring parties to the table, and cases are getting resolved faster than ever -- often in a matter of days.
Finally, we need to continue to level the playing fields of competition so that the advanced technologies that fuel our economy and excite our imagination can be found in every school, every library, and every home in America.
We need to create a telecom system that reaches all Americans - the young as well as the old, those with every advantage and those with special needs, families in our cities and in our countryside.
This is the agenda for 1999 -- to fulfill the promise of the Telecom Act. To unlock the promise of the Information Age.
As we look to the future of the telecommunications industry, I can't help but think about a story from its past.
When the telephone industry first began, Alexander Graham Bell had his own idea about how people should answer the phone. He wanted people to say, "Hoy, hoy" when they answer the phone. Really. He did. Instead of "Hello," he wanted people to pick up the phone and say "Hoy, hoy."
Now, Thomas Edison, who was hired by an early rival of Bell's, had another idea. An idea as sensible as the electric lightbulb and as elegant as the phonograph.
He wanted us to pick up the phone and say, "Hello."
The fight over how to answer the phone was one small part of a much larger battle among competitors in the early phone industry. In the early part of this century, there was a brief, shining moment when we had phone competition.
As we know, this conflict ended when the government acquiesced in the creation of a telephone monopoly. And by 1913, competition in the phone industry, an industry which was seen as a dynamic part of our industrial economy, had been eliminated.
It took us awhile, but we have now embraced a new course, a better course -- a course to bring competition to our telecom markets here at home and around the world.
And I am convinced, that the course we are on will lead us to a future where monopoly will surely go the way of "hoy, hoy." We need to stay that course.
Thank you, Comptel, for being out there in the marketplace, fighting to bring new services to America.
This is your party. And as we blow out these candles today, my wish for the coming year is a fourth anniversary of the Act that is even bigger and better for me, for you, and, most importantly, for the American consumer.