(As prepared for delivery)
A Pro-Consumer, Pro-Competition Agenda
It is a pleasure to join you here in Florida -- the Sunshine State. Of course, an invitation to come down South during the heart of winter is always welcome. But I am especially pleased to be here at the request of someone who always exudes sunshine no matter how heavy the telecom storm clouds are lurking on the horizon.
Julia Johnson and I serve together on the NARUC Communications Committee, as well as on the Federal-State Joint Board on Universal Service. That Board had the unenviable task of recommending to the FCC a workable universal service structure for high cost support, for low income consumers, and for advanced telecommuni-cations services to classrooms, libraries, and rural health care providers. Let me tell you -- there are more alligators swimming in those waters than in all of the Everglades!
These were extremely tough issues, but Julia helped navigate us through these murky regulatory waters with great skill and good humor.
In light of the third anniversary of the Telecommunications Act of 1996, Julia has asked me to provide you with an overview of the status of telecommunications competition nationally, what has been accomplished, and where the FCC is headed in the coming months. I then will focus in greater detail on consumer issues and on our vision for universal service.
The Supreme Court Ruling
No telecom status report would be complete without commenting on the recent Supreme Court decision on interconnection. Last month's Supreme Court decision was a victory for consumers. Carriers and regulators were mired in a litigation swamp for far too long. The uncertainty it generated reinforced the status quo. Now that the uncertainty largely has been removed, it is an excellent time to reaffirm the partnership between the FCC and the states. We must work together to ensure that consumers reap the benefits of greater local competition.
State legislators and regulators continue to play a critical role in promoting competition by reviewing and arbitrating interconnection agreements between incumbents and new entrants. Also, some issues are especially suited for state involvement, such as evaluating the terms and conditions for access to in-building wire ("the last 100 feet"). I applaud the Florida Commission for its leadership in this area.
While the Supreme Court reinstated the FCC's authority to set rules implementing all of the Telecom Act, it remanded to the FCC the portion of our order concerning designation of unbundled network elements. We are committed to moving quickly to finalize a standard for network elements by this summer. We will be taking a fresh look at each network element identified in our Local Competition Order, as well as network elements used to provide advanced services, and will determine (1) whether access to proprietary network elements is "necessary" and (2) whether the failure to provide access to such network elements would "impair" the ability of competitive carriers to provide services they seek to offer. As we proceed, we will be looking to our colleagues in the states for their insights on these difficult issues.
In the meantime, I am alarmed at rumors that some incumbents might choose to take advantage of this interim period by refusing to sign new interconnection agreements, which would frustrate CLEC efforts to enter their markets. It is in the best interest of all stakeholders not to allow the whole process to collapse.
To this end, the Commission has sought both oral and written pledges from all Bell Companies and GTE that they continue to fulfill their current obligations as set forth in existing interconnection agreements. I am happy to report that all of the large ILECs have pledged not to disrupt the process. We expect to release their letters publicly this week. These letters should provide a measure of marketplace stability.
Our Pro-Competition, Pro-Consumer Agenda
At the threshold of the 21st century, the FCC is committed to: promote competition, deregulate as competition develops, protect consumers, ensure broad access to communications services, foster innovation, and advance competitive goals worldwide. These goals -- pillars of the Telecommunications Act of 1996 -- are not mutually exclusive.
Many segments of the telecommunications marketplace are exhibiting signs of healthy competition.
Long distance rates are the lowest ever, and prices are continuing to decline. Just three years ago, consumers paid 20 to 25 cents a minute for a long distance call. Today, consumers are paying a dime a minute -- or even less under special plans.
But despite these signs of progress, most Americans do not have a choice of local carriers or broadband service providers.
There is plenty of work left to do. I'll just give you a quick overview of the Commission's Agenda for 1999, which Chairman Bill Kennard recently announced.
1. Promote Competition
Goal Number One is to promote competition throughout the communications arena. The main unfinished task is to complete the opening of the local telephone market. As already mentioned, the Supreme Court decision will accelerate that progress. And, as the Bell companies complete their market-opening responsibilities, they will in turn win the opportunity to compete in the long distance market.
The benefits of competition are well documented in many communications sectors -- long distance, wireless, customer-premises equipment, and information services. The benefits of local telephone competition for the most part remain the promise of the future.
