SPEECH BY REED HUNDT CHAIRMAN, FEDERAL COMMUNICATIONS COMMISSION NEWSWEEK TELECOMMUNICATIONS FORUM WASHINGTON, D.C. (AS PREPARED FOR DELIVERY) FEBRUARY 21, 1996 IMPLEMENTING THE TELECOMMUNICATIONS LAW OF 1996: THE REAL WORK BEGINS This august group is gathered here today to discuss a truly momentous achievement: enactment of the new telecommunications law. The Telecommunications Act of 1996 is the first major overhaul of telecommunications law in almost 62 years. It turns the old law on its head. The old law assumed that communications was a natural monopoly. The new law assumes that all parts of the communications marketplace can be made competitive. The new law is intended to end the era of big government in communications and begin the era of genuine competition. We at the Federal Communications Commission have dedicated ourselves to a twin mission: We are for encouraging private competition in communications, and for guaranteeing public benefits from communications. We will adhere to these goals -- only more so -- under the new law. And consumers will benefit as we pursue both goals. The goal of the Telecommunications Act is to let anyone enter any communications business -- to let any communications business compete in any market against any other. The goal is to remove the legal and economic obstacles that have frustrated competition for too long. Only two weeks ago it violated federal law for some local phone companies to provide long-distance service outside their regions. And only two weeks ago, competition in the local phone markets was illegal in some states. Today both are legal: Bell companies are beginning to provide "out-of-region" long-distance service, and cable companies, wireless companies, and long-distance companies must be allowed to offer local telephone service. The possibilities unleashed by the new law have already led to grand plans. Long- distance and local telephone and cable companies each tell us that, before long, all of our telephone needs will be served by one-stop shopping. Local and long-distance telephone services will be bundled and provided by the same company, perhaps with a TV service thrown in for the times when we're sick of gabbing and want to start gazing. For the consumer, the new law promises choice. If markets develop as the new law contemplates, consumers will not be stuck with one seller of local service and one seller of cable service, but will have a range of different companies from which to choose our communications services. The possible combinations and permutations are numerous, and each day's newspaper brings new surprises. The new law also hastens the day when 100% of our schools and classrooms will be linked to the information superhighway. A recent Education Department study found that we're making progress as a nation in wiring our classrooms. Half the nation's public schools have hooked up to the Internet, but this does not mean that the Internet is a tool available to half our classrooms. Nationally, fewer than 10% of schools have local area networks, or LANs, connecting computers in all classrooms. The study also found that minority and low-income students are less likely to have classroom access to the Internet than wealthier students. So there continues to be a significant information gap between schools in poor areas and schools in well-off areas. To quote Education Secretary Riley, "Learning on-line must not become a new fault line in American education." The new law, with the Snowe-Rockefeller-Exon-Kerry provision, gives us one powerful tool to help ensure that, at least for school children, the economic haves and have- nots will not also become the information haves and have-nots. For this reason alone, the Telecommunications Act of 1996 deserves accolades. For those of us at the FCC and elsewhere who have been charged with implementing the new law, it is now time to get down to the hard work of putting Congress' vision into practice. In fact, we've already been hard at work and have produced results. At the very first Commission meeting after the signing of the new law, we implemented one of its provisions by adopting streamlined licensing rules for fixed microwave service. Even more remarkable was our recent action regarding Bell companies that want to provide long-distance service outside of their home regions -- something the new law allows them to do immediately. We noticed there was a problem. There was an old rule on the FCC books that would have hampered the Bell companies' ability to compete in these out-of-region markets. Within days of the signing, the Commission issued a Notice of Proposed Rulemaking revising the old rule to ensure a level playing field. If you open your copy of the Telecommunications Act of 1996, you will see that the first major group of provisions is entitled: "The Development of Competitive Markets." By this, Congress clearly means the development of competitive local telephone markets. Specifically, the new law has changed a fundamental principle of communications policy that has endured for most of this century. Though I am oversimplifying a bit, it is true that the regulation of local phone service has historically been the province of the states. But in this new law, Congress has provided the blueprint for the FCC to follow to formulate a national communications policy for both interstate and intrastate services. In a single clear sentence in Section 253(a) of the new law, Congress announced that: "No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service" (emphasis added). What s more, Congress did more than say: no more local phone monopolies. Recognizing that merely prohibiting exclusive franchises would do little to make competition a reality, Congress went