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Statement of Harold Furchtgott-Roth
Commissioner, Federal Communications Commission
before the American Public Communications Council
April 29, 1998
Las Vegas, Nevada

It is an honor to be here before the APCC. I want to thank Vincent Sandusky and all of the officers of APCC for inviting here. I want to thank Al Kramer for all of his help. I also want to thank my good friend Andy Barrett for all of his help.

I was going to call the airport earlier this morning, but when I got to the other end of the hotel lobby, I did not have enough change to make the call. That does it. When I get back to Washington, we will have to start regulating the price of these slot machines.

Seriously though, I have never put a nickel in a slot machine. Coins are too valuable to me. There is something about coins and the jingle of change in a pocket that reminds me of my childhood, a time when coins and money were synonyous to me.

My earliest concepts of money and responsibility were as a child growing up in Knoxville, Tennessee. Like most boys my age, I tried to earn money any way I could. At age 10, I mowed lawns in the neighborhood for $1 or $2, if you were lucky. I was a substitute paper route carrier. One summer, I had my own route.

To a young boy in the 1960s, money had value. Tangible value. A penny could buy a wad of bubble gum. A nickle could buy a small bag of potato chips or a small candy bar.

For eight cents, you could buy a 10 ounce bottle of soda at the local store, plus two cents for deposit on the bottle. There were no cans.

And a dime -- now that was real money. For a dime, you could buy a large candy bar. Or a newspaper. Or a local phone call.

I remember my first experience with inflation. The 8-cent bottle of soda suddenly cost 10 cents. I thought the world was unfair at best, or coming to an end at worst.

Times have changed. The bag of potato chips or the candy bar cost 50 cents. The soda costs 60 cents. The newspaper costs 25 cents, and the phone call costs 35 cents.

Most services have gone up substantially in price over the past few decades, and actually very few people complain to me about it. Not even the dear old pay phone.

Telephones in general connect us to family, friends, and businesses the world. People are not always at home, or at work, or with a mobile phone. And some Americans simply cannot afford or choose not to have their own phone. And that is where your industry plays a vital role.

Payphones have a prominent place in our culture. College students once sought to count how many people could squeeze into a phone booth. In many movies, both old and new, pay phones are a sympathetic and emotional symbol. In one of my favorite old TV series, Get Smart, it was no mere coincidence that a series of doors in the introduction opened merely to reveal a phone booth.

In England, the red cast iron phone booth is a national symbol. Many Britons are indignant that the EU is demanding that they be phased out. At the British Embassy in Washington, the first symbol that greets the visitor is not a pub or a Beefeater, but a red phone booth. And to many homesick British, it is a welcome sight, unvanquished by EU regulators.

Pay phones also have personal memories in all of our lives. It was from a payphone in Columbia, South Carolina that I would call my parents to pick me up after sports practice in high school. It was from a payphone in Ithaca, New York that I called my parents during my first summer away from home. And it was from a payphone in California, years later, that I called my parents to tell them that I was engaged.

Yes, pay phones are great. They are part of America. But it is because of you, the members of APCC, that payphones are going to be even greater. It is because you want to compete.

Competition is the wave of the future in telecommunications and in payphones. It has not always been that way. There was a time when competition was not the likely future for telecommunications. One need only look back to the 1930s to understand why.

The 1930s were a difficult time for much of the world. Famine and war gripped much of the world. Totalitarian regimes compounded natural calamities with wicked forms of repression and death.

In the 1930s, the United States merely had to contend with a severe economic depression. Compared with the rest of the world, our plight was easy. It was a decade of fear, fear compounded by shaken faith. The American economy had grown steadily during the 1920s, a time of little government intervention in the market. Growth, however, halted contemporaneous with the stock market crash.

The American response to economic crisis in the 1930s was a more activist and interventionist federal government. Part of that intervention was, at times, to regulate and to protect certain monopolies. There were some who thought that too much competition was bad, that the government rather than competitors could best discipline prices in consumer interest.

The United States slowly but surely recovered from economic depression. Whether federal intervention helped or hindered that recovery is a matter of great academic debate, but we as a Nation have for decades lived under the remnants of the great economic experiments of the 1930s. Perhaps nowhere more visibly did that experiment place its faith in regulated monopolies than in the area of telecommunications.

