text version

Federal Communications Commission
Before the
America's Carriers Telecommunications Association
McLean, VA
December 15, 1997

(as prepared for delivery)

Good afternoon. I am delighted to be here today with you for my first speech as an FCC Commissioner. I enthusiastically accepted your kind invitation because I believe very strongly that one cannot understand where we are in this herculean effort to move from regulation to competition, without hearing the stories and experiences of small and midsize companies. It is you all more than anyone who are realizing the promises of competition and innovation contemplated in the Telecommunications Act of 1996.

I want to tell you how I will approach my wide-ranging policy and regulatory responsibilities in a moment, but let me first say where I think we are in this hair-raising journey. Some would see us moving along a super-highway -- modern, wide, smooth. I prefer to analogize our current trip to those experienced by one of my child-hood heros, Evel Knieval.

You may recall that Evel was a stunt motor-cyclist who was famous for making ever-more spectacular jumps -- over cars, trucks, buses -- you name it. His greatest attempt was to leap Hells Canyon over the Snake River, propelled in his red, white and blue rocket vehicle. I was always thrilled to watch Evel's jumps. They were well-hyped and were major media events. We would gather around the TV and watch Evel -- he would ride out to great fanfare, hope and anticipation. Evel would race toward the ramp a couple of times and then turn away or hit the breaks, purportedly to get his timing and courage up for the big jump. The television announcer would inform us in a play-by-play fashion of the speed he would need, the angle of the jump, and other critical details. Then Evel would race toward the ramp, and we would wait for him to hit the critical speed -- that speed at which there was no turning back. Once he hit critical speed, Evel had to go for it, for any attempt to stop would be futile, sending him crashing into the ramp or flinging him into the obstacles and back to the hospital.

Well, the implementation of the Act is like one of Evel's jumps. We are daringly attempting to leap the canyon that divides the regulatory world from the competitive one. I believe we have already reached the critical speed. The point where, if we tried to stop or turn back, we would crash and burn. Thus, like the mighty Evel Knieval, we have only one option -- TO GO FOR IT! Despite the problems any of us may have with this Act or with the Commission's policies, or the courts or whomever, we all must recognize that it will be disastrous for everyone if we try to go back, or stop our pursuit of robust competition in telecommunications markets.

Now let's turn to who I am and how I will work to ensure that we hit the ramp squarely, that our speed stays up and that the crosswinds do not interrupt our trajectory so that we can land, unharmed on the other side. To give you a better understanding of who I am, let me share with you a glimpse of my guiding principles, priorities and approaches to all telecommunications issues.

My first priority is to be pro-competitive. Why? First, we must be pro-competitive because the 1996 Act says so. Congress has given us a clear mandate to move to a pro-competitive, de-regulatory environment. Second, we must be pro-competitive because world economic history tells us so. The lesson of the Cold War is that competitive markets are far superior devices for controlling prices, spurring innovation, enhancing quality and producing consumer choice than are central planning models. Third, we must be pro-competitive because rapidly developing high technology markets demand it. It is nearly impossible for regulators to be able to predict accurately the direction and impact of changing technology, or to keep pace with it.

This leads me to my second guiding principle, to be "technology-wise." The philosophy in my office is to learn, learn, learn. We make a concerted effort to study the details of networks and emerging technologies, so as to make more informed policy decisions. We are committed to not confining our learning to what we see from our offices in Washington. We intend to take field trips to your facilities and those of others to see first-hand how things are working.

I also believe that we must guard against what I call "techno-euphoria." Remember the old commercial that said "it's not nice to fool mother nature?" It is important to keep that in mind so as not to be swept up by over-blown promises that technology is the immediate panacea for all our ills. We must respect the laws of science and their limitations.

For example, where were the network engineers when the 1996 Act was written? In large measure the confidence surrounding the belief that local competition would arrive in a very short time can be attributed to the belief that cable companies need only flip a switch to become instant phone companies. Now there was some over-promising by the industry there, but the truth is that any good network engineer would have told you that the idea had real short term limitations because of the way the networks were configured, and that local telephony was not going to happen overnight.

It is also wise to keep in mind one of the greatest discoveries of the twentieth century that was brought to use by the great Albert Einstein -- that there is another dimension to the universe called time and space. Just as with physics, we must be realistic that what we hope to achieve will require time and patience if there is to be any hope of success. This is the most complex de-regulatory transition to competition that has ever taken place, yet we are beginning to hear pronouncements after less than two years that the Act or the transition has failed. Consider the transition to competitive long-distance service after the AT&T break up. That transition was exponentially easier than what we are presently attempting, yet nearly 14 years later, the previous monopolist/incumbent still has over 50% of the market.

Perhaps instead of the time-space dimension, we should call it the money-time dimension. I believe that, given enough capital and enough time, American entrepreneurs, engineers and scientists can achieve anything, but those forces are real constraints on our hopes and expectations and we must take them into consideration when making policy. We must be sensitive to how the capital markets are evaluating our efforts and the efforts of companies engaged in this grand transition.

Take utilities as an example. Although utilities are an obvious candidate for providing phone service, they are inhibited by the fact that most Wall Street portfolio managers view them as a conservative investment that adds stability to their holdings and Wall Street seems loath to put capital at risk for such companies to enter new markets. Yet, Teligent, a new fixed-wireless start-up company seems to attract a phenomenal amount of capital with little more to their credit thus far than good spectrum and a good idea. Wall Street valuation may punish even the big guys who are seen by many on Wall Street as steady dividend companies and not as entrepreneurial ones.

