WPCE 2BJZ Courier3|j  x6X@`7X@HP LaserJet 5PHPLAS5P.PRS5x  @\%DX@2K 6EF Zf 3|j   bA# PE37w$P#HP LaserJet 5PHPLAS5P.PRS5x  @\%DX@",tB^ f ^ENluuNNNuNNNNuuuuuuuuuuNNhN[}NNNuuNhuhuhNuuAAuAuuuuV[Auuuuhhuhu=uuuuuNuuuuuuuuuAhhhhhhhhhhNANANANAuuuuuuuuuuhuuuuuuguggguuguuguuuuuuuNAuuuuNuuuuATuAAuuuuuTTu~Y~Y~Y}uTAuuuuuuuuggguuu}uuuNuuNNNWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNuuuNh__uuuuuuRuuuuRNNyyu<<uuuuuNyuR"uyuCuNNNuuuuNuhulcuhhNNNNh[huhNAhhuhuuuhhNuhNNuuuuuuuNuhN /;k  PP9~~+k~~KkKk&&pY2!K} tf <K"i~'^99Ipp.DDNt9D99pppppppppp99tttp̅}9ep}}999\p.ppepp9pp..e.ppppDe9peeeeE5EtD9sZDDD9DDDDDDpD|9pppppȰepppp99999999pppppppppepp|pepppppeese|pppppppspsp9.D|DD9|Xssep.p:pDpDp.pxppppȼDDDeees}L}9}Zpppppps}e}e}eppDpe}Dp|8dp,(,WddddddddddddddddddddddddddddddddddddddddNHxxHlpD|pppppLJpDHpD,,DDpDDxppxHxxHsdd,DdD"dxdldtxxd",^LLa=[[gL[LLLLLLLL{=L===[L\G\[Ly[[[L[[[[[[[L LLLLLLLLL=[[[Lu=N[[= [[[eLy[[K;5;WddddddddddddddddddddddddddddddddddddddddN``[%eb[`[;;[[ [[   ` ` ;[ ["    ",tB^ f ^;C]ddCCCdCCCCddddddddddCCY~~vCN~sk~CCCddCYdYdYCdd88d8ddddJN8ddddYYdYd4dddddCddddddddd8YYYYYY~Y~Y~Y~YC8C8C8C8ddddddddddYdddddsdXdXXXddx|X~d~d|XdddddddC8ddddCdoddd|8|H~d|8|8dtddddHHdlLlLlLkd|H|8~ddddddddXXXd~ddkd~ddxCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCYQQddddddFddddFCChhd44ddxxdddvooChdF"dhd9dCCxCddoddCdYds]xUvdYYCCCCx~oxoY~NYdYC8YooYdYxsdxdd~YYxoxxx~CdxYxxxxCCdddddddxCsdYC\   pxtll\tll@\@\`L"i~'^:DpddȨDDDdp4D48ddddddddddDDpppd|Ld|pȐD8DtdDdpXpXDdp8Dp8pdppXLDpdddXP,PhD4htDDD4DDDDDDdDp8dddddȐXXXXXJ8J8J8J8pddddppppddpddddzpdddXXhXXXXXdddhdptL8LpLDLpphhp8ZDP8pppddƐXXXpLpLpLphfDtppppppȐhXXXpDppLDd4ddC6CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxHjdDdddddd^@FZCourierCG TimesArialCG Times BoldCG Times ItalicTimes New RomanTimes New Roman BoldTimes New Roman ItalicTimes New Roman Bold Italic"i~'^:LpddDDDdp4D48ddddddddddDDpppdLd||p|||D8DpdDddXdXDdp88d8pdddLL8pXdXLD,DpD4ppDDD4DDDDDDdDd8dddddXXXXXL8L8L8L8pddddpppp|Xdddd|Xd|ddddXXpXXXXXdddpdppL8LdLDLdpppd|8|h|D|L|8pppddLLLpLpLpLpp|l|8|ppppppp|p|L|L|Ld|DppL|D|d4ddC8CWddddddddddddddddddddddddddddddddddddddddNHxxHddLdddddd4&0*((\$" That's why I've been somewhat surprised at the impatience with which some pundits have viewed the level of local competition under the '96 Act.  X4On the first anniversary, folks were asking "where's the competition?" I observed then that this was like piling the family into the car for a long trip, and, before you've reached the end of the driveway, there is a plaintive voice from the back seat, "Are we there yet?" No, we're not there yet even now, two years further into the journey. Chairman Bliley uses a different metaphor, but to the same effect. He had a grandchild born about the time the law passed. No matter how bright that child is, you cannot expect a threeyearold to speak Greek or solve quadratic equations. But, just as that child is undoubtedly growing stronger and more capable with each day, we are getting a whole lot closer to achieving robust competition even in the local telephone  X 4marketplace. Consider: competitive local exchange carriers or CLECs had revenues of  X 4about $500 million in 1996. By 1998, this number had increased between fourfold and eightfold. Perhaps $20 billion of capital has been raised, and new facilities are being deployed in first, second, and even thirdtier markets. Focal and MFS (now Worldcom) and Teleport (now AT&T) are laying fiber in numerous markets, while Winstar and Teligent and NextLink are using wireless to give businesses service that is better, or cheaper, or both. Competition in the residential market is shall I say, less robust? But carriers like RCN and McLeod USA, as well as cable companies like Cablevision and Cox, are in fact competing for residential telephone subscribers. Other carriers have focused their strategies on resale and unbundled network elements. These modes of entry have been clouded by (1) the overhang of litigation, (2) the difficulties (on both the ILEC and the CLEC side) of operations support systems, and (3) residential pricing issues which I note is outside the purview of the FCC. These obstacles are being addressed. The litigation cycle may be drawing to a close. We've had a string of helpful circuit court opinions on Section 271 in the past year thereby ensuring that the Bell companies have an incentive to meet their marketopening responsibilities. And the Supreme Court is poised to rule on the interconnection order, which has been tied up almost since it was issued back in August of 1996. Many state commissions have demonstrated their commitment to the competitive paradigm. Some have been working