July 18, 1996

It is a privilege to appear before you today. I welcome the opportunity to discuss with you the strides we have made in implementing the Telecommunications Act of 1996, and the many challenges that we will face in the months ahead.

The Telecommunications Act of 1996 enables a vital sector of our economy to grow and to prosper, to better meet the needs of American consumers and businesses, and to increase U.S. competitiveness abroad. As the Federal Communications Commission implements the legislation, we are taking our direction from its language, and filling in the interstices appropriately. This means acting with a guiding sense of fairness to the complex array of interests and parties before us. Most importantly, it means recalling that Congress intended to benefit the American consumer with this legislation, and that the public interest must always remain at the fore in our deliberations and decisions.

Introduction of local telephone competition is at the heart of your legislation, and our rulemaking to implement the interconnection provisions of Section 251 is possibly our most significant proceeding. It is also, perhaps, our most complex.

The issues relating to local competition are not assigned entirely to the FCC. The Telecommunications Act of 1996 contemplates that these matters will be resolved in a combination of ways -- through voluntary negotiations, through state mediation and arbitration, and through FCC regulations. Our approach must reflect that mix. It is also essential that we establish a new relationship -- a partnership, if you will -- with the states.

On the topics of interconnection, universal service, and access charges, it is possible that state and federal perspectives will be different, but we are determined to think the issues through together. We share a commitment to follow the law. We share a commitment to promote competition. We share a commitment to protect consumers. I am confident that, working together, state and federal commissioners can fulfill both the letter and the spirit of the law you authored.

The Telecommunications Act of 1996 has charted a new path for the evolution of this industry over the next few years. It is an honor to be part of the process of working to implement Congress's vision and intent.

Mr. Chairman and Members of the Subcommittee:

It is a privilege to appear before you today. I welcome the opportunity to discuss with you the strides we have made in implementing the Telecommunications Act of 1996, and the many challenges that we will face in the months ahead.

When we last appeared before you, I congratulated you on the historic accomplishment of passing the new Telecommunications Act. You placed your trust in the Federal Communications Commission to effectuate your vision, and now, only five months after its passage, and four months since we last met, the Commission can report that it has successfully achieved every statutory deadline, and that it will continue to do so.

As an institution responsive to the public which we serve, we have streamlined our procedures and eliminated unnecessary regulation. As an agency charged with spurring competition, promoting technological innovation, and eliminating barriers to entry, we have initiated -- and in some instances already concluded -- dozens of rulemakings to accomplish just that. Our universal service joint board is plowing ahead. Our open video systems rules are in place. Our broadcast ownership rules conform to the new legislative mandates. And as we work on rules for interconnection and for interLATA competition, we have already eased regulation to facilitate the entry of the Regional Bell Companies into long-distance service outside of their home regions.

Everyone at the FCC -- every Commissioner, every Bureau, and every Office -- is working hard, and with a sense of mission. I am proud to say that the women and men of our agency are determined to meet the challenges of implementation with decisions that will withstand both public and judicial scrutiny.

The legislation enables a vital sector of our economy to grow and to prosper, to better meet the needs of American consumers and businesses, and to increase U.S. competitiveness abroad. We are taking our direction from the legislation, and filling in the interstices appropriately. This means acting with a guiding sense of fairness to the complex array of interests and parties before us. Most importantly, it means recalling that you intended to benefit the American consumer with this legislation, and that the public interest must always remain at the fore in our deliberations and decisions.

I have a keen sense of the complexity of the issues with which you grappled as you crafted this legislation. I also appreciate the wisdom reflected in the decisions you made.

You were right to commit us irreversibly to a course of competition in local telephone service, but also to insist that universal service -- with affordable rates for all Americans -- be maintained. You were right to adjust media ownership limits, but not in a way that imperils the diversity of speakers in any particular market. You were right to empower us to eliminate unneeded regulations, but only where the regulations in question are unnecessary to prevent unjust and unreasonable discrimination and where consumers' interests can otherwise be protected.

