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Address of FCC Chairman
William E. Kennard
National Telephone Cooperative Association
Annual Meeting
San Antonio, TX
February 10, 1999

"A Networked Future for all Americans"
(As Prepared for Delivery)

Thank you, Marie Guillory, for that kind introduction. It is a great pleasure to be here today.

You should know that Marie is part of a leadership team that you all should be proud of. Marie, Michael Brunner, David Lasher, and the whole board of directors are highly effective advocates in Washington. I am happy that they invited me to be here today.

Over 160 years ago, an obscure French nobleman, named Alexis de Tocqueville, set sail from Paris for the New World. He was determined to discover what made our new nation tick. He wanted to report back to the Old World the secrets of the New.

He toured our country throughout 1831, visiting everything from our legislatures to our prisons and from our ale houses to our academies (hard to tell the difference back then). Keeping careful notes, this young man, wrote down his observations into two volumes called, Democracy in America. This book would become one of the most famous commentaries ever written on who we are as Americans.

In his book, de Tocqueville was amazed at the number of associations he found. He never saw anything like it in either France or England. Americans, he wrote, "have carried to the highest perfection the art of pursuing in common the object of their common desires." This, to de Tocqueville, was the key to America's success and the strength of its democracy.

If our strength as a free people and as a democratic nation is tied to our organizations and associations, then you all, cooperatives and small, independent phone companies alike, are pillars of our democracy. Cooperatives bring local communities together to provide essential services and to pursue a greater good.

And both telephone cooperatives and small rural telephone companies literally link Americans who live in the countryside into the national community. You make it possible for all Americans, whether they live in a small town in Maine, on a ranch in Montana, or on a farm in Missouri -- to be part of the debate and give and take that is vital to our democracy. By investing in your exchanges where the big companies wouldn't, you have enabled millions of Americans to be a part of the free exchange of ideas.

Think back to how things were in our countryside in 1953, one year before the NTCA was founded. Out of the 5.3 million farm homes, only 3.3 million had phones. And many of those had inadequate and shoddy service. You wired America, weaving together a national community. You should be proud of what you have accomplished .

We meet today almost three years to the day after the Telecommunications Act of 1996 was signed into law. This bill is the most important legislation affecting the telecom industry ever passed. It is the foundational document for a world of the future, a world where monopoly has been replaced with competition, where uniformity of service gives way to a multitude of choices, and where the technologies enjoyed by the privileged are available to all.

In drafting this framework, Congress, in its wisdom, reached back to a value as old as America itself: choice. The idea that individuals are best suited to decide what is best for them once given a wide range of options.

This model is one that respects our free market values. It recognizes that the transition to competition is needed, and it does not happen overnight. It's the right framework for growth. It's the right system of rules. It's a structure that I am proud to say has the full backing of the United States Supreme Court.

But the time for litigation is past. It's time for consumers, not lawyers, to shape the outcome in this marketplace. It's time to bring the effort out of the courtroom and into the marketplace. It's time to end the legal uncertainties. It's time to move on.

There are a few issues left in the wake of the Supreme Court's decision that require further clarification by the FCC. For instance, the question of the rural exemption remains pending in the Eight Circuit Court of Appeals. I pledge that we will work with you to bring clarity to this issue as soon as possible. We need to bring stability back to the marketplace.

The law requires all of the stakeholders cooperate. It requires parties to negotiate on interconnection and collocation. It requires state and federal regulators to collaborate. The irony of this Act is that cooperation is the prerequisite to competition. In that spirit of cooperation, I fully intend to continue to work with NTCA as we resolve outstanding issues. While change brings anxiety for all of the stakeholders we must recognize that this pie is big enough for everyone to have a slice.

By every measure, the telecom industry is thriving. Since the passage of the Telecom Act, the communications sector of our economy has grown by over $140 billion. Stock values are up and rising. And this growth has meant new jobs for approximately 25,000 more Americans in the first year of the Telecom Act alone.

