Remarks of William E. Kennard
Chairman, Federal Communications Commission
Georgetown University Law Center
Continuing Legal Education
" FCC 2000 "
October 5, 1999
(as prepared for delivery)
Thank you, Jean, for that gracious introduction.
I also thank the FCBA and Georgetown University Law Center for joining with the FCC in presenting this third conference on the "State of the Commission."
Since I am here at Georgetown Law Center, my staff advised that I start the speech by telling some lawyer jokes.
But the problem with lawyer jokes is that lawyers don't think they are funny, and no one else thinks they are jokes.
So instead, let me ask you a question: How many of you are here for CLE credit?
Well, even if the speeches are not good, you still get credit.
In fact, in that case, maybe you ought to get extra credit.
In any event, I'll try not to disappoint you.
The Past Year
This year I want to talk about our progress since I gave this speech at this conference a year ago, and what we can anticipate in the years to come.
It's been a very satisfying year, but also a challenging one.
Challenging because we are still grappling with the challenge of making sure our laws and regulations are relevant in a market that is changing so very fast, changing faster than any market has in the past.
Even in the face of this, I believe we have achieved some major victories.
It has been three and one-half years since the Telecommunications Act of 1996 was adopted.
We have been through the first two rounds of implementation:
First, rulemaking; and
Second, the challenge in the courts.
We are now in the third round: implementation of the rules in the market place.
Here is what has happened over the last year:
First, in opening up existing markets . . .
The vision of Congress in the 1996 Act was for the Commission to break up the bottlenecks where incumbent monopolies provide the service, and to open those markets to competition.
I believe we have been successful.
We adopted basic rules for opening up local telephone exchanges to competition, and the Supreme Court affirmed the most important components of that blueprint in Iowa Utilities Board.
We established rules of interconnection and co-location. Where those rules are beginning to work, and competition is beginning to flourish, we have eased the pricing rules and given incumbent local exchange carriers pricing flexibility where threshold levels of competition have been reached in their regions.
In addition, we currently are seeking comment on access reform.
Second, in keeping new markets open . . .
Another vision of Congress was that new technologies be allowed to flourish, unhampered by regulation.
With this vision in mind, the Commission is seeking to create an oasis free from regulation.
In the UNE Remand, we refused to pick winners, but, by freeing incumbent local exchange providers from unbundling requirements, let broadband and other advanced services enter the market unregulated.
We also agreed to forbear from requiring the unbundling of the cable pipeline to the home.
Finally, where markets have not responded to public needs, the Commission has.
As we worked to implement the E-Rate, the Fifth Circuit upheld most aspects of our obligation and ability to carry out this important program of Congress. Last year we wired 500,000 classrooms to the Internet. This year that figure will be up 20%, to an additional 600,000 classrooms that will be wired to the Internet.
Similarly, when the market was not providing sufficient access to telecommunications for Americans with disabilities, we adopted rules to enhance access, one of the most significant advances in access for Americans with disabilities since the
Americans with Disabilities Act was enacted in 1990.
An Access Story
We sometimes get caught up in debates about advanced services, and lose sight of the fact that many Americans are still waiting for basic telephone service.
Earlier this year I was on a panel in Scottsdale, Arizona, with some very senior executives from MindSpring, on the one hand, and AT&T on the other hand.
We were talking about the important issue of access to a cable platform. The debate was heated. People were literally pounding the table about how to bring high- speed Internet access into the homes of America.
So I said, "Time out. It is ironic that we are talking about how to bring another megabit of speed to suburban homes, yet less than an hour away from here there are thousands of Americans on the Gila River Indian Reservation where fewer than fifty percent even have dialtone. If you really want to do something to bridge the digital divide, come with me to the Gila Indian Reservation. I'd love for you to bring your talent and expertise to these people."
After the panel I was standing in the hotel lobby, and all these people came up to me and said, "Let's go to Gila River." And so, we went.
We drove up to this dusty little Indian reservation outside of Scottsdale. I had a caravan of black Lincoln Continental Town Cars behind me. I felt like a latter day Pied Piper. I had AT&T, Nortel, Lucent Technologies, Motorola, and North Point with me.
We had a wonderful meeting. We met with the tribal leaders, and talked about bringing basic telephone service to that part of the country.
I am very proud to say that things are beginning to happen there.
