Commissioner Susan Ness
before the Atlanta Chapter of the
Federal Communications Bar Association
February 4, 1997
"The 1996 Telecom Act -- One Year Later"
It's great to be here in Atlanta, home of the Braves. That is, brave entrepreneurs such as Ted Turner, creator of the world's first all-news cable channel.
Atlanta -- home of Cox Communications, a brave pioneer in cable, publishing, and now telephony.
Atlanta -- home of the venerable Neal Boortz, delivering a quarter-century of provocative talk radio.
And Atlanta -- home of BellSouth, one of the world's most profitable local telephone companies.
You are in the thick of it -- but I'm sure Washington sometimes seems distant, maybe even surreal. So I'm delighted that you've formed a chapter of the FCBA and that I could be with you today to talk about what is happening at 1919 M Street, and then to respond to your comments and questions from Main Street -- and Peachtree Street.
A Year of Profound Change
One year ago this week, President Clinton signed into law the Telecommunications Act of 1996. The legislation's goals are to promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers, and to encourage the rapid deployment of new telecommunications technologies.
The new law made 1996 a year of profound change. But 1997 promises to be no less earth-shattering.
On this first anniversary of the Telecom Act, I'd like to focus on Commission decision-making in three areas: local telephone competition, digital television, and spectrum management.
Competition in Telephony
As we near the one-year anniversary, industry leaders, consumer advocates, legislators, and many others have all offered their assessments of the legislation. Like you, I have heard many expressions of disappointment.
Long distance rates are up. Cable rates are up even more. Local telephone rates are not down, and few of us yet have the ability to choose our local telephone carrier, or video provider.
So, is the Telecom Act ...
a colossal miscalculation by Congress?
a brilliant legislative initiative that has failed because of incompetent
implementation by the FCC?
a well-conceived law, implemented properly by the FCC, but ruined by
the actions of state regulators? or stymied by an overzealous federal court?
or stalled by the obstinacy of incumbent monopolists?
The truth is, it's too soon to tell.
Personally, I believe the Act will prove to be a great success. As I work closely with its provisions, I am struck by the wisdom, foresight, and balance that are reflected throughout the legislation.
Congress wrestled with these issues on and off for 20 years. Most of the good insights that arose through this arduous process are embodied in the bill that was signed into law.
Of course, Congress handed off many hard issues to the FCC and to our colleagues at the state commissions. Much remains to be done. It's just too soon to expect that the benefits Congress intended would be pervasive in the marketplace, when the first phase of implementation is not yet complete.
It's a bit like taking a trip with your kids. Getting into the car. Driving to the end of the driveway. And then they ask: Are we there yet?
So far, the FCC has made extraordinary progress in writing the rules Congress assigned to us. Every statutory deadline has been met -- literally dozens of them. Three more rulemakings -- on tariff streamlining, electronic publishing, and infrastructure sharing -- will be completed this week alone.
Meanwhile, the States are focusing on mediations, arbitrations, and approvals of negotiated arrangements for resale, for unbundled network elements, and for transport and termination.
Some are also reevaluating local rate structures, examining intrastate access, and devising state-specific universal service mechanisms.
Carriers are positioning themselves for competition.
Incumbents must develop operational support systems that make it as easy for a customer to change her local carrier as to change her long distance carrier.
And new competitors must formulate their entry strategies, raise capital, and secure interconnection agreements. Just provisioning switches takes months from the time they are ordered until delivery.
Despite our efforts, the regulatory foundation of the new competitive paradigm is not yet set.
With all that remains to be done, no one should be surprised that we cannot yet enjoy all the competition, choices, innovation, and lower prices that were so optimistically predicted 362 days ago.
Competition isn't like carrots or tomatoes. To prepare the soil, plant the seeds, let them sprout, grow, and flower takes years, not weeks. We need to be patient -- as well as diligent and committed.
Consider: the biggest competitive success story this year is the emergence of wireless competition, with the advent of Personal Communications Services.
It is clear that many consumers love the digital privacy, the caller ID, the voice mail, and the lower prices that PCS offers. Cellular companies are responding: accelerating their own introduction of digital technologies, and dropping prices for analog service.
This competition is just now heating up. Before long, we'll have a third, fourth, and fifth provider of wireless service in each market. Over time, if the technology proves out, we'll also see wireless compete with the wired local loop.
But PCS isn't the product of the new law. It's the result of actions taken years earlier, including the Omnibus Budget Reconciliation Act of 1993.
I worked on PCS in my very first days at the Commission in May 1994 -- to approve the final service and auction rules. The auctions began that December. Now, in 1997, PCS service is just beginning to be rolled out, the results of rulemakings and auctions two and three years earlier.
Telephone competition, likewise, will take time.
No, telephone competition hasn't flowered yet, but the soil has been carefully prepared, the seeds have been planted, and the first sprouts are appearing. If we continue to cultivate the right environment, the harvest will be bountiful.
The Telecom Act also gave us direction on another major service that will have profound consequences for the American public -- the conversion of broadcast television from analog to digital.
We began our final lap in December when the Commission adopted a transmission standard for digital television (DTV). This world-class standard not only provides magnificent video pictures and theater-quality sound, but also allows multiple streams of standard quality programming in one six MHz channel. And it enables computers to carry broadcast video, while television sets will be able to download data transmitted over the broadcast signal. In the future, advertising brochures and even whole newspapers and books can be delivered in seconds to your TV, PC, or TV-PC.
