"THE NEW FCC: FAST, FLAT, AND FUNCTIONAL"

Remarks of William E. Kennard

Chairman, Federal Communications Commission

Georgetown University Law Center

Continuing Legal Education

\" FCC 2000 \"

Washington, D.C.

October 5, 1999

(as prepared for delivery)

***Introduction***

Thank you, Jean, for that gracious introduction.

I also thank the FCBA and Georgetown University Law Center for joining
with the FCC in presenting this third conference on the "State of the
Commission."

Since I am here at Georgetown Law Center, my staff advised that I start
the speech by telling some lawyer jokes.

But the problem with lawyer jokes is that lawyers don't think they are

funny, and no one else thinks they are jokes.

So instead, let me ask you a question: How many of you are here for CLE
credit?

Well, even if the speeches are not good, you still get credit.

In fact, in that case, maybe you ought to get extra credit.

In any event, I\'ll try not to disappoint you.

***The Past Year***

This year I want to talk about our progress since I gave this speech at
this conference a year ago, and what we can anticipate in the years to
come.

It's been a very satisfying year, but also a challenging one.

Challenging because we are still grappling with the challenge of making
sure our laws and regulations are relevant in a market that is changing
so very fast, changing faster than any market has in the past.

Even in the face of this, I believe we have achieved some major
victories.

It has been three and one-half years since the Telecommunications Act of
1996 was adopted.

We have been through the first two rounds of implementation:

First, rulemaking; and

Second, the challenge in the courts.

We are now in the third round: implementation of the rules in the market
place.

Here is what has happened over the last year:

First, in opening up existing markets . . .

The vision of Congress in the 1996 Act was for the Commission to break
up the bottlenecks where incumbent monopolies provide the service, and
to open those markets to competition.

I believe we have been successful.

We adopted basic rules for opening up local telephone exchanges to
competition, and the Supreme Court affirmed the most important
components of that blueprint in *[Iowa Utilities Board]{.underline}*.

We established rules of interconnection and co-location. Where those
rules are beginning to work, and competition is beginning to flourish,
we have eased the pricing rules and given incumbent local exchange
carriers pricing flexibility where threshold levels of competition have
been reached in their regions.

In addition, we currently are seeking comment on access reform.

Second, in keeping new markets open . . .

Another vision of Congress was that new technologies be allowed to
flourish, unhampered by regulation.

#  With this vision in mind, the Commission is seeking to create an oasis free from

# regulation. 

In the UNE Remand, we refused to pick winners, but, by freeing incumbent
local

exchange providers from unbundling requirements, let broadband and other
advanced

services enter the market unregulated.

We also agreed to forbear from requiring the unbundling of the cable
pipeline to

the home.

Finally, where markets have not responded to public needs, the
Commission has.

As we worked to implement the E-Rate, the Fifth Circuit upheld most
aspects of

our obligation and ability to carry out this important program of
Congress. Last year we

wired 500,000 classrooms to the Internet. This year that figure will be
up 20%, to an

additional 600,000 classrooms that will be wired to the Internet.

Similarly, when the market was not providing sufficient access to

telecommunications for Americans with disabilities, we adopted rules to
enhance access,

one of the most significant advances in access for Americans with
disabilities since the

Americans with Disabilities Act was enacted in 1990.

#### **An Access Story** 

We sometimes get caught up in debates about advanced services, and lose
sight of

the fact that many Americans are still waiting for basic telephone
service.

Earlier this year I was on a panel in Scottsdale, Arizona, with some
very senior executives from MindSpring, on the one hand, and AT&T on the
other hand.

We were talking about the important issue of access to a cable platform.
The debate was heated. People were literally pounding the table about
how to bring high- speed Internet access into the homes of America.

So I said, "Time out. It is ironic that we are talking about how to
bring another megabit of speed to suburban homes, yet less than an hour
away from here there are thousands of Americans on the Gila River Indian
Reservation where fewer than fifty percent even have dialtone. If you
really want to do something to bridge the digital divide, come with me
to the Gila Indian Reservation. I'd love for you to bring your talent
and expertise to these people."

After the panel I was standing in the hotel lobby, and all these people
came up to me and said, "Let's go to Gila River." And so, we went.

We drove up to this dusty little Indian reservation outside of
Scottsdale. I had a caravan of black Lincoln Continental Town Cars
behind me. I felt like a latter day Pied Piper. I had AT&T, Nortel,
Lucent Technologies, Motorola, and North Point with me.

We had a wonderful meeting. We met with the tribal leaders, and talked
about bringing basic telephone service to that part of the country.

