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Remarks of
William E. Kennard, Chairman
Federal Communications Commission
National Association of Regulatory Utilities Commissioners (NARUC)
July 19, 1999
San Francisco, CA

(as prepared for delivery)

Thank you, Joan Smith, for that generous introduction. Hearing your kind words, I am reminded of what Hubert Humphrey once said, "Flattery is like smoking. It's O.K. as long as you don't inhale."

I want to thank Bob Rowe for his friendship, his counsel, and his help. Even since the last time we all met, he and all of NARUC have been a constant and trusted ally of the FCC. I am happy that we are able to work together to our common goals.

Looking around this room and seeing all of you, I feel good because you have dedicated your careers to public service. You have decided to serve the people of your states and of the entire country with long hours and hard work in order that they may have the best telecommunications services possible at the best prices.

For that, I thank you all.

We meet today in San Francisco, one of the most wired and high-tech cities in our nation. Like the '49ers of the last century who came west seeking gold, the '99ers of this century head west to the San Francisco area to seek their fortunes.

In fact, since its founding, San Francisco has been a wired city - - wired to the rest of the country and the outside world. That is, except for three hours on the morning of April 18, 1906 the day of the Great Earthquake.

On that day in 1906, Harry Jeffs was the wire chief of the Western Union Telegraph Company here in San Francisco. After the earthquake, he realized that the city was totally cut off from the rest of the world. And so Harry Jeffs tested wires all throughout the city to find a live one. He tested and moved on, tested and moved on until he finally reached a pole at a place called Land's End.

After testing each wire, he finally made contact with Sacramento. With that, he notified the outside world about the earthquake and from his perch 30 feet in the sky Jeffs began to work on untangling the system. He stayed on top of that pole for 18 hours.

It was crucial so many years ago to re-establish these connections for they literally connected San Francisco to the rest of the country and the world were the foundation on which any economic recovery could be built.

As we enter the next century, communications is equally important to the prosperity of this city and of the entire nation.

Compared with other countries, we have a real headstart, because our businesses adjusted earlier and our technicians seized on innovations quicker. But there is more than that. The fertile fields of innovation across the communications sector and around the country are blooming because we have undertaken a deregulatory, competitive approach to our communications structure.

In some ways, this approach began 30 years ago when the FCC allowed people to hook any equipment up to the phone network as long as it did not hurt that network and when we decided that computer applications were not subject to regulation.

With these two decisions, the FCC cleared the way for the explosion of the Internet that we see today. This week we are releasing a paper examining 30 years of the FCC's pro-competitive policies and how they helped shape the environment that has allowed the Internet to flourish.

This competitive, de-regulatory approach accelerated with the passage of the Telecommunications Act of 1996. In one bill, Congress in its wisdom reached back to a value as old as America itself, choice, and decided that consumers should have a choice in their communications services.

Since then, we and, more importantly, consumers, have seen many of the benefits of competition.

In many areas, consumers have the choice of four or five wireless providers, and can purchase service at prices that last year cost 40 percent less than it did three years ago. By the end of 1997, there were over 600 long-distance providers competing for customers. With competition heating up, prices have steadily dropped and more and more Americans are using these services. And in the local phone sector, this newly- born marketplace is growing. In the first quarter of 1999 alone, almost a million CLEC access lines were installed.

Now let's be clear. We still have a lot of work ahead of us to reach the goal of a competitive environment will take hard work. There are no shortcuts.

At the FCC we learned this a long time ago. Back in the 1970s, MCI was trying to get off the ground and compete with AT&T. Back then the FCC was saying the right things, but quite frankly, it didn't follow through. The FCC talked the talk, but we didn't walk the walk. And so the courts had to step in with a structural remedy under the antitrust laws.

And what happened in long distance puts our current challenges in perspective. Because, broadly speaking, there are two ways of taking a monopoly environment and making it competitive. One is structural, along the lines of the AT&T divestiture in the 1980s, and the other is regulatory. In the 1996 Act, Congress chose the regulatory approach, and thus both directed and empowered us to make it happen.

