Mr. Chairman and members of the Subcommittee, I appreciate the opportunity to participate in today's hearing.

You have entrusted the Federal Communications Commission with enormous responsibilities under the Communications Act and, most particularly, under the provisions enacted by the Telecommunications Act of 1996. We are accountable to you for the decisions we make to implement these laws, and I welcome the opportunity to discuss the Commission's activities with you.

I remain convinced that the principles and policies of the Telecommunications Act of 1996 are right on target. This law is bringing about changes that will increasingly produce more competition, more choice, more innovation, and lower prices -- all to the benefit of American consumers. This law also strengthens our commitment and our ability to deregulate and discard regulations that have outlived their usefulness. Throughout the time since the passage of the statute, the Commission has maintained a steadfast adherence to the law you wrote. I am aware that each member of this Subcommittee can identify FCC decisions you would have made differently, but you have my personal assurance that we have made every effort to remain faithful to the letter and spirit of the law.

Of course, there remains a great deal of unfinished business. Transforming the local telephone market from monopoly to competition -- the single biggest change sought to be effectuated by the Telecommunications Act -- has proved to be a more complicated and time-consuming task than anyone could have known. Transitions take time. Monopoly providers, not unexpectedly, fight to retain their marketplace advantage. The FCC and the state commissions and the courts and the carriers all have a lot of work in front of us before consumers fully enjoy the fruits of competition in local services.

But, there are signs of healthy progress. My personal assessment is that the momentum of competition is increasing.

Even as competition enters the local telephone marketplace, Congress made it clear that it wanted to maintain universal service -- affordable telephone service for everyone. It is important to explain that the FCC has not withdrawn any of the support that makes local phone service affordable in high cost areas; a variety of high-cost subsidies remain in place, and we have done nothing that requires local phone rates to increase. But one major task that remains to be completed is to reform high-cost support mechanisms in ways that are competitively neutral and competitively sustainable.

Thus far, we have been unable to do so for several reasons. The biggest difficulty relates to the competing interests of the high-cost states and the low-cost states, and the prospect that any FCC order that lacks consensus support will be mired in jurisdictional litigation. Another major problem is the inherent complexity of devising models that accurately compute the economic costs of serving consumers in areas of differing density, topography, climate, etc. A workable solution must be devised this year, so that the interests of consumers in rural, insular, and high-cost areas, as well as those in low-cost areas, are safeguarded -- and incumbents and new entrants alike can finalize and execute their business plans. We are working closely and diligently with state commissioners -- through the mechanism of the Joint Board on universal service -- to accomplish this task.

As you know, we are also revisiting issues relating to the newest element of universal service -- the requirement that we promote telecommunications access for elementary and secondary schools, libraries, and rural health care providers. Since the passage of the Act in 1996, the Internet has integrated into the fabric of our society far more rapidly and pervasively than anyone would have imagined when the Act was drafted. It is more critical than ever that children in lower income school districts have access to this invaluable information tool. We as a nation cannot afford to be fostering through our inaction a widening of the divide between the technology "haves" and "have-nots."

A variety of issues have arisen regarding the mechanisms we have established to implement the schools, libraries, and rural health care support provisions. You have raised important issues, and we have sought to be responsive to your concerns. We are seeking to consolidate the Schools and Libraries Corporation, the Rural Health Care Corporation, and the Universal Service Administrative Corporation. We are prepared to address the salary issues. And there is an active dialogue underway on the issue of collection rates. It is vital that we continue to engage on these issues in as constructive a manner as possible.

Another major area of activity this year will be to rule on a number of proposed mergers. Our job is to review these carefully and approve only those that bring the prospect of increasing competition, not reducing it. We will also continue our review of applications by Bell companies to offer long distance services. It may well be that, sometime this year, we will see one or more applications that demonstrate compliance with the criteria you established for opening local markets.

As competition has grown, new problems have arisen. Slamming is proving to be an especially severe problem. We are committed to use all tools at our disposal to attack it, and we welcome your efforts to create even stronger consumer protections through additional legislation. Cramming is a newer problem, but the Commission and carriers are working proactively to prevent this kind of abuse from taking hold. As competition takes hold, I firmly believe that we must escalate our efforts to prevent these and other consumer abuses. It is imperative that the Commission respond immediately and forcefully to eliminate consumer fraud and abuse.

To this end, I believe that we may need to consider establishing an Office of Consumer Affairs to ensure that these kinds of problems are given priority treatment. This is a critical year for the rollout of digital television. Many of the FCC issues are behind us, but others still lie ahead, such as the fee structure for ancillary uses and cable must-carry. To reduce the danger of delays, I will be chairing an FCC strike force to work cooperatively with local authorities and broadcasters to help resolve tower siting problems.

I am pleased that most of the stations pledging to be on the air by this Fall report that they are on schedule to do so.

If all goes well, we can expect to see the fruits of ten years of labor ripen later this fall into a spectacular television viewing experience. Right here on Capitol Hill, I had the opportunity to witness the opening game of the American League's Texas Rangers and Chicago White Sox broadcast in true high-definition television, and it was superb. Digital television also will facilitate convergence with computers, and permit broadcasters to deliver a whole new array of other digital services to the American public in addition to traditional video programming.

