OPENING STATEMENT

of

MICHAEL K. POWELL

Commissioner

Federal Communications Commission

Before the

Subcommittee on Telecommunications, Trade

and Consumer Protection of the House Committee on Commerce

##### "Federal Communications Commission Reform for the New Millennium"

## 

## 

###### 2123 Rayburn House Office Building

Washington, D.C.

#######  October 26, 1999

Good morning, Mr. Chairman and other distinguished members of the House
Subcommittee on Telecommunications, Trade and Consumer Protection. Thank
you for inviting me here to discuss "Federal Communications Commission
Reform for the New Millennium" and Chairman Kennard's draft "strategic
plan."

I will start by stating that I wholeheartedly support Chairman Kennard's
efforts and commend his leadership in developing this draft strategic
plan. The "vision" that the draft plan has of "vigorous competition that
will greatly reduce the need for direct regulation" is laudable and
consistent with Congress' intent in drafting the 1996 Act. I, therefore,
generally support the goals of the plan and its commitment to make the
agency "faster, flatter and more functional."

In my testimony this morning, I would like to highlight for the
Subcommittee some of the elements of the draft plan, and, of course,
talk briefly about the few areas that may need further consideration by
both the Commission and Congress.

In March, when we were last here to testify on FCC reauthorization, I
submitted five areas for exploration: (1) the need to more clearly
define the Commission's annual priorities and focus; (2) the need to
operate efficiently enough to meet the demands of an innovation driven
market; (3) how to better align the agency with market trends and
demands; (4) whether to continue the administration of functions that
are largely duplicated elsewhere in government; and (5) the breadth of
the Commission's quasi-legislative authority. I am pleased that many of
these areas are considered in the Chairman's draft plan, but I believe
that it alone will not completely obviate the need for Congress to
monitor and perhaps modify the agency in response to rapid change in the
industry and to ensure that Congress' pro-competitive, deregulatory
vision, embodied in the 1996 Act, is realized.

######## The Commission's Mission, Goals and Objectives

A must-do for any organization -- from the smallest to the largest -- is
to establish goals and objectives that are measurable and achievable.
Congress sets the Commission's mission and goals in the first instance.
In my mind, it is our duty to implement specific statutory direction,
before, or concomitant with, any discretionary authority. This simple
priority principle should stand foursquare at the summit of any
Commission plan.

I believe, generally, that the draft strategic plan covers the broad
areas that should guide our work in coming years. However, I would point
out two areas that I believe are important and derive from Section 1 of
the Act, but are omitted in the present draft: (1) the promotion of
safety of life and property and (2) the national defense.

As the "Defense Commissioner" responsible for the FCC's emergency
preparedness, security and national defense matters, I have asked the
Chairman to include up-front in the plan these important statutory
goals. These issues are becoming more acute and more challenging as
competition and deregulation drive greater commercial activity. While I
intensely encourage new entry and applaud innovative business models,
these interests do not always coincide with governmental interests in
law enforcement and national security. I would alert the Congress to the
growing challenge of reconciling these competing interests. Some of
these challenges include fulfilling the spectrum needs of federal, state
and local public safety entities; ensuring that law enforcement
continues to have the necessary tools at its disposal in the digital
age; balancing the competing demands for spectrum by governmental and
non-governmental institutions, particularly in international forums; and
safeguarding critical national security and defense assets.

With an expansive and complex statute it is difficult to compress into
one sentence and four enumerated goals the purpose of the FCC "for the
21^st^ Century." I congratulate Chairman Kennard for his attempt to do
so. Such an endeavor, however, necessarily produces a document of lofty
generalities. The more significant challenge is to translate this
strategic vision into an operational plan, detailing the means for
reaching the objectives and the resources for doing so. My only caution
here is that it is always more difficult to execute a plan than to craft
one, and I have some concerns that the goals in this strategic plan are
overly optimistic and some of its numeric targets potentially unhelpful.