further and actually set out the ground rules for local competition, mainly in Sections 251 and 252. Section 251 says, among other things, that local phone companies must unbundle their local phone networks so competitors can buy and sell component parts and put together their own networks. It also says that local phone companies must allow competitors networks to interconnect with their own so that calls from one network can be terminated on any other. And the local phone companies have to do this at just and reasonable prices. Of course, the states, along with the FCC, will play a critical role in filling in the details. But the essential framework we will all be filling in is Congress . It is also true that both the FCC and many states have adopted increasingly procompetitive policies on their own over the last few years. So, in many ways, Congress edict to be procompetitive simply codified nascent trends. In states, such as New York and Illinois, barriers to competition have been coming down fast over the last few years. States and the FCC now must work very fast. The FCC has only six months to put certain parts of Congress' vision into action, so we need to start collecting some answers now. Finally, I will be talking about some of the potential real-world consequences of various approaches we might take. Competition inevitably means that there will be winners and losers. There s no way around that, and we need to go into this brave new world with our eyes and ears and minds open. But there is one group I feel a special obligation to watch out for as local competition unfolds, and that is consumers. Unlike the situation with respect to cable rates after passage of the 1992 Cable Act -- most people in this country are relatively satisfied with their phone service and with the prices they pay, and they would not think the system needed massive overhaul. But to say that the people did not ask for this legislation does not mean they are opposed to it. In the very same "Development of Competitive Markets" section of the law I was describing above, there is a provision guaranteeing, for the first time in law, "universal service." This provision guarantees that "[q]uality services should be available [to everyone] at just, reasonable, and affordable rates." For example, prices of $100 a month residential for local phone service would not be affordable. The states will play an important role in the transition to competitive markets because states have always been the conscience of the local consumer. The FCC has to pass at least four tests in implementing the Telecommunications Act of 1996. First, are we going to succeed in writing rules that support competitive markets as opposed to favoring individual competitors? Second, are we going to succeed in developing a workable economic model for guiding our decisions? Third, in the context of our economic model, are we going to be able to implement fully the public interest goals of the law? And fourth, will we accurately read the words of the new law? Whether we pass these tests will be decided by the courts, and ultimately by the consumers. We've got five dedicated Commissioners, all of whom take their jobs very, very seriously. We've got the benefit of the guidance, wisdom, and experience of six terrific bureau chiefs -- Beverly Baker of Compliance and Information, Michele Farquhar of Wireless, Scott Harris of International, Meredith Jones of Cable, Gina Keeney of Common Carrier, and Roy Stewart of Mass Media. And we have a gifted General Counsel in Bill Kennard, whose role will be essential in reading the new law. After fair and thorough consideration of some very complex issues, I am confident we will make the right decisions. There is a tremendous amount at stake. If we get it wrong, we will be unable to realize the great promise the new law offers. But it we get it right, everyone in this country will benefit. While most of my remarks today have focused on the telephone provisions of the bill, I want to make a quick comment about the provisions relating to the V-chip and the ratings systems. I am heartened by reports that the broadcast industry is at least exploring developing a rating system to meet the concerns so appropriately addressed in the bill. I am particularly encouraged by the vision of such leaders as Rupert Murdoch who has announced he will rate the shows in his network. In the last couple of years, many have said content is king. Others say cash is king. But on the basis of what I've been hearing and reading recently, it may be that, in this new era, navigation is king. And where navigation is king, parents must have the tools to safely guide their children through uncharted waters. This country is about to explore a whole new world of communications competition. It is consistent with the American spirit that we are the first country to undertake this exciting journey. But while we should be excited, we should recognize we are entering uncharted territory. Just as it did at another time for explorers of new territory, Congress has given us a mission, tools, and some maps. But like Lewis and Clark, we will have to fill in the maps as we go. If you think it's been difficult getting a new telecommunications law enacted, the past 10 years will seem like the good old days compared to the difficulties we will now face due to the complexity and challenge of implementing the law. But we're in this together. We've got to be flexible and reasonable and open, and we've got to keep talking to each other. So talk to us. You know where we are. Yes, we are in for some tough challenges. But it's not the worst challenge we've ever faced, and working together we can make the new law one that benefits us all. Thank you. -FCC-