SPEECH BY REED HUNDT CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION UNITED STATES TELEPHONE ASSOCIATION ORLANDO, FLORIDA (AS PREPARED FOR DELIVERY) NOVEMBER 2, 1995 THE CHALLENGE OF COMPETITION I'm delighted to have the chance to participate in the United States Telephone Association's Annual Conference. I wish I could be there with you in sunny Orlando, but I'm going to be in Brazil at a conference of South American countries designed to talk about how to open all those markets to competition. In the age of competition, the FCC has a twin mission: we are for private competition in communications, and for public benefits from communications. That means we should write fair rules of competition. These should be simple, clear, easily understood, and focused on outputs and deliverables as opposed to detailed accounting and bookkeeping requirements. But we also should represent the public interest where competition policy won't deliver all the socially desirable benefits of the communications revolution. As to private competition, this is the most deregulatory, procompetitive, rule- simplifying, market oriented FCC in history. As to public benefits, we are the most de-monopolizing, consumer-aware, family- friendly FCC in history. Look at the record. With respect to deregulatory and procompetitive steps we have: simplified price caps; freed up AT&T to compete more vigorously for high volume customers; blessed competition and transport tariffs; moved to virtual collocation; moved to authorized dozens of VDT plans and simplified depreciation. With respect to consumers, we've got new rules on slamming, we've cracked down on pay phone abuses, and we've implemented caller ID rules. We're going to control unfair charges for 1-800 calls. We're tackling the disgusting international dial-a-porn business. But there's much more left to do. First, we need to do much more to promote competition in every local exchange market. With the help of key state regulators the local exchange market is opening up competition. If Congress makes competition the law of the land, so much the better. The FCC needs to do its part as well. PCS providers should be able to serve fixed as well as mobile sites. We need to unbundle access at all rational points in the network. In short, we need a more aggressive interconnection policy. Second, we need to guarantee number availability and portability to promote competition. We soon will get the new, neutral number administrator up and running to assure that all competitors have fair access to numbers. Third, we need to reform our method of interstate access charges for connection by long distance companies to the local exchange markets. The Carrier Common Line Charge makes high-volume users subsidize lower-volume users. Waivers requested by NYNEX and Ameritech underscore the fact that as competition hits the local exchange market, the current system cannot continue. The fact is that the CCLC tends to drive access charges too far above cost. That raises long-distance prices, and reduces the number of calls people make. It's time for reform. As we fix the CCLC, we need to take a hard look at the hard caps on the Subscriber Line Charge. These charges are the two sides of the coin paid by long distance carriers and end users to the local telephone company monopolies to recover interstate local loop costs. Subscriber line charges should reflect economically rational pricing for consumers and single line businesses. This historically has been the third rail for FCC chairmen to touch only if feeling suicidal. But, heck, if you can lower cable prices 17%, the SLC should be a piece of cake. Fourth, in the same vein, we need to move to a price cap system that ends sharing and low-end adjustments, but which recognizes that -- facing different levels of competition - - all price cap LECs are not the same. Moving to pure price caps is how we can simplify regulation by focusing on outputs, and can eliminate onerous bookkeeping requirements. Fifth, and as important as all the rest -- we must do all this while strengthening -- not abandoning -- our commitment to universal service. We need to reform and refocus universal service. The core principle should be that all communications competitors pay in, and that all get a chance to compete for any transfers or subsidies that are necessary to guarantee universal service. In addition, we need to refocus and restrict such subsidies. What we don't need to do is keep the price of the second phoneline at the ski condo abnormally low. We also need to recognize the failings in our current universal service. Our current 93.8% penetration of phone lines nationwide is a high number. It is also a low number. For example: -- One of every five homes in Camden, N.J. does not have telephone service. -- In three states, more than 10% of the homes do not have active telephone service. -- Less than 60% of households completely dependent on welfare have phone service. -- Some 14% of African-American and Hispanic households do not have telephone service. -- 50% of rural Native Americans do not have telephone service. -- Less than 70% of households on Food Stamps have telephone service. -- Almost 12% of unemployed adults do not have telephone service. This makes it infinitely more difficult to seek employment. In 1993, more than one-quarter (27.1%) of below-the-poverty-line households with children -- that is, some 3.7 million children -- did not have phone service. In an emergency, they cannot even call 911. Our economy would perform better, our social problems would be fewer, if we did better than this. In part we need to narrow subsidies and focus them better. We also need to redefine what we mean by universal service. One thing the term definitely should include is putting communications technology into every classroom, clinic, and library in the country. Schools are in the communications business. But while commercial business is roaring into the 21st-century information age, 45 million American children go to school in a 19th-century world. Only 12% of the classrooms have basic phone lines, and only 3% of our classrooms have computer networks. In San Francisco in September, President Clinton started laying out his plans to make sure every classroom in our country is connected to the information superhighway by the year 2000. Recently, British Labour Party leader Tony Blair picked up the President's theme when he called for a Britain in which every school, hospital, and library is wired into the information superhighway, and every child has a laptop computer. Copying is a great compliment. But we need to do more so there can be more to copy. One positive step will be the Snowe-Rockefeller-Exon-Kerrey provision of the Telecommunications Reform bill that will tell the FCC to order special prices for schools. Other steps are already being taken by many of you. Pacific Bell, for example, has initiated a promotion to offer a free year of ISDN service to public and private schools, and has discounted rates after the year is up. This is not just good citizenship, it is also good business. It was just reported that AT&T will provide $150,000 million in the next five years to help connect all of the nation's public and private elementary and secondary schools to the Internet and other electronic networks. There should be no partisanship when it comes to doing the right thing for all of America's children, and I'm asking you to support both the Snowe-Rockefeller provision explicitly, publicly, loudly. I'm asking you to let me know after your convention if you will do so. As consumers, citizens, and parents we all know that there is no higher goal for any of us than keeping the American Dream alive for our children. The opportunities of the communications revolution are limitless. There should be no limits on who has those opportunities. That's the essence of the American Dream. I know you can help, and I'm counting on you. Thank you. -FCC-