I am very proud to say that things are beginning to happen there.

So as we debate the issues that will define the future of communications
technologies, let us never forget that some Americans have yet to
receive the technology of the past. As we go into the digital future, we
must work to ensure that no American is left behind.

##### Hard-Won Victories

These types of victories are hard-won, and I am proud of them.

We have won them, while at the same time trying to adjust to the new
market demands swirling around us.

Senator Hollings told me recently that being at the FCC now must be
"like trying to take a drink from a firehose."

A year ago I said our effort was like trying to redesign a 747 while in
mid-flight.

I still believe that is an apt description.

Our effort, however, is paying off, for these victories have set the
stage for the new FCC that I want to talk about next.

***The New FCC***

This year I have entitled my talk:

"The New FCC: Fast, Flat, and Functional."

If that gives you the image of a runner bent for victory, that is
intended. This new FCC is on the move.

In August of this year, we set an ambitious five year agenda.

We call it our blueprint for the 21^st^ Century.

My father was an architect, a maker of blueprints.

Although I obviously did not become an architect, he taught me much
about the value of having a blueprint. For example, you have to have a
well thought-out plan to lay the foundation for any solid structure; and
that plan must have the flexibility to adapt to new conditions as you go
along.

Our blueprint, our five-year plan, has three basic pillars

First, promote competition,

Second, protect consumers, and

Third, give every consumer access to basic and advanced telephony
services.

##### Changing Environment

My father practiced architecture in Los Angeles, and he had a special
obligation to design buildings that could withstand earthquakes.

In a similar manner, we are called upon to design a structure that can
withstand the earthquakes going on everyday in the telecommunications
market.

The three pillars of our new FCC are not all that different from the
pillars of the Communications Act of 1934.

The difference is that the ground is shifting beneath us at a much
faster rate, with the swirl of market change all about us.

The new FCC is going to have to be flexible enough to keep up with this
constantly changing environment.

We will do this by being . . . fast, flat and functional.

***Fast***

First . . . fast.

We held a series of public forums on our strategic plan, and heard from
every side of the community. . . industry, academics, non-profits, and
consumer groups.

One comment that everybody made was that we need to find ways to get the
work done faster.

And we are making that effort.

But we need the help of those of you in the audience this morning.

The FCC simply cannot be expected to write a rule for everything.

Some sectors of this market move so fast that by the time a public
notice on a proposed rule is issued, and comments are gathered, the
market has bypassed the conditions that gave rise to the proposed rule
in the first place.

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.

I believe today's markets are moving too fast for us to act in that role
very much longer.

Before the ink is dry on a rule, the market has erased the lines drawn
by the rule.

Government can step in selectively, but only very selectively.

At the FCC we are cleaning out the "ghosts of regulators past," but we
need your help to carefully select where the scarce resources of the FCC
can be applied with good effect.

There are other ways to speed up our processing.

We have plans to "go electronic."

Much of your transaction work at the Commission could and will be done
electronically, and you should be able to view the current status of
your transaction on our web site.

Toward this end, I reported to Congress that the FCC aspires to become a
\"paperless\" organization, through investment in the technology that
will support 100% electronic filing and electronic licensing.

Another way we are accelerating our proceedings is to have fewer rules
with which we must contend.

Launched in 1998, our Biennial Regulatory Review team quickly initiated
or identified 32 proceedings at the Commission to scrap unneeded rules.

I am pleased to report that 24 of those proceedings have been completed
or

otherwise significantly advanced by Commission orders.

***Flat***

Next . . . flat.

The model for a regulator, is top-down, command-and-control, with
chiefs, bureaus and support staff.

And the voices at our public forums consistently complained that we have
too many levels of review at the Commission.

The model for market facilitator, the model we are moving to, is a
flatter and more fluid organization. Its work units are smaller and more
responsive.

This is possible because much of the governance -- the
microdecision-making -- will pass from the FCC to the market.

More [governance]{.underline} from the marketplace means [less
government]{.underline} from the FCC.

***Functional***

Finally . . . functional.

In five years, I expect the U.S. communications markets to be
characterized by vigorous competition that will greatly reduce the need
for direct regulation.

I believe that in that same time period, the FCC will change radically
from what it is today.

The American consumer does not switch from wireline phone to wireless
phone, and think "Well, now I'm moving from the Common Carrier Bureau to
the Wireless Bureau."

And neither should you, as practitioners.

The new driving functions are not [types]{.underline} of technologies,
but procedures that apply to [all]{.underline} technologies: policy,
licensing, enforcement, and consumer information.

Those are the drivers at the new FCC.

