USTA Annual Convention
Remarks by Commissioner Kathleen Q. Abernathy
October 7, 2001

Good afternoon.  It's great to be here in this beautiful setting.  
Now that I have a new job I have many new friends and I get 
invited to lots of conventions, but I'm especially glad to come to 
the USTA meeting, because I always enjoyed attending when I 
was in the private sector, and it's great to catch up with so many 
friends.  I'd probably enjoy it even more if I didn't have to get up 
here and give a speech, but I guess that's part of my new job 
description.
Since I'm still relatively new at the FCC, I thought I'd spend 
some time today discussing my regulatory approach.  I've 
developed five core principles that I will rely on to guide my 
decision making during my time as a commissioner.  Against the 
backdrop of these broad principles, I will share some of my views 
on various proceedings that are currently pending before the 
Commission or soon will be on our agenda.
My first guiding principle is that Congress determines the 
FCC's responsibilities in the Communications Act, and our job is 
to implement the statute, rather than to pursue our own policy 
preferences.
	Second, where the Act gives us discretion, we should rely 
wherever possible on market forces, rather than prescriptive 
regulation.  My experience in the private sector - working for 
several different providers of wireline and wireless services - as 
well as my past experience at the FCC have taught me that 
competitive markets do a far better job than regulators of 
delivering benefits to consumers.
	Third, we should regulate with enforcement in mind.  Don't 
cringe.  What this means is we should adopt a small number of 
clearly written rules and enforcing them vigorously.  It also means 
refraining from enforcing aspects of rules that exist only in the 
minds of regulators, and not within the clear text of the rule itself.
	Fourth, the FCC needs to be humble and recognize the limits 
of what it knows and can achieve, especially during this time of 
rapid technological change.  We need to reach out to companies 
and trade associations, to consumer groups, state regulators, and 
others to improve the flow of information into the agency.  And we 
also need to improve the flow of information out of the agency, so 
that our processes are more transparent to the companies we 
regulate.
Finally, the FCC is a service-based organization and we 
should act like it.  What I mean by this is that the FCC should 
strive to provide you - our customers - with the same degree of 
timeliness and responsiveness that for-profit businesses  strive to 
provide.
I'll discuss each of these principles in turn. And you should 
feel free to ask questions at the end of my prepared remarks.
1.	Implementing the Agenda Set by Congress in the Statute
	My first principle - looking to the Communications Act to 
determine our responsibilities and agenda - may seem obvious.  
Of course we should take our lead from the statute, right?  Well, 
surprise, it is very tempting for Commissioner to elevate their own 
policy preferences above those established by Congress in the Act.   
But we must not do so.  While we have discretion to prioritize 
among congressional mandates, we must not turn this discretion 
into a license to define those mandates.
	Another surprise, the Act doesn't always tell us precisely 
what to do.   It does however contain some relatively specific 
mandates.  For example, section 251(d)(1) of the Act instructs:  
"Within 6 months after the date of enactment of the 
Telecommunications Act of 1996, the Commission shall complete 
all actions necessary to establish regulations to implement the 
requirements of [section 251]" - that is, the Commission shall 
implement the provisions concerning interconnection, unbundling, 
resale, collocation, and the like.  Section 254 contains a similar 
mandate to carry out congressional policy with respect to universal 
service.  I call these sorts of provisions the "shalls," and that means 
there is no discretion as to whether or not we take action.  
There are other provisions in the Act that say the 
Commission may take a certain action.  For example, section 
273(c)(3) says that "The Commission may prescribe such 
additional regulations . . . as may be necessary" to carry out the 
purposes of that section, - as that section which concerns Bell 
company manufacturing of customer premises equipment.  I call 
these kinds of provisions the "mays."
And there are other areas where Congress did not speak at all 
- that is, where the statute is silent regarding the Commission's 
authority.  
I take this hierarchy very seriously when it comes to 
determining the FCC's priorities.  I believe we should concentrate 
on fulfilling specific mandates (the "shalls"), and responding to 
decisions sent back to us by the courts, before we devote 
significant resources to proceedings that are solely within our 
discretion (the "mays") - and certainly  we should take care of the 
mandates before we launch any initiative an in area where the 
statute is silent.  Since the FCC has a finite amount of resources, 
devoting resources to discretionary matters before we have 
implemented mandatory provisions has the potential to subvert 
congressional priorities. 
