KEYNOTE SPEECH BY
FCC COMMISSIONER HAROLD FURCHTGOTT-ROTH
BEFORE THE UNITED TELECOMMUNICATIONS COUNCIL
PHOENIX, AZ - JUNE 26, 2000
Today I would like to talk about why businesses that are members of the United Telecommunications Council ought to consider entering competitive telecommunications markets. Some of you have already entered. And others of you simply need a helpful nudge. All you need is a little motivation. To me, there is an irresistible linkage compelling one to move from at least electricity to telecommunications. All it requires is a little motivation. Let me explain.
Five years ago, I was a staffer for the House Committee on Commerce. I worked for Tom Bliley. I worked on the Telecommunications Act of 1996. After passage of the act, my reward, some might say my punishment, was to be assigned to work on federal electricity deregulation. Federal telecommunications deregulation had taken more than 20 years. The more I learned about electricity, the more I learned how simple telecommunications really is in comparison.
After all, does telecommunications have to worry about environmental policy?
Nuclear energy policy and disposal?
Never heard of it.
TVA, BPA, PUHCA, PURSA, and an endless list of acronyms that sound faintly familiar to sounds emanating from a pediatrics ward?
You've got to be kidding.
Hundreds of billions of dollars in something called "stranded costs?"
I don't know about you, but if I had costs of hundreds of billions that are worthless in a competitive market, I would be in a lot worse shape than merely "stranded." What a euphemism.
In telecommunications, any issue has two or three well-defined sides. And the protagonists and antagonists will fight to the death. It seems in electricity deregulation, every issue has at least a dozen sides. Consequently, as a Congressional staffer, it was very difficult to know with whom to negotiate legislation. So, when I had a chance to come to the FCC, or to continue working on electricity deregulation legislation, it was not a hard choice.
Now if anyone can make electricity deregulation work, it is Tom Bliley. And I am confident that he will, but it is much more difficult than telecommunications. So, if you are in electricity, gas or water, let me assure you, telecommunications is a piece of cake.
You say telecommunications carriers often go bankrupt. This is true. You say that you don't know anything about telecommunications. Perhaps not. So, you ask, why should you get into telecommunications?
Why should you or anyone enter a market? Because you can provide a service better or at lower cost than someone else can. Are you that company?
Hundreds of different companies are represented here. I don't know any of your business plans. I don't want to know. But I am confident that many, if not most of you, have something that would be very valuable in the competitive telecommunications industry. You have resources that businesses in the competitive telecommunications markets covet in at least seven areas:
At the very least, you are in a good position to lease or sell some of your resources to a telecommunications company. Perhaps you can go further and enter into a joint venture. Or perhaps you will go all the way, like Montana Power, and go into telecommunications full time.
How do I know you can succeed? Because telecommunications companies come tell me their problems all of the time. As an FCC Commissioner, I hear all sorts of problems. After 2-1/2 years, I have come to the conclusion that companies that have no problems don't come talk to FCC Commissioners. Companies don't come to talk about the weather. They come to tell me about their problems and suggest ideas about what the FCC can do to help. As often as not, I tell them the FCC cannot legally help them. But, in the meantime, I hear about their problems.
It seems to me that, as often as not, many of these companies would do just as well coming to a company in the electricity, gas, or water industries. Let me give some examples.
1. Plant and equipment
"Commissioner, my company is having difficulty gaining access to poles and conduits. What can the FCC do to help?"
Have you tried talking to your local utility?
"Commissioner, my company will fail without access to more fiber networks and cell sites. We need dark fiber and lit fiber between cities. We need dark fiber and lit fiber throughout the cities."
Is there anyone here who could help?
2. Skilled work force
How about skilled work force?
"Commissioner, my business plan is 12 months behind schedule. We can't find enough work crews to lay underground fiber. What can the FCC do to help?"
How about trying your local utility?
How about this one?
"My company is losing customers because our customer services representatives have all been hired from scratch, and they don't really know what they are doing."
Or, how about this one.
"Half of the customers we install, we lose because we make mistakes with installation."
Or, "Commissioner, can the FCC help us start repair crews from scratch?"
Starting a business from scratch that must serve thousands of new customers every month, with a technically sophisticated but fragile service, is not a simple matter. Countless residential customers and heterogeneous business customers with different needs--all willing to switch away at the slightest mistake.
But dialing the FCC for help doesn't demonstrate a lot of business savvy. I can suggest some other numbers to dial.
3. Technical expertise.
How about technical skills?
Designing redundant capability?
Designing emergency procedures when primary systems fail?
These are not simple tasks. They are highly technical skills. Skills that are acquired by decades of experience. Not the sort of skills that many new entrants bring to the table. Some companies want the FCC to regulate all of this rather than trust the market. How about first finding a little expertise? I have some ideas where a company might look.
