NewsMarch 25, 1996

Commissioner Ness Predicts Intense Competition and
Abundant Consumer Benefits Will Flow from
Procompetitive, Deregulatory Legislation

FCC Commissioner Susan Ness told wireless industry representatives today, as a result of enactment of the Telecommunications Act of 1996, the markets for local communications services "will be transformed much more rapidly than ever before. . . . [T]he certainty that came from a very structured regulatory system is gone."

In a speech at the annual convention of the Cellular Telecommunications Industry Association, Commissioner Ness declared that the availability of "more and better services to consumers" is the central goal of the new telecommunications law. "Your job and mine is to make sure that consumers receive the rich array of benefits Congress intended. Our task is to transform the legislative vision into reality," primarily by promoting increased entry by wireline and wireless carriers.

Commissioner Ness described the new Telecommunications Act as "the opening tip- off" for a new era of intense competition. She cited specific examples of the FCC's "March Madness" of effort to implement the new legislation. "Our intrepid agency is now working day and night, seven days a week, to carry out the tasks assigned by Congress. There are no half-time breaks or time-outs to catch our breath."

Commissioner Ness claimed that critics of the agency "focus[] on ancient history. It's much more relevant to measure our current performance by our handling of PCS" than by the licensing process for cellular service. She cited the role of auctions in creating a "'fast break' opportunity for [PCS] providers to construct and operate their systems." She credited flexible PCS service rules with enabling providers to "chang[e] your game plan whenever you want."

Commissioner Ness believes that "Wireless services will play a pivotal role in enabling consumers to break away from the wireline incumbents which, until now, were selected not because they were necessarily the right choice but because they were the only choice." For this reason, "fair interconnection arrangements are even more crucial -- as you begin to become the primary local service providers for some consumers, and volumes of exchanged traffic increase."

On the question whether to adopt a separate interconnection regime for CMRS, or whether CMRS providers should be subject to the same rules as competitive wireline carriers, Commissioner Ness believes "[n]either side has a 'slam-dunk' argument." Accordingly, she urged CTIA members "to promote interconnection arrangements for all competitive carriers that are as procompetitive as possible."

She also discussed numbering and universal service issues, as well as E911, hearing aid compatibility, and education applications of wireless activities.

Contact: James L. Casserly at (202) 418-2100.

- FCC -

Remarks of
FCC Commissioner Susan Ness
Federal Communications Commission
before the
Cellular Telecommunications Industry Association
Special Commissioner's Forum
Wireless '96 Convention

Dallas, Texas

March 25, 1996

The End of the Beginning
(or "Hoopla")

Tom Wheeler suggested that I base my remarks on Winston Churchill's memorable declaration after the 1942 battle at El Alamein. You are surely familiar with it:

"This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."

These phrases certainly describe where we are today in the development of competition for local communication services.

In the past, it was assumed the local loop was a natural monopoly. Regulation controlled prices and encouraged investment. The regulatory bottom line was certainty for the carrier and the consumer. No surprises.

That era has ended. Local competition is beginning. And, as it develops, the role of government will diminish.

Today, in the wireline arena, the largest cities are experiencing increasing competition for transport services and, to a lesser degree, for exchange services provided to high-volume end-users. Residential competition has begun in Rochester, Grand Rapids, and a handful of other locations.

But, the number of small businesses and residential consumers who have a meaningful choice in selecting their local wireline service provider is still modest. Indeed, fewer than 10,000 homes, nationwide, are using the services of a competitive local carrier instead of those provided by an incumbent wireline carrier.

Contrast this with the literally tens of millions of subscribers every year who change their long distance companies.

In the wireless context, cellular service has been successful beyond all expectations. Industry growth rates are exceeded perhaps only by the growth of Internet connections.

But for most of the population, there are still only two underlying carriers in each market.

These markets will be transformed much more rapidly than ever before. And the certainty that came from a very structured regulatory system is gone.

Telecommunications Act of 1996

The event that marks the "end of the beginning" is the enactment of the Telecommunications Act of 1996. This historic legislation won overwhelming, bipartisan support in both Houses of Congress and was signed into law by the President on February 8.

