Remarks of

William E. Kennard, Chairman

Federal Communications Commission

Before the

National Association of Regulatory Utilities Commissioners (NARUC)

July 19, 1999

San Francisco, CA

(as prepared for delivery)

Thank you, Joan Smith, for that generous introduction. Hearing your kind
words, I am reminded of what Hubert Humphrey once said, \"Flattery is
like smoking. It\'s O.K. as long as you don\'t inhale.\"

**I want to thank Bob Rowe for his friendship, his counsel, and his
help. Even since the last time we all met, he and all of NARUC have been
a constant and trusted ally of the FCC. I am happy that we are able to
work together to our common goals.**

**Looking around this room and seeing all of you, I feel good because
you have dedicated your careers to public service. You have decided to
serve the people of your states and of the entire country with long
hours and hard work in order that they may have the best
telecommunications services possible at the best prices.**

**For that, I thank you all.**

**We meet today in San Francisco, one of the most wired and high-tech
cities in our nation. Like the \'49ers of the last century who came west
seeking gold, the \'99ers of this century head west to the San Francisco
area to seek their fortunes.**

**In fact, since its founding, San Francisco has been a wired city - -
wired to the rest of the country and the outside world. That is, except
for three hours on the morning of April 18, 1906 the day of the Great
Earthquake.**

**On that day in 1906, Harry Jeffs was the wire chief of the Western
Union Telegraph Company here in San Francisco. After the earthquake, he
realized that the city was totally cut off from the rest of the world.
And so Harry Jeffs tested wires all throughout the city to find a live
one. He tested and moved on, tested and moved on until he finally
reached a pole at a place called Land\'s End.**

**After testing each wire, he finally made contact with Sacramento. With
that, he notified the outside world about the earthquake and from his
perch 30 feet in the sky Jeffs began to work on untangling the system.
He stayed on top of that pole for 18 hours.**

**It was crucial so many years ago to re-establish these connections for
they literally connected San Francisco to the rest of the country and
the world were the foundation on which any economic recovery could be
built.**

**As we enter the next century, communications is equally important to
the prosperity of this city and of the entire nation.**

**Compared with other countries, we have a real headstart, because our
businesses adjusted earlier and our technicians seized on innovations
quicker. But there is more than that. The fertile fields of innovation
across the communications sector and around the country are blooming
because we have undertaken a deregulatory, competitive approach to our
communications structure.**

**In some ways, this approach began 30 years ago when the FCC allowed
people to hook any equipment up to the phone network as long as it did
not hurt that network and when we decided that computer applications
were not subject to regulation.**

**With these two decisions, the FCC cleared the way for the explosion of
the Internet that we see today. This week we are releasing a paper
examining 30 years of the FCC's pro-competitive policies and how they
helped shape the environment that has allowed the Internet to
flourish.**

**This competitive, de-regulatory approach accelerated with the passage
of the Telecommunications Act of 1996. In one bill, Congress in its
wisdom reached back to a value as old as America itself, choice, and
decided that consumers should have a choice in their communications
services.**

**Since then, we and, more importantly, consumers, have seen many of the
benefits of competition.**

**In many areas, consumers have the choice of four or five wireless
providers, and can purchase service at prices that last year cost 40
percent less than it did three years ago. By the end of 1997, there were
over 600 long-distance providers competing for customers. With
competition heating up, prices have steadily dropped and more and more
Americans are using these services. And in the local phone sector, this
newly-born marketplace is growing. In the first quarter of 1999 alone,
almost a million CLEC access lines were installed.**

**Now let's be clear. We still have a lot of work ahead of us to reach
the goal of a competitive environment will take hard work. There are no
shortcuts.**

**At the FCC we learned this a long time ago. Back in the 1970s, MCI was
trying to get off the ground and compete with AT&T. Back then the FCC
was saying the right things, but quite frankly, it didn't follow
through. The FCC talked the talk, but we didn't walk the walk. And so
the courts had to step in with a structural remedy under the antitrust
laws.**

**And what happened in long distance puts our current challenges in
perspective. Because, broadly speaking, there are two ways of taking a
monopoly environment and making it competitive. One is structural, along
the lines of the AT&T divestiture in the 1980s, and the other is
regulatory. In the 1996 Act, Congress chose the regulatory approach, and
thus both directed and empowered us to make it happen.**

