|News||December 6, 1994|
Discussing the need for an updated policy framework, Commissioner Ness declared, "We are in a time of momentous change. I believe the forces in motion may be as seismic as at the time of the first of these FCBA/PLI conferences in 1983. Then it was the eve of divestiture . . . . Now, we can feel the rumblings of equally earth-shaking developments. This time, the epicenter will be Main Street. Cable companies, interexchange carriers, telcos, and others will all be battling for the heart, the voice, and the pocketbook of the consumer."
Commissioner Ness also supported the plans of congressional leaders to make communications legislation a priority in the new year. "I agree with Senator Pressler that legislation is vitally needed. I have been glad to hear Senators Dole, Packwood, and Hollings and Congressmen Gingrich, Fields, and Markey all express their intentions to make communications legislation a priority in the new year. I applaud the bipartisan spirit that has characterized many of the initiatives to date and hope that it will continue in the new Congress."
She also noted, however, that Congress has found it difficult to legislate in this area and that passage of legislation in 1995 is not assured. "In my judgment, the Commission must continue to move forward with an agenda for competition. Pending the enactment of legislation, there are ways in which we can build on the bipartisan consensus reflected in recent legislative proposals, continue the momentum resulting from overwhelming votes on the floor of the House and in the Senate Commerce Committee, and provide the opportunity and certainty sought by industry."
In particular, she emphasized her interest in expanding competition in the two markets where there remains a genuine issue of monopoly power: cable and local telephone service. "Pending the enactment of legislation, we can continue to tackle the tough issues -- number portability, intelligent network architecture, expanded interconnection, support for universal service, and the like -- associated with the introduction and expansion of competition."
Commissioner Ness declared that the Commission is "taking one enormous stride forward on the path to competition with our actions on video dialtone." She stated that the Commission's reconsideration ruling was "based on a careful assessment of consumer and competitive concerns" and that it "reflects sensitivity to legitimate concerns of states."
Commissioner Ness supported consideration of local exchange competition in the context of VDT Section 214 applications. Such an approach, she explained, is "forward- looking and pro-competitive . . . , fair . . . , and prudent." She further emphasized that the Commission will strive to render decisions on all pending video dialtone applications "expeditiously" and pointed out that extra resources are being deployed to process the applications quickly.
Contact: James L. Casserly, Office of Commissioner Ness, 202-418-2100.
December 5, 1994
Thank you for the kind introduction.
I want to begin by congratulating the Federal Communications Bar Association and the Practicing Law Institute on 12 successful years. I understand that this program has always been timely and informative, and I am certain that this year will be no exception.
I should also congratulate the planners of this conference for your prescient decision months ago to select Senator Larry Pressler as the congressional keynoter.
One need not look too far into the future to assert with confidence that we are in a time of momentous change. I believe the forces in motion may be as seismic as at the time of the first of these FCBA/PLI conferences in 1983.
Then, it was the eve of divestiture. The Modification of Final Judgment was about to be implemented, shattering the integrated structure of the Bell System and fundamentally altering the landscape for competition in information services, long distance, and equipment manufacturing.
Now, we can feel the rumblings of equally earth-shaking developments. This time, the epicenter will be Main Street. Cable companies, interexchange carriers, telcos, and others will all be battling for the heart, the voice, and the pocketbook of the consumer.
To take one example, the largest auction in history will be opening just one hour from now. This auction represents an electronic version of the gold rush -- except this time the taxpayer gets some of the gold.
And this auction will lead to a booming business -- PCS -- that has the potential to change Main Street, as well as Wall Street.
A second set of rumblings is occurring across the globe.
Although the focus here today is largely domestic issues, we clearly have reached the point where most of our domestic decisions have international ramifications, and vice versa.
As so many of you who are finding yourselves negotiating international deals or working to open foreign markets can attest, it is truly becoming a global information infrastructure.
In the G7 preparatory meetings that I attended this past weekend and in the European Union bilateral talks last week, I was struck by the fact that our vision of competitive markets and the GII has caught on with users in Europe and with many of the governments. No longer is there a debate whether to liberalize -- the issue is when. The Council of Ministers has voted to have facilities-based competition for most member states by January 1998. The race is on.
A third tremor is the rumbling sound of impending change in our telecommunications law.