There are plenty of areas where Congress has told the FCC to 
take action, yet the Commission has dragged its feet.  A prime 
example is unsolicited faxes.  You may think this is not such a big 
deal but consumers and Congress disagree.  Even though Congress 
enacted the Telephone Consumer Protection Act in 1992 to 
prohibit that practice, it took the Commission seven years to bring 
its first enforcement action.  There may have been lots of reasons 
for that delay.  I hope that none of them was that the Commission 
was busy devoting substantial resources to purely discretionary 
proceedings, because then the Commission's allocation of 
resources ignored the priorities established by the statute.
This hierarchy of "shalls," "mays," and statutory silence 
doesn't just determine the order in which the FCC should initiate 
proceedings; it also should give us pause in addressing matters that 
Congress has not spoken to.  The ongoing debate over cable "open 
access" - or "forced access," as opponents would call it - 
provides a good example here.  While parties have made some 
persuasive arguments on both sides of this issue, a key threshold 
question concerns our legal authority to regulate cable modem 
services.  Some proponents of open access have argued that we 
don't need to figure out whether cable modem services fall under 
Title VI or Title II, or what the legal constraints would be under 
each Title, because the FCC has the requisite statutory authority 
under section 4(i) of the Act to reach out and regulate - our 
version of the Constitution's "necessary and proper" clause.  I'm 
not going to get into the question of whether cable modem services 
should fall under Title II or Title VI, and I'm not going to address 
the merits of the open access debate.  But I will say that I do not 
support reaching out and asserting jurisdiction under section 4(i) 
alone.  If a fair reading of the Act denies us authority under Title 
VI, or Title II as the case may be, we should not grant ourselves 
supplemental authority through an expansive reading of section 
4(i).  I do not think the courts will tolerate such an approach, and, 
more fundamentally, I believe we overstep our bounds as an 
independent agency, and encroach on congressional prerogatives, 
when we look past the Act's substantive titles and rely on general 
grants of authority as the sole basis for a major policy initiative.
2.	Relying on Market Forces

My second core principle comes from my faith in the ability 
of market forces to maximize consumer welfare.  Despite our best 
intentions, regulators cannot duplicate the ability of markets to 
allocate resources efficiently, to spur innovation, and to induce 
companies to improve services and lower their prices.  Therefore, 
where Congress has given the FCC the leeway to choose between 
market forces and prescriptive regulation, I will look to market 
forces to promote consumer welfare.
My experience working in the wireless sector has played a 
large part in developing my skepticism toward relying on 
regulatory mandates as a means of promoting consumer welfare.  
When Congress passed Section 332 in 1993, the FCC faced a key 
choice of how to regulate PCS and other new wireless services.  It 
could have imposed strict Title II common carrier regulatory 
constraints on pricing and service terms and conditions.  Some 
advocates called for such regulation based on the supposed 
entrenchment of incumbent cellular providers.  But instead the 
FCC opted for a deregulatory framework that freed carriers from 
traditional regulatory constraints on pricing and service offerings.  
The consequences have been explosive growth, unparalleled 
choices for consumers, improved calling plans and service quality, 
and dramatically lower prices.  
I think the Commission has been wise in recent years to 
apply a similarly deregulatory framework to cable-based Internet 
access services.  By refraining from imposing common carrier 
duties on cable operators, the FCC has contributed to rapid 
broadband deployment.  Indeed, despite some hand-wringing in 
Congress and among some advocates about the supposedly slow 
pace of broadband deployment, the reality is that broadband 
services have been deployed as rapidly as any other breakthrough 
communications technology ? including radios, televisions, and 
wireless phones.
Of course, the Commission's hands-off approach with 
respect to cable modem services contrasts sharply with the 
Commission's relatively heavy regulation of advanced services 
provided over the local loop - specifically, the decision to require 
line sharing.  The FCC exercised discretion in extending the 
unbundling obligations in section 251(c) to the high-frequency 
portion of the loop, and it is fair to question whether its decision to 
do so has helped or hindered the overall deployment of DSL 
services.  That's a difficult question to answer, and I'm not going 
to try to answer it here, particularly since the Line Sharing Order is 
currently on appeal in the D.C. Circuit.  
But I do want to emphasize that, as a general matter, I believe 
it's important to focus on the costs of forced unbundling, in 
addition to the purported benefits.  As Congress recognized in 
section 251(c)(3), some degree of unbundling was clearly 
necessary to introduce competition to local markets, because 
incumbents' control of bottleneck facilities otherwise would 
preclude entry.  But Congress also enacted the impairment 
standard in section 251(d)(2) so that the FCC would consider 
whether the costs associated with forced sharing of incumbent 
LECs' facilities were warranted.