Large and even some small businesses are starting to see the emergence of choice in local telephone service providers, but only a small percentage of residential consumers today have a choice of local carrier. The FCC and the state commissions need to renew our partnership to accelerate the development of competitive alternatives.
As I noted, the pricing of unbundled network elements will need to be revisited in light of the Supreme Court's recent decision. States and carriers must continue to develop operations support systems that swiftly and seamlessly permit consumers to change from one carrier to another. Collocation and building access issues need to be resolved.
But I am more confident than ever that competition will succeed.
Bell Entry into Long Distance: As local markets are opened, the Bell companies will in turn win the right to compete in long distance. States like Florida have played a crucial role in the section 271 process for Bell entry into long distance. Many states are diligently reviewing compliance with Congress' 14-point checklist. For example, the New York Commission and Bell Atlantic are using a third-party contractor to assess operational support systems, with commercial volumes of orders.
State commission findings of fact and a thorough hearing record are invaluable to us, especially because we have only ninety days in which to review the application and render a decision. So far, we've received section 271 applications for four states. We have diligently applied the standards Congress set out, and thus declined to allow Bell Companies to enter the long distance market before their local markets were truly open.
I await the first complete application so that we can move to the next chapter in telecom history -- active and competitive bundling of all products by all carriers. It is not until we reach this next stage of open markets and Bell Company long distance service that consumers will truly reap the benefits of the 1996 Act.
Mergers: Our competition agenda also requires close scrutiny of merger proposals to ensure that they are pro-competitive and benefit consumers. Some mergers enhance competition; others do not. Our challenge is to review proposed alignments expeditiously and to approve those that will accelerate competition and disapprove those that will hinder it.
Before us right now are two mergers involving four of the largest local telephone companies: Bell Atlantic and GTE, and Ameritech and SBC Communications. They represent over 65% of access lines in this country.
And I am pleased to announce that the FCC has just adopted the AT&T/TCI merger order. The text has not yet been released.
Some state commissions have the authority to review mergers; others may only be able to comment informally in the review proceedings conducted elsewhere. We will weigh carefully the views of our state colleagues as we assess the competitive impact of these proposed combinations.
Access Charge Reform: We also need to reform access charge mechanisms to promote the development of competition and preserve affordable interstate rates. Modest increases in flat-rated recovery of loop costs have led to dramatic reductions in per-minute rates for long distance, and vast increases in long distance calling volumes. We also need to identify that portion of access charges that supports high cost lines and make it an explicit subsidy.
2. Deregulation
Our second objective is to deregulate as competition takes hold. Consumers ultimately pay the cost of unnecessary regulation, and we are committed to eliminating such regulatory burdens or delays.
We want to drop reporting and accounting requirements that no longer are necessary to serve the public interest. Also, where competition is thriving, we hope to increase flexibility in the pricing of access services.
We have streamlined rules for the certification of telephones and other equipment. And we are streamlining our processes to issue licenses faster, resolve complaints quicker, and be more responsive to competitors and consumers in the marketplace. Enforcement must be swift but fair. Lingering complaints forestall competition.
3. Consumer Protection
The Commission's third goal is to empower consumers with the information they need to make wise choices in a robust and competitive marketplace, and to protect customers from unscrupulous competitors.
Consumer bills must be truthful, clear and understandable. We will have "zero tolerance" for perpetrators of consumer fraud such as slamming and cramming. We will make it easier for consumers to file complaints by phone or over the Internet, and reduce by 50 percent the time needed to process complaints. And we will remain vigilant in protecting customer privacy.
More on consumer issues in a moment.
4. Universal Service
Number four on our agenda is universal service. All Americans -- urban or rural, rich or poor, whatever the color of their skin, their age, or their physical abilities -- should have access to new technologies created by the telecom revolution:
More on universal service in a few minutes.
5. Innovation
The fifth agenda item is to foster innovation.
We will promote the development and deployment of high-speed Internet connections to all Americans. That means clearing regulatory hurdles so that innovation -- and new markets -- can flourish.
Earlier this month, we released a report required by Section 706 of the Act on the status of deployment of advanced telecommunications capability. We concluded that deployment -- while in its very early stages -- appears to be reasonable and timely. We cite the level of infrastructure investment by a multitude of competitors, as well as clear signs of emerging competition between cable companies offering cable modems and telcos offering DSL technology. Wireless broadband offerings are also in the works, and satellite solutions are on the horizon. The Commission will monitor developments and report annually on progress achieved.