We are now enjoying the longest period of peacetime economic growth in our history. And, for one-fourth of this growth, we have the information technology sector to thank. You have enriched our nation and enriched our lives. For this, you should all be proud.

This growth has touched the lives of almost every American. Taking a call while driving to work or at a ballgame is now the norm for the 68 million Americans who have a mobile phone. They made calls on a service that costs 40 percent less than it did three years ago. Calling friends and family across this nation has gotten cheaper and cheaper as the choice of providers has risen and the AT&T monopoly's hold on the market has weakened.

For the 25 million households now on-line, "you've got mail" has nothing to do with the US Postal Service and everything to do with bits streaming across their phone lines. And as more and more Americans go on-line, so has American commerce. In 1998, 26% of retailers had a web-site, over three times the amount in 1996, and it is estimated that they did over $10 billion in sales. It is no surprise, then, that last year, Internet data traffic eclipsed voice traffic on phone lines.

The telecom industry is changing, changing fast, and changing for the better. It is a transformation unleashed by competition and fueled by technology. We cannot ignore these changes. We must change with them.

The Telecom Act of 1996 fully embraced and expanded our historical notion of universal service. This was a victory for rural America. It ensured that the Information Superhighway would not bypass our farms and small towns. For at its essence, universal service is about crafting a nation. It's about linking this vast continent of ours of over a quarter billion people, representing every race, religion, and language of the world into a cohesive, networked whole. A country that can talk to each other, trade with each other, share ideas, and grow together.

See, the phone lines, and the airwaves, are our springboard into the 21st century. They are a launching pad for all Americans into a New Economy, one based on the free flow of information, a highly-skilled workforce, and rapid change. An economy which can, and must, benefit us all. That is why I am committed to making sure that rural America remains wired to the promise of the 21st century.

Now, for many parts of our country, the fastest path to this goal is the quick opening up of markets to eager competitors. This is a model that works, but one that does not work absolutely everywhere.

The telecom marketplace is a diverse one. It has different players in different places operating in different environments. We cannot have a one-size-fits-all solution to a multi-faceted problem. We have to realize that not all parts of the telecom marketplace will move at the same pace. And we should not force a timetable appropriate to one part of America to rural America, especially if it will jeopardize its access to the telecommunications of tomorrow.

Realizing the challenge of reconciling our commitment to competition and our obligation to the millions of families who live in our nation's small towns and farms, Congress created a universal service joint board with representatives from the states, a consumer advocate and the FCC. This board has looked at both state and federal regulations and has given us a recommendation that takes both into account. By July, the FCC will adopt a new universal service mechanism for the non-rural companies.

At the same time, the FCC will work with you to find a better way, perhaps a different way, for ensuring continuing universal service support for the rural companies. This FCC is committed to that. That's why last year we revisited the controversy over the so-called 25-75% rule and put that matter to rest. This FCC unanimously found that we will not draw an arbitrary line when it comes to funding universal service, not if that would mean that some states would not be able to provide their consumers affordable telephone service.

Nor will we establish an arbitrary date for reforming universal service for the rural companies. That's why I also announced last year that if we do not have a universal service model that works for the rural companies by the year 2001, we are not going to force the issue.

That's why, quite frankly, I am puzzled why Harold Furchgott-Roth came before you earlier this week and questioned this Commission's commitment to ensuring affordable phone service in rural America. Well, Harold and I do not always agree. For instance, I will never agree that universal service should be block granted to the states. Or that we should freeze the amount of universal service funding. No. I believe that there is a continuing federal role, indeed a federal safety net, that we must have to protect Americans living in rural areas. We have a strong record on these issues. And I hope that you recognize that.

And let me say a word about the FCC's implementation of the Telecom Act's mandate to bring technology to schools, libraries and rural health care clinics. Don't fall into the trap of making a false choice between affordable phone service for rural Americans and providing our young people with the tools they need to compete in the Information Age. We can do both. We must do both. We will do both.

