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JULY 25-29, 1998

It is an honor to be here today to address OPASTCO.

There is something noble about rural America. It defines this country. From our earliest times, we have been a nation of people seeking new frontiers.

We have been a nation of people seeking to define themselves by their beliefs, their beliefs in God, their beliefs in hard work.

Their beliefs in the individual and local governments not in distant governments.

About 250 years ago, Ben Franklin wrote that no one in America worked for anyone for very long. Unlike in Europe, where occupation was determined by birth and tenure was a lifetime, in America, people would go off to work for themselves.

OPASTCO is living proof of Ben Franklin's observation today. You are the independent small business of the telephone world. No one above you, except your customers.

Yet, you might be surprised how many times otherwise thoughtful people come into my office and tell me that the world will soon consist of 3 or 4 companies to provide all telecommunications, computer, information, and entertainment needs.

The certainty, formality, and immediacy of these announcements are breathtaking.

But I only smile. A certain smile of amusement, a gentle way of saying - I don't believe you.

Partly, I don't believe them because big companies come and go. Who would those companies have been 30 years ago, and who would they be today? Some of the biggest companies today - Microsoft, Intel, Sysco Systems and others, did not exist a generation ago.

And it is hard to believe the future generation will not also have such new giants.

Perhaps more importantly, America has always been a canal of small companies as well as large. Generation of big companies does not mean that small companies vanish.

Some of you may. Some of you may sell out to a big company. But there will likely be as many new small telecos created as absorbed by bigger companies.

Small rural telcos are, by law, a privileged class. OPASTCO has led the way. You have flexed your collective political muscle time and again. In the Omnibus Budget Act of 1993, you were successful in having small rural telcos included in the list of designated entities whose participation was to be ensured in Spectrum Auctions.

In the Telecommunications Act of 1996 you were successful again in looking after the interests of rural Telcos, particularly in Section 254 on Universal Service.

Let me describe in more detail what happened.

The Telecommunications Act of 1996 was about competition and breaking down the barriers that for decades had placed regulators between consumers and businesses, in telephony, in video, in data, and a host of other services. Heretofore, businesses had to go to regulators for permission to offer new services, even if consumers desperately wanted those services. And consumers had to go to regulators to get new services even if businesses were desperate to provide those new services. All too often, the regulatory middle man was not needed, and only led to delay and higher prices.

Competition and deregulation had transformed many other industries including trucking, rail, airlines, banking, insurance, and natural gas.

But not everyone believed that the changes had been all for the better. Some believed that regulation had helped rural America and that deregulation had hurt.

Some believed that competition had come first and primarily to urban and suburban America.

Some believed that in telecommunications, competition and deregulation would be bad for rural America. That competition would come first and only to urban and suburban America, and that rural America would be left hopelessly behind.

I do not believe that view. I believed and continue to believe the competition is good for all Americans, whether urban, suburban or rural; and for all businesses, whether large or small. I believe and continue to believe that consumers and markets rather than governments should determine where competition will emerge. I believed and continue to believe that excessive regulation harms everyone.

In my view, your success can not and should not be ascribed to regulatory protection. You succeed precisely because you are competitive and efficient. You succeed because of who you are, not because of government handouts.

You succeed despite and not because of government regulations. You succeed because your customers know you - perhaps all too well. They are your neighbors, your friends. You see them at PTA meetings, at church.

When your customers have a problem, they call you. In the middle of the night. In the middle of the day. In the middle of a storm. In the middle of a family picnic.

They call you because they know you will help. You won't say sorry "check with corporate management." You are corporate management. The buck stops with you, not some distant corporation.

That is why you succeed and will continue to succeed, with or without additional government help.

But what I believe about what policy should be does not matter. The FCC is not a policy-setting body. We only implement the law.

Let me also note that, during drafting of the Telecommunications Act, representatives of other industries would come to me and tell me all sorts of very interesting things about rural telcos. Some good; some, well, not so good. They said that you had a lot of political power in Washington, particularly in Congress. In my book, that is a good thing to have.

They also said - and I don't' know how to put this politely, so I won't try - some unflattering things. I am not sure exactly what they meant, but I am sure it was not entirely polite.

It had the sound of envy. In a city filled with envy, you were a prime target. I didn't pay much attention to the disparaging remarks, but I did have to admire the political power in Congress.

What emerged in the Telecommunications Act of 1996 is a classic legislative compromise. Congress wanted competition and deregulation to proceed but with certain safeguards for rural America. Those safeguards were embodied in the language of Sections 254 on universal service and Section 216 on eligible carriers.

Make no mistake, the protection of rural America was part of the Telecommunications Act. Rural America, and small rural telcos in particular, were to be protected. Section 254 was written by and for rural America. Competition for all Americans, is predicated in protecting small rural telcos.

The Telecommunications Act was a great political victory for rural telcos, for rural America, and OPASTCO. I am sure that you were proud. Of all industries, perhaps you did the best legislatively.

If I had come to speak to your convention two years ago, I suspect that my speech would have been much different. Perhaps I would have ended here and said: "Congratulations! You won!"

But a funny thing happened after 1996. It seems that you have started to lose. And to lose big. The powerful muscles you flexed in Congress don't seem to reach across town to the FCC.

And the folks who disparaged you with unkind remarks during the legislative process have not exactly come to your rescue.

How have you lost? Let me see if I can describe it. If it is too painful, close your ears; I won't be offended.