The prior Commission, in my view, was overly focused on 
the anticipated benefits of unbundling, without considering the 
costs.  Unless properly circumscribed, forced unbundling can 
impose costs and distort investment incentives.  Unbundling 
requirements that are too broad destroy an incumbent's incentive 
to invest in facilities.  This is because incumbents will avoid 
risking capital on new infrastructure if rivals can piggy-back on 
their facilities risk-free.  By the same token, new entrants will have 
diminished incentives to invest in their own facilities if the 
incumbent's network is readily available at below cost rates.  
Obviously, pricing is key:  If TELRIC rates turn out to be set 
below realistic cost estimates ? which the Supreme Court will 
soon tell us ? then the distortion of investment incentives are 
significant.
Where I believe the prior Commission went awry was in 
effectively defining the impairment standard out of the Act.  The 
Commission ruled that a new entrant was impaired, and thus had a 
right to purchase an incumbent's network element at TELRIC 
rates, whenever a lack of access to the network element in question 
caused any increase in cost or any decrease in quality to the 
competitor's service.  This of course led to the forced unbundling 
of the entire network.  The Supreme Court rejected that analytical 
approach, requiring the FCC on remand to give some content to the 
impairment standard.  The revised standard adopted by the 
Commission was not quite as expansive, yet still remains quite 
broad.  The D.C. Circuit is presently considering whether that 
revised interpretation is consistent with the Act.
I don't want to suggest that there is some easy answer 
regarding the appropriate scope of the unbundling requirements in 
section 251(c)(3):  There is not. But when reviewing this section of 
the statue, I will focus both on the benefits we hope to achieve and 
the costs of any regulations we impose.  I believe that the 
impairment standard in section 251(d)(2) of the Act was intended 
to ensure that the Commission would not impose unbundling 
without engaging in this sort of cost-benefit analysis.
I think we will be forced to grapple with these questions most 
immediately in the proceeding involving combinations of high-
capacity loops and transport, otherwise known as enhanced 
extended links, or EELs.  The Common Carrier Bureau has yet to 
give me its recommendation on the ILEC petition to eliminate the 
obligation to unbundle these elements or the related question of 
whether, if these elements must be provided, there should continue 
to be prohibition on their use for providing interstate access 
services.  So I have not yet formulated any firm views on the 
appropriate outcome of that proceeding.  We may not yet be at a 
point where the costs of unbundling these network elements is 
greater than the benefits associated with promoting competition; 
and I am skeptical of assertions that there is now a competitive 
market for loops, particularly in light of the economic downturn 
we have seen in recent months.  But, in analyzing these questions, 
I will consider not only competitors' espoused need for unbundled 
access, but also the long-term economic impact on facilities-based 
competition.
I will apply the same preference for market forces when 
considering the continued availability of UNE-P and individual 
network elements.  I may be persuaded that the market is not yet 
mature enough to eliminate UNE-P - and therefore that continued 
regulatory intervention is warranted despite the costs.  But I will 
take those costs very seriously into consideration in making these 
judgments because I am confident that, in the long run, consumers 
are best served if our policies preserve incentives for facilities-
investment by incumbent LECs and CLECs alike.
Before I move on to my next principle, which concerns the 
importance of enforcement mechanisms, I want to point out that 
adopting a presumption in favor of market forces applies not only 
to my consideration of new regulations, but also to the 
Commission's review of existing regulations through the Section 
11 biennial review process and in the context of Section 10 
forbearance petitions.  There is a tendency for regulators to expand 
and defend their turf, even after the narrow justification for 
regulatory intervention in the marketplace has long since 
disappeared.  Congress enacted Sections 10 and 11 as an antidote 
to this bureaucratic inertia:  These provisions actually require us to 
eliminate outmoded regulations.
Our biennial reviews to date have resulted in some significant 
streamlining of outmoded regulations, including the elimination of 
significant portions of the Part 68 rules governing the connection 
of customer premises equipment to the telephone network and the 
detariffing of long distance services.  We will soon add to these 
accomplishments by adopting an order that eliminates a significant 
number of Class A accounts required under the Uniform System of 
Accounts and various ARMIS reporting requirements. And to the 
extent you identify regulations that you think are no longer 
necessary, filing a forbearance petition is always an option.
