# Remarks of William E. Kennard, chairman

# Federal Communications Commission

# to the

# National Association of Regulatory Utility Commissioners

# 

# San Antonio, Texas

# November 10, 1999

# (As prepared for delivery)

### 

## 

##### "Blazing A Trail: A Vision for the Twenty-First Century"

I am delighted to join you here in San Antonio.

Yesterday, on the plane ride here, I was thinking that we have a lot of
celebrations and anniversaries taking place this time of year. Today we
are celebrating over 100 years---111 to be exact---of NARUC national
conventions. NARUC began in the last century---in 1889---and I am
honored to give this address at NARUC's last convention of this century.
Next February we will mark the fourth anniversary of the
Telecommunications Act of 1996, and just last week I had the pleasure of
celebrating my second-year anniversary as Chairman of the FCC.

Lately, I've spent some time thinking about my two years as Chairman,
thinking about what makes my job so rewarding. And I thought that what
makes it particularly rewarding are all the people I've had the pleasure
of working with: my wonderful staff, my colleagues on the Commission,
and working with you\--our partners in the states---to make sure that
the public reaps the benefits of the changes transforming the world of
telecommunications.

So let me thank Jim Sullivan, Bob Rowe, Joan Smith, Brad Ramsey, and all
of my fine colleagues at NARUC. You have helped make my time at the
Commission a special time, and I'm looking forward to working with you
and strengthening our partnership in the months to come.

And lately I've also thought about the road not taken---my own road not
taken. In 1982, I started practicing communications law at a Washington
DC law firm. At that time, the practice of communications law was not
the booming specialty that it is today. My former law firm had a small
communications law practice then, but the firm had a huge transportation
law practice. The firm represented airlines and trucking companies and
railroads and bus companies, mainly before the Interstate Commerce
Commission.

And I'll never forget the day when one of the senior partners in the
firm called me into his office. He had been a former high-ranking
official at the ICC, and he had left government and built a large
practice representing clients before the ICC. And he told me that I
should think about practicing in the transportation law area. That
meeting was like my own version of the classic scene in *The Graduate*,
when Dustin Hoffman is told that his future lies in one word: Plastics.
Well, for me, in 1982, the word was\--trucking.

And I'll never forget that the senior partner told me that I should
consider transportation law. He said that transportation technology was
unlikely to change dramatically and so the transportation law field
would be much more stable than the practice of communications law.

It's little wonder that he held this view. For a long time, of course,
the ICC was a large and powerful agency blazing new trails in the field
of American regulatory policy.

In the early and middle parts of this century, the ICC had immense
regulatory power over rail lines, trucks, buses, and just about anything
else that moved across state lines. The Commission busted trusts,
reviewed merger transactions, issued safety regulations for the
railroads and helped desegregate bus and train lines; at one point it
even handled complaints against moving companies.

But, as we all know, things changed. In the second half of the twentieth
century, buses and trucks replaced railroads as the principal mode of
commercial carriers; large portions of the transportation economy were
deregulated, and market dynamics began to replace the ICC as the
principal means of protecting consumers.

In 1995 Congress and President Clinton abolished the ICC with a simple
stroke of the legislative pen.

That year, a few days before Christmas, the ICC issued its last
order---it was a permit for Santa Claus to operate \"as a common carrier
by two-runner sleigh\" as long as he \"renders reasonably continuous and
adequate service to the public.\" It was a bittersweet end to what had
been one of the most powerful regulatory agencies in American history.

It also marked the passing of a large part of our shared regulatory
heritage. NARUC was founded in 1889, just two years after the ICC, and
the FCC and most state commissions are modeled after the ICC. We are
all, in a very real sense, offspring of the ICC, and now of course we
are orphans.

We came into being in a different era, an era in which the views of
regulation were quite different than they are today. The FCC was founded
on the simple notion that each technology was a distinct market with a
separate regulatory framework. And our predecessors accepted the
prevailing wisdom of the day\--that the principal mission of regulators
was to protect consumers by regulating the retail activities of the
companies under their jurisdiction.

But now, as we leave the twentieth century, we need a new vision for the
future.

The world of telecommunications is changing and changing fast.
Technology driven-communications services are eroding the traditional
regulatory distinctions between different sectors of the communications
industry. We are witnessing an inexorable movement from monopoly to
competitive markets, from basic to advanced services, from analog to
digital technologies.

