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Remarks of William E. Kennard
Chairman, Federal Communications Commission
United States Telecom Association Annual Convention
San Francisco, California

October 18, 1999
(As Prepared for Delivery)


Thank you, for that very kind introduction.

I would also like to thank my friend, Roy Neel, for inviting me to your convention. As you know, Roy is a very effective advocate for your industry. He does a great job for you in Washington.

I really am very pleased to have the opportunity to attend USTA's national convention. It is an honor to be here. In part, I am pleased because I get a chance to travel to San Francisco, one of my favorite cities in the world. There really is no other city like this one. It is a city of incredible vistas, amazing architecture, and most of all it has a wonderful spirit of entrepreneurial energy, a real zest for invention and ideas and innovation.

It is also a city that has had to rebuild itself. Sometimes when I am here in San Francisco, I think about what happened here on the morning of April 18, 1906 - the day of the Great Earthquake. The earthquake flattened this city -- the buildings, the boarding houses, the cable cars, the telegraph lines -- and for a few critical hours on that morning, San Francisco, then one of the most wired cities in America was cut off, literally, from the rest of the world.

Harry Jeffs, the wire chief for the Western Union Telegraph Company in San Francisco, realized that the city was totally cut off. And so Harry Jeffs ventured out into the city and started testing wires to find out how he could restore service. He tested hundreds of wires that day, trying to find a live wire to the outside world. He tested and moved on, tested and moved on, until he finally reached a pole at a place called Land's End.

He tested every wire at Land's End and there he finally made contact with Sacramento. From his perch on top of a 30-foot telegraph pole, Harry Jeffs was able to make contact and notify the outside world about the earthquake. Jeffs began to work on untangling the system. He stayed on top of that pole for 18 hours.

Single-handedly, Jeffs reestablished the wires that connected San Francisco to the rest of the country. And as I was thinking about my remarks for today, I thought about Jeffs, how he reestablished communications for this city--creating a lifeline, really, for the people of this community. And I thought so many of you in this audience are doing for communities across America what Harry Jeffs did for San Francisco in 1906: connecting communities to the outside world.

Now, thankfully, you do not have earthquakes to contend with, unless maybe you were in Los Angeles yesterday, or here in San Francisco at USTA exactly ten years ago. But you are dealing, as we all are, with the shifting landscape of telecommunications - the tremors that are rumbling through your industry with each new merger, or joint venture, or change in law or regulation. These are the forces that are reshaping and rebuilding the telecommunications industry today in America.

One of the great joys of my job as chairman of the FCC is the opportunity to meet with my counterparts from all over the world. I get the chance to talk with telecommunications leaders from Europe, Asia, Africa and South America.

Two things always strike me about these meetings. First, these leaders always marvel at our telephone network in this country. The telephone network that you have created is the envy of the world. And it should be. No country has developed a telephone network that is as efficient, as technically sophisticated, as ubiquitous, and as universally available.

We should all feel very proud of that. And you, the local carriers, should feel especially proud of it. You are the ones who built it, you are the ones who have extended it nationwide, and you are the ones who will develop it into the next century.

So, in a very real sense, for many millions of Americans, you are their connection to this marvelous telephone network, bringing basic telephone service, and now wireless and Internet access, and even cable television service to millions of Americans. You are the Harry Jeffs of the Internet age, doing for many Americans what Jeffs did for the people of San Francisco nearly a century ago - keeping that lifeline open to the network and to the world.

The second thing that strikes me when I meet with my counterparts from abroad is how they are so intently focused on the transformation of our telecom markets from monopoly to competition. The whole world is watching how we manage this momentous shift in our law and our policy and our markets from monopoly to competition.

I want to talk about this transition today. I want to talk about where we are in that transition; what we can all expect in the future; and how to strike the right balance between competition and deregulation.

So here is the good news. Everybody I talk to agrees on the ultimate goal of this transition. No matter whom I talk to - local exchange carriers, competitive local exchange carriers, interexchange carriers, cable operators, wireless providers, consumer groups, members of Congress - everybody agrees that competition must be our overarching goal. So what does competition mean? There is almost universal agreement here, too. Most agree that competition means the elimination of all entry barriers, so that anyone who wants to provide a telecommunications service to the consumer can do so. And to make this possible, everybody agrees that we need collocation and cost-based interconnection of networks to allow the seamless and efficient handoff of customers and services; and, once competition arrives, a significantly deregulated environment.

Easy so far.

Easy because everybody in Washington these days recites the mantra of competition and deregulation. It has become the pledge of allegiance to the digital age. But, like most things, the devil is in the details. So one of the things that I have come to realize in my job is that most people talk a good game about competition. Everybody says that they want open, competitive markets. But too often, when you press people on these issues, their view of deregulation means less regulation for me, but more for my competitors - a playing field that is more level for some than others.

Most of the controversies that I deal with as chairman do not tend to focus on what our ultimate objectives should be, but rather on how to achieve them and when. And today at the FCC, much of the debate surrounds the question of when there is enough competition in the marketplace to warrant more deregulation: striking the right balance between competition and deregulation.

Some say, if you just deregulate, then competition will magically arrive. Well that theory may work in some industries, but not in a networked industry where control of the essential building blocks of competition - the loops and central offices - is still in the hands of only a few established competitors.

I think that most people in your industry accept that view. So the challenge is finding the right balance between imposing rules to introduce competition, and eliminating rules that are no longer needed because competition has taken root. We have to find the right balance. And it seems that much of the dialogue between the FCC and your industry in the past few years has focused on where to draw that line. Where to find the right balance between competition and deregulation.

And let us be frank about it. We have not always agreed on where to draw that line. I understand this. Many of you feel that competition has already arrived, and that you are required to confront these new competitors with one hand tied behind your back, still shackled with more regulation than any of your competitors.