closely with Bell companies to develop and test the operations support systems that will enable the CLECs to have their resale and UNE orders processed quickly and reliably. This in turn will help to pave the way for approval of Section 271 applications, bringing formidable new competitors to the long distance market. "%'0*((%"Ԍ X' Convergence The Regulatory Crossroads Competition brings new suppliers and lower prices for existing services. It also fosters completely new services. Perhaps the most vibrant competition to emerge since the Telecommunications Act is in broadband services. Broadband has given form and substance to the term convergence. Telcos are finally deploying digital subscriber line, or DSL, services, as cable companies press forward with cable modems. Both services offer the prospect of ending the "World Wide Wait." Because of the "always on" nature of the connection, it has the power to create a totally different relationship between consumers and the online world. As I just saw at the Consumer Electronics Show, a host of new applications are based on inhome networking, as well as connections between home appliances and the outside world. Convergence presents the question whether disparate regulatory regimes based on historic differences among providers should be preserved. The debate on this pivotal issue centers on some of the most intriguing arguments I have heard during my tenure at the Commission. We confront a dynamic marketplace, characterized by rapid changes in technology, a new business alignment with every passing day, and lighteningspeed changes in the flow of capital. Even electronic scorecards can't keep pace. Some parties find it anomalous to treat similar offerings differently, just because one service is provided by a telephone company and the other service is provided by a cable company. On the other hand, Congress explicitly rejected a proposed "Title VII" that would have unified the regulatory framework for all switched broadband services. Also, both innovation and capital formation could be hindered if we too readily apply a Title II regime to the nascent broadband services offered by cable companies. And what about the broadband services that are being introduced by terrestrial wireless carriers, satellite carriers, and unlicensed providers, or even digital broadcasters? Do these all need to be forcefit into a single regulatory regime? I think not. Yet the policies of interconnection, equal access, and open architecture have served us well in the wireline context. Indeed, the concepts of connectivity and interoperability and openness are the lifeblood of the Internet. These principles are worth preserving. Some worry that any mention of these principles portends premature and excessive governmental intervention, jeopardizing investment and deterring buildout. Not so. "#'0*((%"ԌNo one is seriously suggesting that cable operators ought to be subject to the obligations of unbundled network elements, TELRIC pricing, resale on an avoided cost basis, and collocation. We haven't even figured out what questions to ask, much less what the appropriate answers may be. But I don't think anyone can responsibly suggest that we ought not to be asking questions of a wide variety of stakeholders. In my judgment, the Commission must better understand how these divergent approaches will promote, or retard, the continued growth of the Internet. We need to remember that highspeed access to the Internet and related services are still nascent. Fixed and mobile wireless options may soon become part of the equation. I am listening carefully to the arguments on both sides, but right now I am inclined to believe that, as multiple paths to the home and to the business emerge, the competitive marketplace will safeguard consumers' interests in access and choice and interoperability. As we rely more on competition and less on regulation, telcos should also have a "procompetitive, deregulatory" option for participating in this emerging market. That's why I like the concept of a Section 706 separate affiliate. It lets the incumbent LECs out from under the unbundling and resale obligations mandated by Section 251; and it opens the door to still more competition by unaffiliated broadband providers like Covad and Rythyms. I particularly want to salute Northpoint and Ameritech a CLEC and an ILEC for finding common ground on this issue.  