Last November, you came to me with concerns about changes in the rate of return and with the universal service program. We had a frank discussion. I heard your concerns and we will do more than listen. I appointed Lisa Zaina, Deputy Bureau Chief of our Common Carrier Bureau to work with you on a daily basis to find solutions. She knows these issues backwards and forwards from her ten years working with small and rural phone companies.

You came back to us with a set of principles to guide any changes to universal service. And I was happy to see that we are basically reading from the same page. As we reform the system, we must maintain quality rates and services. We must be sure that the small telecom companies don't get squeezed out of the marketplace by the large multi-nationals. We must make sure that all Americans, especially those in our smaller communities, have access to the same top-quality, high-tech services at affordable prices. And we must undertake these reforms in a coordinated way that does not lose sight of the "big picture" for small phone companies.

I believe that these are sound principles. The next step is to work with you on how to implement them as we move ahead.

You know, we also can't afford to waste a minute in solving the Y2K problem. The problem is real and it is upon us right now! I need you to work with me and my colleague, FCC Commissioner Michael Powell, to make sure that this problem gets the attention it deserves.

As we work on devising a smarter system, on updating it for the 21st century, we cannot be blind to the changes going on in our industry today. It is possible today to use the copper wires laid down decades ago to deliver advanced broadband services with DSL technology, giving customers a high-speed on-ramp onto the Information Superhighway. It is possible today to use alternative wireless networks to link remote areas into our national network at low cost. It is possible today to have faster Internet access for all Americans.

Our obligation is to provide all of rural America with the same quality of communications services available to city-dwellers, and do so in the most efficient way possible. Just as you brought your customers the basic phone service necessary to live in this century, you must bring them the high-speed Internet access necessary to live in the next. Make no mistake about it: linking the communities you serve to the networks of tomorrow is crucial to this nation's livelihood and even survival. Think back to how the networks of another era so shaped the prospects of hundreds of small towns around the country.

About 150 years ago in this country there was a frontier town of about 30,000 people. This town had a good location. It was mildly prosperous. But by no means was it significant to the country or the world.

At the beginning of 1850, this town had one railroad. It had one vital connection to the railroad -- the 19th century network that was transforming the nation and the world. Then, over the next two years, the town got the 19th century equivalent of broadband access, it got more railroad lines. By 1852, it had five. By 1856, it had ten. The cost of shipping the staples of the economy plummeted. Businesses and hotels sprung up like the wheat filling the town's warehouses. People and capital flowed in. And by 1860, this town, Chicago, Illinois, had tripled in size, and by 1870, it tripled again. The rest, of course, is history.

The "broad shoulders" of Chicago were built by its connections to the railroad network. Indeed, all over the nation, linking up to the railroad turned settlements into towns, and where it by-passed them, turned communities into ghost towns.

In fact, right here in Texas, in the northeast corner of the state right in the panhandle, there is a town named Follett. This town actually began its existence as Ivanhoe, Oklahoma, six miles to the north. But in 1917, when the town fathers saw that the railroad was going to pass them by, they picked up the town, buildings and all, and moved it across the border.

Thankfully, towns don't have to move to access the networks that are shaping our future. We have the technology to bring these technologies to all Americans wherever they live. All that is needed is the will. And I assure you that I have it. And it will take hard work to craft the right policies to make sure that these networks really reach everywhere. That I am willing to give. But I need your help. We need to work together.

We must work as partners. We share the same goals of ensuring that all Americans have access to advanced telecommunications services. With this common goal in mind, I'm sure that we'll find a solution that both promotes competition and maintains our obligation to rural America.

The networks of opportunity of tomorrow are the networks that you are building today. And I pledge to you that I will make sure that they are open to all Americans. That advanced technologies reach every corner of our nation. From the suburbs of San Antonio to the wheat farms of North Dakota. From the neighborhoods of Boston to the small towns of Oregon.

This is our challenge. This is our duty. This is the work that rural phone cooperatives and companies have been doing for decades. This is the work that we must continue into the next century.

Thank you.