**That's an awesome responsibility. For if we fail, then our legacy will
be that the Act failed; that Congress's historic re-write of
telecommunications policy in this nation was all for naught; that we
talked the talk but didn't walk the walk.**

**Well, this time the FCC is walking the walk. And as I look around this
room, let me tell you how honored and grateful I am to have you walking
alongside me. I believe the state-federal partnership is as strong as
ever. And we have to keep it that way. For as I said before, our work is
far from over. We are still in the transition period from a monopoly
marketplace to a truly competitive one.**

**While flying here the other day, I began to think that our challenge
is not that dissimilar from other industries that have deregulated. Take
the airline industry that transported most of us to San Francisco for
this meeting.**

**In 1978, the Airline Deregulation Act was passed that lifted virtually
all economic regulations on the industry, eliminated the Civil
Aeronautics Board, and sent remaining regulatory duties to the Federal
Aviation Administration.**

**Since 1978, the number of people who fly has more than doubled to more
than 600 million passengers. And, adjusted for inflation, people are
paying 37 percent less for tickets than they were before deregulation.**

**Despite these successes, there have been problems with deregulation,
problems that the FAA and the Department of Transportation are dealing
with, and problems that are similar to the ones that we have to deal
with.**

**One is the creation of competition. Deregulation of monopolies does
not automatically produce competition. Monopolies are stubborn beasts.
Networks need to be pried open. In the airline industry, this meant
ensuring access to gates for competitors. For us in telecom, it\'s
opening the phone platform.**

**So what have we been doing lately to make sure that the local market
is opened up in the way Congress envisioned? Well, already this year,
we\'ve made it easier for competitors to collocate their equipment in
the central office. And we\'re currently working on the list of
unbundled network elements as directed by the Supreme Court\'s remand.**

**And the FCC is spurring on local phone competition in other ways.**

**I am especially encouraged by the package of proposals presented by
SBC and Ameritech in the context of their merger application. SBC and
Ameritech worked long and hard with the staff of the FCC and ultimately
I believe they really understood that accelerating the opening of local
markets is what the FCC is all about.**

**And they have found the same thing out about most of the state
commissions. And so let me say to the state commissioners in the SBC and
Ameritech regions, if you are pursuing a plan to accelerate local
competition in the context of this merger, or otherwise, you do so with
the blessing of all of us at the FCC who share your goals.**

**In a market transitioning to deregulation and competition, and
especially when that transition is complete, there are other concerns to
keep us busy. One of these is making sure that consumers are protected
and informed. I have been struck by how confused consumers can become as
they are presented more and more choice in telecommunications providers
and services.**

**So we must be extra vigilant in looking out for consumers and giving
them the information that they need to decide what telecomm services are
right for them and their families.**

**There is one issue where these two concerns merge, and that is
numbering.**

**I don\'t need to tell you that we are facing an area-code crisis. If
current demand keeps up, sometime in the next six to 16 years we will
run out of phone numbers. In the meantime, we\'re adding area codes at a
steady clip.**

**This may staunch the problem, but as you know, being on the frontlines
in the states, this does not help consumers and businesses who are sick
and tired of changing their phone numbers.**

**I, too, receive complaints from all over the country. A few months
ago, I received a letter from a small business in Maine that takes
tourists out on its schooner to see the beautiful coastal islands of
that state.**

**They wrote that for their \"mom-and-pop\" operation, a new area code
will force them to re-print their brochures and stationary, an expensive
proposition that could in their words \-- \"cause a great setback for us
all.\" There is no question that for businesses, especially small
businesses, this turmoil in the numbering regime costs them plenty.**

**Another consumer from California wrote us in total frustration. He
ended a very heated letter with these words: \"do something smart for a
change.\"**

**Well, I am going to tell you what I told that woman from California:
we are doing something smart, we are going to let the states solve this
problem.**

**Because we at the FCC understand the bind that the states are in; that
you feel that your hands are tied. We now have petitions pending from
six states.**

I believe that we should be granting the states the authority that they
need, and I am optimistic that by the time the summer ends, we will have
dealt with most of these petitions. But this is only an interim
solution. That\'s why this past May we proposed rules on ways to reach
long term solutions, and I hope that we can adopt new rules in the
coming year.

