Remarks of
FCC Commissioner Susan Ness
Federal Communications Commission
before the
Women of Wireless Conference

Washington, DC

Friday, November 4, 1994

Making the Connection - Women in PCS

Thank you for your kind introduction and warm welcome.

I am honored to be with you today as one of two female FCC commissioners. You will be hearing from my colleague and friend, Rachelle Chong, later this afternoon. People confuse us all the time. I often receive hand-delivered items addressed to her and vice versa. You know, it's hard to tell one woman from another -- women are all alike!

Being at the Commission has been an extraordinary experience. My wish for each and every one of you is that you love your job as much as I love mine. Although the pace is breathtaking, the issues are fascinating and the ability truly to make a difference is enormously fulfilling.

The first time I set foot in the Commission building was just ten years ago. A former Commissioner, Mimi Dawson, had organized a seminar for women and minorities on financing broadcast station acquisitions. I was a communications banker at the time, and was invited to speak on the panel.

I remember the event well, for it was the day after I returned from my six weeks on maternity leave following the birth of my first child. In researching statistics for my panel presentation, I contacted one of the trade associations and asked to use its library. I did not have a baby sitter, so I brought my newly minted daughter with me. Despite the library staff's misgivings, they fell in love with my daughter, who behaved angelically.

Incidentally, in those days, a female corporate lender was a rarity. Today, many of the top communications bank lenders around the country are women. However, only a handful of women manage the top venture capital funds.

For almost a decade, I lent money to people acquiring radio and television stations, cable systems, cellular telephone systems, publishing companies and the like. To my great disappointment, virtually no women appeared at my doorstep looking to borrow for an acquisition.

But we are at a different point in history. Women today are making the connection. They can be found in great numbers in all segments of the communications industry -- except, sadly, the ranks of ownership.

I am also frustrated that few facts are available on the number of female- owned communications companies. It is hard to know the progress being made unless one has a baseline against which to measure it. I have asked our new Office of Communications Business Opportunity to help me in gathering such statistics; I hope that you will help me as well.

Chairman Hundt cited a number of employment statistics this morning. There is one statistic that he may not have mentioned, but about which he justly should be proud: under his skilled leadership, two-thirds of the Commission's Bureau Chiefs are women. You heard me right -- two- thirds -- including the new Wireless Bureau Chief, Gina Keeney.

We stand on the threshhold of a new era in communications -- a revolution in the way people will use technology to communicate with each other and to make their lives more productive in the workplace and at home. Wireless communication presents exciting prospects for those with the creative vision to discern what consumers will want and what they are willing to pay for such services.

Women have an unprecedented opportunity to play a leadership role in wireless. I am pleased to see so many of you here today, preparing to make the connection with PCS.

Much of the excitement in my first five months as a member of the Commission results from the legislation Congress enacted in 1993 that gave the FCC the authority to auction spectrum for PCS.

During my tenure, no issue has consumed more of my time and attention than the design and implementation of spectrum auctions.

This new authority represents a fundamental change in the way the FCC awards licenses. Spectrum auctions -- bidding for airwaves -- has never happened before. Yet now, not much more than one year since enactment of the legislation, the FCC has already successfully designed, planned, conducted and completed -- or nearly completed -- its first three series of auctions.

When Congress decided to give the FCC auction authority, it did so because of the inherent problems with the FCC's existing licensing methods. Comparative hearings were costly and slow; lotteries were capricious and put licenses in the hands of many people who had no real desire to develop the service. Congress believed that spectrum auctions would allow licenses to go to those who most valued them in a timely fashion.

Yet there was also a keen awareness that requiring payment for licenses could erect an additional barrier to entry that had not existed previously. No one wanted to create a system where licenses went only to those with the "deep pockets".

Congress consistently has recognized over the years that women and minority-owned businesses have particular difficulty obtaining capital. As you know better than anyone, in an auction, a lack of access to funding translates into an inability to participate successfully.

For that reason, Congress directed the Commission to design a competitive bidding system that addresses this problem head-on. Congress was quite explicit. It said that the competitive bidding system, among other things, must promote "economic opportunity and competition. . ." The system must ensure that "new and innovative technologies are readily accessible to the American people by avoiding excessive concentration of licenses and by disseminating licenses among a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women."

Our mandate, put simply, is to ensure meaningful participation by all groups in the auctions. The Commission takes this mandate seriously. We want to find a way to address the difficulties traditionally faced by small, minority-owned and women-owned businesses in obtaining access to capital.

The results of our efforts are reflected in the Entrepreneurial Block rules we adopted in July. The rules provide for an array of options for designated entities (D/Es) -- including bidding credits, installment payments, spectrum set-asides and tax certificates -- from which the FCC can choose for each particular service that it auctions.

The FCC's D/E rules -- which you must know inside and out after your panel this morning -- are comprehensive. They were fashioned to create a meaningful opportunity to participate in the PCS auctions.

