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hh#(-@pp2 -ppp PLAIN PAPER6hPLAIN PAPER PARAMETERSf*DIfmfE]ab#x  @;@#   X X` hp x (#%'0*,.8135@8:-xWe at the FCC are reminded daily of the fact that carriers, manufacturers, licensees, and users of telecommunications services many of whom are assembled here today have been working on the problem for many years and have invested substantial capital and manpower. xWe are also reminded of the many technical and managementoriented challenges that  X-lie ahead. First, the telecommunications network is a tremendously complicated thing and  X-consists of millions of interconnected parts that need to be assessed. Second, there are literally thousands of companies to engage in the wireline telecommunications industry.  Xo-Third, it will be long and hard work to fix the Year 2000 problem. There are no magic bullets that will automatically fix software affected by the Year 2000 problem, and it is unrealistic to expect that one will be invented between now and the year 2000. There will also be a profound management challenge to deploy technical solutions in a timely fashion  X-without affecting the quality and level of communications service. Fourth, testing is (and will  X-continue to be) a difficult part of the Year 2000 compliance effort. Fifth, we cannot get an extension on the January 1, 2000 deadline.  X"-xThe subcommittee should know (and it is my understanding) that U.S. telecommunications carriers are very motivated to fix the problem. However, this is a very dynamic process. Simultaneously, the equipment manufacturers have to develop upgrades and patches for their products, the telecommunications carriers have to assess and prepare their systems for change and when technical "fixes" arrive they must install and test the equipment in their networks, and they also have to conduct interoperability tests with other carriers and"D'0*((&" with their customers. xI have been told that U.S. equipment manufacturers have already tested and fixed most of their products. Manufacturers report that most of their software and hardware products are already Year 2000ready and have been made available to customers. They have targeted endofyear 1998 or first quarter 1999 for general availability for all Year2000ready products. xThe carriers report that the manufacturers' schedules will enable them to meet their compliance objectives. According to information submitted by the carriers to the FCC, the major local and long distance carriers have been working on the Year 2000 problem since 1995 or 1996 and generally plan by late 1998 or early 1999 to have completed internal testing of all systems that are critical to the passage of telecommunications traffic. xThe carriers are also cooperating on interoperability and endtoend testing. The Telco Year 2000 Forum, which is comprised of eight large regional local exchange carriers, is performing integration testing on Year 2000ready equipment throughout 1998. The Alliance for Telecommunications Industry Solutions (ATIS), which is an industryfunded organization whose mission is to advance new telecommunications technologies, will conduct internetwork interoperability testing in January and February 1999. xThe real problem with the Year 2000 problem is what we do not know. For example, how serious are the cascade effects? Can we make sure that all the fixed systems work  X-together properly? How long will it take to fix problems that occur in January, 2000?  X-xI want to emphasize that the FCC takes very seriously its responsibility to work closely with the communications industry to ensure that the Y2K challenge is successfully met. The FCC has been aware of the Year 2000 problem for many years. In 1995, we started to examine and fix our internal computer systems. In early 1997, the FCC made a coordinated effort to find out what industry was doing about the problem. xIn midMarch of this year, the Commission created its Year 2000 Working Group. In midApril, at the request of FCC Chairman William Kennard, I agreed to oversee the FCC's Year 2000 efforts and represent the agency on the President's Council on Year 2000 Conversion, which was established on February 4, 1998. I also cochair with Dennis Fischer of the General Services Administration (GSA) the Council's Working Group on Telecommunications, which met for the first time on April 30, 1998. xWe have been encouraged because telecommunications companies have been providing more information on how the Year 2000 problem could affect their systems and services and what they are doing to ensure they are Year 2000 compliant. This is partly in response to pressure from customers, the FCC and the Securities Exchange Commission, but primarily due to the fact that the companies are making good progress, and are more willing to share the good news."