OPENING STATEMENT

of

MICHAEL K. POWELL

Chairman

Federal Communications Commission

Before the

Subcommittee on Telecommunications and the Internet

of the House Committee on Energy and Commerce

Thursday, March 29, 2001

10:00 a.m.

2123 Rayburn House Office Building

#### SUMMARY OF OPENING STATEMENT OF

#### FCC CHAIRMAN MICHAEL K. POWELL

**BEFORE THE**

##### SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

#### OF THE HOUSE COMMITTEE ON ENERGY AND COMMERCE

**MARCH 29, 2001**

In order to serve the American public, the Federal Communications
Commission, as an institution, must be efficient, effective, and
responsive. The challenges of reaching these goals at the Commission are
complicated by the sweeping, fast-paced changes that characterize the
industries that we regulate. Indeed, the Commission is experiencing a
challenge it has never faced: each industry segment in our portfolio is
in the midst of revolution, and is attempting to adapt to the most
fundamental changes in their history. Moreover, the changes are blurring
the lines that once separated these industry groupings. There are new
markets, new competitors, and new regulatory challenges.

For this agency to fulfill its congressional charge, indeed to remain
relevant at all, it must write and execute a new business plan built
along four dimensions: (1) a clear substantive policy vision, consistent
with the various communications statutes and rules, that guides our
deliberations; (2) a pointed emphasis on management that builds a strong
team, produces a cohesive and efficient operation, and leads to clear
and timely decisions; (3) an extensive training and development program
to ensure that we possess independent technical and economic expertise;
and (4) organizational restructuring to align our institution with the
realities of a dynamic and converging marketplace.

My goal is to improve the agency on all these dimensions. To that end, I
intend to seek the opinions and thoughts from a wide range of
participants, including this Subcommittee and other Members of Congress
and their staffs, as well as the businesses that come before the
Commission. And, I want to hear from the Commission\'s employees. They
often know best how we should change and what tools they need to do
their jobs. I want to gather opinions and ideas, but be swift to make
changes. It is our goal to fully complete many of these changes this
year.

Finally, I will be turning to this Subcommittee and Congress for
assistance. With regard to the organizational restructuring that is
likely to be necessary, I hope you will concur in those changes. Most
critically, I look to Congress to support the Commission\'s budgetary
needs and objectives.

I cannot predict the future, nor can anyone else at the Commission. When
faced with future challenges that are uncertain, the best approach is to
build a first-class operation, with top talent, that is trained and
disciplined enough to adapt quickly to new and changing situations. I
hope to build, along with my colleagues and the outstanding FCC staff,
just such a unit---one well suited to an uncertain future.

Good morning, Mr. Chairman and other distinguished members of the House
Subcommittee on Telecommunications and the Internet. Thank you for
inviting me here to discuss the Federal Communications Commission\'s
agenda for 2001 and the agency\'s reform effort.

I am honored and humbled to lead the Commission at this time of
unbelievable change in the communications industry. I believe a critical
part of my job is to be a leader and steward of the agency, and I take
this responsibility very seriously. In order to serve the American
public, the FCC, as an institution, must be efficient, effective, and
responsive. The challenges of reaching these goals at the Commission are
complicated by the sweeping, fast-paced changes that characterize the
industries that we regulate. Indeed, the Commission is experiencing a
challenge it has never faced: each industry segment in our portfolio is
in the midst of revolution, and is attempting to adapt to the most
fundamental changes in their history---for example, competition and
deregulation in telephones, DTV transition in television, modem and
interactive services in cable, wireless Internet and digital services,
consumer accessible satellite service, broadband everywhere, and on and
on. Moreover, the changes are blurring the lines that once separated
these industry groupings. There are new markets, new competitors, and
new regulatory challenges. The game has become three-dimensional chess,
where each board is spinning.

These winds of profound and dynamic change, unleashed in part by the
Telecommunications Act of 1996, have buffeted the Commission and blown
it into a position where its decisions have far-reaching impact on the
future of communications, not only in the United States but throughout
the world. We have come a long way from an agency where the principal
focus was the assignment of radio licenses, and its principal activity
was conducting lengthy comparative hearings to assign those licenses.
This new environment is no longer linear, but chaotic and dynamic. For
this agency to fulfill its congressional charge, indeed to remain
relevant at all, it must put together a new business model and build the
type of team that can execute it effectively. That is what we intend to
do.