I think the Chairman's draft strategic plan includes some appropriate
implementation steps and ways to measure our results. He has also put in
place a top-notch team of FCC managers and professionals to implement
these steps. My limited concern, however, is that the plan takes a
fairly long-term view of our mission and priorities (5 years). What form
the communications market will have taken by then is anyone's guess, and
one must be a bit skeptical that any restructuring along that time
horizon will unfold as planned. While a long-range strategic plan has
some value in setting an approximate course, it is perhaps more
important to work on specific priorities calibrated to shorter
timeframes.

For example, as I testified in March, I continue to believe that it
would be useful for the Commission to enumerate clearly and widely
communicate a set of annual priorities. I would favor a more structured
process by which the Commission formally develops and publicly reports
its priorities for the upcoming year to help focus the work of the
Commission and create greater regulatory certainty. To assist in this
and other managerial challenges, I would consider creating a
professional management position in the Commission, dedicated to
operational matters.

Let me now offer a few observations regarding specific subjects covered
in the draft plan.

######### Some Highlights of the Draft Strategic Plan

######## Internal Procedures

In the effort to improve internal procedures, we should be centrally
focused on drastically improving efficiency. In a market guided by
"Internet" time, the FCC needs to make quicker, more timely decisions.
This is why I fully support our current and future efforts to modernize
and automate many of our functions. The FCC is focused, rightly, on
becoming a "model agency for the digital age." I have been very
impressed by the various automation efforts, including the spectrum
auction bidding system and the Wireless Bureau's "ULS" project.
Automated tools are appropriate for the bulk of the routine and
non-controversial work. At the same time, however, we need to find ways
to accelerate decisions involving complex transactions and important
policy questions. Here, more than any other area, a decision that comes
too late, might as well not have been made at all.

Therefore, I am encouraged by the draft plan's proposals to eliminate
multiple levels of review, making the agency faster, flatter and
functional. We must be structured to render decisions quickly,
predictably, and without imposing needless costs on industry or
consumers through unnecessary delay. In this regard, while I agree with
the proposal to act on certain petitions for reconsideration within 60
days of the record closing, I would suggest the same expedited treatment
of applications for review of actions taken on delegated authority, as
well.

Finally, I am very pleased to see that the Chairman will restructure the
Office of the Secretary to facilitate management of Commission
proceedings and to ensure Commissioners adhere to timetables and voting
procedures. I also anticipate that the Secretary will be instrumental in
facilitating the Bureaus' disposal and release of pending matters.

######## Structural Changes

The Chairman's draft plan clearly recognizes (as almost everyone has)
that the Commission is currently organized around industry segments that
increasingly are less relevant as convergence strains and eliminates
their unique technical distinctions. I generally concur with the
Chairman's proposals to reorganize the agency along functional rather
than technological lines. I supported the consolidation of dispersed
functions into the new Enforcement and Consumer Information Bureaus and
I look forward to these new bureaus getting started soon.

I am very intrigued (but not yet sold) by the second phase proposal to
consolidate the FCC's policy/rulemaking and authorization of
service/licensing functions. A single policy/rulemaking bureau may have
some merit. For one, it will increase the field of view of management,
hopefully in a way that harmonizes our decisions across industry
segments. However, given the depth and breadth of our policy/rulemaking
responsibilities, a single bureau overseeing these functions could prove
too large and unwieldy. Moreover, because the Communications Act
continues to categorize industries based on technology, a consolidated
bureau, while appearing functional, may in fact collapse into a "mini
FCC" with separate divisions charged with particular sections of the
Act. This subject requires the fullest consideration, but I caution one
not to expect revolutionary changes in the analysis or outcomes of our
decisions as a consequence of this type of organizational change.

## **C. Deregulatory Initiatives**

I regret that the deregulatory objectives of the draft plan fall short
of my expectations. It seems that one of the core principles articulated
in the plan is that we "deregulate as competition develops." As I have
written several times, I am of the view that in many instances,
deregulation is a necessary pre-requisite to competition developing. I
have often observed a hesitancy to deregulate, under the belief that
competition has not yet fully developed or matured. The assumption is
that regulation is removed only when it has been rendered superfluous
because of competition. In some areas, this may be true. But, this
approach fails to recognize the interrelationship between regulations
and the development of competitive markets. Regulations often distort
market incentives or inhibit efficient entry and competition.
Deregulation, then, is not just desert, served after competition comes
out of the oven. It is a necessary ingredient to the competition dish.