#'0*((%"Ԍ X-ԙxIn conclusion, I believe it is critical that the U.S. telecommunications community take prompt, comprehensive and effective action to address the Year 2000 problem. Our national wellbeing is dependent upon the reliability of all the nation's telecommunications networks, and government and industry must work together to ensure that whatever disruptions occur do not lead to widespread outages and failures. To that end, the FCC is committed to taking whatever actions it can to facilitate information sharing and industry compliance efforts."0*((e"   #Xj\  P6G;9XP# Good afternoon, Madam Chairman, and distinguished members of the Subcommittee. I commend you for holding a hearing on the critical issue of the Year 2000 problem, and I welcome this opportunity to discuss the potential impact of the Year 2000 problem on our nation's telecommunications networks. In the seven months that I have been at the Federal Communications Commission (FCC), I have been struck by the fact that almost every sector of our economy and every part of our government depends upon our telecommunications system. Many of the critical programs that the Ways and Means Committee oversees, such as Social Security and Medicare, also depend upon this ubiquitous communications infrastructure and consequently could be seriously affected if the Year 2000 problem interrupts telephone and data networking services. Today, I would like to: (1) summarize what we know about the Year 2000 problem and how it might affect the nation's telecommunications networks; (2) list what we do not know; and (3) describe what the FCC has done, and intends to do, to ensure that our nation's critical  X-telecommunications infrastructure still functions at its full capacity and effectiveness on and  Xy-after January 1, 2000. My comments today will focus primarily on wireline telecommunications services. However, it is important to note that the FCC is engaged in outreach and assessment initiatives in each of the different subsectors of the communications industry, including terrestrial wireless, radio and television broadcast, cable television, international telecommunications and satellites.  X-Attached to my testimony is an appendix summarizing how each of these different industries may be affected by the Year 2000 problem and what industry and the FCC are doing to address these problems.  X|- WHAT WE KNOW ABOUT THE YEAR 2000 PROBLEM  Xe- The FCC has been monitoring the telecommunications industry's efforts to meet the Year 2000 problem for the past several years, and has developed an understanding of the scope of problem and how it may affect the nation's telecommunications networks. Let me elaborate briefly on some of our observations.  X-   The Year 2000 problem is simple to understand. The cause of the Year 2000 problem is very simple. It is caused by the fact that many computer programs use only two digits to  X!-store the year (e.g., the program translates "67" to mean "1967"). At the turn of the century when the date changes from 1999 to 2000, there are concerns that these systems will fail to recognize the millennial change, thereby erroneously assuming "00" to be "1900," not "2000."  XS%- The Year 2000 problem has complicated consequences. While the cause is simple, because so many computer and communications systems are interlinked and interdependent, the consequences could be complex, unpredictable, and in some cases very serious. The recent"%'0*((%" AT&T framerelay network outage and the failure of PanAmSat's Galaxy IV satellite highlighted how many different systems can be affected by the failure of a single piece of hardware. Fortunately, telecommunications networks are designed to be faulttolerant and there is no reason to believe that one or two Y2Krelated failures could lead to a chain reaction that could disable large parts of the nation's telecommunications networks.  Xv- The Year 2000 problem does not affect every computer. After reading some articles on the Year 2000 problem, it would be understandable that one would conclude that every computer chip, every software program, and every computer had a Year 2000 problem. That is not the case. Most devices do not care what time it is and thus are not affected.  X - Most Year 2000 glitches will be annoying, not disastrous. For those systems that have a Year 2000 problem, it will often be the case that the problem will not disrupt the whole system, it simply will make some features or functions, which are not "missioncritical," difficult or impossible to use.  