By mandating a standard, the FCC ensured that the digital TV set you buy here in Atlanta will work if you move to Albuquerque or Albany. The standard will also lead to economies of scale by the set manufacturers, which will drive the price down further and faster than if there were competing transmission systems.
If the Commission sticks to its schedule, you may well see the first sets in stores during the summer of 1998, and chips in computers by this Christmas. But much remains to be done before you will receive digital TV broadcasts at home.
We are writing the rules for the transition period.
The DTV transition is unlike the introduction of prior broadcast services. FM did not replace AM radio. UHF was added to VHF television. Direct broadcast satellites are a new service, not a replacement for terrestrial TV broadcasting. But DTV will lead to the termination of NTSC television.
So consumers need sufficient time to purchase a digital set or an inexpensive converter box before the analog signals are turned off. During the transition, broadcasters will initiate digital transmission on a new channel while maintaining their analog signal on their old channel.
At the end of the transition period, the analog signal will cease, and that channel will be returned to the government, leaving only digital broadcast signals. Each broadcaster would end up with the same amount of spectrum he has today -- 6 megahertz.
Because digital transmission is much more efficient, the signals can be squeezed together without interference, enabling the FCC to auction a large 130 MHz chunk of unencumbered spectrum -- beachfront property. That's more than all of the spectrum allocated for PCS.
Thorny issues remain:
We are sailing in uncharted waters. As we address these issues, I am first and foremost concerned about consumers. On each issue, I ask myself:
Free, over-the-air TV broadcasting has been tremendously important to all of us for 50 years. While subscription services are great for those who want and can afford them, I do not want to see subscription services becoming the bottleneck through which all news and information must pass.
I want all of our nation's children, rich and poor, to have free access to programming that enriches our lives, and with a technical quality that reflects today's technological advances.
As I noted, the Telecom Act has two principal goals -- competition and deregulation. Both of these goals are served by enlightened spectrum management.
Last March, we held an en banc hearing to explore what spectrum policies are appropriate in a rapidly changing technological and competitive environment. During the past year, we have implemented many of the concepts that were discussed at that forum.
Stewardship of our Nation's airwaves is one of the Commission's most important functions, and one of my personal priorities.
As technology advances, there is a heightened need for spectrum management policies that are both flexible and pragmatic. And the public must be compensated fairly for the use of its resource.
Auctions fit the bill. They are fast; they are fair; they are efficient. Auctions put spectrum in the hands of those who value it most. And, they compensate the public. I strongly support the use of auctions to assign licenses for most services.
I also support the use of unlicensed bands -- crowded, efficient bands for low cost, low power consumer products such as garage door openers, baby monitors, and cordless telephones. There, manufacturers have to adjust their equipment to avoid interference with others.
And I believe Congress should consider annual fees for private spectrum users -- to compensate the public for the use of the airwaves.
What additional policies that are flexible and pragmatic can we employ to further competition and reduce regulation? Allocations for new services should be expedited. Often service and technical requirements can be relaxed. Licensing should be streamlined and coordination functions privatized, to the extent possible.
Licensees need regulatory latitude to adapt to changing market conditions. They also benefit from the ability to reconfigure the size and shape of their service areas and to adjust the amount of bandwidth.
So we have revised our PCS rules to permit licensees to disaggregate and partition their assigned spectrum, and we expect to extend that flexibility to other wireless services.
But some economists argue for total flexibility. That is, the spectrum can be used for any purpose -- mobile, fixed, satellite -- as long as there is no interference with other licensees and the use is consistent with international allocations.
But our spectrum en banc taught us that total flexibility -- particularly where there is no guidance as to the expected use of new spectrum -- may lead to inaction, greater cost, and inefficient spectrum use, not rapid delivery of new services.
Why? Because equipment manufacturers say they will not know what to manufacture. Auction bidders will not be able to structure realistic business plans. Conflicting spectrum uses by licensees within a band will eliminate economies of scale, thereby increasing equipment prices for consumers. In addition, total flexibility may be less spectrum efficient, because greater isolation is necessary to avoid interference with neighboring licensees.
That's akin to saying I can build my factory anywhere I want to -- including right next door to your home or your child's elementary school -- as long as I don't exceed the noise limits.
I think most would agree that some level of planning -- or zoning -- allows for more efficient use of the roads, allows for parks, and improves the quality of life for all inhabitants. Similar logic applies to spectrum.
So there is a need for pragmatism, as well as for flexibility.
This does not mean that we should engage in restrictive spectrum management as has been practiced in the past. We should be guided by Commissioner Quello's famous dictum: "I do deregulation. I don't do anarchy."
In short, there is no one answer to all spectrum issues. We must apply our judgment in each instance to determine how best to serve the American public. Flexibility and pragmatism should be our watchwords.
If we are successful, you will see increasing numbers of beneficial new wireless products and services, and most will work without impairments caused by other radio signals.
Local competition, DTV, and spectrum management will be three of our biggest priorities in the coming months, but there are many other items on our agenda as well. Every corner of the communications marketplace is experiencing change, and all of us are fortunate to be a part of it.
Let me stop here to find out what's on your mind. I welcome the chance to field your questions, just as I welcomed the chance to share the foregoing thoughts with you.