So as we debate the issues that will define the future of communications technologies, let us never forget that some Americans have yet to receive the technology of the past. As we go into the digital future, we must work to ensure that no American is left behind.
These types of victories are hard-won, and I am proud of them.
We have won them, while at the same time trying to adjust to the new market demands swirling around us.
Senator Hollings told me recently that being at the FCC now must be "like trying to take a drink from a firehose."
A year ago I said our effort was like trying to redesign a 747 while in mid-flight.
I still believe that is an apt description.
Our effort, however, is paying off, for these victories have set the stage for the new FCC that I want to talk about next.
The New FCC
This year I have entitled my talk:
"The New FCC: Fast, Flat, and Functional."
If that gives you the image of a runner bent for victory, that is intended. This new FCC is on the move.
In August of this year, we set an ambitious five year agenda.
We call it our blueprint for the 21st Century.
My father was an architect, a maker of blueprints.
Although I obviously did not become an architect, he taught me much about the value of having a blueprint. For example, you have to have a well thought-out plan to lay the foundation for any solid structure; and that plan must have the flexibility to adapt to new conditions as you go along.
Our blueprint, our five-year plan, has three basic pillars
First, promote competition,
Second, protect consumers, and
Third, give every consumer access to basic and advanced telephony services.
My father practiced architecture in Los Angeles, and he had a special obligation to design buildings that could withstand earthquakes.
In a similar manner, we are called upon to design a structure that can withstand the earthquakes going on everyday in the telecommunications market.
The three pillars of our new FCC are not all that different from the pillars of the Communications Act of 1934.
The difference is that the ground is shifting beneath us at a much faster rate, with the swirl of market change all about us.
The new FCC is going to have to be flexible enough to keep up with this constantly changing environment.
We will do this by being . . . fast, flat and functional.
First . . . fast.
We held a series of public forums on our strategic plan, and heard from every side of the community. . . industry, academics, non-profits, and consumer groups.
One comment that everybody made was that we need to find ways to get the work done faster.
And we are making that effort.
But we need the help of those of you in the audience this morning.
The FCC simply cannot be expected to write a rule for everything.
Some sectors of this market move so fast that by the time a public notice on a proposed rule is issued, and comments are gathered, the market has bypassed the conditions that gave rise to the proposed rule in the first place.
The regulatory process is incremental. The market process is not.
The regulatory process, by definition and by law, has to be linear and methodical, to provide due process.
The market process, by contrast, is chaotic and nonlinear, and, because of that, very often unpredictable.
A traditional role for government has been to predict the market and write a rule; and to act as gate-keepers to markets, deciding who may enter, and who may not.
I believe today's markets are moving too fast for us to act in that role very much longer.
Before the ink is dry on a rule, the market has erased the lines drawn by the rule.
Government can step in selectively, but only very selectively.
At the FCC we are cleaning out the "ghosts of regulators past," but we need your help to carefully select where the scarce resources of the FCC can be applied with good effect.
There are other ways to speed up our processing.
We have plans to "go electronic."
Much of your transaction work at the Commission could and will be done electronically, and you should be able to view the current status of your transaction on our web site.
Toward this end, I reported to Congress that the FCC aspires to become a "paperless" organization, through investment in the technology that will support 100% electronic filing and electronic licensing.
Another way we are accelerating our proceedings is to have fewer rules with which we must contend.
Launched in 1998, our Biennial Regulatory Review team quickly initiated or identified 32 proceedings at the Commission to scrap unneeded rules.
I am pleased to report that 24 of those proceedings have been completed or otherwise significantly advanced by Commission orders.
Next . . . flat.
The model for a regulator, is top-down, command-and-control, with chiefs, bureaus and support staff.
And the voices at our public forums consistently complained that we have too many levels of review at the Commission.
The model for market facilitator, the model we are moving to, is a flatter and more fluid organization. Its work units are smaller and more responsive.
This is possible because much of the governance - the microdecision-making - will pass from the FCC to the market.
More governance from the marketplace means less government from the FCC.
Finally . . . functional.
In five years, I expect the U.S. communications markets to be characterized by vigorous competition that will greatly reduce the need for direct regulation.
I believe that in that same time period, the FCC will change radically from what it is today.
The American consumer does not switch from wireline phone to wireless phone, and think "Well, now I'm moving from the Common Carrier Bureau to the Wireless Bureau."
And neither should you, as practitioners.