Xy- WHAT WE KNOW ABOUT FIXING THE YEAR 2000 PROBLEM xAs part of the FCC's outreach and assessment initiatives, the Commission's Bureaus and Offices have been communicating with the various industry players who are individually responsible for ensuring that their networks and systems are Year 2000 compliant. We are reminded daily of the fact that carriers, manufacturers, licensees, and users of telecommunications services many of whom are assembled here today have been working on the problem for many years and have invested substantial capital and manpower. xWe are also reminded of the many technical and managementoriented challenges that  X-lie ahead. First, the telecommunications network is a tremendously complicated thing and consists of millions of interconnected parts. When you make a phone call from here to New York, every element along the established circuit has to work: the telephone itself, the  XN-Private Branch Exchange (i.e., switchboard) in your building, the central office switch, the computers that connect your call to its destination, the longdistance trunk lines, as well as the central switch and the telephone on the other end. If any one of those components is affected by the Year 2000 problem, your call might be disrupted.  X-xSecond, there are literally thousands of companies to engage in the wireline telecommunications industry. Simply put, there are the major telecommunications carriers like the Bell Operating Companies, GTE, AT&T, MCI and Sprint. But there are also 1,400 small to midsize telephone companies that serve many rural, insular and underserved parts of the country as well as the U.S. territories and possessions. Telecommunications carriers alone, however, cannot solve the whole problem. For example, manufacturers of central office switches and other customer premises equipment are vital participants in the collective Year 2000 effort. And, finally, we cannot forget about the telecommunications users who have to take action to ensure that their telecommunications equipment their telephones, their"%'0*((%" voice mail systems, their Private Branch Exchanges (PBXs), their local area computer networks are all Year 2000 compliant. It will not do much good if all the telephone companies fix all their networks, but then major corporations and governmental organizations cannot call out of their buildings because their internal systems do not work.  X-xThird, it will be long and hard work to fix the Year 2000 problem. There are no magic bullets that will automatically fix software affected by the Year 2000 problem, and it is unrealistic to expect that one will be invented between now and the year 2000. There will also be a profound management challenge to deploy technical solutions in a timely fashion without affecting the quality and level of communications service.  X -xFourth, testing is (and will continue to be) the hardest part. Most telecommunications companies estimate that testing comprises 50 to 70 percent or more of their Year 2000 efforts. And, testing often uncovers more problems that need to be fixed.  X -xFifth, we cannot get an extension on this deadline. Time is of the essence with only 564 days left till January 1, 2000.  XK- WHAT WE KNOW ABOUT TELECOMMUNICATIONS INDUSTRY Y2K EFFORTS  X4- xIn the last few weeks, public attention has started to focus on the Year 2000 problem. There have been illustrative examples of nonYear 2000 related network failures, such as the AT&T data network incident and the Galaxy IV satellite incident, that have been prominently featured in the general media. These events have hastened public concern about the telecommunications industry's readiness and capacity to implement Year 2000 compliance remedies. Unfortunately, we hear more Year 2000 horror stories than Year 2000 success stories. Horror stories get repeated and reprinted, success stories get filed away and forgotten. xThe subcommittee should know (and it is my understanding) that U.S. telecommunications carriers are very motivated to fix the problem. However, this is a dynamic process. Simultaneously, the equipment manufacturers have to develop upgrades and patches for their products, telecommunications carriers have to assess and prepare their systems for change and when technical "fixes" arrive they must install and test the equipment in their networks, and they also have to conduct interoperability tests with other carriers and with their customers.  X!-xI have been told that U.S. equipment manufacturers have already tested and fixed most of their products. The major manufacturers have had extensive Year 2000 programs in place for some time, and have been working closely with both local and long distance carriers to develop strategies for Year 2000 readiness. Manufacturers report that most of their software and hardware products are already Year 2000ready and have been made available to customers. They have targeted endofyear 1998 or first quarter 1999 for general availability for all Year2000ready products."