Although I will not get into the details of the dispute over these core
beliefs, I generally see deregulation (whether in the form of
forbearance, streamlining or a biennial review) more as a *means* of
facilitating competition through the elimination of burdensome
regulatory requirements. It is not a reward to hold out to industry,
after *the government* determines that there is enough competition to
grant relief. I would suggest that the plan's deregulatory component be
beefed up to shift our paradigm for handling forbearance requests and
the next biennial review toward a presumption in favor of deregulation
and an obligation to re-justify regulations that are retained, with the
burden to do so resting with the Commission.

### Forbearance

The draft plan says that the Commission will "consider additional areas
that may be appropriate for forbearance," claiming that we have already
engaged in substantial forbearance. I cannot concur with this favorable
view of our forbearance record. The true tale is not in the numbers (no
matter how well massaged), but how meekly we have wielded the powerful
forbearance tool. Yes, we have swatted a few gnats, but very few
dragons. I think Congress expected us to be much more aggressive.
Indeed, I believe Congress intended that when we are faced with a
petition to forbear that we should have to fully justify a decision that
leaves the rules on the books. If we cannot, the rule should fall. The
burden rests with us.

### Biennial Review

The Biennial Review requirement of Section 11 of the Act, like Section
10, is a very important provision enacted in 1996. I share some of
Commissioner Furchtgott-Roth's concerns about the Commission's first
biennial review and, as I recall, Chairman Kennard responded favorably
to Commissioner Furchtgott-Roth's ideas for the Year 2000 review. I am
also very pleased that Chairman Kennard's draft plan calls for "an
aggressive" biennial review next year, citing wireless as an area where
competition has clearly emerged and where most regulation has become
unnecessary. I can only add to the thoughts of my colleagues on this
score by emphasizing that I expect that we will take on the burden of
justifying the rules that we keep and to grapple head on with the
statutory public interest test of "meaningful economic competition."

**D. Duplicative Functions**

As I testified in March, it is very important to address areas where
Commission authority and activities overlap with those of other
government agencies. While such governmental overlaps may be desirable,
they should at least be complementary (or supplementary) rather than
simply duplicative. I am glad that the draft plan provides that we will
continue efforts to coordinate with other federal agencies (and with
state and local governments) and, especially, to improve coordination
with the Federal Trade Commission and the Departments of Justice,
Commerce and State to ensure that our respective functions are more
complementary. However, some of the FCC's functions must be thoroughly
evaluated in the context of the overlapping duties of other federal
agencies and state and local jurisdictions.

**1. Merger Review**

For example, merger review is the topic of several pending bills and of
much interest lately as we see a pace of strategic consolidation in
telecommunications and media markets like we have never seen before. The
FCC's review of major transactions should be generally limited to those
areas in which we can claim primary expertise. While I believe that
there is room to preserve a complementary role for the FCC in the review
of mergers, we need to have some disciplined procedures and limiting
principles to ensure the rapid processing of such transactions, to
preserve the rights of the parties and to avoid duplication with other
authorities. I have articulated in more detail some of these limiting
principles and have criticized our current process in recent public
statements, which I would be pleased to pass on to the Subcommittee.

Chairman Kennard's plan (which is not yet part of the strategic plan) to
set up an intra-agency transactions team in the Office of General
Counsel may be a promising proposal. I fully support efforts to make the
FCC's merger review process more predictable and transparent. But we
need more than a new box on the organizational chart. We need much more
significant consideration of two areas for revision: (1) we must
institute a clearly articulated review process replete with timing
benchmarks, and (2) Congress and the Commission need to reevaluate the
applicable merger standards to limit duplication and guard against
extraneous conditions. I look forward to considering a proposal along
these lines.