## FCC Reform: The New Business Plan

I conceive of FCC reform as a comprehensive retooling and redirection of
the Commission\'s entire mission. Our approach is to write and execute a
new business plan built along four dimensions: (1) a clear substantive
policy vision, consistent with the various communications statutes and
rules, that guides our deliberations; (2) a pointed emphasis on
management that builds a strong team, produces a cohesive and efficient
operation, and leads to clear and timely decisions; (3) an extensive
training and development program to ensure that we possess independent
technical and economic expertise; and (4) organizational restructuring
to align our institution with the realities of a dynamic and converging
marketplace.

1.  [Substantive Vision]{.underline}

The industry, the capital markets, and the government find themselves
navigating between the matured, legacy communications system and the
nascent innovation-driven Internet space of the future. The legacy world
to our back is a proud one. This nation built the finest voice
communication system in the world, as well as top-notch mass media
delivery systems in the form of radio, television, and cable. These
systems have reached maturity though: that is, we understand the basic
technology and architecture; we largely understand the cost
characteristics; and, we understand what the consumer wants and what the
product is. And, government regulation and policy had coalesced around
these understandings, principally in the form of regulated monopoly and
oligopoly.

We now are looking up at a cresting wave of change that we are much less
sure of how to navigate. The digital broadband world is in its infancy,
and its qualities and characteristics are much less clear. The new
advanced architectures and technologies are just beginning to be
understood and deployed, with no clear winning technology or industry.
The cost characteristics may differ substantially from those of
traditional networks to which we are accustomed. Broadband Internet
products are still being developed and we all wait to see what service
offerings consumers will and will not embrace. It is a world of dynamic
and chaotic experimentation in which any prediction of how it turns out
is foolhardy.

I believe government policy needs to migrate steadily toward the digital
broadband future, but remain humble about what it does not understand
and cannot predict. I submit that this digital broadband migration
should be built around incubation, innovation and investment. At the
Commission, our policy direction will focus on this migration and will
have several directional guideposts:

-   We will do everything we can to facilitate the timely and efficient
    deployment of broadband infrastructure. In doing so, we will
    endeavor to promote the growth of a wide variety of technologies
    that can compete with each other for the delivery of content and
    will strive not to favor---or uniquely burden---any particular one.

-   We will pursue the worthy universal service goals of ubiquity and
    affordability as new networks are deployed, but will challenge
    ourselves to do so in creative ways.

-   We will redirect our focus onto innovation and investment. The
    conditions for experimentation and change and the flow of money to
    support new ventures have often been misunderstood or neglected. If
    the infrastructure is never invented, is never deployed, or lacks
    economic viability we will not see even a glimmer of the bright
    future we envision.

-   We will harness competition and market forces to drive efficient
    change and resist the temptation, as regulators, to meld markets in
    our image or the image of any particular industry player.

-   We will rationalize and harmonize regulations across industry
    segments wherever we can and wherever the statute will allow.

-   We will validate regulations that constrain market activity that are
    necessary to protect consumers, or we will eliminate them.

-   We will be skeptical of regulatory intervention absent evidence of
    persistent trends or clear abuse, but we will be vigilant in
    monitoring the evolution of these nascent markets.

-   We will shift from constantly expanding the bevy of permissive
    regulations to strong and effective enforcement of truly necessary
    ones. We will need Congress\' help to put real teeth into our
    enforcement efforts.

2.  [Operations and Management]{.underline}

All the vision in the world is useless if you do not build and manage an
institution that can execute it. We intend to actively manage the
agency. Indecision and avoidance are not legitimate policies and, thus,
we will strive to reduce backlogs and put systems in place that will
prevent them from returning. Managers will be measured, in part, on this
basis.

The Commission will develop an annual strategic planning process that
will be integrated with the federal budget cycle and the review of our
performance as an institution and as individuals. We are working to
establish uniform measures of productivity across the agency to
facilitate this activity.

