Text Version

Speech by Commissioner Rachelle B. Chong
of the Federal Communications Commission
at the U.S.-Vietnam Dialogue on
Telecommunications and Information Policy

9 a.m., Monday, March 24, 1997 U.S. Department of State, Room 1107
2201 C Street, N.W., Washington, D.C.

"Overview of the Federal Communications Commission"


Deputy General Secretary Luan, Ambassador McCann, Deputy Assistant Secretary Kinney, ladies and gentlemen: It is a great pleasure this morning to participate in this historic dialogue between the United States and Vietnam on Telecommunications and Information. As the Commissioner who has often represented the FCC in the Pacific Rim area, it is a special pleasure to welcome all of you to Washington D.C. Your timing is perfect, as the cherry blossoms are just beginning to bloom.

This day offers the opportunity for both of us to exchange information and learn about each other's systems. We all know how critical telecommunications is to the commercial and economic infrastructure of all nations. It is my hope that this day marks the beginning of renewed communications between us on telecommunications policy.

My task today is to give you a brief overview of my agency, the Federal Communications Commission or FCC. I will begin by describing the FCC's structure, discussing some of the essential principles of the FCC's regulatory policy, and finally turn to some key international issues where the FCC has played a role.

The Structure of the Commission

The Federal Communications Commission or FCC was established by Congress in the Communications Act of 1934. The FCC is an independent federal agency funded by and responsible to Congress. The FCC is charged with regulating interstate and international communications by radio, television, wire, satellite, and cable.

I note that the state public utilities commissions have jurisdiction over intrastate communications issues. We work together closely with our state counterparts.

The FCC is directed by five Commissioners appointed by the President and confirmed by the Senate for staggered 5-year terms. Right now, we have only four Commissioners because one of the seats is vacant. By law, we are a bipartisan commission, meaning the Commissioners represent both major political parties.

The Commissioners hold regular monthly agenda meetings. These meetings are open to the public. In addition, the FCC occasionally holds open en banc hearings on special topics of interest. Last year, for example, we had en banc hearings on spectrum management and political broadcasting issues.

The FCC has a staff of about 2,000 employees. Our staff is divided into six bureaus, which are organized according to the industries we regulate.

  1. The Common Carrier Bureau handles domestic wireline telephony.

  2. The Mass Media Bureau regulates television and radio broadcasting.

  3. The Wireless Bureau oversees wireless services, such as private radio, cellular telephone, personal communications service (PCS), and paging.

  4. The Cable Services Bureau regulates cable television and related services.

  5. The International Bureau oversees international and satellite communications.

  6. The Compliance & Information Bureau investigates possible violations of the law and FCC operating rules, and answers questions from the public.

In general, the FCC regulates telecommunications through two mechanisms: (1) rulemaking proceedings; and (2) the processing of applications for licenses or adjudications. Rulemaking proceedings are used to issue or amend regulations affecting an entire service, a whole class of licenses, a technology, or the structure of the industry. By contrast, applications or adjudications typically concern individual licensees or small groups of licensees.

To avoid conflicts of interest, all FCC Commissioners and employees are prohibited from having a financial stake in any telecommunications company.

Regulatory Philosophy

You might wonder how the FCC makes policy decisions? First, the FCC must follow the law. Last year, our lawmakers passed a historic new law called the Telecommunications Act of 1996. This Act revised our communications law to make clear that competition and deregulation are the key guiding principles for the U.S. communications industry. Thus, a sixty-year tradition of telecommunications monopolies has been replaced by open competitive markets and deregulation. Right now, the FCC is busily implementing the new law by issuing new rules and regulations, after public comment and consultation with the state commissions, other federal agencies, consumers, and interested parties.

Second, the FCC must make judgments about how to apply the law to particular circumstances. We always issue written decisions explaining why we have decided to take a particular path and setting forth our reasoning.

Speaking for myself, I constantly bear in mind that our regulations have a very real and direct impact on our licensees' businesses. Too much regulation can be very burdensome and impose unnecessary delays and costs that in turn are passed to consumers. Because of this, I believe that any regulation we impose should be as simple and pragmatic as we can make it.

I also think that the FCC must regularly review its regulations to ensure that our rules continue to make sense in the current market environment. If not, I think these rules should be removed.

Technology is also advancing rapidly in the telecommunications and information arenas. Our regulations must be flexible enough keep up with such advances. In the past, I have worked with communications clients whose very livelihoods depended on "winning in the marketplace" through creative service or equipment offerings. They developed those offerings by being on the cutting edge of technology. I do not think government regulation should frustrate that entrepreneurial spirit.

However, I also believe that even flexible regulation must provide some certainty to the industry. That is, the FCC's rules should be clear and known to all in advance. I believe that this regulatory certainty is critical to creating an environment that encourages private investment. Private sector actors will not seriously consider major investments if the regulatory environment is perceived as uncertain.

Consideration of Global Impacts

In making FCC policy, I also believe it is important to consider the global impacts of all our decisions. Given that the U.S. plays an important role as a world leader in the communications field, I believe that the FCC can and should play an important role abroad by doing four things: First, by assisting in efforts to open closed markets to U.S. telecommunications companies; second, by encouraging interoperability of global communications systems; third, by promoting fair, nondiscriminatory and reasonable interconnection; and finally, by urging the private sector construction of a Global Information Infrastructure.

International Role of the FCC:

Accounting Rate System Reform

One example of how the FCC plays a role in global telecommunications is our substantial commitment to achieving reform of the international accounting rate system. The FCC believes that the current accounting rate system sets prices for international service that do not reflect the true economic cost to carriers of providing the service. We believe that lowering these rates will encourage greater use of the telecommunications network and more competition among telecommunications providers.

As a result, the FCC is committed to developing settlement rate policies that reflect diverse national market structures, more flexible policies for competitive markets, and stronger measures to reduce accounting rates in monopoly markets. To advance our reform efforts, we also support new services such as international simple resale, country-direct and call-back services, as alternatives to the accounting rate system.

During the process of reforming the accounting rate system, we recognize the potential adjustment problems for foreign carriers that could result from an immediate shift to more cost-based settlement rates. Accordingly, the FCC has proposed a transition schedule for negotiating settlement rates within the benchmark ranges that is based on a country's level of economic development. Under this schedule, countries at a more basic level of telecommunications development would have a longer period to reach the benchmark ranges. We would also be flexible beyond this transition schedule where countries demonstrated an actual commitment to introducing competitive reforms.


Another example of the FCC's international role is the recent completion of the World Trade Organization agreement on Basic Telecommunications. There, many nations of the world endorsed a blueprint for the construction of the Global Information Infrastructure. In the WTO agreement, 65 countries have bound themselves to the Reference Paper embodying a world vision of free competition, fair rules, and effective enforcement.

The FCC plays a number of roles in the WTO process. The FCC provided technical expertise to support the US Trade Representative and the Executive Branch during the negotiations. The FCC will also be the agency responsible for implementing much of the agreement through rule changes. Finally, we hope that the rest of the world can benefit from our experience in developing regulation for a highly competitive domestic telecommunications market.

The FCC believes that both of these initiatives, the accounting rate system reform and the WTO agreement, will benefit all telecommunications carriers and consumers. Both initiatives will increase the impact of market forces on global telecommunications. This should lead to lower prices that will stimulate additional demand for international services, expand market size, and increase revenues of both U.S. and foreign carriers.


It has been a great honor to help begin this dialogue between our two countries. Later today, FCC staff members will provide additional information about our current activities. I hope this exchange of information and views continues in the future. I wish you all the best in today's events.

Thank you very much.