#'0*((%"Ԍ xThe carriers report that the manufacturers' schedules will enable them to meet their compliance objectives. According to information submitted by the carriers to the FCC, the major local and long distance carriers have been working on the Year 2000 problem since 1995 or 1996 and generally plan by late 1998 or early 1999 to have completed internal testing of all systems that are critical to the passage of telecommunications traffic. xThe carriers are also cooperating on interoperability and endtoend testing. The Telco Year 2000 Forum, which is comprised of eight large regional local exchange carriers, is performing integration testing on Year 2000ready equipment throughout 1998. The Alliance for Telecommunications Industry Solutions (ATIS), which is an industryfunded organization whose mission is to advance new telecommunications technologies, will conduct internetwork interoperability testing in January and February 1999. According to ATIS, the interoperability tests should encompass network configurations that serve over 90 percent of the country. This type of cooperative industry testing is very important because it is nearly impossible to conduct interoperability and endtoend tests on the publicswitched telephone network. The nation's phone network has to be up and running 24 hours a day, 7 days a week and it involves millions of different elements. The telephone companies cannot disconnect their network and turn the clock ahead to the year 2000 to do a test. xOf course, there are areas of concern to the FCC. For example, although the largest 20 phone companies provide 98% of U.S. phone lines, there are over 1,400 telephone companies, and each one needs to address the Year 2000 problem. The small to midsize telecommunications carriers have further to go, and the FCC is working with the various trade associations to ensure that these smaller carriers also meet the challenge. xThere is also the international dimension to the Year 2000 problem. The United States, Canada, and the United Kingdom are ahead of the rest of the world, but the FCC is concerned that some international telecommunications carriers, especially those in developing countries, are just realizing the seriousness of the problem and have not yet taken the necessary steps to prevent system failures. Because global telecommunications rely upon seamless interconnection of networks, the international dimensions of the Year 2000 problem are especially significant. xOn the international front, the FCC is taking an active role in the International Telecommunication Union's ("ITU") Year 2000 Task Force to promote international awareness and provide guidance on Year 2000 readiness. The ITU Year 2000 Task Force is establishing "Y2000 Ambassadors" who will serve as regional coordinators for assistance on Year 2000 problems and activities, and the FCC will assist in the region of the Americas.  XQ%- "#'0*((%"Ԍ  X- WHAT WE KNOW ABOUT THE GOVERNMENT'S ROLE  X- xThe FCC's role is important, but our power to force carriers, manufacturers, and telecommunications users to address the Year 2000 problem is limited. Consequently, we are working to promote an effective publicprivate partnership. xWe believe that the FCC can play an important role by encouraging companies to share information with each other and with their customers. This will increase the sharing of solutions, avoid duplicative testing, help companies spot undetected problems, and reduce customer uncertainty and anxiety. Fortunately, the World Wide Web provides a very powerful tool for information sharing. We have discovered over 2000 Year 2000 Web sites, including the FCC's own Web site at , which has received over 10,000 hits to date. xThere may also be a significant role to be played by the Administration and Congress  Xy-with regard to the legal liability issue which has slowed the information flow. Some companies have been reluctant to divulge information due to concerns about liability. Several companies and organizations have developed very useful Web sites and databases, which are not available to the general public because of liability concerns. In addition, antitrust concerns have discouraged some cooperative efforts. I understand that the Justice Department recently released a letter designed to allay antitrust concerns, but uncertainty still exists.  X- WHAT WE DO NOT KNOW YET  X- xThe real problem with the Year 2000 problem is what we do not know.  Xe-x How serious are the cascade effects? At this point, we just do not know all the ways that the failure of one piece of the network could trigger failures elsewhere in the system.  X -x Can we make sure that all the fixed systems work together properly? It is essential that companies do interoperability testing to make sure that their systems will function on January 1, 2000. But unfortunately, such tests cannot be done until all the individual pieces of the system are fixed.  X!-x How long will it take to fix problems that occur in January 2000? If too many problems are overlooked or ignored, there just will not be enough technicians and equipment to fix everything. Unless companies are willing to be offline for months, they cannot wait until the Year 2000 to fix their problems.  