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Carpe Diem: Seizing Opportunities in the Global Marketplace

Remarks of
William E. Kennard, Chairman
Federal Communications Commission

at the
Regulators' Breakfast
ITU Plenipotentiary Conference
Minneapolis, Minnesota

October 13, 1998


Good morning, ladies and gentlemen. It is my distinct honor to welcome you to the United States and to thank you for joining me early this morning for this regulators' breakfast. One of my priorities for this Plenipotentiary Conference was to have the opportunity to meet and exchange ideas with as many of my counterparts from around the world as possible. As I look around this room, I am thrilled to see so many representatives of new regulatory bodies gathered together. If we had a similar meeting at the last Plenipot, all of the independent regulators probably could have fit around one small table. I am particularly pleased to welcome the Secretary General of the ITU, Dr. Pekka Tarjanne, to this gathering. Pekka, you have led the ITU with great distinction for the past eight years, and have helped refashion this institution to meet the challenges of this new competitive era. I'm sure you must feel a great weight being lifted from your shoulders. All of us in the world telecommunications community are very grateful for your wisdom and your leadership.

I must convey the regrets of my colleague, FCC Commissioner Susan Ness, who had to leave the conference last night to attend an argument of an important case that our agency has pending before the United States Supreme Court. Commissioner Ness brings great insight and energy to international communications issues. I'm glad that she will be able to return later today to be with you again.

This conference provides a unique opportunity for regulators from around the world to debate and discuss, both formally and informally, the major issues that will determine the future of international telecommunications. As regulators, we face a critical role in shaping that future and ensuring that competitive and liberalized markets benefit all consumers around the globe.

An Era of Limitless Opportunity and Challenge

I have been Chairman of the Federal Communications Commission for almost one year. It has been a wonderful privilege and opportunity for me to hold this important job at this important time in the history of telecommunications. One of the greatest joys of my job is the opportunity to meet with my counterparts from around the world. We are all so privileged to be entrusted with the responsibility for this dynamic sector of the world economy.

In my many meetings with my counterparts from around the world, I am always struck by the fact that the challenges we face are fundamentally the same: managing the transition from monopoly to competitive markets; facilitating the conversion from analog to digital technology; and above all, ensuring that the needs of consumers are always foremost in our minds.

A revolution in technology is sweeping the globe and transforming the way we communicate and the way we live. Developments and improvements in technology are occurring at a pace that was inconceivable even a few short years ago. These developments are fundamentally affecting our daily lives--from the way we do business, to the ways in which our children learn, and our health care systems are administered. They are also dramatically expanding the potential of individuals, businesses, communities and nations to participate in the global community. It is no exaggeration to say that telecommunications policy today is a core component of social policy.

This new digital age has created significant new responsibilities for governments, regulators and for the ITU. As regulators, we must recognize that the transition to competitive markets, and the shift from analog to digital are unleashing tremendous new bandwidth capacity. If we embrace these changes, the benefits to our citizens, our communities and our countries can be enormous. If we do not, we run the risk of leaving our communities, our citizens, and our children behind.

So what should we do to ensure that everyone benefits from this technological revolution? Although government is no longer suited to act as a provider of telecommunications services, it must continue to act as a guardian of competition and a champion of new entrants in the market. If we are to ensure that competitive and liberalized markets benefit consumers, governments must establish regulatory authorities that are independent from incumbent operators and shielded from political pressure. These independent regulators must be empowered with licensing and enforcement authority to establish fair, transparent and predictable regulatory processes.

In the same way that regulators must keep pace with a dynamic telecommunications environment, the ITU also must continue to embrace reform. As it enters the 21st century, the organization will be challenged continually to reinvent itself in order to assist all nations, and particularly developing nations, to participate fully in the new world of telecommunications. Many of the measures under consideration at this conference to promote efficiency, transparency and responsiveness to members are warranted and should be adopted because they will make the ITU stronger and more viable in the years ahead.

Four years ago, Vice President Al Gore addressed this body in Buenos Aires and set forth a vision of a Global Information Infrastructure that would connect the nations of the world through an information highway. Yesterday, he laid out a vision for expanding the GII into the 21st century, issuing five challenges intended to improve the lives of all of the world's people.