4. Regulatory expertise
Don't underestimate the value of your regulatory expertise. The CEO of a small foreign company once told me that he can't stand the sanctimony with which American government officials discuss the openness of the American market. He said, as far as he was concerned, the U.S. market was the most difficult market in the world to enter because there are so many layers of government to deal with.
In most other countries, a new entrant merely must deal with one level of government; and often, just one agency. In America, how do we regulate thee? Let me count the ways:
One federal government;
More than 50 state and regional governments;
Hundreds of tribal governments; and
More than 30 thousand local governments.
And in each of these jurisdictions are countless fiefdoms with formal names like "Department of This and That," or the "Such and Such Public Utility Commission," or the "Office for the Licensing of Any and All Comers."
Those are just the government offices.
Have you ever dealt with the non-governmental entities in America:
Affirmative action proponents?
Local chambers of commerce?
Now, I don't know how it works in other countries. I half suspect that many operate under the tried-and-true economic principle of the checkbook. That is, one can do whatever one wants to do today as long as one is willing to write large enough checks to enough people. But regulated industries in America don't work that way. America is the land of opportunity. It is also the land of patience. I often bemoan and ridicule the processes at the FCC. They are slow, inefficient, arbitrary, and often punitive. And part of only thousands of agencies that a new entrant must deal with.
New entrants constantly complain to me that they can't deal with the regulatory landscape. Who knows the regulatory landscape in America better than local utilities? Whether electricity, gas, or water, you have seen it all. You deal with it daily. You know when to open the checkbook. You know when to say "No." You know whom to call. And above all, you have the patience of Job.
5. Business expertise and customer loyalty
Starting a new business from scratch is not just about finding a lot of disparate pieces of expertise. It is also about making them fit together. Good management--it isn't easy. Most new businesses fail. Even in a hot area like telecommunications, success is not guaranteed. Financial markets know that. Raising money is not a cinch. Moreover, consumers tend to trust established brands, even ones that are not always perfect.
Businesses come to the FCC daily and ask for licenses. Now, of course, there are hundreds of thousands of FCC licenses. No matter how many we give away or auctions off, businesses want more. How often have I heard: "My business plan will fail if I don't have more licenses"? So they come to the FCC and beg for more. I suppose I would do the same in their shoes. But I might also try to lease or buy space on existing licenses. And where would I look?
Look around this auditorium for a starting place. Some of the most valuable assets at an electric utility or a natural gas pipeline company are the FCC licenses, often labeled as industrial licenses. Some electric utilities, such as Southern, have used their industrial licenses to develop a commercial wireless network. These licenses, held by all utilities, have substantial value for a wide range of applications. Current FCC policy tends to favor flexible use.
Moreover, non-telecommunications companies are in a favored position to buy and sell FCC licenses relative to telecommunications carriers. When telecommunications companies buy and sell FCC licenses, bad things happen. Ordinary transfers are taken out of the queue and treated differently. Worse. Longer. All sorts of strange conditions are placed on the transfers. The FCC doesn't look at all when non-telecommunications companies transfer licenses. Exxon-Mobil and BP-Amoco were some of the largest license transfers at the FCC in recent years. No one took a second look. The same situation holds when utility companies merge or transfer licenses. Paradoxically, you are in a better position than telecommunications companies.
7. Rights of Ways
Finally, telecommunications companies come to the FCC and complain about limited access to rights of way. Limited access to rights of way adjacent to streets, highways, rail lines, natural gas pipelines, electric power transmission lines--rights of way their competitors allegedly have. Do these telecommunications companies ever talk to you?
One of the latest crusades at the FCC is to provide rights of way and access to buildings.
"Oh, Commissioner, my business will fail unless I have access to buildings to reach customers."
The FCC is considering providing greater building access. How would we do that? By saying the pole attachments (which some of you own) which the FCC does regulate, include risers inside buildings (which you do not believe you own). Now isn't that interesting? The FCC is being asked to determine that you own plant and equipment inside buildings, not the building owners. Congratulations! The FCC may be about to expand your property and you may not have known about it.
Seriously, how may utilities (electricity, water, gas) have difficulty reaching customers inside buildings because of uncooperative building owners? If you had such problems, would you come to the FCC? How many telecommunications companies have come to you seeking help in reaching customers inside private buildings? I don't mean to diminish the importance of reaching customers in buildings. If you can't reach your customers, you have no business. But to the extent there are problems, what better way to solve them than by partnering with a utility that already has substantial building access. That is at least part of the RCN business model.
I hope that I have given you some motivation to enter telecommunications markets. If I haven't, I am sure that this conference will. Thank you for your attention. I will be around some today or you can reach me at the FCC in Washington.