VQ%- "#' 0*((%"Ԍ X- WHAT THE FCC HAS DONE  X- xThe FCC has been aware of the Year 2000 problem for many years. In 1995, we started to examine and fix our internal computer systems. In early 1997, the FCC made a coordinated effort to find out what industry was doing about the problem. At that time the responses were: (1) "It is not that serious. . ."; (2) "We are taking care of it. . ."; and (3) "There is not much the FCC can or should do. . ." Prior to 1997, the FCC's individual Bureaus and Offices were following the issue. xBy late 1997, we were starting to hear increased concern as more companies did more tests and discovered just how pervasive the problem is and realized that they could be vulnerable if their partners, suppliers, and customers were adversely affected by the Year 2000 problem. Earlier this year, many telecommunications users came to the FCC seeking more information on the seriousness of the problem and what the telecommunications companies were doing about it. We determined we could play a valuable role by promoting information dissemination. xIn midMarch, the Commission created its Year 2000 Working Group. In midApril, at the request of FCC Chairman William Kennard, I agreed to oversee the FCC's Year 2000 efforts and represent the agency on the President's Council on Year 2000 Conversion, which was established on February 4, 1998. I also cochair with Dennis Fischer of the General Services Administration (GSA) the Council's Working Group on Telecommunications, which met for the first time on April 30, 1998. xWe have been encouraged because telecommunications companies have been providing more information on how the Year 2000 problem could affect their systems and services and what they are doing to ensure they are Year 2000 compliant. This is partly in response to pressure from customers, the FCC and the Securities and Exchange Commission, but primarily due to the fact that the companies are making good progress, and are more willing to share the good news.  X - WHAT THE FCC INTENDS TO DO xI want to emphasize that the FCC takes very seriously its responsibility to work closely with the communications industry to ensure that the Y2K challenge is successfully met. As part of the Commission's sector outreach initiative, the FCC is engaged in activities divided into three distinct but interrelated operational modes: (1) outreach and advocacy; (2) monitoring and assessment; and (3) regulatory actions and contingency planning. xThe FCC's first operational mode is to encourage private sector compliance efforts and to foster information sharing. Accordingly, we will continue efforts to ensure all companies understand the seriousness of the problem. We have set up a Web site and sent over 200 letters to major companies and organizations in all sectors of the telecommunications industry. "#' 0*((%" Chairman Kennard, myself, the other commissioners, and FCC staff are all mentioning this problem in speeches and in meetings with leaders in the telecommunications industry. x xOur second mode is to monitor industry Year 2000 compliance efforts and to assess the pace and extent of the implementation of remedial actions. In June alone, we organized five roundtables with representatives of different sectors of the telecommunications industry to facilitate information sharing and see how the FCC can assist industry efforts to tackle the Year 2000 problem. The Commission is asking the National Reliability and Interoperability Council, a privatesector committee that advises the FCC on technical issues, to take steps to foster industry cooperation on Y2K compliance testing and other related problems. xFinally, if we learn in coming months that some companies are not making enough progress in addressing the Year 2000 problem, we may decide to use our regulatory authority to gather additional information or to accelerate Year 2000 compliance efforts. We have done a thorough review of how we might use our regulatory authority to ensure that companies in all sectors of the telecommunications industry are adequately addressing the Y2K problem and are fully informing their customers about their efforts. Of course, we view regulation as a last resort. xBecause we know that not every problem will be fixed and because we cannot anticipate all the consequences of Murphy's Law, we intend to encourage contingency planning by service providers and customers.  X- CONCLUSION xWithout a doubt, it is critical that the U.S. telecommunications community take prompt, comprehensive and effective action to address the Year 2000 problem. Our national wellbeing is dependent upon the reliability of all the nation's telecommunications networks, and government and industry must work together to ensure that whatever disruptions occur do not lead to widespread outages and failures. To that end, the FCC is committed to taking whatever actions it can to facilitate information sharing and industry compliance efforts. xOnce again, I commend the committee for holding this hearing and focusing attention on this critical issue. I would be happy to answer any questions you might have." 0*(("  X-  #X P7 XP# T