It represents the most sweeping change in telecommunications laws in over 60 years. Enactment of the new law, in and of itself, did not "change the world." No new technologies were created by the stroke of the President's pen. Market shares on February 9 were presumably about the same as on February 7.

But this legislation has the potential to usher in a communications world we scarcely can imagine today.

The beginning is now over. Congress has now provided clear policy guidance.

Here is how the House and Senate conferees described the new law:

. . . a procompetitive and deregulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition. . .

That's a mouthful. But it's not just a lot of words. It's a lot of ideas as well.

Let's parse the language. At the beginning we have the starting point, the guiding philosophy of the legislation: "A procompetitive and deregulatory framework."

And then we have the real objective: "private sector deployment of advanced telecommunications and information technologies and services to all Americans."

This is what it's all about -- more and better services to consumers.

Between the end of the beginning (the new legislative framework) and the beginning of the end (providing advanced technologies and services to all Americans), we have the means to get to the end: "by opening all telecommunications markets to competition."

Your job and mine is to make sure that consumers receive the rich array of benefits Congress intended. Our task is to transform the legislative vision into reality. Competition is the key ingredient.

Success in this endeavor will transform our work and our leisure, will enhance our education and our entertainment, and foster both domestic employment and international competitiveness.

For those of you who are keeping track, that's the end of the beginning of my remarks today.

Winston Churchill's comment about the end of the beginning occurred in the most dramatic and consequential kind of competition: warfare.

You and I are dealing with a very different kind of competition: the marketplace.

Meanwhile, most Americans are more concerned right now with yet another kind of competition: the NCAA national basketball championships.

This month, homes and bars and dormitories and hotel rooms across the nation echo with the televised sounds of pounding feet and squeaking sneakers on hardwood floors, rippling nets, and wild applause. This may be a bit of a stretch, but I think NCAA basketball and communications competition have a lot in common.

I assume that's why you subtitled this convention something like "Get in the Hoop."

For example, we can think of the 1996 Act as the opening tip-off for the most intense phase of the competition. This is the moment we have all been waiting for. The players are ready. Congress has put the ball into play.

But the rulebook is not entirely finished. Congress has resolved a host of difficult issues, but it has passed many others to the FCC.

We have clear guidance to promote competition and a checklist that tells us the basic responsibilities of some of the key players. But Congress has left it to federal and state officials both to flesh out many of the rules and then to referee their implementation.

Among the open questions: What are the terms and conditions for interconnection? How will number portability be implemented? What new burdens -- and new opportunities -- will be presented by a restructuring of universal service mechanisms?

And there are obstacles on the court: Restrictions on antenna siting. Fears of the health effects of radiation. A few incumbent fixed microwave service operators who are delaying the game.

Let me tell you how we at the FCC are working to accelerate the new era of competition.

FCC In Action

Passage of the Telecommunications Act began the most intense period of activity our agency has ever known. In six short weeks -- it began in February but I think it's still okay to call it "March Madness" -- we have identified many issues that require rulemaking activity.

We have established a schedule for briefings, drafting of notices of proposed rulemaking, and adoption of final orders.

Our Wireless, Common Carrier, and Cable Bureaus have held public dialogues open to all industry and consumer organizations. Our General Counsel has moderated an extraordinary public debate regarding some of the most complex and critical provisions of the statute.

We have provided unprecedented public access to our internal planning information.

Our intrepid agency is now working day and night, seven days a week, to carry out the tasks assigned by Congress. There are no half-time breaks or time-outs to catch our breath.

We need to finish our work as fast as possible so that your industry -- and others -- can get on with the game.

I'd like now to discuss a few of the specific issues that are in play.


First let me turn to spectrum. Effective spectrum management is at the center of the FCC's mission. It's also the key to your business.

I was immensely pleased by the day-long spectrum management hearing we held earlier this month. I had proposed this en banc hearing because of the need to review spectrum policies as a whole, and not just in specific proceedings focused on discrete slices of spectrum.