The Commission is developing a set of internal procedures that will
allow it to function more smoothly. These procedures will cover subjects
such as Commission deliberation, voting procedures and internal document
security.

The Commission should continue to modernize its information technology
infrastructure to ensure productivity gains. We must strive to be a
virtual agency---one in which someone in Connecticut is able to access
us as easily and readily as someone on Connecticut Avenue. We are
working to make this goal a reality through increased electronic access
capability. We are engaged in a time-consuming and expensive project,
but one that is critical to our ability to remain relevant in this new
millennium. We must continue with due speed to use the advances of
technology to our advantage.

We have 18 major information technology systems that incorporate
electronic filing or offer public access to data. The industry can file
most license requests, equipment authorizations, and comments
electronically. Seventy-two percent of our services have electronic
filing capability, but I want to do better. We administered well over
three million licenses last year, so it is critical that we are
efficient in this area. It is also important that citizens all over
America have the ability to contact us easily and from anywhere.
Currently, they are able to do so electronically, by phone or the old
fashioned way---by letter. Last year, we received well over one million
inquiries from consumers. The public must be an active voice in the
communications transformation, for they are the ultimate beneficiaries
of the abundant choices resulting from full and fierce competition.

We are also overlaying this virtual agency concept to the benefit of FCC
staff through an expansive telecommuting program, which is open to all
eligible employees. Virtually 100 percent of the Commission\'s employees
are eligible for the telecommuting program. Approximately 400 of our
eligible employees, about 20 percent, have chosen to telecommute on
either a regular or ad hoc basis. Fewer than one percent of those who
wanted to telecommute have been turned down based on the Commission\'s
criteria.

3.  [Technical and Economic Expertise]{.underline}

The communications revolution is being driven by advances in technology.
The Commission must have a strong fluency in technology. We cannot
depend on those we regulate for on-the-job tutorials while we make
decisions. This situation is grave. Over the last six years, our
engineering staff has decreased by more than 20 percent. Within the next
four years, 40 percent of our engineering staff will be eligible to
retire. Conversely, we are not replenishing the coffers at the other end
by bringing in new employees. We, like other governmental departments
and agencies, are competing for this talent in a tight labor market and
are challenged to convince talent to enter government service. This has
been most apparent trying to recruit entry level engineers at the GS-5
and GS-7 levels.

To address this situation the Commission is developing an agency-wide
\"Excellence in Engineering\" program. We will examine creative ways to
gain greater personnel and pay flexibility to attract technical talent.
Increased salaried alone, however, will not do the trick, nor is it the
sole motivator for anyone entering government service. We will look at
ways to ensure technical workers are able to continue to develop in
their field, through strong training and development programs and job
rotation. Our laboratory facilities in Columbia, Maryland, need to be
upgraded to provide engineers with the tools to engage in critical and
challenging work. Improvement in this area will be difficult to achieve,
but we consider it imperative to our efforts to improve our workforce.

It also is vital that we train our non-engineering staff in the areas of
engineering and advanced technology. We already have begun to develop an
FCC \"university\" of sorts using our own staff and guest lecturers, and
taking advantage of various programs currently available through the
government and local academic institutions. We can use this Washington,
D.C. location to our advantage and tap into industry and academia. We
can use local scholars and have them participate in an educational
curriculum, to provide lectures, to provide classroom instruction, to
provide counsel and advice. We need to take better advantage of our
access to talent and knowledge.

I am putting similar emphasis on economics and market analysis. These
tools are essential to our agency\'s mission. We have the opportunity to
take advantage of both internal resources, visiting experts, and outside
educational programs to help not only our economists improve their
skills but to help all the FCC\'s employees understand better the impact
of our rules on technological innovations, and competitive markets.

4\. [Restructuring]{.underline}

In addition to examining our systems and procedures, we need to look at
the organizational structure of the agency. Communications policy has
been written in carefully confined buckets premised on certain types of
technology. The FCC\'s organizational structure largely mirrors that
premise. But the convergence of technology tears down those traditional
distinctions and makes it evermore difficult to apply those labels to
modern communications providers. In the same way, it makes it more
important than ever for us to examine whether those organizational
buckets still hold water.