In the midst of all the Telecommunications Act activity, it is difficult to single out one area warranting special emphasis. But the introduction of local telephone competition is at the heart of your legislation, and our rulemaking to implement the interconnection provisions of Section 251 is possibly our most significant proceeding.

It is also, perhaps, our most complex.

Federal-State Partnership

The record developed in our interconnection proceeding exceeds 17,000 pages. We are now meeting with scores of industry representatives who want to share additional information and analysis with us. By the time of this hearing, the Commissioners will have received two draft orders, totalling well in excess of 500 pages, which we need to review and consider and discuss and edit. Many hard questions are presented. What costs are "avoided" when telecommunications services are provided on a wholesale rather than retail basis? Should unbundled network elements be priced solely on the basis of forward-looking costs, or should embedded costs also be weighed in the equation? Should call-waiting, call-forwarding, and similar services be available only under resale tariffs, or should the underlying capabilities be available to new entrants as part of a switching platform? Are the interconnections of commercial mobile radio service providers with local exchange carriers subject to Sections 251 and 252 -- or to Sections 332 and 201?

These issues are not assigned entirely to the FCC. The Telecommunications Act of 1996 contemplates that these matters will be resolved in a combination of ways -- through voluntary negotiations, through state mediation and arbitration, and through FCC regulations. Our approach must reflect that mix.

To resolve the issues that need to be addressed, we must establish a new relationship -- a partnership, if you will -- with the states. As a member of both the Joint Board on universal service and the NARUC Communications Committee, I have been working with my federal and state colleagues to establish a base of mutual trust and cooperation.

That understanding and cooperation will be invaluable not only as we finalize our interconnection rules, but also as we address the closely related issues of universal service and access charge reform. As we stated in our Interconnection Notice, we understand -- as you do -- that the introduction of competition in local telephone markets will intensify the need for reform of our interstate access and universal service mechanisms. Over the course of these three proceedings, we need to ensure that subsidies are truly explicit and better targeted. But as we complete the first rulemaking and prepare for the second and third, we need to be careful about the manner in which we effectuate the transition from one regime to another.

On the issues presented in all three contexts, it is possible that state and federal perspectives will be different, but we are determined to think these matters through together. We share a commitment to follow the law. We share a commitment to promote competition. We share a commitment to protect consumers. I am confident that, working together, state and federal commissioners can fulfill both the letter and the spirit of the law you authored.

Children's Television

Even while we implement the Telecommunications Act of 1996, we must continue to meet our other responsibilities under the law. I mention one such responsibility, involving the Children's Television Act of 1990, because it is one which I have approached with the seriousness and commitment expected by Congress when it passed the Act.

The law directs us to assess, at license renewal time, the extent to which each television broadcaster has served the educational and informational needs of children. The problem is that we have not had any standard by which to measure whether a licensee has satisfied its obligation. As a result, broadcasters have lacked clear guidance, children have been shortchanged, and our staff has been required to undertake a highly resource-intensive process to evaluate each renewal application.

A few weeks ago, we believed that we had reached consensus. All four Commissioners had agreed to support a processing guideline based on three hours of "core" educational and informational programming. Under this approach, a broadcaster which offers three hours of qualifying programming per week is assured that it will be deemed to have fulfilled its obligations under The Children's Television Act. But approval can also be obtained if a somewhat lesser amount of core children's programming is supplemented by significant other programming activities which, in the aggregate, represent a comparable level of commitment. This approach offered broadcasters dual virtues: the certainty that they are meeting their legal obligations, and a measure of flexibility to do so in the manner of their choice.

Unfortunately, this consensus broke down last week. Nonetheless, I remain hopeful that we might still resolve this issue in a manner that works for children and families, for broadcasters, and for the Commission. Our agency is working day and night to implement the Telecom Act, and we cannot afford to allow this roadblock to divert us from our other responsibilities along the information highway.

Conclusion

The Telecommunications Act of 1996 has charted a new path for the evolution of this industry over the next few years. It is an honor to be part of this process. I welcome the opportunity to account to you on our performance to date and to receive your guidance on our future efforts.

Thank you.