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Before the


Field Hearing on Universal Service
Anchorage, Alaska

JULY 1, 1998

Mr. Chairman, Senator Stevens, and Members of the Subcommittee, thank you for the opportunity to discuss universal service issues with you today. Senator Stevens, thank you for the invitation to come to Alaska. I am delighted to be here. This is my first trip to this wonderful and unique state. I am impressed by Alaska's natural beauty and by the friendship and hospitality that has been shown to me.

I am here to discuss universal service. This is a subject that I have devoted much time to since becoming Chairman of the FCC last year. I have learned a lot during that time and I appreciate the continuing guidance of the Members of this Committee.

To have a complete appreciation of the need and the import of universal service, nothing compares to spending a few days in a place like Alaska. On Monday, I took one of the most fascinating trips I have ever been on. I flew in a small plane down to see the facilities of the Bristol Bay Telephone Cooperative in King Salmon. From there, we stopped in the tiny community of Igiugig.

On Tuesday, I travelled to Bethel, Aniak and Koliganek. I will discuss in a moment how these travels have reinforced my views regarding the importance of universal service. Let me begin by simply saying what a great education this has been and how much I have been moved by the stunning beauty of this State and the kindness and hospitality of its citizens. I again want to express my appreciation to you, Senator Stevens, and to everyone who has allowed me to experience this great state.

A trip like this one to Alaska reminds me of what an honor it is to be Chairman of the FCC at such an interesting time. But even more, it is a tremendous responsibility. We all know that the communications and information industries represent a most dynamic sector of our national economy. Together, communications and information services comprise one-sixth of our national economy. Revenues in the communications industry alone grew 43 percent between 1990 and 1996.

I feel a great sense of responsibility because Congress has entrusted my colleagues and me with the duty to continue the implementation of the sweeping reforms adopted in the Telecommunications Act of 1996 in such a way as to foster a robust and competitive communications marketplace, while strengthening our commitment to the historical concept of universal service. Senators Burns and Stevens, rest assured that I will work with you as hard as I can to make the promises of that law a reality for the citizens of Alaska.

I also feel a sense of responsibility because tremendous new technological changes will revolutionize the way all Americans live, work, play, and learn, and because of the power of advancing telecommunications technology must be directed toward enriching the lives of residents of rural areas of our nation.

Government can be an enabler and a catalyst for positive change, or it can be an obstacle. We can choose to tap the power of technological change to forge a stronger society, reinforce our core values, and create economic opportunities for all Americans. Or we can let this golden opportunity slip by.

We can create competitive markets that will drive our entrepreneurs to lead the world, or we can abide large, cumbersome monopolies.

I believe we can meet these challenges. I believe we can create competitive markets that will drive our entrepreneurs to lead the world. And I believe we can step up to the challenge of ensuring that the benefits of advancing technology extend beyond the large metropolitan centers to all corners of the nation. We can, and we must.

For my core vision, which I take straight from the pages of the Telecommunications Act of 1996, is that the FCC must ensure that all Americans have the power of choice; that communications technology serves to bring our nation together; and to open doorways to economic opportunity, particularly in those areas of the nation where opportunity is most distant or threatened.

The most important way we can harness the forces of technological change to improve our society is to ensure that all of our nation's communities benefit from telecommunications and information technology. That's why I am strongly committed to working with Congress to implement the Act's vitally important mandate to ensure support for the nation's rural and high cost areas.

It would be a gross understatement for me to say that universal support for high cost areas is important for the State of Alaska. Unique for its vastness and awesome beauty, Alaska also presents unique challenges to universal service. The communities I have visited have striking characteristics. They are remote, surrounded by mountains and water, sometimes accessible only by plane. They are subject to extreme weather. And many of the people who inhabit these places have limited means. All of these factors make the provision of telecommunications services a supreme challenge, and make universal service support an absolute necessity.

Let's also look at the companies that serve this state. Whereas most states are dominated by one of the large Bell companies, Alaska is served almost exclusively by small companies with fewer than 100,000 lines -- companies that cannot exploit economies of scale to reduce average service costs.

The Commission is working very hard on reforming support mechanisms for high cost areas like Alaska. At the same time, the Commission is mindful that many companies, particularly smaller companies, depend on the existing support systems. We are required by the 1996 Act to reform universal service support mechanisms so that they are consistent with a competitive marketplace. But it is my belief that we should not try to fix something that is not broken. I do not intend to rush into reform for small companies until we are certain that our proposals will guarantee that basic telephone service remains affordable for rural Americans and that they do not become have-nots in the information marketplace.

When I visit a state, I learn a lot from the people who work in the communications industry. But I make it a point to talk to other folks as well. For example, the pilot who flew that small plane down to King Salmon told me what it was like growing up in Pilot Point without a telephone. This from a man younger than me.