In some parts of the world, the Vice President's vision is well on the way to becoming a reality. For others, particularly in developing countries, this vision may still be a dream deferred. Throughout Africa, Asia, Latin America, and other parts of the world, many people who are clamoring for basic telecommunications services have not had the opportunity to benefit from the information revolution. These conditions require special, targeted efforts if we are to achieve our objectives. After all, we will not have a Global Information Infrastructure without an African Information Infrastructure, an Asian Information Infrastructure and a Latin American Information Infrastructure.

As the first person of African American descent to chair the Federal Communications Commission, I have spent a great deal of time searching for ways to ensure that the revolution in technology is inclusive--that it benefits all people regardless of nationality, race or income, and that it bridges the gap that separates the haves and have-nots.

In the same sense, I care deeply about issues of concern to developing countries, and I am firmly committed to working cooperatively with policy-makers in these nations to craft responsible, sensible and sensitive solutions to the formidable challenges you face. To underscore the importance of these efforts, I believe it is essential to have separate and distinct initiatives that focus exclusively on the unique needs of developing nations, such as the USAID Internet Initiative the Vice President announced yesterday. I believe that working together we can design effective new ways to improve the telecommunications services available to the developing countries represented here today and achieve our shared goals.

Establishing A Global Dialogue

Today I'd like to propose a framework for advancing universal access that is based on a few core principles. I am confident that if we embrace these principles and adapt them to our own countries' conditions, the decisions we make will have a more positive effect on our citizens, neighbors and trading partners.

Achieving Universal Access

While the vision of universal access may vary slightly from country to country, I believe it is safe to say that we are all talking about the same fundamental issue: meaningful access to the broadest array of communications tools available in today's marketplace for all of our citizens.

As you know, 72 nations have pledged to open and reform their telecommunications markets by signing the WTO Basic Telecom Services Agreement. This landmark agreement signals a sea change in the global telecommunications market and indicates that much of the world has fully embraced the vision that community can best be achieved by opening our markets to one another. Of course, many in the developing world have not participated in this agreement, and may understandably be concerned about the changes this agreement will bring about. We must continue to work with and learn from one another as we grapple with these complex issues. But across all continents, developed and developing countries are liberalizing their markets, introducing competition, and adopting transparent, pro-competitive regulatory policies that will foster the growth of a global information infrastructure. The bottom line is that these changes are creating opportunities, and are good news for consumers.

Facing the Challenges

But with every opportunity there are new challenges that complicate the job of the regulator. Perhaps the greatest of these challenges is the task of developing universal access policies that will be successful in a globally competitive environment, and that will meet the challenge of improving service to remote, rural, poor and minority communities which continue to be underserved throughout much of the world.

Despite our relative progress, there is a disturbing disparity among different demographic groups in the United States. For example, 96% of households in white communities have basic telephone service, compared with 86% of households in black and Hispanic communities and only 47% on Native American Indian reservations. For low income Americans, the gap can be wider.

Developing effective and innovative universal access programs for underserved populations is indeed a challenge for us all--from the United States to Zimbabwe, from Belgium to Bolivia, and from Canada to China. Our world today presents global challenges.

Achieving Universal Access--Three Principles

I believe there are three basic principles which should guide our policies on universal access:

1. Reasonable and Affordable Rates for All Consumers

2. Competitive and Technological Neutrality

3. Universal Service Mechanisms that are Transparent and Fair

1. Reasonable and Affordable Rates for All Consumers

Above all, universal access policies should promote reasonable and affordable rates for all consumers, especially those in under-served communities. The promise of the Information Age should not be the exclusive domain of big business, the affluent or those who live in urban centers. As we move through the essential steps of re-balancing our rates in the face of competition, financial support to ensure affordable services for rural and low income citizens is crucial. Universal access subsidies should first and foremost assist those who cannot afford realistically priced services.

2. Competitive and Technological Neutrality

Competition is here to stay. Policies and rules pertaining to universal access should neither unfairly advantage nor disadvantage one service provider over another. And they should place no barriers to competitive entry. For example, in prescribing build-out requirements for new entrants in a market, great caution should be exercised to ensure that new entrants are not precluded from providing service by arbitrary technical requirements that favor incumbents. Similarly, we should promote an open, transparent and market-oriented standards setting process and seek to ensure that standards are not employed as de facto barriers to entry.