6. Global Competition
Our sixth objective is to advance global competition.
This month marked the first anniversary of the effective date of the World Trade Organization Agreement on Telecoms Services. We have pressed other nations to establish rules for fair competition and encouraged private telecommunications investment so that people throughout the world can participate in the Information Revolution. Our goals are to intensify competition at home and create growth opportunities for U.S. companies abroad.
That's our telecom agenda for 1999. These six objectives also apply to our responsibilities in mass media and in spectrum management, but for today, I wanted to focus on the telecommunications markets for which the FCC and state officials bear a shared responsibility.
CONSUMER PROTECTION AND UNIVERSAL SERVICE
Now I'd like to spend a few minutes talking in more depth about consumer protection and universal service.
As I've mentioned, the Telecommunications Act of 1996 established a national policy that is pro-competitive and deregulatory. We rely increasingly on competition, rather than rate regulation, to protect consumers on the prices they pay for service. But as competition increases, so too do opportunities for unscrupulous competitors to take advantage of customers.
Consumer Protection
Consumer issues have always been near and dear to my heart. From my early days at the National Consumer Law Center, the Consumer Product Safety Commission, and the House Banking Committee, I have placed consumer interests at the core of my public policy decision-making.
Each of us is a consumer. We are all bombarded by dinner hour phone calls coaxing us to change long distance carriers. We are all trying to figure out the best calling plan for our mobile phones. We are all integrating Internet access into our lives at a far more rapid clip than we ever imagined. And we are all trying to figure out what the charges mean on our phone bills.
The top consumer complaints to the Commission include:
I am happy to report that the FCC has cracked down on consumer fraud, with actions to prevent misconduct and to severely punish bad actors. We have stepped up our consumer education programs, too. I also want to applaud the Florida Public Service Commission and state legislature for your aggressive efforts to combat slamming and cramming.
Slamming and Cramming
In December 1998, the FCC adopted tough new rules to take the profit out of slamming. First, we strengthened our verification requirements to prevent slamming. Second, we streamlined our systems to make it easier for consumers to file complaints. Third, we absolved customers who have been slammed of liability for phone charges for a 30-day period.
We also issued more than $8 million dollars in proposed forfeitures against slammers, many of whom took advantage of Floridians. To combat consumer fraud, we need to take prompt and decisive action at both the federal and state levels to enforce the consumer protection rules.
The number of cramming complaints, while troublesome, is trending down. Last year, carriers proposed to adhere to a voluntary code of conduct. While we are remaining vigilant, those efforts appear to be working. In addition, our Truth-In-Billing proposals were designed to enable consumers to identify inappropriate charges.
Truth-in-Billing
No question. Consumers are confused about their bills. Even I have trouble understanding my telephone bill.
The many changes that are underway in the industry are giving rise to creative new "line items" on consumers' bills. In addition to the Subscriber Line Charge, some carriers have added "Interstate Non-Primary Access" charges, "universal service fees," etc. And this month many customers will see a new charge to cover the cost of local number portability.
Some of these charges are legitimate. Others are not. Carriers must provide clear explanations for these charges. We need to help consumers understand the basis for the charges. We also need to make sure that the one line that really matters -- the bottom line -- keeps getting smaller.
An industry with declining costs and increasing competition should enable consumers to pay less and get more. Line items should not serve as a smokescreen for unjustified rate hikes.
To help consumers better understand their telephone bills, last September we announced what Chairman Kennard called the "Three C's" plan for consumer protection. The three C's are charges, changes, and contacts. Each charge should have a clear and non-misleading explanation, each change should be highlighted, and a contact should be clearly listed to answer questions about the bill.
Dial-around '10-10'
The 10-10, dial-around services pose new consumer information problems. While some of the television commercials can be amusing, consumers are not amused when they end up paying more for the new service than they reasonably expected. We must make sure consumers are provided enough information to make an informed choice and are not being misled.
The FCC and the Federal Trade Commission should cooperate on remedies, and we should work closely with our colleagues on the state public utility commissions as well. Only with coordinated inter-agency efforts can we fulfill our responsibilities in consumer education and carrier compliance.