And as these changes transform the telecommunications world, we need to
think about our role in the next century. We need to accept the fact
that as industry restructures we will have to change.

And so I've come here today\--to this, the last NARUC convention of the
century\--to say that the time has come for us to embrace a new vision.
The time has come for us to respond to the deregulatory demands of the
next century, to realize that the old regulatory model of the ICC no
longer applies to the world today.

We need to find new ways to protect consumers in this new environment.
We need to respond fully and quickly to emerging technologies and the
other transformations shaping telecommunications.

The central organizing principle in telecommunications today is change.
The regulatory process is incremental; the market process is not. The
regulatory process, by definition and by law, has to be linear and
methodical, to provide due process. The market process, by contrast, is
chaotic and nonlinear, and because of that, very often unpredictable.

A traditional role for government has been to predict the market and
write a rule; and to act as gate-keepers to markets, deciding who may
enter, and who may not. But today's markets are moving too fast for us
to act in that role for very much longer.

# So the question before us today is really quite simple: how do we remain relevant in the next century?

Well, one way we remain relevant is by changing both the structure and
mission of our agencies. This will not be easy. One of the most
difficult things to do, in fact, is to change the regulatory culture of
an agency. It is not easy giving people who have been in their jobs many
years---people who are accustomed to doing things a certain way\--a
whole new mission.

But that is the first thing we must do. And we are.

Last August, I submitted to Congress a draft strategic plan for the
future, entitled "A New FCC for the 21^st^ Century." The plan recognizes
that the FCC must refocus its efforts from managing monopolies to
addressing issues that will not be solved by the market.

The plan says that the FCC must become a leaner, faster and flatter
agency responsive to the needs of the digital age. It calls on the FCC
to redirect its energies towards the twenty-first century---to focus on
what consumers need: promoting competition in all communications
markets; managing the electronic spectrum; protecting consumers against
slamming, cramming and other abuses in a competitive market; and making
sure all Americans benefit from the communications revolution.

With this plan, the FCC is meeting the challenge of reinventing itself
to keep pace with our rapidly changing landscape. It is a plan that says
we have to give ourselves a new identity, we have to reinvent ourselves.
The plan recognizes that competition is coming to all sectors of the
communications industry, and that as it does so we must make the
transition from industry regulator to market facilitator.

The plan is a blueprint for the regulatory agency of the next century.
And I know that pioneering state commissions will also make the
transition from industry regulator to market facilitator.

But agency restructuring will only be one piece to the new regulatory
puzzle. In the next century, we need to understand that there will be
only one way to manage the transition from monopoly to competition: that
way lies through a partnership between the states and the federal
government.

Only by working together can we establish the fundamental tenets of
regulatory policy for the next century. Only by forging a partnership
can we lay the basis for a successful transition.

And I'm proud to say that over the past two years, on many issues and in
a wide range of areas, we have worked together to meet the demands of
the new marketplace. Working together, we have recognized that open,
unfettered and competitive markets are a prerequisite to a healthy
telecommunications economy.

And while we're on the subject of competition, I would like to pause for
a minute and salute the tremendous achievement of Joel Klein last week.

In today's environment, it's easy to keep your head down and not take
risks; in Washington today people will give you a thousand reasons not
to stand for change. Well Joel took a risk, he stuck to his guns---and
he ended up winning a historic victory in one of the most important
antitrust cases of the century. Consumers will reap the benefits of that
decision for years to come, and this man is the reason.

The history of these markets teaches us one fundamental truth: there are
two ways to introduce competition in this marketplace. Through a
structural approach, usually involving divestiture, as we saw with the
break-up of AT&T; or a regulatory approach, which is the underpinning of
the Telecommunications Act of 1996. There are two ways and there are no
shortcuts. If we as regulators do not do the hard work of prying these
markets open to competition, then the regulatory solution will fail and
I guarantee you that Joel Klein or his successors will have to finish
the job.

And I want to applaud the states for being the pioneers in this movement
towards competition.

The 1996 Telecommunications Act only codified into national policy what
a number of state commissions---New York, Illinois, Washington,
Massachusetts, among others\--had already adopted for their individual
states. It was the states who first determined that local competition
could work to the benefit of consumers---and they were the first to pry
open markets and order collocation and the unbundling of networks. This
is important, trailblazing work, and I applaud you for it. And this
important work will only be completed if we\--the state and federal
regulators---do the hard work of prying these markets open to new entry.