We need to know how best to speed the delivery of valuable new services to the public. We need to know how best to judge when to make additional spectrum available for such services -- and when to rely instead on more efficient use of the spectrum already allocated.

We need to be fair, flexible, and fast.

I learned a lot, and I believe my colleagues did as well.

It was clear that the FCC has already made great strides in its administration of the spectrum. Critics who bemoan the delays in authorization of cellular service are focusing on ancient history.

It's much more relevant to measure our current performance by our handling of PCS. Let's talk about the 1990s, not the practices of ten or twenty years ago!

Auctions: Today, we are routinely using the most efficient spectrum assignment tool yet devised: auctions. Our initial PCS auctions were a triumphant success. They placed licenses in the hands of those who valued them most. The rapid issuance of licenses created a "fast break" opportunity for service providers to construct and operate their systems.

Flexibility: Our PCS service rules have unprecedented flexibility. We defined PCS in broad terms, leaving it to you, your suppliers, and your customers to decide which services are most valuable. Voice communications, business data and faxes, Internet access, or whatever -- it's up to you.

And most importantly, you can respond to market forces by changing your game plan whenever you want. You don't have to come to us for permission. You have more room to run.

Fixed Local Loop: In January, we proposed to authorize you to provide any fixed wireless local loop service as well as mobile. Why should we care whether the signal from a pole on the street goes to a mobile phone inside the house or to a mounted transceiver outside on the wall?

The goal, once again, is to increase consumer choice. Choice comes from competition.

Wireless services will play a pivotal role in enabling consumers to break away from the wireline incumbents which, until now, were selected not because they were necessarily the right choice but because they were the only choice.

Relocation: Your ability to use PCS spectrum to increase wireless competition and consumer choice is, of course, constrained. You are held back by the obligation to relocate incumbent fixed microwave users.

Most relocation negotiations are apparently proceeding in a reasonable manner. But some incumbents are said to be making extortionate demands out of all proportion to the true costs of relocation.

Our staff has been instructed to review all specific allegations carefully and expeditiously. In April, we plan to address all the microwave relocation issues in response to these complaints.

Antenna Siting: Antenna siting is another major concern. The new law takes the FCC out of the game completely concerning the placement, construction, and modification of facilities for personal wireless services.

Our only involvement is tangential: State or local government decisions based on environmental effects of radiation must comport with our rules. We will update those rules by August 6.


Besides spectrum, I would like to talk about three other critical issues that will affect your opportunity to compete effectively against incumbent wireline companies.

Looming above all others is the issue of interconnection.

Communications services are based on networking. Even to provide mobility services, you require interconnection with incumbent wireline carriers.

Fair interconnection arrangements will be even more crucial in the new era -- as you become the primary local service providers for some consumers, and as volumes of exchanged traffic increase.

A three-cent-per-minute interconnection charge may not hinder you from marketing a 30- cent-per-minute mobility service. But three cents per minute totally blocks your shot at offering a $20-dollar-per-month wireless local loop service.

Also, today, you not only pay dearly for the right to terminate calls on landline networks, but often receive no corresponding payment for traffic going in the other direction. I can understand why you cried "foul."

For this reason, in December, we sought to establish a new regime for interconnection between CMRS providers and wireline carriers. To speed implementation of a solution, and to get competition off and running, we proposed bill-and-keep for an interim period, pending more detailed analysis of various alternatives.

That was before the legislation passed.

The new law establishes a framework for the negotiation and arbitration of interconnection arrangements between competitive local carriers and incumbent wireline carriers. We now confront the question of whether to adopt a separate regime for CMRS, or whether CMRS providers should follow the same procedures that will apply to competitive wireline carriers.

Do differing statutory provisions or practical considerations require that CMRS interconnection be treated entirely as a federal matter, while wireline-to-wireline issues are resolved under the mixed federal-state regime established by the statute? Your industry argues that it should be treated separately. On the other hand, aren't the prospects for fair play enhanced when competing players are subject to the same rules? Regulatory parity. That's what the wireline carriers are telling us.

The lobbying on this issue has been intense (I'd call it a "full-court press"), even though a decision is several months away. I have reached no decision and will carefully consider the legal, economic, and policy arguments on all sides before making up my mind.