As you know, the FCC is preparing to adopt an order at its meeting next Thursday that will fine-tune some aspects of the D/E rules for broadband PCS. Many parties have asked us to clarify or modify our rules. Because we are now in the "Sunshine period", I cannot discuss any of those possible modifications.

I do want to assure you, however, that we recognize the need for clarity in our rules and the need for certainty. As a former lender, I know that nothing chills a deal more than uncertainty. How can you draw up a realistic business plan if our rules are a moving target? My hope is that, after our action next week, you will know what the rules are and that the rules will not change, and you can go about finalizing your plans.

We expect to see significant numbers of designated entities applying for the upcoming broadband PCS auctions. I hope to see women do more than just "show up" for the auctions. Nor will I be content simply to see a long list of women's names on the "winner board" when the PCS auctions are over. It is not enough for women just to connect; I want to see women make a long term connection in PCS.

The FCC plays a role in making that happen. We have two goals. First, to make the PCS market a truly competitive one; second, to create the opportunity for full and meaningful participation by women, small businesses and minorities in that market.

Let me start with competition. Competition is a goal that pervades all we do at the Commission. The outlook for competition in the wireless market is uniquely promising. PCS will compete with cellular service, facing incumbent providers, to be more responsive to consumer needs. There is also the real prospect that PCS can become a substitute for wireline local exchange services.

The auctions should enhance the prospects for competition -- and efficient spectrum utilization -- by ensuring that the licenses go to those who most value them and will make the best use of them. With carefully crafted, narrowly tailored rules, the FCC can set the stage for a PCS market with robust competition, where independent players are competing on price, service and quality.

Our rules must be structured to prevent a single entity from effectively controlling multiple licensees in a single market. I intend to be vigilant in ensuring that our rules do not permit that outcome.

But competition alone cannot ensure "economic opportunity for a wide variety of applicants." Long-term, meaningful participation by women and minorities in all segments of the communications industry is our other, equally important and sometimes conflicting goal. The introduction of PCS, and our Congressional mandate, set the stage for the FCC to encourage these groups to connect at the launch of a brand new and promising industry.

We have sought to strike a balance between the financing realities of a PCS venture and the need to ensure that D/Es have a significant economic stake in the business. Our D/E rules are designed to bridge the tension between these two objectives.

We have heard a lot about exit strategies, about supermajority provisions, rights of first refusal, puts, calls, and management agreements. I think we all recognize that potential investors have legitimate interests in protecting their investment and limiting their risks.

But you must understand that the FCC has equally legitimate concerns. We do not want to see D/E firms acquiring licenses, at reduced rates and on preferential terms, only to be forced to turn them over to the big players, the "deep pockets", at the end of the license holding period. If this happens, in my view, women will have made little progress.

This is not an easy balance. It has required the FCC to ask some hard questions and make some tough decisions. As I mentioned, at our open meeting on November 10th, the Commission will rule on petitions for reconsideration of our D\E rules. My test on any modifications will be to ask: will this enhance the ability of the designated entities to obtain access to capital in a manner consistent with reasonable financial principles? And does it minimize the ability to game the process?

We cannot and should not micro-manage the process. But as stewards of the Nation's radio spectrum, we can and should be careful in how we distribute our country's scarce resource. Has the public truly benefited from this effort? The answer to that question may not come in six months, nor even in five years, but rather, in ten years or more as these emerging businesses become thriving enterprises.

The Commission is extending a helping hand, not a handout. Many prospective bidders are so focused on winning the license, I fear they have left for later their plan for how they will succeed in the business. Given the enormous dollars which must be invested to operate a PCS system, one must ask critical questions upfront -- and answer those questions in a well thought out business plan.

For example: How will I compete with the large companies bidding in the A and B blocks? What services will I provide to distinguish my service from that of my competitors? How can I put together a package of skills and expertise that will be attractive to investors? How much money will I need, not just for the license, not just to build the system, but to cover operating losses for three or more years?

I very much want to see the entrepreneurial women who take the risk of ownership in the PCS industry succeed and prosper five and ten years down the info-pike.

Many of you in this room may have made the choice that ownership is the path you want to take. Others may find different ways to make a connection in the PCS industry. Ancillary businesses -- such as system design, marketing, training, or equipment supply, just to name a few -- will spring up to feed the core PCS business, providing additional, less capital-intensive opportunities for financial reward.

System management is another option. As a lender to communications companies, I found that experienced management was a critical factor for success. I expect that PCS will be no different. I would like to see more women in senior management jobs so that they can make their connection at the beginning, just as these new, entrepreneurial businesses are getting off the ground.

For those of you who have decided to pursue ownership, have you thought about what you can do for women? You will be hiring employees. You will be negotiating contracts with service suppliers. You will be placing equipment orders. In these and other ways, I hope you will think about making these connections with women.

The women who have succeeded in the communications business thus far are an impressive group, but they are too few in number. We all want to see their numbers grow. PCS is the next great frontier for women in communications.

I hope to see women make a variety of connections in PCS that will lead to both meaningful and prosperous participation in that industry. I will work tirelessly to help achieve that goal.

Thank you very much.