We all recognize that mergers are a tough issue for us. Together, we
have said---and we need to continue to say\--that we will not allow any
firm to become so dominant that it kills competition and stifles
innovation. But we have also said that not all mergers are bad, that
some in fact can allow firms to offer new services and enter markets
once dominated by monopolists.

And we have forged a real partnership in the merger review process. I
applaud the states for taking the time to scrutinize the transactions
that come before you, for working so closely with the FCC, and for
providing a model of a fair and judicious review process. And, thank you
for your resolution this week supporting our merger authority.

We need to remember that all mergers are different and that we need to
approach them one at a time, to make sure we produce the right result.
Some mergers, like SBC-Ameritech, take time; others, like US WEST-Qwest,
move along more quickly. I'm pleased with the progress being made by US
WEST-Qwest. The companies are working to demonstrate that their
transaction will not harm the public interest, and it's fair to say that
their application is on the fast track.

Now so far I've talked about competition. But I also want talk about the
two other fundamental roles for our agencies in the twenty-first
century: consumer protection and universal service.

In the next century, the people who enforce the rules are going to be
just as important as the people who write them. And that's why we've
created two new Bureaus with an important focus on consumers---the
Enforcement Bureau, which will have a division devoted to consumer
protection enforcement, and the Consumer Information Bureau, which will
provide one-stop shopping for consumer inquiries and informal
complaints. This reorganization is part of a recognition by the FCC that
we must change the way we do our jobs as communications markets evolve.

But that's not all we've been doing. At both the state and the federal
levels, we have been rolling up our sleeves to help consumers navigate
the new telecommunications marketplace. In recent months the FCC has
undertaken a number of pro-consumer initiatives---among them
Truth-in-Billing and Truth-in-Advertising---in which we have said that
consumers need protection from unfair marketing and billing practices
and clear and accurate information about the choices available to them.

We've also forged an important partnership to address the problem of
area code exhaust. The FCC and the state commissions are working
together to solve this issue, working together on behalf of American
consumers.

And as we refocus our energies towards promoting competition and
innovation and towards consumer protection, we must always remember that
competition does not come to all people and all parts of America at the
same time. We must remember that competition is not the only ingredient
to a healthy marketplace.

Communities without access to advanced technologies will be placed at
substantial risk in the next century, and we must ensure that all
Americans, no matter where they live, reap the benefits of the
Information Age.

We are moving full speed ahead to meet this challenge. Soon, we will be
working together through the Joint Conference to speed the deployment of
advanced telecommunications services to all Americans. The Joint
Conference will serve as a clearinghouse for information and ideas about
broadband. I'm confident it will speed ubiquitous access to every
person. I'm looking forward to serving on it and I applaud Bob Rowe and
NARUC for spearheading the resolution last July that helped make the
Joint Conference a reality.

I'm also pleased to see us joining forces in support of the e-rate. We
fought for full funding of the e-rate, and now millions of children
across the country are reaping the benefits of that program. Millions of
children who otherwise might have been left behind now will have access
to the high-tech tools of the digital economy.

And I'm especially pleased to see the FCC and the states working
together through the Joint Board on other aspects of universal service.
Our new support mechanism for non-rural carriers will keep service
affordable for Americans in high-cost areas and ensure that in the next
century, everyone has access to the network.

And of course, we have more to do. I applaud the work of the rural task
force and look forward to working with the Joint Board to focus on
universal service issues facing rural carriers.

You know, two decades ago, around the time the senior partner at my
former law firm was attending those ICC hearings, critics of the ICC
said that the agency had become a lumbering, obsolete bureaucracy unable
to keep pace with consumer needs of the late twentieth century.

They were probably right.

They said the ICC took 53,000 pages of testimony before it finally
decided on the appropriate rate for shipping grain. That it took 11
years to review a single railroad merger; and that the ICC had lost its
relevance in a new more competitive marketplace.

We can't allow people to say the same thing about us.

Next year, fifty years, a hundred years from now, we must make sure that
people look back on what we have done and say that we had the foresight
to abandon the regulatory shibboleths of old and meet the demands of
consumers in the Information Age.

Our legacy must be that we helped unleash the entrepreneurial energy of
the American people; that we created an environment in which innovation
and convergence could thrive; and that we protected consumers from
market abuses.

And they must say that we helped give people access to the digital tools
of the Information Age, all people, rich and poor, urban and rural,
Americans with disabilities, everybody.

That is my vision. That is where I want to go. And I want us to go there
together.

Thank you.