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Federal Communications Commission

Before the
Subcommittee on Communications of the
Senate Committee on Commerce, Science and Transportation

253 Russell Senate Office Building
Washington, D.C.
March 25, 1998

Mr. Chairman and other distinguished members of the Senate Subcommittee on Communications:

Thank you for inviting me to be here this afternoon. I am grateful for this opportunity to share my views on promoting telecommunications competition. The Telecommunications Act of 1996 mandates that we remove regulatory restraints and ensure that the Bell Operating Companies have satisfied local market-opening requirements before obtaining authority to provide long distance service within their regions. This is one of the most important tasks that Congress delegated to the Commission in the Telecommunications Act of 1996.

I share the concerns expressed by some on the Subcommittee and elsewhere that there has yet not been a successful application for long distance entry. I, too, am disappointed that this is where we are, but I am not entirely surprised. The Act's goal of promoting competition in local and long distance markets is a lofty one, and achieving that goal is exponentially more difficult than any previous deregulation effort. To deliver the promise of the Act, we will need to redouble our efforts to unravel a regulated system that has been viewed as a legal and natural monopoly for almost a century.

I also accept that the Commission bears some responsibility for the fact that no Bell Operating Company has been able to obtain long distance authority under sections 271 and 272 of the Act. The Commission's approach, until recently, has not yielded the degree of clarity in our standards demanded by both incumbents and new entrants alike. Specifically, I believe that the initial arms-length, adjudicative approach to implementing sections 271 and 272 was not sufficiently productive. Under that approach, the Commission attempted to investigate, interpret and provide guidance on the statutory requirements solely in the context of a single application and within the ninety days allowed for evaluating applications. This harrowing process left our talented and hard-working staff powerless either to give detailed guidance on all aspects of section 271's "competitive checklist" or to coordinate as fully with the applicants, the Justice Department and State Commissions as I believe is necessary. Only by offering clear and complete guidance to the Bell Companies about what they need to do to satisfy the statute will we bring the benefits of the Act to American consumers in the form of more local and long distance competition.

But experience is the best teacher, and I am committed to applying the lessons the Commission has learned in reviewing the first few section 271 applications. In particular, I am pleased that the new Commission, under Chairman Kennard's leadership, instituted a collaborative process for implementing sections 271 and 272, under which the staff of the Common Carrier Bureau works continuously on these issues, rather than only when an application is filed. The Bureau has been meeting informally with the Bell Companies and other stakeholders in an effort to identify and resolve some of the many complex, fact-intensive, technical issues that arise in translating the broad provisions of the Act into specific requirements that the Bell Companies and new entrants can use to coordinate their activities on a day-to-day basis. Based on these meetings, the Bureau also has begun to provide informal, staff-level guidance to the industry, thus making clearer than ever what a Bell Company must do to satisfy the statutory requirements. Some of the fruits of this effort are summarized in the attachment to Chairman Kennard's March 20 letter to Senators McCain and Brownback regarding section 271 issues.

I have supported this approach, having seen the limits of the more adjudicative approach while serving at the Justice Department and at the Commission. Indeed, the importance and urgency of section 271 issues prompted me to outline my preference for more collaboration in a White Paper I released back in January. (I have attached a copy of this White Paper to my prepared testimony for this hearing.) The purpose of this paper was to help reinvigorate the section 271 process, in which I had observed companies losing faith. I also hoped to encourage a redirection of our efforts to achieve success in the section 271 process, or, as Commissioner Ness has termed it, "getting to yes."

The goal of the collaborative approach to implementing section 271 is to solve as many of the problems of checklist compliance for a given state as possible, well before an application for that state is filed. In doing so, the Commission encourages parties who wish to participate constructively to do so, while guarding against procedural "gaming" that distracts us from the difficult task of opening local markets. I am pleased to note that the general concept of having the Commission work collaboratively with industry and other governmental entities to implement section 271 has been endorsed by many others, inside and outside the Commission, as well as among the states.

I am pleased that we have received positive feedback on our new approach from representatives of the industry, State Commissions, the Justice Department and Congress. In particular, some industry representatives have commented that the collaborative meetings have enabled them and Common Carrier Bureau staff to learn from each other and to identify misunderstandings on a variety of technical issues. Further, at the urging of Chairman Kennard and others, the Bureau has begun to give informal, staff-level guidance on what Bell Companies must do to satisfy section 271's competitive checklist. I fully recognize that the new process is not perfect and that we have much more to do. Indeed, there may come a time when we may need to muster the courage to revise further the section 271 process if we find an even better way to reach our collective aim: the successful approval of Bell Company applications consistent with the requirements Congress has imposed. I firmly believe, however, that if we continue along this path of collaboration, we will be better positioned than ever to provide guidance on all of the relevant statutory requirements when the Commission issues its next section 271 order. I am thus deeply committed to giving the Common Carrier Bureau, my fellow State and federal regulators and the industry whatever support I can to make the collaborative process, which I believe has begun to work, a success.

I recognize that "process" alone will be insufficient to promote competition in local and long distance markets pursuant to sections 271 and 272 of the Act; reforming the section 271 process also requires a sea-change in the collective mind-set of both regulators and the industry. All stakeholders must commit themselves organizationally and emotionally to shift from the arms-length, sometimes combative, quasi-litigation approach we initially employed to one built around collaborative working relationships that will allow us to develop reasonable and workable solutions.

But I think this change of mind-set must be deeper still. In particular, in order to bring the deregulatory promise of the Act to fruition, I believe devoutly that all of us -- policymakers and industry alike -- must have more faith in free markets. We must accept the fact that in any competition some companies must win and others must lose. We thus must avoid the traditional tendency of policymakers to protect firms or industry segments in exchange for promised results for consumers. This promotes monopoly and not competition. It is true that risks await in free markets. But I believe that many of our fears of these risks may be inflated and may be best addressed through vigorous enforcement mechanisms, such as antitrust law. We must guard against giving in to these fears too lightly and instead have the courage to trust the market.

In my mind, trusting the market means that, in interpreting section 271 and other provisions of the Act, we must not allow the perfect to be the enemy of the good. While I believe the Commission should continue to apply rigorously the local market-opening requirements of section 271's competitive checklist, I also believe we must acknowledge that there are limits to what we can learn about how to promote competition before competition itself begins to mature. In particular, we must realize that, even in the context of the collaborative process, policymakers and industry representatives will not be able to anticipate and resolve ahead of time every possible issue that may arise as a Bell Company works with new entrants to carry out its regulatory obligations. Thus, I believe that after taking pains to prevent the important anti-competitive abuses that we reasonably can foresee, we must resist the temptation to speculate too much on additional abuses, as such speculation may paralyze us in our efforts to release the tethers of regulation and let competition roam free. Put another way, we must not allow our fears of what might happen to prevent us from allowing anything to happen at all.

Thank you for your attention to these matters. I look forward to continuing to work with members of Congress and with my colleagues on the many challenges that await us in implementing section 271, and I trust that, by working collaboratively and by having faith in free markets, we will bring the benefits of local and long distance competition to American consumers.

Thank you.