Universal access rules also should not unfairly advantage or disadvantage one technology over another. Wired telecommunications services may make sense in some places while wireless may make sense in others. Our objective should be to create an environment in which such distinctions are of no great consequence to consumers. As I travel throughout the United States, incumbents tell me they want to make investment decisions based on the rules of market risk and reward, rather than regulatory advantage. They deserve that opportunity.

3. Universal Service Mechanisms that are Transparent and Fair

The rules for financing universal access are changing. We all know that implicit subsidies are no longer sustainable in a competitive environment. For this reason, mechanisms used to finance universal service should be explicit. By this, I mean that subsidies for universal service should be un-bundled from rates for other services such as long distance and international services. Instead, regulators should apply a separate, explicit charge to fund universal access that is transparent to all service providers.

As competition develops, regulators will be compelled by market forces to move implicit subsidies to explicit mechanisms. Charging some consumers rates that far exceed the cost of providing service is economically inefficient. It will distort prices. Distorted pricing will misallocate resources and lead to less efficient use of the resources needed to develop networks.

Finally, policies, plans and procedures to attain universal access should be administered in a transparent and non-discriminatory manner, and they should not be more burdensome than necessary to achieve the kind of universal service defined by the nation. These guiding concepts are all reflected in the WTO Basic Telecom Agreement's Reference Paper. There is already a broad consensus that they are essential to a credible and sustainable universal access program. We should build upon this consensus and develop practical ways to implement the core concepts expressed in the Reference Paper.

Success Stories

Implementing these principles -- Reasonable and Affordable Rates, Competitive and Technological Neutrality, and Transparent and Fair Universal Service Mechanisms -- in real-life, practical contexts is not easy, but it can be done. I'd like to highlight some of the innovative measures my fellow regulators in developing countries have devised to achieve universal access in their countries. These initiatives illustrate that creative application of these principles can successfully close the gap between the information haves and have-nots.

In Chile, for example, the legislature created a rural telecom development fund, financed from general government revenue, to increase the number of public pay phones in rural and low income urban areas. The regulatory authority in Chile, after consulting with local governments, annually issues a list of projects to be funded through the development fund. The regulator specifies the subsidy that is available to finance a given project, and issues a bid calling for technically qualified companies to undertake the project. Bids are opened during a public meeting, and the bid that proposes to use the least amount of subsidy funds wins. Transparency at its best.

The Philippines also has undertaken some innovative universal service initiatives to build out its network. At one point, the Philippines relied on its incumbent for network build-out. In the 1980s, the government initiated a major paradigm shift and decided to introduce competition with the explicit objective of encouraging a quicker network build-out. They have established competition in local, long distance, wireless and international service. As a result, over the last decade, the Philippines has seen tremendous growth in network build-out, and it continues to award licenses for areas where the network is not being built out fast enough.

South Africa's SATRA, led by my friend Nape Maepa, has established a targeted universal service fund focused on two goals: (1) assisting existing end users to adjust to higher local rates as Telkom rebalances its tariffs; and (2) funding network expansion in areas where there is no infrastructure, including through the funding of new telecenters in underserved areas.

There are many other good examples. The important thing is that many countries are actively considering innovative methods to achieve universal access. I believe it is important that the goodwill and spirit of cooperation which led to the WTO Basic Telecom Agreement should prevail as we move forward to successive stages of universal access.

We regulators have a special responsibility to cooperate and coordinate closely with one another and the ITU on many difficult issues that will affect consumers in the next century. As Vice President Gore discussed yesterday, perhaps the most imminent challenge is the Year 2000 problem. Because global telecommunications relies on the seamless interconnection of networks, the international dimensions of the Year 2000 computer problem are especially significant. Failure to make wireline, terrestrial wireless, and satellite systems Y2K-compliant could cause major disruptions in virtually every sector of the global economy, from air traffic and banking to cable systems and government operations. In concert with industry, regulators should take an activist role to address these problems. We believe that information and cooperation are the keys to meeting the Y2K challenge, and we are actively working with the ITU's Year 2000 Task Force to increase international awareness on this important matter.

I sincerely hope that the dialogue we have begun today will help us meet the challenge of universal access, and will carry forward for many years to come. I believe that as we develop individual solutions to the challenge of universal access, ultimately our families, schools, businesses, communities and our nations will become enriched members of the global village. Let us reaffirm today our common commitment to building a truly global information infrastructure and to bringing the benefits of technology to each and every citizen of the world.

Thank you, and again, welcome to the United States.