That's an awesome responsibility. For if we fail, then our legacy will be that the Act failed; that Congress's historic re-write of telecommunications policy in this nation was all for naught; that we talked the talk but didn't walk the walk.

Well, this time the FCC is walking the walk. And as I look around this room, let me tell you how honored and grateful I am to have you walking alongside me. I believe the state-federal partnership is as strong as ever. And we have to keep it that way. For as I said before, our work is far from over. We are still in the transition period from a monopoly marketplace to a truly competitive one.

While flying here the other day, I began to think that our challenge is not that dissimilar from other industries that have deregulated. Take the airline industry that transported most of us to San Francisco for this meeting.

In 1978, the Airline Deregulation Act was passed that lifted virtually all economic regulations on the industry, eliminated the Civil Aeronautics Board, and sent remaining regulatory duties to the Federal Aviation Administration.

Since 1978, the number of people who fly has more than doubled to more than 600 million passengers. And, adjusted for inflation, people are paying 37 percent less for tickets than they were before deregulation.

Despite these successes, there have been problems with deregulation, problems that the FAA and the Department of Transportation are dealing with, and problems that are similar to the ones that we have to deal with.

One is the creation of competition. Deregulation of monopolies does not automatically produce competition. Monopolies are stubborn beasts. Networks need to be pried open. In the airline industry, this meant ensuring access to gates for competitors. For us in telecom, it's opening the phone platform.

So what have we been doing lately to make sure that the local market is opened up in the way Congress envisioned? Well, already this year, we've made it easier for competitors to collocate their equipment in the central office. And we're currently working on the list of unbundled network elements as directed by the Supreme Court's remand.

And the FCC is spurring on local phone competition in other ways.

I am especially encouraged by the package of proposals presented by SBC and Ameritech in the context of their merger application. SBC and Ameritech worked long and hard with the staff of the FCC and ultimately I believe they really understood that accelerating the opening of local markets is what the FCC is all about.

And they have found the same thing out about most of the state commissions. And so let me say to the state commissioners in the SBC and Ameritech regions, if you are pursuing a plan to accelerate local competition in the context of this merger, or otherwise, you do so with the blessing of all of us at the FCC who share your goals.

In a market transitioning to deregulation and competition, and especially when that transition is complete, there are other concerns to keep us busy. One of these is making sure that consumers are protected and informed. I have been struck by how confused consumers can become as they are presented more and more choice in telecommunications providers and services..

So we must be extra vigilant in looking out for consumers and giving them the information that they need to decide what telecomm services are right for them and their families.

There is one issue where these two concerns merge, and that is numbering.

I don't need to tell you that we are facing an area-code crisis. If current demand keeps up, sometime in the next six to 16 years we will run out of phone numbers. In the meantime, we're adding area codes at a steady clip.

This may staunch the problem, but as you know, being on the frontlines in the states, this does not help consumers and businesses who are sick and tired of changing their phone numbers.

I, too, receive complaints from all over the country. A few months ago, I received a letter from a small business in Maine that takes tourists out on its schooner to see the beautiful coastal islands of that state.

They wrote that for their "mom-and-pop" operation, a new area code will force them to re-print their brochures and stationary, an expensive proposition that could in their words -- "cause a great setback for us all." There is no question that for businesses, especially small businesses, this turmoil in the numbering regime costs them plenty.

Another consumer from California wrote us in total frustration. He ended a very heated letter with these words: "do something smart for a change."

Well, I am going to tell you what I told that woman from California: we are doing something smart, we are going to let the states solve this problem.

Because we at the FCC understand the bind that the states are in; that you feel that your hands are tied. We now have petitions pending from six states.

I believe that we should be granting the states the authority that they need, and I am optimistic that by the time the summer ends, we will have dealt with most of these petitions. But this is only an interim solution. That's why this past May we proposed rules on ways to reach long term solutions, and I hope that we can adopt new rules in the coming year.