About a year ago, we began breaking down the technology-based divisions
with the creation of the Enforcement Bureau and the Consumer Information
Bureau. With those reorganizations, we created two bureaus aligned along
functional responsibility. We created the Enforcement Bureau to improve
the effectiveness of our enforcement activities in an increasingly
competitive and converging market. We created the Consumer Information
Bureau to enhance consumers\' ability to obtain quick, clear and
consistent information about communications regulations and programs.
These changes have proven to be quite beneficial. As the industry moves
toward fuller competition, the missions of these bureaus become even
more critical. For consumers to take full advantage of the choices that
competition brings, it is important that they have access to information
that allows them to make an informed choice. Their ability to easily and
quickly convey to us instances where the markets are not providing
useful information to consumers in a particular circumstance or with a
particular business is our early warning system for market failure or
malfeasance on the part of industry players. While the consolidation of
these functions is almost complete, there are some additional functions
that are transferable into or out of those two bureaus.

We have undertaken a structural reorganization project that builds on
some of the initial efforts of my predecessor, Chairman William E.
Kennard. Our efforts will be guided by a few key objectives: (1) a
functional organization designed along market lines, rather than
technical ones; (2) a flatter substantive bureau structure; and (3)
greater consolidation of key support functions.

Our program will proceed in phases. We have begun by systematically
taking account of the agency\'s activities and functions to see what is
working well and what is not. From that review we will produce a Phase
I, short term, restructuring plan and a Phase II, longer range plan. The
Phase II plan will consider what wholesale change is necessary and
whether it is timely to move away even more from technology-based
buckets. The question has been asked whether the Commission should be
aligned along functional lines---e.g., enforcement, consumer
information, spectrum management, licensing and competition---given
increased convergence in the industry. This question deserves to be
asked and answered. But first, we must seek additional and substantial
information, and be completely satisfied that it is the right thing to
do, before we move to rearrange substantially the organizational
structure of the agency.

My goal is to improve the agency on all these fronts. An informed
decision, however, is better than one based merely on supposition. I
intend to seek the opinions and thoughts from a wide range of
participants as we proceed down the path of reform. First, I look
forward to working closely with this Subcommittee and other Members of
Congress and their staffs. Second, I intend to hold forums to allow
those that do business before us let us know how we can improve our
processes and procedures. Third, I want to hear from the Commission\'s
employees. They often know best how we should change and what tools they
need to do their jobs. I want to gather opinions and ideas, but be swift
to make changes. It is our goal to fully complete many of these changes
this year.

I will be turning to you for assistance. With regard to the
organizational restructuring that is likely to be necessary, I hope you
will concur in those changes. Most critically, I look to Congress to
support the Commission\'s budgetary needs and objectives. Please keep in
mind that we are largely a fee-based agency, where those who come before
us pay for the services we render in the form of licensing and
regulatory fees. We need to have the staff and other resources to
provide those services efficiently, knowledgeably and decisively.
Finally, I will look to this Subcommittee and Congress to help us expand
our authority where necessary to bring about competition and to more
effectively enforce our rules. For example, the authority given to us in
Section 10 of the Communications Act to forbear from regulating when
certain conditions are present has been quite helpful. I would like to
be able to use that ability even more and would welcome the opportunity
to work with you to explore whether that is feasible. Additionally, we
need tougher penalties and longer statute of limitation periods if
enforcement is

to be more effective.

## Conclusion

I cannot predict the future, nor can anyone else at the Commission. When
faced with future challenges that are uncertain, the best approach is to
build a first-class operation, with top talent, that is trained and
disciplined enough to adapt quickly to new and changing situations. No
army, for example, can know in advance what it will find when it engages
on the battlefield. The fog and terror of war never afford the luxury of
predictability. The key to success is to have a force that is
well-trained in tactics, strategy and the weapons it will need. A force
that is disciplined and able to adjust quickly and adapt to fluid
conditions---threats and opportunities both will present themselves
through the haze. I hope to build, along with my colleagues and the
outstanding FCC staff, just such a unit---one well suited to an
uncertain future.

Thank you. I would be happy to answer any questions this Subcommittee
may have.