X' Industry Consolidation  X4 If convergence presents an intriguing set of challenges, so too does consolidation. The "urge to merge" is alive and well in all of the market sectors the Commission oversees. Much of the consolidation that has occurred in the past three years was permissible, foreseeable, and, generally, beneficial. Congress gave the FCC the responsibility of insuring that telecommunications and broadcast mergers serve the public interest, convenience, and necessity. We must not hesitate to fulfill our statutory role in cases where the prospects for telephone competition or broadcast  X4diversity are truly imperiled. At the same time, we must resist entreaties by those who would have the Commission address perceived ills that are beyond our competence. Our consistent record in doing so speaks for itself.  Xj$'  XS%'Global Competition One major change in the landscape is the increasingly globalized nature of communications"%'0*((%" markets. The procompetitive policies that have brought such great benefits to U.S. consumers are being emulated around the world. Many of these policies are embodied in the WTO Reference Paper, and in the specific marketopening offers other countries affirmed just one year ago. Our relentless commitment to open markets has created new opportunities for U.S. businesses abroad, and lower prices and greater choice for our consumers at home. That commitment extends to our efforts to secure adequate spectrum for satellite and terrestrial users. As we seek innovative solutions to allow more efficient use of the spectrum, we must not jeopardize the ability of existing licensees to deploy next generation technologies. It is both humbling and encouraging to witness other countries model their newly minted independent telecommunications authorities after the FCC. We have much to offer and much to learn from our international colleagues.  X'  Xy'Reinventing the FCC  Xb4 My final point is that, as the marketplace changes, so too must the FCC. As competition increases, we must place greater reliance on marketplace solutions, rather than the traditional regulation of entry, exit, and prices; and on surgical intervention rather than complex rules in the case of marketplace failure. In addition, government often serves best by focusing a spotlight on problems, and prodding parties to work together to design solutions. Public/private partnerships can speed the introduction of new technologies and help pave the competitive way in a global marketplace. Consumer fraud and abuse are the dark side of competition. We are beefing up our enforcement efforts to empower consumers and to eliminate economic incentives for carriers to defraud. As markets grow more competitive, unnecessary costs or delays are . . . not killer applications, but application killers. The FCC must render decisions quickly, predictably, and without imposing unnecessary costs on industry. This is true not just for 8th Floor decisions, but also for those on delegated authority. That's why it's so important that we continue to deploy electronic filing systems and to increase selfcertification of equipment. As John Chambers of Cisco observed, product life cycles are so short, a three month delay means you may be out of the game. Our rulemaking and enforcement activities should give clear and consistent guidance to licensees. That's the only way to reduce the regulatory risk that capital markets abhor."#'0*((%"ԌThese "reinventing government" trends began several years ago. I welcome these changes. I  X4believe in government that is smart, efficient, and fair. I don't believe in big government or  X4no government. In this respect, I have welcomed the opportunity to pursue the public interest missions Congress assigned us. I am proud of our role in increasing the quality and quantity of children's educational television programming and in bringing advanced telecommunications technology to classrooms and libraries. We achieved these goals by being sensitive to business realities and avoiding excessive regulation. We can bring the same blend of idealism and pragmatism to our other public interest efforts, such as increasing opportunities for minorities, women, and people with disabilities.  X ' Conclusion In sum, the world of communications is being reborn. Henry Kissinger once said, "My job is to guide the inevitable." Our challenge during this "transition of epic proportions" is to have the courage to know when to intervene and when not; to use creatively and judiciously the wide assortment of tools available as we move from monopoly to competition; and, at all times, to keep the interest of consumers paramount. Only then will we be fulfilling Congress's vision of competition and deregulation for the benefit of all Americans. Thank you very much.