Some of you may feel that the FCC talks a good game of deregulation, but you are still waiting to see it. And oftentimes the FCC believes that you talk a good game of competition, but we are still waiting to see it, at least the kind of broadscale competition that means choice for all consumers.

What we need is a better understanding of where to strike the balance between competition and deregulation. What your expectations are. What the FCC's expectations are. And what we can both expect from each other.

First, what you can expect from us. You should expect that competition will bring deregulation. This has happened; it will continue to happen; and the FCC has a track record to prove it. When competition came to the long distance business, we deregulated. When competition came to the international sector, we deregulated. When competition came to wireless, we deregulated. And as competition comes to the local telephone business - as consumers enjoy more and more choice - we are lifting regulatory burdens on incumbents and making regulation give way to the marketplace.

A few months ago, Roy Neel and others at USTA wrote me a letter asking that we lift some of the FCC rules governing your business.

You asked us for greater pricing flexibility. Last August, we adopted an order that says that in sectors of the market where there is demonstrable competition, you get pricing flexibility. And this approach has worked. Access rates are going down; competition continues to increase.

Last year a group of smaller LECs told us that we shouldn't have a one-size-fits-all approach to mid-sized companies. They filed a petition asking for relief. And last May, we granted that petition. We issued an order that streamlines ARMIS reporting requirements, eliminates Section 214 filing requirements, eliminates some separation requirements for mid-sized LECs and permits new access services.

I told Roy Neel and others that one of my principal goals as Chairman is to bring broadband to every home in America as soon as possible. Roy and others in your industry convinced the Commission that we could create more incentives for investment in broadband if we did not require incumbent LECs to unbundle certain equipment needed to deploy advanced services. So that is what we did.

I want to create an oasis from regulation in the broadband world, so that any company, using any technology, will have incentives to deploy broadband in an unregulated or significantly deregulated environment. And that does not mean just cable companies. We must have fast and ubiquitous deployment of broadband services and that will only happen if every sector of the industry has incentives to provide it: wireline, wireless and cable.

Now, let us talk about what we can expect from you. You have to embrace competition. Lipservice and footdragging are simply not good enough. You need to get past narrow, technical interpretations of our market-opening rules and embrace the spirit of those rules. Competition is here to stay. Because only by embracing competition can you be sure that you will not be left behind; that you will be left standing. Those companies - incumbents and new entrants alike - that bring value and innovation will be the victors as competition sweeps the landscape.

Ultimately, I am confident that we will find the right balance between competition and deregulation. Just as we have in most other sectors of the telecommunications business, widescale competition will come to local phone service, just as it has come to long distance, and wireless and international. And when it does, deregulation will follow. It is a matter of time. And I am convinced that it will come faster if we cooperate and work together to find the right balance.

One of the interesting ironies of the Telecommunications Act of 1996 is that it establishes cooperation as the essential prerequisite to competition. It requires federal and state regulators to cooperate in our efforts to craft policy. It requires incumbents to negotiate interconnection agreements; to cooperate with their competitors. This is one of the hard learned lessons of the 1996 Act.

Unfortunately, the first three years of the implementation of the Telecommunications Act of 1996 were characterized not by cooperation, but by confrontation. Litigation instead of collaboration. What we got was uncertainty, confusion and delay. We lost valuable time.

It is time to move on. It is time to bring the benefits of this Act to the American public. It is time to take the battles out of the courtroom and into the marketplace.

And it is time for companies like yours to enjoy the benefits of the Act - as you form CLEC affiliates to compete in new markets and bring new services to consumers.

It is also time for us to reaffirm our commitment to ensuring that all Americans benefit from the communications marketplace.

The new digital economy is being principally defined by its power to unlock markets, to transform retailing, and to create unimaginable wealth for a privileged few in our society. But I believe this New Economy must also be defined by its power to unlock the potential of all our people--by its power to educate our poorest children, to lift up people in rural and inner-city communities and Native American communities, to empower people with disabilities, and to repair and revitalize the social fabric of our communities.

Some Americans still lack basic phone service; many are still without basic cable and Internet links. That means that the people in these communities are more likely to use public institutions -- schools and libraries -- to access the Internet.

Thanks to President Clinton and Vice-President Gore, and many members of Congress, we have the E-rate program which is making it possible to wire every classroom and public library to the Internet. We are giving all children the tools need to compete in this New Economy. We are building footbridges across this digital divide for millions of young Americans all across the country.

And I would like to thank you for helping us in this effort. Many of you, in fact, have been at this long before anyone had ever heard of the E-rate, and you have been a vital part of our ongoing effort to bring the fruits of the digital age to the poorest parts of America. And you are also the ones wiring rural America. You are the primary vehicle for bringing universal service to our farming communities

People tell me all the time that no one in rural America has access to advanced telecommunications services. I know better, and so do you. Many rural companies are providing their communities with state of the art advanced services over DSL and cable and wireless platforms. And I applaud those of you who are doing this vital work. The challenge for us is to make sure that all people in rural America have access to these services.

Indeed that is a fundamental mandate of the '96 Act: to promote competition while at the same time preserving and protecting universal service. Congress recognized that the implicit subsidies that form the basis of support may not be sustainable in a competitive marketplace so we are reforming universal service for the competitive age. Later this week, the Commission will consider an important order to update universal service support for non-rural companies. I am confident that this order will help put universal service for these companies on a firm footing for the future.

We need to make sure that the next century is a century of vigorous competition, a time of continued innovation in telecommunications, an era in which this industry continues to be the envy of the world. And I know that if we all work together, if government and industry continue to follow the course of competition, and stay focused on serving all of our communities and our country, then everybody wins.

And I look forward to sharing this victory with all of you.

Thank you again for having me here today.