DISSENTING STATEMENT OF

COMMISSIONER MICHAEL J. COPPS

RE: Section 257 Triennial Report to Congress; Identifying and
Eliminating Market Entry Barriers for Entrepreneurs and Other Small
Businesses

Congress understands the importance of small business to our country.
But the Commission's 2003 Small Business Report will lead many to
believe that the FCC does not. In Section 257 of the Telecommunications
Act, which contains the mandate to produce this report, Congress told
the FCC to start taking small business concerns seriously. Every three
years we must identify the market entry barriers faced by small
businesses in the communications industry and report on the specific
regulations we have prescribed to eliminate those barriers. Despite this
Congressional clarity, today's Report does not fulfill our statutory
obligation. Instead, I fear that the Report will undermine our
credibility with the small business community. To me, that is
unacceptable. So I find myself forced to dissent.

Section 257 creates a critical reporting requirement for the Commission.
It is critical because small business is the engine that drives
America's economy. Small businesses generate two-thirds to
three-quarters of new jobs annually in the United States. Almost 98
percent of U.S. telecommunications field employers are small businesses.
Much of the future of the telecommunications industry hinges on how well
our small to medium-sized businesses do in the national and
international economy. This is not only because of the huge number of
jobs involved, but also because small business is the source of much of
the innovation and energy for the economy in general and for the
communications sector in particular, developing 13 to 14 times more
patents per employee than larger firms.

Recognizing this, Congress directed the FCC to examine the market entry
barriers faced by small businesses and entrepreneurs and then to detail
the efforts the FCC has taken to eliminate those market barriers.
Congress created this requirement to force the Commission to explain
what it was actively doing to promote entrepreneurship and to prevent
the Commission from catering to industry giants at the expense of small
business.

But today the Commission sends Congress a report that: (1) does not meet
the specific requirements of the statute, and (2) for the most part
blithely claims that three years of proceedings leading to the removal
of competition and consumer protections were really designed to help
entrepreneurs all along. American small businesses deserve better than
this.

***[The Report Fails to Meet Section 257's Statutory
Requirements]{.underline}***

Section 257 states that the Commission must report to Congress every
three years on "any regulations prescribed to eliminate barriers within
its jurisdiction that are identified by subsection (a) and that can be
prescribed consistent with the public interest, convenience and
necessity."[^1] The "barriers" identified by subsection (a) include
"market entry barriers for entrepreneurs and other small businesses in
the provision and ownership of telecommunications and services and
information services, or in the provision of parts or services to
providers of telecommunications services and information services."[^2]

Section 257 thereby clearly requires the Commission to identify market
entry barriers faced by small business and to report on new rules that
it has promulgated to eliminate those barriers. Instead, we have a
slapdash cataloging of miscellaneous Commission actions over the past
three years that fails to comply with the requirements of Section 257.
If Congress had wanted the Commission merely to list its proceedings and
the general regulations that it had eliminated, it would have said so.
In this particular report, the importance of small businesses to the
economy and the legacy of small businesses facing market barriers in the
communications industry led Congress to ask the Commission to report on
***[pro]{.underline}active steps*** it had taken to establish new rules
to help small business.

So why did the Commission fail to report on new initiatives designed to
eliminate market barriers for small businesses, and thereby fail to
comply with the statute? It may be because this Commission does not have
a small business record to brag about.

We should be more forthright with Congress. We should admit that the
Commission has not articulated a plan for how to eliminate market
barriers for small business. We should recognize that we have created
too few new rules designed specifically to help small businesses. And
maybe most importantly, we should realize that some of this Commission's
actions -- indeed more than a few -- have harmed small businesses.

I have supported some of the decisions made by this Commission and
opposed others. Although I could give numerous examples raised in this
Report, let me highlight just two of the major actions that increase
market barriers for small businesses and that I opposed: (1) eliminating
media consolidation protections, and (2) undermining broadband
competition.

***[Eliminating Media Consolidation Protections Hurt Small
Businesses]{.underline}***

On June 2, the Commission voted to weaken its media ownership rules and
open the door to more media control by ever fewer corporate giants. In
Section 257 Congress expressly commands the Commission to "seek to
promote the policies and purposes of this Act favoring diversity of
media voices," but instead the Commission surrendered enormous powers
over our news, information and entertainment to a handful of
corporations.

In adopting this decision, the Commission failed to analyze how the
media consolidation it allowed affects small businesses. The Office of
Advocacy of the Small Business Administration strongly urged the
Commission to conduct such an analysis prior to rushing ahead with a
decision. We failed do so then, and we fail to do so in this Report.