When I accepted this invitation, I thought I would be coming here to discuss the FCC's plans to implement a comprehensive telecommunications bill, the biggest overhaul in 60 years. I'll bet other speakers had the same expectation. Congress, however, was unable to complete its effort on communications legislation this year.
I remain hopeful and supportive of congressional action in this area. I agree with Senator Pressler that legislation is vitally needed. I have been glad to hear Senators Dole, Packwood, and Hollings and Congressmen Gingrich, Fields, and Markey all express their intentions to make communications legislation a priority in the new year. I applaud the bipartisan spirit that has characterized many of the initiatives to date and hope that it will continue in the new Congress.
Yet we need to recognize that immediate enactment of communications legislation is by no means assured. It can be enormously difficult to complete the legislative process. Consider the history.
There have been efforts to rewrite common carrier laws in each of the last ten Congresses. Significant common carrier issues have been considered regularly throughout the past 20 years, beginning with the Consumer Communications Reform Act in 1975. Yet, despite considerable effort, no comprehensive common carrier legislation has passed both the House and the Senate -- even in 1994, when just about everyone said "the stars are aligned" for passage of a bill.
Time will tell whether the 104th Congress produces a different result, but in my judgment the Commission in the meantime must continue to move forward with an agenda for competition. Pending the enactment of legislation, there are ways in which we can build on the bipartisan consensus reflected in recent legislative proposals, continue the momentum resulting from overwhelming votes on the floor of the House and in the Senate Commerce Committee, and provide the opportunity and certainty sought by industry.
To do so, we must confront the complex implementation questions associated with expanding competition in the two markets where there remains a genuine issue of monopoly power: cable and local telephone service.
There are many other important issues on the table, but none more important than this - - moving forward with efforts to spur competition in local communications markets.
I believe many Members of Congress on both sides of the Hill and both sides of the aisle would want us to press ahead. I believe the Administration is similarly inclined. There is broad bipartisan support for permitting cable to provide telephone services and for enabling telephone companies to provide competition in the delivery of video programming.
We fully expect that this competition can yield substantial consumer benefits -- lower prices, better service, more choice, and increased innovation -- as has already occurred in other communications markets. The emergence of competition will also make it possible to ease the burdens regulation can impose on industry, on government, and on the taxpayer.
The issue is no longer whether competition in video and in telephony is desirable but how best to effectuate it. Issues of implementation -- sequencing and safeguards -- were what made the legislative debates so difficult and contentious.
Most of the same communications issues considered in legislation also face the Commission, with the additional complication that the FCC cannot amend the governing statute. The Commission cannot itself remove the cable-telco cross-ownership provision in the Cable Act, though we have urged the Congress to do so. (And, as others will be discussing, the courts have been busy in this area.) Likewise, it is not feasible for the Commission directly to preempt those state laws and regulations that protect telephone companies against unfettered competition.
Nonetheless, we can continue to make progress. Pending the enactment of legislation, we can continue to tackle the tough issues -- number portability, intelligent network architecture, expanded interconnection, support for universal service, and the like -- associated with the introduction and expansion of competition.
Our challenge is to formulate measures that remove barriers to, and stimulate, competition, while respecting jurisdictional and political constraints.
Let me take a moment to discuss one area where we are pushing ahead under our existing statute. We believe we are taking one enormous stride forward on the path to competition with our actions on video dialtone, or VDT.
Video dialtone, the courts have affirmed, fits within existing law. It can be implemented without legislative or judicial actions to remove the cable-telco prohibition of the 1984 Cable Act.
VDT allows telephone companies to provide a platform for competition to cable, but it is based on a different model. In VDT, the telco is a common carrier, and multiple independent customer-programmers provide the video programming to end-users.
As most of you know, the Commission issued a major VDT order early last month. This order addressed approximately two dozen petitions for reconsideration of the Commission's original VDT decision. These petitions were reviewed by a Commission with three members (including representatives of both political parties) who were not participants in the agency's initial decision two years earlier. Our recent ruling reaffirms the basic framework of the prior decision, but it makes some significant adjustments as well.
I want to emphasize that the full Commission, including old and new members, strongly supports video dialtone. We believe it will foster competition in the delivery of video programming, spur investment in telecommunications infrastructure, and, over time, increase the availability of diverse program choices. To the extent VDT produces increased competition, it will also lead to reduced regulation -- another worthy goal.