From what I have heard so far, it appears to be a close question. Neither side has a "slam- dunk" argument.

I can give you no assurance that a special -- and more favorable -- interconnection regime will apply to CMRS providers alone. For this reason, it may be to your benefit to promote interconnection arrangements for all competitive carriers that are as procompetitive as possible.

Number Portability

The second critical issue is number portability.

Consumers value their telephone numbers. Competition in the local loop cannot occur without the ability of residential and business subscribers to choose a new supplier -- wireline or wireless -- while keeping their old number.

Congress recognized this problem. It required incumbent local exchange carriers to devise means of implementing number portability.

Our rulemaking on this issue was begun before passage of the Act. We plan to adopt an order in May.

We will be mindful of the progress that has been made in several of the States. It is not our intention to tread on their toes or to prevent them from completing the work that is already well underway.

But it is our responsibility to implement regulations which ensure that you and other local loop competitors are not hindered by the lack of number portability in any of the fifty states.

Universal Service

The third issue is universal service.

The 1996 Act requires a comprehensive revision of the way in which universal service is funded and provided. Both sides of your balance sheet will be affected.

On the one hand, you'll be paying to support universal service. The bill requires measures to address special needs of rural, insular, and high-cost areas, and of low-income consumers. It also requires discounts for schools, libraries, and health care providers.

All telecommunications carriers will now pay to support these responsibilities. That's consistent with the national policy for promoting fair competition. (Maybe we can call it a "level playing court.") This burden should not fall uniquely or disproportionately on any one industry sector.

On the other hand, eligibility to receive universal service support will be expanded. Multiple carriers will be eligible to receive support in non-rural areas and, at the discretion of the state commissions, possibly in rural areas as well.

Wireless carriers will have the same opportunity as wireline carriers to qualify to receive universal service support payments.

Again, this is consistent with a pro-competitive policy framework.

Schools, libraries, and rural health care providers present special circumstances. Under the new law, these entities are entitled to receive discounted rates from all carriers, including wireless carriers, not just the "eligible carriers" selected under the generic universal service provisions.

The services to be provided, the magnitude of the discounts, and the methods of reimbursement are all subjects on which we are currently seeking comment.

I encourage you to participate in this rulemaking. Beginning of the End. . .

I have sought to focus these remarks on the FCC issues that I believe to be of greatest relevance to you -- the highlights of the action, if you will.

I want to avoid going into overtime.

Although this is the beginning of the end of my remarks (or should I say, the Final Four minutes?), I don't want to close without briefly mentioning three other topics.

First, E911: I want to commend CTIA and the public safety community for seizing the initiative and negotiating a compromise on E911. You deserve a lot of credit for promoting solutions that will enable your customers to receive emergency assistance where needed.

Second, hearing aid compatibility: I know you are also at work to solve compatibility problems between wireless telephones and hearing aids. This effort is not as far along, but again you seem to recognize the need to address genuine needs before the clamor for government intervention grows irresistible.

Third, community service: the best competitors are ones which also make time for activities that make communities stronger. I want to salute the CTIA Foundation for Wireless Technologies, especially the ClassLink program. I enjoyed the demonstration this morning.

I also had the great pleasure of participating in a ClassLink demonstration with Newt Gingrich and Reed Hundt last May. The benefits wireless technologies can offer to students and teachers are noteworthy.

Schools are one setting in which the rewards of technology can be magnified. I hope you will continue to make students a priority, even as the battles of competition intensify.


At the last, I want to return to the points I made earlier -- about the benefits to consumers of competition and the enormous difference it will make if we are successful in bringing about the competition Congress envisioned. Success is not pre-ordained.

But we will have the best chance of success if we approach our task with the same spirit that Churchill maintained throughout World War II.

Just a few days after he uttered the remarks I quoted at the outset, Churchill sent a telegraph message to another leader. "There is still a long road to tread," he wrote, "but the end is sure."

That conviction carried him through to the end, and brought him success.

I wish the same to you.

And now I hear the final buzzer. . . .