Across this country, in the many hearings and forums that Commissioner
Adelstein and I attended, we heard that weakening media concentration
rules threatens the very survival of small businesses. As fewer and
fewer companies control our media outlets, small local broadcasters will
find it harder and harder to compete. Media analysts expect that the
only option for small broadcasters will now be to sell. They conclude
that those that want to remain will face an extremely tough road. During
our hearings, we heard from small broadcasters that had already been
squeezed out of the market, who explained that the Commission's decision
will only accelerate this trend. Yet, we failed even to consider the
impact of our decision on small broadcasters.

In addition, other small businesses will find it harder to produce and
sell programming as national vertically integrated conglomerates control
local distribution. We also heard from small businesses that
consolidated media markets are more expensive for advertisers, and that
this may hurt small businesses' ability to advertise their products and
services, particularly if they seek to reach niche communities or
minority groups.

Amazingly, the Commission states that only one aspect of its biggest
decision of 2003 affects small businesses. The June 2 decision
grandfathered any radio ownership clusters that exceed our ownership
limits. But it also allows the grandfathered owners to sell the entire
cluster to a small business, which can turn around and re-sell the
cluster, after only a few years, to anyone \-- even to a media
conglomerate. The Small Business Report, like the June 2 decision,
claims that this will help small businesses, but fails to analyze such
questions as whether this decision will encourage a regulatory shell
game that threatens to make a mockery of the radio limits. And it fails
to address the harms to small businesses of eliminating media
concentration protections and allowing large conglomerates to lock up
the available stations in a market.

The June 2 decision further relegated to some indeterminate future
Notice of Proposed Rulemaking the critical question of how access to
capital in the media industry acts as a barrier to entry for small
businesses. This Report again fails to indicate when the Commission will
take up this important issue.

***[Undermining Broadband Competition Hurt Small
Businesses]{.underline}***

The Report also fails to recognize that many of the FCC's recent telecom
competition and broadband decisions will create new barriers to entry
for small businesses, and that these decisions have eliminated earlier
Commission efforts to break barriers down. More than 26 million access
lines are provided by competitive carriers today, many of which are
entrepreneurial upstarts. Yet when it comes to "promoting vigorous
economic competition," we have failed these new entrants by closing off
access to key facilities and raising barriers for entry into the
telecommunications service market.

Last year, in the *Triennial Review Order*, the Commission undermined
competition in the market for telecommunications services by
limiting---on a nationwide basis in all markets for all
customers---competitors' access to broadband loop facilities whenever an
incumbent deploys a mixed fiber/copper loop. So as incumbents deploy
fiber anywhere in their loop plant, they are relieved of the unbundling
obligations that Congress imposed to ensure adequate competition in the
local market. This can only make it more difficult for small businesses
to get into the business of providing telecommunications services. With
decisions like this, the Commission constructs barriers to vigorous
economic competition by small entities, when it should be eliminating
them.

The story is also ominous when it comes to the market for broadband
information services. For years, the Commission has had in place
policies that make it possible for information services entrepreneurs to
access incumbent networks on nondiscriminatory terms. This has made it
possible for small businesses like independent ISPs to provide service
to customers. But two years ago, in the *Wireline Broadband NPRM*, the
Commission suggested that these rules that keep the roads of the
Internet open to all are no longer necessary. Should the Commission
follow through with this proceeding, it will allow those who own and
control networks to set up toll booths on the onramps to the Internet.
This will prevent tomorrow's entrepreneurs---who are today tinkering
away in garages and laboratories and office cubicles---from getting
nondiscriminatory access to the transmission facilities they need to
bring their innovations to market. By dismantling these rules, the
Commission will raise barriers for small businesses and innovators
interested in providing Internet-based information services.

***[Conclusion]{.underline}***

As a final matter, let me just add that, although this Report highlights
the entry barriers faced by small businesses that seek to provide
telecommunications or information services, this Commission has failed
to address the challenges faced by ***small businesses as consumers***
of telecommunications. As competition falls prey to consolidation and
competitive and consumer protections are eliminated, small businesses
will see prices rise and choices vanish. Today's small business men and
women face limited or no choice for many services, they receive the same
kind of confusing and misleading bills that individual consumers
receive, and they have nowhere to turn if they are dissatisfied. While
this is not the subject of this Report, it needs to be a central focus
of Commission attention.

[^1]: 47 U.S.C. § 257(c)(1).

[^2]: ^2^ 47 U.S.C. § 257(a).