3.	Enforcement-Oriented Regulation
	My third principle concerns the importance of enforcement.  
I believe it is critical to the FCC's effectiveness and credibility to 
enforce all of its rules vigorously.  Failure to enforce rules sends 
the inappropriate signal that companies may engage in 
anticompetitive or otherwise unlawful conduct with impunity.  As I 
mentioned previously, years of inaction in the face of repeated 
complaints regarding unsolicited faxes - in violation of section 
227 - provides a perfect example:  Until the Commission's recent 
enforcement proceedings, such faxes could be sent without any 
fear of penalty.  If we succeed in eliminating unnecessary 
regulations and are left with fewer regulations that implement our 
core responsibilities, it becomes all the more important that we 
enforce those remaining rules strictly.
Compared to prescriptive rules, which prohibit whole 
categories of conduct, only some of which may be problematic, 
enforcement mechanisms have the advantage of being narrowly 
tailored.  By relying more on enforcement mechanisms, the FCC 
can tailor its intervention to particular circumstances, thereby 
allowing markets to operate with minimal regulatory distortion.
There is clearly some tension between the goals of 
streamlining our rules and beefing up our reliance on enforcement 
mechanisms:  While refraining from micromanaging carriers has 
the advantage of making our rules simpler and more concise, the 
absence of detail can create gray areas that may sometimes make 
enforcement appear unfair.  
I believe we can resolve this tension in large part by crafting 
our rules with enforcement in mind.  If we commit to strict 
enforcement of all of our rules, I believe we will end up adopting 
complex rules only when doing so is necessary to carry out our 
core statutory responsibilities.  So one aspect of an enforcement-
oriented approach to rulemaking is restraint:  We need to be sure 
we're willing to devote substantial resources toward enforcing a 
rule before we decide to adopt it.  If we are sure that a rule is worth 
this effort, then we must not shy away from full enforcement.
Another aspect of this enforcement-oriented approach is that, 
where we don't spell out detailed expectations in a rule - and 
instead adopt broad, generally worded principles - we cannot 
insist on specific forms of compliance.  While Commission staff 
may have particular expectations, we cannot base our enforcement 
policy on such expectations unless they are clearly articulated in 
the text of the rule.  
One example of what we should not do occurred in a case 
involving a radio station called Queen of Peace.  The FCC has a 
rule that requires broadcast stations to maintain a "main studio."  
In various orders and footnotes - but not in the rule itself - the 
Commission stated that a main studio must maintain full-time 
managerial and full-time staff personnel during normal business 
hours.  Because the staffer at the main studio for Queen of Peace 
radio was absent from the office after 3:00 p.m. each day, the 
Enforcement Bureau fined the radio station for violating the main 
studio rule.  To its credit, the Commission later vacated this fine, 
but this episode illustrates the danger of broadly worded rules 
becoming empty vessels for regulators to fill with their own 
expectations.  Going forward, I will attempt to ensure that we do 
not bring enforcement actions unless the carrier had sufficient 
notice that the conduct in question failed to comply with our rules.
Notwithstanding this incident, I've been very encouraged by 
the performance of our new Enforcement Bureau.  The Chairman 
is committing substantial resources to enforcement activities, and 
the Bureau has established several complementary enforcement 
approaches.   These include formal complaints, some of which can 
be decided on a "rocket docket" basis; structured mediation, which 
has yielded many settlements; and confidential investigations, 
which may lead to substantial forfeitures.  While formal complaint 
proceedings still move too slowly, the Bureau has done a terrific 
job substantially reducing its backlog.
4.	Government Humility
My fourth principle is that the FCC should be humble about 
what is knows and can achieve.  We need to recognize that we 
cannot possibly duplicate the vast knowledge base of the industry 
we regulate.  The communications industry is perhaps the most 
technologically advanced sector of our economy.  Regulators 
cannot keep up with the myriad developments and innovations by 
the thousands of communications providers.  For example, we 
cannot know all the latest research on advances in next-generation 
digital loop carrier systems or optical switching.  But we can put 
structures in place that maximize the information available to the 
agency in charting its regulatory course.