As we move to a competitive telecommunication marketplace, the Commission confronts the immediate challenge of ensuring that all Americans, including those in rural and high cost areas, continue to have access to telecommunications services at affordable rates. In order to meet this challenge, we have developed a strategic plan for undertaking the difficult task of universal service reform. Our plan requires the Commission to provide high cost support in a manner that encourages competitive entry, while ensuring a smooth transition for customers in rural and high cost areas.

The Commission has previously stated that we would not change universal service support for small companies pending further review, and in no event would that occur before 2001. I wish to emphasize again today that 2001 is not a target date. High costs support for rural companies is working well, and it should not be changed until we know that the changes we implement will provide adequate and appropriate high cost support.

We are getting closer to adopting a revised support mechanism for large, non-rural companies. In Alaska, only the largest provider in Anchorage falls into this category. With respect to small companies, the Commission will be looking to the recommendations of the Rural Task Force. The Universal Service Joint Board is in the final stages of selecting Rural Task Force members. Among the nominees to that Task Force are two Alaskans: Jack Rhyner of TelAlaska, Inc. and Elstun Lauesen of the Tanana Chiefs Conference. The Rural Task Force will study the needs of small companies and make a recommendation to the Joint Board, which will then issue a recommendation to the Commission about how universal service for small carriers should be restructured. The Commission looks forward to receiving the guidance of the Task Force and the Joint Board as we move forward with the reform of universal service support for high cost areas.

There is a related issue that is among the Commission's top priorities -- that of the concern raised by rural health care providers here in Alaska, and in other states, with respect to their ability to obtain telecommunications services at discounted rates. As you know, under the 1996 Act, a telecommunications carrier must provide its services to a rural health care provider at a discounted rate, when the provider makes a bona fide request for telecom services that are necessary for the provision of health care services to a rural community.

The rural health care mechanism can provide enormous benefits to the residents of rural Alaska. I have been told of children being airlifted from rural areas to urban hospitals for treatment of illnesses for which the cost of the cure is a small fraction of the cost of transporting the child. With telemedicine, the diagnosis can be made and the illness treated without the child ever having to leave his or her community. The rural health care mechanism makes this attainable.

Yet here in Alaska, and in some other states, the provision of this wonderful service requires the use of facilities owned by long distance companies that do not fit the definition of an eligible telecommunications carrier and thus are not entitled to receive reimbursement for providing discounted service to rural health care providers. If we do not address this problem, then it would mean that certain remote areas, indeed the most remote areas, would not be able to benefit from the rural health care support mechanism established specifically for them by Congress. I have no doubt that Congress did not intend to eliminate the most rural areas from the benefits of the statute. Let me assure you that the FCC will solve this problem. Alaskans were among the first to call to our attention the difficulty in this regard. Our Common Carrier Bureau and our Office of General Counsel are working to remedy this problem and I expect to have their recommendations shortly.

I am committed to ensuring that the telecommunications services rural health care providers require are available to them at rates comparable to those paid by urban hospitals.

We are also examining our responsibility towards unserved areas: those where a community requests services supported by universal service mechanisms, but no carrier is willing to provide those services. In such cases, the Act instructs the Commission and the State to determine which carriers are best able to provide such services and to order those carriers to do so.

The Commission agreed with the Universal Service Joint Board that the record was inadequate to adopt specific rules in this area. Thus, the Commission sought additional information and strongly encouraged the state commissions to file with us reports detailing the status of unserved areas in their states. I look forward to considering the comments of the Alaska Commission in this regard.

The FCC must and will work closely with the states and with the Joint Board to craft a workable solution to universal service reform. Additional time spent working with the states and the Joint Board will be time well spent.

Many states are working hard to help us address the challenges we have, and I can think of no finer example than the Telecommunications Information Council here in Alaska, working under the tremendous leadership of its Chair, Lieutenant Governor Fran Ulmer. Folks like Fran Ulmer are a real inspiration to me, and a source of invaluable assistance. At the FCC, we are listening to people like the Lieutenant Governor and the members of the Council because we need their help.

Chairman Burns and Senator Stevens, I also have been listening to your concerns and those of Congress regarding universal service. So has our new Chief of the Common Carrier Bureau, Kathy Brown. I know she already has met with some of the Members of this Committee and staff and I know how eager she is to focus our efforts on implementing the universal service high cost fund properly.

Mr. Chairman, we recognize ways in which the new support mechanisms can be improved and we are taking steps to improve their efficiency and effectiveness. I welcome your suggestions in this regard.

Thank you again for this wonderful opportunity to join you here in Alaska and to testify before you today.