Section 254 was supposed to be for you. Universal Service was supposed to go to rural America and rural telephone companies in particular.

In 1996, you received perhaps about $1 billion from Federal Universal Service programs. The exact amount does not matter. You know the system worked. Others in the industry knew how the system worked. Perhaps as importantly, your banker knew how the system worked.

Two years ago, you got the lion's share of Federal Universal Service input.

And all of these conditions seemed likely to stay in place.

Under the FCC's interpretation of Section 254, you face a great deal of uncertainty. That is not what the law said. All of your issues, by statute, should have been resolved by now.

They have not been.

You don't know what is going to happen. Others in industry do not either. Nor does your banker. That doesn't make life easy for you or your customers.

Your customers say they want a new service. You go to your bank. And just why should they lend you more money.

The FCC says "don't worry."

It is easier said than done.

Perhaps you will be taken care of. Perhaps.

You have no guarantee of it other than a promise.


Oh, and remember how you used to get the lion's share of Federal Universal Service? Yeah - Federal Universal Service used to be about rural America.

Not any more.

It seems Universal Service has a new meaning in Washington. Now it means schools and libraries.

They now get more money from the FCC than you do.

Is that what Congress intended? I don't think so.

Is that what the law requires? Certainly not.

Oh, and of course, the schools and libraries get tens of billions of dollars annually from other federal programs for infrastructure. Do you? And a lot more than that from state and local government and private industry.

Don't mistake me. I like schools and libraries. I have six children. They are my pride and joy. The more money the Federal government spends on schools and libraries means that I will personally benefit more than most Americans.

The problem is not simply optical. It is not merely the appearance that schools and libraries are getting vastly more money than you, contrary to Congressional intent. It is not merely the appearance that the federal grants program with more than 30,000 applications seems to teeter out of control with little accountability. More fundamentally, the entire schools and libraries program seems to lack a legal foundation.

It puts itself at risk.
It puts rural high cost at risk.
And it puts all of us at risk.

We as a Nation must have government agencies that abide by the law. When the government does not follow the law, we have no law, we have no government.

We have anarchy.

As I have stated repeatedly in speeches and dissents at the FCC, I believe the FCC's interpretation of Universal Service is not consistent with the law for Section 254.

Make no mistake. Spending on Universal Service outside of high cost, small-company rural support is your problem. There is only a finite amount that can be spent on Universal Service. And I believe that Congress intended the lion's share to go to rural, high cost programs.

Money must go only to telecommunications carriers as required by law. Otherwise this "fee" becomes a tax.

But money is going hither thither and yon. Who comes in to lobby for schools and libraries? Sometimes it is computer companies.

Why? Because it is a billion dollar business for them. This isn't just about education. It's about corporate welfare for the computer industry.

Now as you may know, I believe all the money for internal connections is outside the law. $1.3 billion of the $2 billion requested for 1998.

But to the extent internal connections can be subsidized by Federal Universal Service, the law is absolutely clear that it, under the paragraph for classroom access must go only to eligible carriers.

Now I suspect most of you are eligible carriers. How many of you have schools in your areas requesting Federal funds to give to someone other than you?

I suggest that you might want to call up these schools and tell them they may want to avoid breaking the law.

Some say: What is needed is some heroic action. Action to return Universal Service to its rightful direction.

Some say that there is no more heroic action to be had. But we see heroic action on Universal Service. But all of the heroics are for schools and libraries.

There is a pattern of education issues resolved; rural issues not being resolved; a pattern of breaking the law to help schools and libraries; but a pattern of don't follow law for rural America.

Just consider the following

1. Joint Board recommendations in 1997 -- solved education issues but not rural telephone company issues.

2. FCC Order, May 1997 -- solved education issues but not rural telephone company issues.

3. FCC Order December 1997 -- solved education issues but not rural telephone company issues.

4. Public campaigns and e-mail campaigns -- solved education issues but not rural telephone company issues.

5. Western Governors Association letter -- solved education issues but not rural telephone company issues.

6. Bills in Congress -- solved education issues but not rural telephone company issues.

7. "Promises" made to schools and libraries are honored; promises to rural telephone companies in the law are not.

our privileged status.

As a Commissioner of the FCC, I am bound to follow the Communications Act as written by Congress, not reinvent as I see fit. And that is what I intend to do.

But it may be of little comfort to you to know that the law is on your side when you are constantly losing the battle of implementation.

But in my view, if you insist on the law being followed, it will be. I have faith in this great Nation. I have faith in its laws. Whether it takes a day, or a month, or a year, or a decade, or a century, the law will be implemented.

As you go forward, you should not engage in policy debates or compromises.

Simply say: "Follow the Law."

The Book of Genesis is filled with stories of rivalry and envy between and among brothers:

Cain and Abel,
Isaac and Ishmael,
Jacob and Esau,
Joseph and his brothers.

In each case, being favored by circumstances or by a parent was not sufficient to ensure trouble-free growth. Indeed, the presence of favoritism seems to bring out the worst in people. Envy seems universal.

Some of the famous Biblical characters triumphed. Some were killed.

But Genesis is not a Book about heroic people who triumphed through heroic deeds. It is a book about ordinary people, fallible, who triumph more by faith and perseverance than by heroic deeds.

It is faith and perseverance that you need as much as anything today in dealing with the envy you face. Faith is what you believe in, faith is your families and communities, faith in this great Nation, its People, and its law. I'll help where I can, but the perseverance is up to you.

I hope you have a good convention.

I'll be around today.