###  2. Other Areas {#other-areas .unnumbered}

Let me briefly address other areas that overlap with other governmental
institutions: consumer protection, equal employment opportunities (EEO)
and political campaigns. First, one focus of the draft plan is rightly
on consumer protection. For, as we have seen in the slamming area,
competition tends to bring out of the woodwork those that try to cheat
consumers for a fast buck. We must, within our authority, be vigilant in
keeping the cheaters at bay. At the same time, we must recognize that
there are other agencies and jurisdictions that have similar authority
and some judgment might be made as to which is best positioned to
administer certain issues.

We must also examine whether all aspects of the Commission's EEO program
should remain separate from the Equal Employment Opportunity Commission
and the federal, state and local civil rights authorities. Although
there is some advantage to having the FCC involved because of its unique
relationship with certain industries, in times of tight resources and
many other priorities at the FCC, we must ensure that the FCC's and
EEOC's respective roles remain complementary and not duplicative. By
deferring some aspects of this program to the expert civil rights agency
(as the Commission has done in certain respects under memoranda of
understanding with the EEOC), we are in better position to justify the
government's role in promoting employment opportunities in the dynamic
and growing communications industry.

Finally, with an election year soon upon us, the FCC will be facing more
pressure to enforce and even expand the political obligations of
broadcast licensees. There are unquestionably problems in our electoral
system, but I shiver at the suggestion that the *Communications*
Commission ought to play a central role in such matters without
comprehensive direction from Congress. Unbridled discretion to affect
campaigns by three of five unelected regulators is unwise. Moreover, the
FCC lacks the knowledge or expertise to properly balance electoral
interests or to weigh the effects on existing election law. I would
leave that to the Federal *Election* Commission, if anyone.

**IV. Legislative Recommendations**

Many of the concerns I have raised, in addition to many other
significant issues such as broadband access and inter-LATA data relief,
may demand Congress' attention over the coming months. However, I
recognize the difficulty of enacting major FCC reform initiatives so
soon after passage of the 1996 Act. In the near term, less controversial
legislative tweaks that support the Commission's efforts to reform
itself and become more efficient may be beneficial.

For the most part, Chairman Kennard's draft strategic plan can be
executed by the Commission and its most highly regarded staff without
congressional intervention. However, the list of modest legislative
recommendations attached to the plan will surely help facilitate its
implementation. I generally support them and I will briefly commend the
Subcommittee's attention to a couple.

First, the proposal to exempt the Commission from the Government in the
Sunshine Act should be considered. I recognize that at first blush, it
seems fantastic to support less openness. But the fact is that the
Sunshine Act not only has failed in its purpose, it may have had the
opposite effect. The notion that substantive decisions are debated by
Commissioners in public meetings and voted after such deliberation is
fiction. The press of business requires that most items be voted on
circulation. Moreover, even the votes at open meetings are ceremonial,
the decision having been debated and determined in advance. The Sunshine
Act, in fact, impedes efficient decision-making. Because three
Commissioners may not discuss a substantive matter (except at a public
forum), questions are filtered through and among layers of Commission
staff and then are communicated back and forth to the Commissioners.
This produces a lengthy and often chaotic decision-making process. Our
decisions certainly should not be cloaked in the shadows, but they are
presently being scorched by sunshine.

Second, the Chairman's legislative proposals that would provide
flexibility to restructure our operations also deserve attention. For
example, \"voluntary separation incentives\" or employee \"buyouts\"
would facilitate further staff downsizing and redeployment, to be more
responsive to the ongoing industry convergence and more conducive to a
functional organizational structure. Additional flexibility to hire
outside experts and consultants would allow the Commission to attract
talented experts to augment our current staff's expertise.

Third, I favor the Chairman's proposals to strengthen our enforcement
assets, including those that toughen penalties for violation of the
Communications Act and FCC rules and that provide for speedier judicial
review of Commission forfeiture orders.

# 

# **V. Conclusion**

I look forward to continuing to work with Members of Congress and with
my colleagues on the many challenges ahead. I trust that, by working
collaboratively and by having faith in free markets, we will bring the
benefits of competition, choice, and service to American consumers as
envisioned by the 1996 Act.

Thank you for your attention.