I am committed to working with you to balance the national interest with the concerns of the states and the needs of consumers everywhere. It's the smart thing to do.

We also need to work together on the issue of separations. I want to thank the state members of the Joint Board on Separations for their work on these issues and for their Report pointing to the need for comprehensive reform of separations. So thank you to Dave Rolka, Joan Smith, Tom Welch, and Jim Posey. I appreciate your concerns and I look forward to working on these issues this Fall.

Working together is how we'll meet this and every challenge of this new telecommunications world. One important challenge is to make sure that all Americans benefit from competition. Just as the airline industry has to deal with serving the low-margin customer living in a small city or town, we have to find a way to address the unique problems associated with low volume consumers, the subject of an inquiry we launched last week. Likewise, we must make sure that the Internet revolution does not leave rural America behind.

That's why I am working with Senate Minority Leader Daschle and a group of his colleagues from rural states to bring advanced communications services to the people of our nation's small towns and farms.

And that's why I am happy to have received a proposal that NARUC and the FCC form a Federal-State Joint Conference on Advanced Services. Let me again commend Bob Rowe for his leadership on this initiative, as I look forward to working with him on this critical issue.

Some companies have said that rural America will never be fully connected because the economies just aren't there. The fact is that some rural Americans do have access to advanced services, while others do not. In fact, there are rural companies in this country that are on the cutting edge of advanced services. I know that's the case because I've seen them, all the way from Virginia to Alaska.

The question is: why aren't all companies making advanced services available to their customers? I challenge these companies to join me in the belief that now is not the time to scare rural America; rather, now is the time to find solutions for rural America.

Because we must ensure that all Americans, wherever they live, are beneficiaries of the telecom revolution.

That's why earlier this summer, we decided to fully fund the e-rate program to wire schools and libraries to the Internet.

With the funding levels we approved, an additional 600,000 classrooms will be wired, touching 40 million schoolchildren, many of them in our poorest and most rural schools. This funding will help close the digital divide that is emerging in our country.

By fully funding the e-rate, we are laying the foundation for footbridges across this divide for millions of Americans in thousands of towns and cities throughout the nation..

And so we will forever be indebted to the state members of the Universal Service Joint Board who helped us design the e-rate program. For now we are seeing the tangible benefits of that program in hundreds of thousands of classrooms across the country where children's lives are being enriched and their opportunities expanded as never before.

The need to create equal opportunities for all Americans also was the foundation for our decision last week to adopt new rules to make sure that telecommunications equipment and services are accessible to the 54 million Americans with disabilities.

We passed what I hope will become the Americans With Disabilities Act for the Information Age. By making the tools needed to function and prosper in a 21st century society and economy accessible to all Americans, we are giving millions of Americans a chance at living independently.

And we're making an investment now that will help millions more in the coming years. As we age and live longer, more and more of us will not see, hear, or move as well as we do now.

Last week, at a conference for persons who have hearing disabilities, someone told me that while I might think of myself as someone who does not have a disability, in reality I'm just a TAB - - a temporarily able-bodied person. And the fact is that most of us will have some disability at some point in our live. The rules we adopted last week will make sure that the technologies which we rely on today and which we will rely on the future can still be used and enjoyed no matter what barriers we face.

Opening markets, protecting consumers, managing public resources, and making sure that all Americans have access to the opportunities that telecommunications bring these are the goals that we work toward everyday whether we're in the nation's capitol or state capitols around the nation.

Just as poor Harry Jeffs had to work into the night to untangle the wires after the Great San Francisco Earthquake 93 years ago, we need to untangle whatever obstacles there are today as we transition to a world of competition, so we can bring the benefits of communications to all Americans.

These are our challenges as we enter the next century. I am proud to say that working together we have successfully met many of our challenges, and I am confident that working together we will successfully meet those that remain.

Thank you.