**I am committed to working with you to balance the national interest
with the concerns of the states and the needs of consumers everywhere.
It\'s the smart thing to do.**

**We also need to work together on the issue of separations. I want to
thank the state members of the Joint Board on Separations for their work
on these issues and for their Report pointing to the need for
comprehensive reform of separations. So thank you to Dave Rolka, Joan
Smith, Tom Welch, and Jim Posey. I appreciate your concerns and I look
forward to working on these issues this Fall.**

**Working together is how we\'ll meet this and every challenge of this
new telecommunications world. One important challenge is to make sure
that all Americans benefit from competition. Just as the airline
industry has to deal with serving the low-margin customer living in a
small city or town, we have to find a way to address the unique problems
associated with low volume consumers, the subject of an inquiry we
launched last week. Likewise, we must make sure that the Internet
revolution does not leave rural America behind.**

**That\'s why I am working with Senate Minority Leader Daschle and a
group of his colleagues from rural states to bring advanced
communications services to the people of our nation\'s small towns and
farms.**

**And that\'s why I am happy to have received a proposal that NARUC and
the FCC form a Federal-State Joint Conference on Advanced Services. Let
me again commend Bob Rowe for his leadership on this initiative, as I
look forward to working with him on this critical issue.**

**Some companies have said that rural America will never be fully
connected because the economies just aren't there. The fact is that some
rural Americans do have access to advanced services, while others do
not. In fact, there are rural companies in this country that are on the
cutting edge of advanced services. I know that's the case because I've
seen them, all the way from Virginia to Alaska.**

**The question is: why aren't all companies making advanced services
available to their customers? I challenge these companies to join me in
the belief that now is not the time to scare rural America; rather, now
is the time to find solutions for rural America.**

**Because we must ensure that all Americans, wherever they live, are
beneficiaries of the telecom revolution.**

**That\'s why earlier this summer, we decided to fully fund the e-rate
program to wire schools and libraries to the Internet.**

**With the funding levels we approved, an additional 600,000 classrooms
will be wired, touching 40 million schoolchildren, many of them in our
poorest and most rural schools. This funding will help close the digital
divide that is emerging in our country.**

**By fully funding the e-rate, we are laying the foundation for
footbridges across this divide for millions of Americans in thousands of
towns and cities throughout the nation.**

**And so we will forever be indebted to the state members of the
Universal Service Joint Board who helped us design the e-rate program.
For now we are seeing the tangible benefits of that program in hundreds
of thousands of classrooms across the country where children's lives are
being enriched and their opportunities expanded as never before.**

**The need to create equal opportunities for all Americans also was the
foundation for our decision last week to adopt new rules to make sure
that telecommunications equipment and services are accessible to the 54
million Americans with disabilities.**

**We passed what I hope will become the Americans With Disabilities Act
for the Information Age. By making the tools needed to function and
prosper in a 21^st^ century society and economy accessible to all
Americans, we are giving millions of Americans a chance at living
independently.**

**And we\'re making an investment now that will help millions more in
the coming years. As we age and live longer, more and more of us will
not see, hear, or move as well as we do now.**

**Last week, at a conference for persons who have hearing disabilities,
someone told me that while I might think of myself as someone who does
not have a disability, in reality I'm just a TAB - - a temporarily
able-bodied person. And the fact is that most of us will have some
disability at some point in our live. The rules we adopted last week
will make sure that the technologies which we rely on today and which we
will rely on the future can still be used and enjoyed no matter what
barriers we face.**

Opening markets, protecting consumers, managing public resources, and
making sure that all Americans have access to the opportunities that
telecommunications bring these are the goals that we work toward
everyday whether we\'re in the nation's capitol or state capitols around
the nation.

**Just as poor Harry Jeffs had to work into the night to untangle the
wires after the Great San Francisco Earthquake 93 years ago, we need to
untangle whatever obstacles there are today as we transition to a world
of competition, so we can bring the benefits of communications to all
Americans.**

These are our challenges as we enter the next century. I am proud to say
that working together we have successfully met many of our challenges,
and I am confident that working together we will successfully meet those
that remain.

**Thank you.**