The new driving functions are not types of technologies, but procedures that apply to all technologies: policy, licensing, enforcement, and consumer information.
Those are the drivers at the new FCC.
They replace the old drivers of the Common Carrier, Wireless, Cable and Mass Media Bureaus, the regulatory niches in which many industries have had to fit.
As practitioners, this should mean one-stop digital shopping.
Take, for example, the transactional business . . . the binding and unbinding of business units to respond to market demands.
Currently, practitioners have to go from bureau to bureau to transfer a license, or to walk a merger through the process.
A unified transactions unit could synchronize these procedures, and cut the processing time by months.
Just because we raise common questions about all technology, however, does not mean we will come up with common answers.
Different media, and different technology, do not need to be regulated identically.
From the regulatory base of common carrier, we have found that the prescriptive interconnection and open architecture have served the market, and the public, well.
For the Internet, however, openness and connectivity have been achieved through unregulated, market-based governance.
The goal of a policy function at the Commission will not be to imprint the policies and practices of one medium onto another, or to impose legacy regulation on new markets.
Rather, it will be to assure some sense and coherence among the various policies, with the emphasis on the ease of going from medium to medium, and with the minimum regulation consistent with the public interest.
Our five-year plan is not built upon a single set of five-year achievements, but upon a series of achievements during each of the five years.
A year ago at this conference, I laid out a set of actions we would take during the coming year.
Today I have been pleased to review the accomplishment of those actions.
I also said that while we were undertaking these incremental actions, we also would be at work on implementing our grand design, our blueprint, our future.
One of those design projects was to consolidate much of the Commission's activities into two new streamlined bureaus that would serve common functions applicable to a wide range of technologies.
Today I am pleased to announce that our Congressional oversight committees have approved our proposal for an Enforcement Bureau and a Consumer Information Bureau.
Those bureaus will go into operation in the very near future.
This year I want to announce that another design project is underway.
I have asked our General Counsel, Chris Wright, to seek your views over the coming weeks about the creation of an intra-agency merger team, to streamline and accelerate the merger review process.
That team will be in place no later than January 3 of next year.
This is not a reincarnation of the old Competition Division.
The goal of this team will be to expedite the review process so that the issues arising in even the most complex transactions may be resolved within definite time periods.
The Commission's merger review process has received considerable criticism.
I think, however, the Commission should be given credit for processing most merger applications, including large ones, in a timely fashion.
Most merger applications are routinely and quickly dealt with.
The problem is that with such dynamic market forces at play in recent years, there have been an increasing number of larger and complex applications that have, at times, strained our limited resources.
The Wireless Bureau, for example, handles around 30,000 license transfers and assignments a year.
Even so, it was able to process MCI-WorldCom's acquisition of SkyTel in nine weeks; ALLTEL's acquisition of Liberty Cellular in 10 weeks; Global Crossing's acquisition of Frontier in less than five months; and AT&T's acquisition of Vanguard in three and one-half months.
I think that is a commendable record.
The new team will work to make the merger review process predictable and transparent, so that applicants know what is expected of them, what will happen when, and the current status of their application.
Before I close, I want to thank Deputy General Counsel David Solomon for his achievements in heading the 1998 Biennial Regulatory Review.
I want to announce that Jeff Lanning will handle next year's effort, the Year 2000 Biennial Regulatory Review. Jeff is the Special Counsel to the General Counsel, and I thank him for taking on this task.
I also want to thank Mary Beth Richards, our Deputy Managing Director, who will oversee the implementation of the five-year strategic plan.
The FCC was created to serve the public, and now it has set itself upon the task of serving the public in a new century.
This undertaking will involve a continuing dialogue with those of you in this room, with your colleagues in the communications bar, with Congress, and with the American people.
I look forward to continuing this great conversation with you.
I thank Congress for approving the two new bureaus, and I look forward to working closely with Congress on the implementation of our blueprint.
Congress is now considering the Commission's FY2000 budget.
I hope Congress will recognize the strength of the blueprint I have described today.
In that spirit, I appeal to Congress to give us the resources we need for the new century. These resources are as specific as buyout authority, so that we can better deploy our human resources, and funds for electronic filing, to complete our program for paperless filing; and as basic as funding to pay the rent.
Pulling together, I believe we can build a FCC that is fast, flat and functional.
As my father would say, good foundations make good futures.
Working together, we have laid a good foundation for the FCC in the 21st Century.