The Consumer Network
We are streamlining our complaint resolution process through an initiative called the Consumer Network. The toll-free help line for consumer complaints is 1-888-CALL-FCC. In addition, the Common Carrier Bureau Enforcement Division has recently launched a consumer-friendly website. Over the next three quarters, the Commission will introduce over-the-phone complaint filing and develop electronic interfaces with the carriers for prompt dispute resolution. As we streamline our systems, we will share our experience with the state commissions and will incorporate ideas we learn from you.
Consumer Privacy Issues
Privacy is another matter that concerns me. Telecommunications carriers obtain a great deal of sensitive information about their customers. It's not just your name, address, and telephone number. They also know whom you call, and when, and how long you talk. They know whether or not you pay your bills promptly. And they know whether you have bought the high-profit, add-on, vertical services like Caller ID and Call Waiting.
Congress understood consumer fears about diminishing control over the information vendors collect about them. That's why Congress enacted strong privacy protections.
The law says that carriers cannot use the information they collect about you for any purpose unrelated to the service for which the information was collected -- unless you consent. This information is called "customer proprietary network information" or "CPNI."
Almost a year ago, we conducted a rulemaking proceeding to implement this provision of the law. We required all carriers to institute electronic safeguards to ensure that consumer privacy is protected. But there was an outcry from virtually all carriers -- claiming that our new rules were too burdensome.
So we are reconsidering these rules to find a way to reduce the cost while ensuring consumer privacy is protected. While we have excellent representation from the industry, we lack consumer involvement in these issues. I would urge you to consult
with your constituents and let us know what level of information or protection consumers desire.
Universal Service
While we don't often think of it as a consumer protection issue, universal service enables those with low incomes or who live in high-cost rural areas to receive telephone service at affordable prices. These consumers are not likely to be among the first targeted for competitive services.
The Telecom Act for the first time explicitly mandated universal service for three distinct categories of subscribers: low income consumers, consumers in high-cost service areas, and advanced services to schools, libraries, and rural health care providers.
For low-income consumers, we beefed up our Lifeline and Link-Up programs to (1) increase the level of federal support and (2) ensure that some support is available in every state. Thus, for states that provide the same $3.50 in support today as they did before the Act was passed, low-income consumers can now receive $10.50 of monthly subsidy, up from $7.00 just two years ago.
I am glad that Florida and other states are getting the word out about the Lifeline program. For some consumers, this program may mean the difference between getting a job and being unemployed or obtaining help in a life threatening emergency.
On high-cost, we have removed $1.7 billion of the cost from interstate access charges and provided for collection from all telecommunications carriers, as the law requires. But we have not yet found the compromise between low-cost states like Florida and high-cost states like Montana that will permit us to convert whatever amount of high cost support is currently implicit in interstate charges into explicit, competitively neutral, portable support.
Nor have most states addressed implicit subsidies embedded in their rate structures.
The Snowe-Rockefeller provisions of the Telecom Act provide targeted assistance designed to extend advanced telecommunications to classrooms, libraries and non-profit rural healthcare facilities. In the Information Age, we cannot afford to leave any child behind. And helping to provide telecommunications services to rural health care facilities today will create a stronger, healthier America tomorrow.
I am pleased to note that more than $30 million has already been committed to bring advanced telecom services to Florida's schools and libraries.
Conclusion
We are in the midst of an extraordinary transition between monopoly and competitive provision of telecom and video services. The velocity of change is stunning. Convergence has blurred the regulatory definitions and jurisdictional boundaries that for so long have structured the marketplace. And technological innovations are creating new headaches and solutions at the same time. It's the regulatory equivalent of Hurricane Georges!
Established companies are expanding their offerings and adapting to a new environment. New entrants are sprouting up to serve real or perceived "niches." New business alliances are being announced every day.
Policymakers need to keep pace. We, too, need to change. We need to be prepared to act swiftly, whether the action needed is a surgical intervention or a retreat from a regulation that is no longer needed. We need to bury the jurisdictional hatchets that have split us in the past.
At all times, our focus must be on the consumer. Whether we be legislators or regulators, whether we serve at the state or federal level, we need to work together to ensure that the inclusive, pro-competitive, deregulatory vision of the Telecommunications Act is realized for all Americans.
Thank you very much.