We need to reach out as broadly as possible to improve the 
flow of information into the Commission.  We need to reach out to 
consumers, licensees and other regulated entities, trade 
associations, and the Bar.  I believe the Commission should only 
reluctantly invoke its authority to make proceedings restricted.  I 
have found, based on my experiences at the Commission and in the 
private sector, that ex parte meetings are critical to ensuring a full 
understanding of all the relevant issues.  I encourage all of you to 
come see me, or to communicate through USTA and other 
associations, when the FCC is considering action that affects your 
business.  In addition, if a proposed rule would impose significant 
costs or burdens, it is extremely helpful if you can provide 
economic data for our consideration.  Having worked for an ILEC, 
I know it can be difficult to compile such data on short notice, but 
it can often make a significant difference in rulemaking 
proceedings.
There are also a number of improvements we can make to 
speed the flow of information out of the Commission, in order to 
maximize the transparency of our decision making.  For example, I 
would like the FCC to create an online tracking system to disclose 
exactly where in the agency a proceeding is pending ? whether in 
the Division, the Bureau, or on the Eighth Floor.  This will cut 
down on inquiries at the agency and allow advocates to address the 
appropriate staff at the appropriate times.  Another simple but 
effective measure is making sure my staff is available to discuss 
the items on our agenda and to answer any questions you may 
have.  Please take advantage of them; and if you don't want to 
come to Washington, you are free to call us instead.
5.	The FCC Is a Service-Based Organization
My final principle is that the FCC is a service-based 
organization, and we should act like it.  Your companies, and 
taxpayers generally, are our customers.  We should strive to 
provide you with the same high level of service that a for-profit 
business would provide.  
Our customers deserve prompt, well-informed answers to 
regulatory inquiries.  We owe you quality process, even if we can't 
always give you the substantive answers you seek.
When I was in the private sector, I worried most about long 
delays.  Even if I got an adverse decision, at least my company or 
client could move forward and revise its business strategy as 
appropriate.  It was regulatory uncertainty that was the most 
damaging and frustrating.  Based on that experience, I will do 
everything in my power to push the Commission to deliver 
answers as promptly as possible.
I also understand that you may not always want the 
Commission to act.  For example, the Commission has been 
planning to adopt an order in response to the MAG Plan regarding 
rural access reform.  Once some carriers learned that the Common 
Carrier Bureau was recommending significant departures from the 
original MAG proposal, however, many carriers urged delay.  In 
this case, I believe that we have a complete record, and there is no 
need for additional delay.  Quite the contrary, Congress told us five 
years ago to remove implicit subsidies from access rates.  So I 
have supported moving forward with an access reform order.  
Although this is a hard issue, we shouldn't shy away from it.
Another area where I'd like to see prompt action concerns the 
EELs issue.  Whether or not the statute permits usage restrictions 
on these UNE combinations is a legal question that we should be 
able to decide relatively quickly.  Yet the FCC's interim rules 
remain in place two years after they were adopted.  Just because an 
issue is controversial and difficult does not justify failing to 
address it.
On balance, despite the fact that there are some proceedings, 
like MAG and EELs, that you would rather us not tackle, I believe 
all carriers will be better off if the FCC substantially improves its 
timeliness.  Even if you don't like the answer, you will have more 
certainty, and of course, you can always go to the court of appeals, 
if necessary. 
Perhaps the area most in need of improvement involves 
petitions for reconsideration and applications for review.  These 
have been known to sit at the Commission for interminable periods 
of time, and often for no good reason.  Such recon. petitions or 
AFRs frequently present no new issues and could be decided 
relatively easily.  But the failure to reach decisions can create 
needless uncertainty.  And where a party's access to judicial 
review is frustrated by the long pendency of recon. petitions and 
AFRs, delays are even more problematic.
One solution that I am exploring would involve the use of 
form orders to deny recon. petitions and applications for review 
within a fixed time frame where no new issues are posed.  The 
appropriate Bureau would sort all petitions into two groups - 
those that raise new issues, and those that don't.  The petitions that 
do not raise new issues would be subject to a deadline of 
something on the order of 45 days, which would be suspended only 
in unusual circumstances.  I have already begun discussing this 
proposal with the General Counsel, and I plan to work with the 
Chairman's Office and the other Commissioners to see if we can 
adopt such procedures to cut delays substantially.
Well, this concludes my summary I will rely on these five 
principles as I make decisions as an FCC commissioner. Not 
surprisingly, all of the issues we face have at least two sides, 
maybe more the parties are represented by skilled lawyers who are 
very persuasive.   And often the answers presented to us are less 
than optimal.  So I think it's critical to rely on a consistent set of 
principles in our pursuit of the public interest.  I welcome your 
feedback on these principles, more visits with all of you and I am 
happy to take some questions.


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