They replace the old drivers of the Common Carrier, Wireless, Cable and
Mass Media Bureaus, the regulatory niches in which many industries have
had to fit.

As practitioners, this should mean one-stop digital shopping.

Take, for example, the transactional business . . . the binding and
unbinding of business units to respond to market demands.

Currently, practitioners have to go from bureau to bureau to transfer a
license, or to walk a merger through the process.

A unified transactions unit could synchronize these procedures, and cut
the processing time by months.

Just because we raise common questions about all technology, however,
does not mean we will come up with common answers.

Different media, and different technology, do not need to be regulated
identically.

From the regulatory base of common carrier, we have found that the
prescriptive interconnection and open architecture have served the
market, and the public, well.

For the Internet, however, openness and connectivity have been achieved
through unregulated, market-based governance.

The goal of a policy function at the Commission will not be to imprint
the policies and practices of one medium onto another, or to impose
legacy regulation on new markets.

Rather, it will be to assure some sense and coherence among the various
policies, with the emphasis on the ease of going from medium to medium,
and with the minimum regulation consistent with the public interest.

***Announcements***

Our five-year plan is not built upon a single set of five-year
achievements, but upon a series of achievements during each of the five
years.

A year ago at this conference, I laid out a set of actions we would take
during the coming year.

Today I have been pleased to review the accomplishment of those actions.

I also said that while we were undertaking these incremental actions, we
also would be at work on implementing our grand design, our blueprint,
our future.

## New Bureaus

One of those design projects was to consolidate much of the Commission's
activities into two new streamlined bureaus that would serve common
functions applicable to a wide range of technologies.

Today I am pleased to announce that our Congressional oversight
committees have approved our proposal for an Enforcement Bureau and a
Consumer Information Bureau.

Those bureaus will go into operation in the very near future.

#### **Transactions Team**

This year I want to announce that another design project is underway.

I have asked our General Counsel, Chris Wright, to seek your views over
the coming weeks about the creation of an inter-agency merger team, to
streamline and accelerate the merger review process.

That team will be in place no later than January 3 of next year.

This is not a reincarnation of the old Competition Division.

The goal of this team will be to expedite the review process so that the
issues arising in even the most complex transactions may be resolved
within definite time periods.

The Commission's merger review process has received considerable
criticism.

I think, however, the Commission should be given credit for processing
most merger applications, including large ones, in a timely fashion.

Most merger applications are routinely and quickly dealt with.

The problem is that with such dynamic market forces at play in recent
years, there have been an increasing number of larger and complex
applications that have, at times, strained our limited resources.

The Wireless Bureau, for example, handles around 30,000 license
transfers and assignments a year.

Even so, it was able to process MCI-WorldCom's acquisition of SkyTel in
nine weeks; ALLTEL's acquisition of Liberty Cellular in 10 weeks; Global
Crossing's acquisition of Frontier in less than five months; and AT&T\'s
acquisition of Vanguard in three and one-half months.

I think that is a commendable record.

The new team will work to make the merger review process predictable and
transparent, so that applicants know what is expected of them, what will
happen when, and the current status of their application.

## Special Thanks 

Before I close, I want to thank Deputy General Counsel David Solomon for
his achievements in heading the 1998 Biennial Regulatory Review.

I want to announce that Jeff Lanning will handle next year's effort, the
Year 2000 Biennial Regulatory Review. Jeff is the Special Counsel to the
General Counsel, and I thank him for taking on this task.

I also want to thank Mary Beth Richards, our Deputy Managing Director,
who

will oversee the implementation of the five-year strategic plan.

***Closing***

The FCC was created to serve the public, and now it has set itself upon
the task of serving the public in a new century.

This undertaking will involve a continuing dialogue with those of you in
this room, with your colleagues in the communications bar, with
Congress, and with the American people.

I look forward to continuing this great conversation with you.

I thank Congress for approving the two new bureaus, and I look forward
to working closely with Congress on the implementation of our blueprint.

Congress is now considering the Commission's FY2000 budget.

I hope Congress will recognize the strength of the blueprint I have
described today.

In that spirit, I appeal to Congress to give us the resources we need
for the new century. These resources are as specific as buyout
authority, so that we can better deploy our human resources, and funds
for electronic filing, to complete our program for paperless filing; and
as basic as funding to pay the rent.

###  Pulling together, I believe we can build a FCC that is fast, flat and functional.

### 

###  As my father would say, good foundations make good futures.

### 

###  Working together, we have laid a good foundation for the FCC in the 

### 21^st^ Century. 

Thank you.

\###