This is not the occasion for a "laundry list" recitation of the salient features of the reconsideration ruling. I will say that our decision was based on a careful assessment of consumer and competitive concerns.
In particular, our ruling relies on careful scrutiny of Section 214 applications and proposed tariffs to address cost allocation and other thorny issues. It also reflects sensitivity to legitimate concerns of states. We modified our earlier preemption of state authority and promised to initiate a new proceeding on jurisdictional separations. We also sought further comment on some issues we were unable to resolve on the basis of the record compiled to date.
I want to mention one particular element of the reconsideration ruling. In our discussion of the importance of requiring review of Section 214 applications, we observed that the Commission's public interest analysis can consider, among other things, the extent to which the state in which service is planned allows for local exchange competition.
The precise contours of this provision of the VDT order were not defined. The Commission was not ready to say what influence the presence or absence of local exchange competition might have on the processing of Section 214 applications. My view is that our analysis of each application should include consideration of the extent to which barriers to competition have been eliminated.
This approach has several virtues. First, it is forward-looking and pro-competitive. It seeks to promote competition in both video and telephone markets, not just one or the other. Second, it is fair. It provides increased opportunities for telephone companies in markets where they are most exposed to competition themselves. Third, it is prudent. Our concerns about cross-subsidies and discrimination are necessarily diminished when telcos entering into new markets can no longer exploit a protected monopoly base.
This and the other relevant factors need to be assessed carefully, but also expeditiously. Now that reconsideration issues have been resolved, it is appropriate that pending applications to authorize the construction and operation of VDT facilities be assigned a high priority. Significant personnel resources are being assigned to process the backlog. We will do what we can to reach a decision promptly, favorable or not, in every case where the record permits us to reach a final decision under the public interest standard.
Through video dialtone and other measures, the Commission and other national and state policymakers can promote market structures that enable consumers to secure telephone and video services from multiple providers. At the same time, we also need to be pragmatic -- and to avoid wishful thinking.
Our hopes for video competition should not rely solely on the competition telephone companies can provide to cable companies, or vice versa. For one thing, there is no way to guarantee that the future will bring widespread, sustainable, two-wire competition. For another, our goal should be robust competition, not market structures that allow for only two participants in a market.
Thus, my vision of video competition is not simply a telco providing VDT in competition with a cable company providing cable service. Direct Broadcast Satellite increasingly looks like a formidable source of additional competition in the video market. Multipoint Multichannel Distribution Service and Local Multichannel Distribution Service can also add additional skills, resources, and competitive pressures to the market. But my hopes for tomorrow do not mean that "effective competition" exists in the video market today.
Similarly, our aspirations for telephone competition should not rest entirely on the prospective entry of cable companies. We need to explore other possibilities, such as the potential for electric and gas companies to provide fiber-based communication services. We also need to promote use of wireless services as substitutes for, and not merely complements to, local wireline services. The national broadband auctions beginning today are a dramatic example of market forces creating an abundance of competitors where now there are few.
In short, I want to explore possibilities that will lead to true multi-firm competition in the telephone and video markets. In this regard, I sometimes think the public policy debate focuses too heavily on the issue of cross-entry from one industry sector to another and that we too easily overlook the potential for intra-sector competition, for example, by telephone companies with telephone companies.
The evolution of fully competitive markets will not happen overnight. At times, the rhetoric has gotten well ahead of the reality. Yet the Commission's decisions cannot be based on speculative visions of the future.
Can we reasonably expect that two telephone companies, or two cable companies, will ever compete toe to toe for any significant share of each other's business? Can we realize expectations that the two wired media will compete successfully with each other? Or should we focus instead on the competition that can come to telephony from PCS, and to video from DBS and other sources?
These are important questions, and the Commission will need your help in answering them. We need to identify all unnecessary barriers to competition and work tirelessly to eliminate them.
It was Congressional legislation that paved the way for today's auction and, sooner or later, it will be Congressional legislation that will give us fresh guidance to solve the legal problems the FCC lacks power to address.
And yet, much as the Commission would welcome updated legislation, we owe it to the public to keep moving forward in the meantime. We need to devise creative ways to press ahead in a variety of areas, most particularly in the areas of local telephone and video services.
We will welcome your help in this endeavor. Together, we can continue our efforts to promote competition, ensure universal service, and maintain U.S. global leadership in technology and in the quality and value of services available to American consumers and consumers across the world.