During the transition from analog to digital, I want to make sure that consumers are not misled or confused when they go to buy new digital TV sets and set-top devices. Minimizing disruption and making the transition to DTV as smooth as possible for all Americans is complicated by the involvement of so many industries with competing incentives: broadcasters, cable operators, consumer electronics manufacturers, and computer companies.

Tomorrow, we will adopt rules to implement Section 629 of the Act, which calls for the commercial availability of set-top devices in stores and through distributors other than video service providers. These devices are becoming more like network computers and will play an increasingly important role in spurring new digital services and new functionality.

While digital equipment is being developed for the broadcast, cable, computer, and satellite industries, unfortunately, gaps exist between them and in a number of important respects, the devices are not compatible. For example, it is very doubtful that the new DTV sets that will be available for the first time this fall will be fully compatible with cable systems carrying digital signals. What's lacking is agreement by the cable, consumer electronics, and motion picture industry on the standard for the short piece of cable, also called the "firewire," that connects digital televisions to other digital devices. I do not believe the Commission should attempt to impose technical standards that ensure DTV compatibility, but we can and should encourage and facilitate marketplace solutions. The need for equipment compatibility is becoming more pressing as new service providers outside of the broadcast and cable arena introduce new services intended for reception on television sets in the home.

We are also continuing to take steps to promote competition to cable by every means open to us. Increased competition to cable would result in benefits to consumers such as lower prices, new programming packages, and better customer service. For example, we're examining whether our program access rules can and should be improved to facilitate such competition. We are also exploring ways to streamline DBS regulations, to lift any undue burdens on what has emerged as the foremost competitor to cable.

The coming year will also see growing consumer acceptance of new wireless services, as prices fall and consumer choices proliferate. The Commission will continue to administer the spectrum in ways that create additional competition. And we'll make sure that all aspects of our spectrum management responsibilities -- domestic and international -- are discharged efficiently.

I have taken special interest in spectrum management because it is so important to competitive wireless services. The allocation decisions adopted by the World Radio Conferences, for example, affect the U.S. terrestrial wireless and satellite industries to the tune of many billions of dollars. These decisions determine the permissible uses of spectrum bands worldwide, including in the United States. I have focused my efforts to ensure that U.S. interests are protected at the world conferences and that our international and domestic spectrum policies are consistent and pro-competitive.

At the same time that we are opening our local markets to competition, we are witnessing the opening of global telecom markets under the historic WTO agreement. Our foreign regulatory counterparts are finding that transitioning from monopoly to competition is both difficult and time-consuming. We have been resolute in our efforts to reduce international accounting rates, with the goal of saving American businesses and consumers $5 billion per year.

There are a host of other matters that require attention. For example, the FBI has requested that we resolve a long-pending dispute with telephone carriers about the Communications Assistance to Law Enforcement Act. We must complete our review of numerous broadcast ownership rules and our biennial review of all of our telecommunications rules to ensure that regulatory burdens and uncertainties are kept to an absolute minimum. We must actively monitor the development and deployment of new technologies and services (such as cable modems and xDSL) that increase access to bandwidth and eliminate the "World Wide Wait." These developments appear to reflect growing competitive pressures between the cable and telephone companies. Consistent with our commitment to the goals of competition and deregulation, I believe we must take pains to ensure that our rules do not unnecessarily hinder the offering of new services and new capabilities to the American consumer.

These are just some of the major issues on our agenda. I look forward to your guidance on these or any other issues of concern to the members of this Subcommittee. Thank you, and I would be pleased to respond to your questions.

June 10, 1998

Summary of Testimony of
FCC Commissioner Susan Ness

Congress has entrusted the Federal Communications Commission with enormous responsibilities under the Communications Act of 1934, as amended, and most particularly under the Telecommunications Act of 1996. We are accountable to you for the decisions we make in implementing those laws. I welcome the opportunity to discuss the Commission's activities with you.

The Telecommunications Act of 1996 is landmark legislation. Its principles and policies are right on target. It sets in motion changes that will produce more competition, more choice, more innovation, and lower prices -- all to the benefit of American consumers. It also enables us to deregulate as competition takes hold in markets that previously had monopoly providers.

Two years after passage of the statute, I can report that the Commission has maintained its steadfast adherence to the law you wrote. I am certain that each member of this Subcommittee can identify FCC decisions you would have made differently, and I am happy to discuss those of course, but I do want you to know that in every decision we have done our honest best to remain faithful to the Act as you wrote it.

The FCC faces a huge agenda of unfinished business. Spurring local competition, while maintaining universal service, is perhaps the biggest challenge. Mergers and Section 271 applications will also require careful review for consistency with the objectives of the Communications Act. Reducing or eliminating outdated regulations is also a top priority.

We are still working through remaining issues to ensure a smooth introduction of digital television for all consumers, including subscribers to cable services. We are using all tools that we have available to increase competition in video services.

Spectrum issues will remain a major concern, so that American consumers can continue to receive new and innovative wireless services. We also need to continue our efforts to advance our international agenda, including the opening of foreign markets and the reduction of international accounting rates. And we will continue to promote the deployment of advanced technologies in all telecommunications markets, and more generally, to advance through all our decisions the goals of competition, deregulation, and innovation.