The regulated monopoly structure of the telecommunications sector limped along for decades. We in America congratulated ourselves for having the best telecommunications sector in the world. But perhaps it could have been better.

The Telecommunications Act of 1996 was a statement that the old way of regulating was no longer useful, if it ever was. Gone were the line-of-business restrictions. No longer could the government tell you or anyone else what line of business it is permitted to offer, or what line of business is off limits.

Gone were the statutory and regulatory barriers to entry by all levels of government.

Gone were the notions that government through price regulation could best discipline prices in markets.

And gone was the notion that the payphone industry should be a regulated monopoly with cross-subsidies here and there rather than a competitive market.

The 1996 Act is not without critics. There are those who say that competition does not work. There are those who say that telecommunications markets should be run by monopolies.

Of all the markets deregulated by the 1996 Act, payphones may not grab the most headlines, but payphone operators are in the trenches of competition today, not tomorrow. You are, in many ways, the test bed for competition.

Competition is not easy. It is nowhere near as easy as being a regulated monopoly. No one guarantees you a rate of return on your investment. There are court challenges to regulations that protect you. There are businesses that owe you millions and millions of dollars that have not paid on time. Don't worry: the check is in the mail. Your creditors want their money. You are hungry. Your families are hungry. Welcome to competition.

Let me assure you. I have talked to Chairman Kennard about this matter. The FCC wants you as industry to succeed. It is not just that is what the law requires. It is not just that you are a bellweather of the success of the 1996 Act. It is also that you are out there competing, hard, vigorously, with gusto, and we admire that.

I won't stand here and pretend to know any or all of the detailed issues that your industry has before the Commission. And I cannot tell you the precise status on each and every one. I know that you have problems. But I can tell you the Commission is trying to resolve some of the outstanding issues facing your industry.

But let me also assure you that it is not the FCC is your long-run protector. Regulatory agencies are not the protectors of competitors. Consumers are.

Consumers like payphones. They know what they receive for a certain price. They don't necessarily know who owns the phone, how it works, or who regulates it. They simply know that they pick up the receiver and it works.

Most Americans do not know what the letters "FCC" stand for, much less what we do. If ignorance is bliss, I am sure that many of you here wish that you were ignorant.

The sad truth is that too many businesses in America know wha the FCC is. And these businesses cower in fear les the Commission do something harmful. Unbenownst to consumers, the FCC plays a major role in the viability and profitability of many businesses. Not just for a few major issues, but in detail after detail.

The best friend of the consumer is not a regulator or even a consumer advocate. The best friend of a consumer is a sales representative of a lower-priced, higher-quality service. Americans like a good deal, and they have enough confidence in the market and our legal system to expect that offers are legitimate.

American consumers are fickle though. Our best friend one moment is forgotten the next when a sales agent for another firm offering even lower priced, higher quality services appears.

And that is the way that it should be.

The best friend of a business is not a regulator. The best friend of a happy customer and a faithful supplier. The best protection of a business is not a regulation but property and contracts, and a legal system that will enforce them.

How can the FCC, as a regulatory agency, help consumers and industry alike? I believe that the answer lies in more rational regulation, for your industry and others, and for consumers. More rational regulation is simply regulation for which benefits exceed costs. Under that form of regulation, I believe that businesses will serve consumers rather than serving regulators.

I would like to reduce the importance of the FCC in many of the details of the telecommunications markets. Oh, to be sure, there is much the Commission can and should be doing. Statutory requirements. Issues that private markets cannot resolve. Issues that no other government agency has the authority or the inclination to handle. Issues where regulation has more benefits than costs.

I do not know which issues in your industry meet these criteria, but I would like to know. And that is why I seek your help to answer two simple questions:

1. How should the FCC regulate your industry, if it all, in the future, say 10 years from now? I cannot pretend to tell you what should be on the list other than it should be short. I would like to understand for each issue why the market or another government jurisdiction cannot handle the issue.

2. How do we get there from here?

These questions may not have easy answers, but I am confident that you will help me find them.

In the meantime, I will be happy to take any of your questions.