On the other hand, we need to respect the power and promise of technology. Having just admonished that we should not get giddy about technology, I will offer the other side of the coin. After all, there is always a ying to the yang, an equal and opposite reaction to an action, a republican to challenge every democrat (at least some of us hope so), oh well, you get the point.

If you remember the 1992 Presidential campaign, you recall President Clinton's campaign video that rang with the refrain, "in a town called Hope." Well, just as there are children in towns like Hope that may grow up to be President, I believe there is a kid right now in a basement or garage working on some technology that will blow our socks off in the next few years. We must keep that in mind and make sure that we are not prevented from utilizing that breakthrough technology because we have committed ourselves to something else, or conferred a competitive advantage to a specific type of technology or use of technology.

The bottom line is that I feel it foolhardy to try to pick technology winners or, just as foolish, to try to anticipate consumer responses to new and innovative technology services. Markets have always proven to be better at empowering consumers to bring technology and services to their highest and best use. I want the Commission to pursue policies that are flexible and that will promote technological innovation.

My last point with respect to technology is that we must respect the need for speed. This is not a time for the timid. Companies and regulators will have to lead, follow, or get out of the way. Telecommunications markets abhor uncertainty and demand timely responses. A decision by the FCC that is right, but too late, might as well not have been made at all. In the Army, we used to say of combat, "Damn it, right or wrong do something!" You can be killed just standing still.

In the computer markets, there is a theory often articulated called Moore's law, which holds that the maximum processing power of a microchip, at a given price, doubles roughly every eighteen months. We would be well advised to adopt the urgency that Moore's law suggests in all telecommunications markets, including telephony, which I dare say is not accustomed to such explosive changes.

My third guiding principle is that it is imperative to understand fully the business perspective. As you meet with me, you will find that I try to be clear and candid and ask the same of you in return. The reason is simple. I believe strongly that I must understand clearly your perspective and have some faith that you are not acting like Chicken Little, crying unnecessarily that the sky is falling. I need to know how your business people see the market, why the company is or is not willing to invest another dollar in a given initiative or market, what are the barriers to entering markets, or why does it not make business sense to do so.

I must understand your perspective, because I believe we have an unfortunate tendency to adopt regulations where the objectives are dependent upon a company or an industry acting against its own self-interest! Think about the section 271 application process for RBOC entry into the long distance market. In order to gain authority to enter the long distance market, RBOCs are required to help would-be competitors in the local market steal away the RBOCs' own customers. Its like asking the Redskins to help the Cowboys win a football game.

You see, I do not believe there are good actors and bad actors, there are only profit maximizing actors and indeed competitive markets depend on those actors acting in their self-interest. I believe we need to recognize that basic economic premise and look for economic and business incentives that will prompt those actors to make decisions (in their self-interest) that ultimately facilitate our government policy goals.

You will find that my office will always fight with ideas and not emotions. I believe that decisions should be made based on sound, rational thinking, not on unrelated political or personal agendas. We all need to remain flexible and open to new ideas, and to check our egos at the door.

From all that I have said, you should have a glimpse of what kind of agency I think we need:

One that is competition facilitating;

One that is nimble, flexible, and efficient enough to keep pace with rapidly developing markets;

One that is idea-driven, not emotionally or politically-driven;

One that is humble enough to admit its errors and has enough courage to change course when events demand; and,

One that is creative.

I would also like to touch on a few quick thoughts about some issues of concern to you. It is my observation that we repeatedly make certain errors in Washington and fail too often to take a comprehensive approach to this grand effort in which we are engaged.

I understand that one of the major topics of this meeting is universal service. So I thought I would make a very brief point. It has to do with the interrelationship between competition and universal service. It is vitally important that as we work through universal service we not lose site of how policies we adopt and changes we make will affect our efforts to bring competition to the marketplace.

Both section 251 which covers the critical terms of local telephone competition and section 254 governing universal service are critical provisions of the Act, laying out the statutory requirements and objectives. We cannot, however, ignore the connection between these two provisions. Indeed, the phones must continue to ring, but we must take into consideration how one affects the other.

Whether tackling the problem of access charge reform and how it will affect competitive entry decisions, prices and services, or struggling with how to encourage competitors to enter low density residential markets in light of government subsidization of rates or when we are considering the funding levels and scope of eligible services for government support, we must remain cognizant that we are imposing a regulatory cost on businesses that must pay into the fund out of their revenues. The cost, if too high, can undermine the economic incentives for those same companies to lower rates or enter new markets. It may even prompt these companies to consider whether the cost of the fund should be revealed to consumers on their bill.

Let me conclude with a diagnosis. Washington tends to suffer from the disease "Big-Guy Myopia." AT&T, Sprint, and MCI are not the only long distance companies in America, nor are the BOCs and GTE the only local carriers. Yet all too often we act as if they are. We write one-size-fits-all policies based on the experiences, data, and promises of the big guys, we short-sightedly cut deals with one or two large companies, and, fatally, we measure the success of competition, new market entry, innovation of services, and prices by what these giants are doing.

It has almost always been that we learn the most about what drives competition and innovation by more modest-sized, hungry companies infected with the American entrepreneurial spirit. We should be chastised that while our Big-Guy Myopia leaves us with our heads in the clouds talking to giants, there are a whole lot of things we are missing that are going on on the ground.

Thank You.