**Remarks\
By\
MICHAEL K. POWELL\
Chairman\
Federal Communications Commission\
\
Before the\
Federal Communications Bar Association**

**Washington, D.C.**

**June 21, 2001**

**\[As Prepared for Delivery\]**

#  **[Consumer Policy in Competitive Markets]{.underline}**

I.  MARKETS AND CONSUMER WELFARE: BUNKING THE MYTH

As you all well know, I am committed to building policy that is centered
around market economics. At times, this foundation of my thinking is
often questioned as being somehow anti-consumer. In a television
interview, the question goes something like this: "Many consumer groups
express grave concern that your laissez-faire approach will harm
consumers. They say you are out of touch with consumers and living in an
ivory tower. What say you?"

I am always a little puzzled by this question, for the premise of it has
been so thoroughly discredited in this nation and in countries around
the world that it should be beyond challenge. Market systems, far from
being the bane of consumers, have unquestionably produced more consumer
welfare than any other economic model devised by mankind. How is it that
anyone can argue that the pro-market policies of the United States have
not yielded enviable productivity in our economy, jobs for our citizens,
a higher standard of living than nearly any other country in the world,
and a tradition of innovation and invention that has brought new
products, tools and services to our citizens?

A well-structured market policy is one that creates the conditions that
empower consumers:

-   It lets consumers choose the products and services they want---
    which is their right as free citizens.

-   It breeds entrepreneurs---giving an opportunity for someone with a
    good idea the chance to build a business and acquire wealth and
    opportunity. Something few, if any, nations have done as well as
    this country.

-   It creates a fertile environment for innovation. Innovators know
    they have the prospect of reaping great rewards (if they take great
    risks) and consumers get the benefits of the latest products and
    latest services.

-   It allows market forces to calibrate pricing to meet supply and
    demand. Consumers get the most cost-efficient prices and enjoy the
    benefits of business efficiencies.

The result for consumers is better, more cutting edge products, at lower
prices.

Contrary to the classic bugaboo that markets are just things that favor
big business and big money, market policies have a winning record of
delivering benefits to consumers that dwarfs the consumer record of
government central economic planning. Thus, if you are truly committed
to serving the public interest, bet on a winner and bet on market
policy.

I am a public servant and I believe very deeply that maximizing consumer
welfare is the paramount objective of public policy. But the public
interest standard and our commitment to it should not stand for the
conviction that markets are consumer unfriendly and cannot be trusted;
assuming that they go to excess, that they always fail, that there are
too many needs and services they cannot deliver and that the risks and
the human and social costs are too high and the potential for abuse too
great. Experience teaches us otherwise.

I (to no surprise to you) do not subscribe to this view. Serving the
public interest means crafting the conditions and the environment that
will allow innovation to bring new and improved products and services to
all Americans at reasonable prices. In capital economies, the central
premise is that the interests of producers (i.e., money-makers) and
consumers need not diverge, but, in fact, can be synchronous. Market
dynamics are proven tools for advancing consumer interest and any public
interest toolbox would be incomplete without them.

I am the first to admit that deregulation for its own sake is not
responsible policy. What is good policy is to carefully examine rules to
determine if they are actually achieving their stated purposes, or if,
instead, they are, in fact, denying consumers value by impeding
efficient market developments that these consumers would welcome.
Regulations are not innocuous simply because they are promulgated in the
name of consumers. No matter how worthy the purpose, rules that
constrain markets can, in fact, deny or delay benefits to the consuming
public. There are many examples of deregulations by the Commission that
were met with fierce claims that consumers would suffer as a result.
When the deed was done, however, we often witnessed instead, the
flourishing of innovation and competition, from which consumers
benefited magnificently. Let me give a few examples:

[Consumer Premises Equipment]{.underline}

In the process of deregulating consumer premises equipment, arguments
were raised that such deregulation would have dire effects by permitting
the technical deterioration of the telephone network and by permitting
"cream skimming" that would undercut regulatory pricing of CPE.

In a famous 1973 speech, the Chairman of AT&T argued: "No system of
certification we can envision . . . can provide a fully adequate
alternative to the unequivocal and undivided responsibility of service
that the common carrier principle imposes." And the "burden" of CPE
interconnection "will fall on the average customer, the users of the
basic services that it has been regulatory policy from time immemorial
to keep as inexpensive as possible . . .. The ultimate effect of this
shift is not hard to see---a shutoff of service to people with marginal
incomes." Of course, we did deregulate CPE and traded in our black,
tired rotary phones for the slick (and inexpensive) phones, answering
machines and call waiting units that line the isles of your local
electronics store.

[Mobile Phone Services]{.underline}

Another example, before 1993, many argued that we should not open up the
wireless market. It was thought that two competitors in the cellular
market were certainly more than sufficient. Since that market was opened
and PCS introduced we have seen a phenomenal explosion in innovative,
digital wireless services. Nearly 85 percent of the nation has access to
4 or more wireless carriers, and nearly 50 percent have access to 6 or
more. Innovation has flourished with new handsets and services. Prices
have persistently declined. "One-rate" plans and buckets of minutes have
increased penetration and minutes of use. After just seven years, 40
percent of every American man, woman and child has a mobile phone and
the future of this deregulated industry, with the coming of wireless
Internet services, is truly brilliant.

[Cable Television]{.underline}

Many argued against eliminating FCC rules that prohibited importation of
distant signals by cable companies, because the competition would harm
broadcasting and local programming. Of course, the result has been that
cable flourished. A very large majority of Americans subscribe to this
pay service, and have benefited from hundreds of new cable networks
offering diverse and niche programming, as well as 24-hour news
programming that has established a vital place in American public
affairs. Moreover, the growth of cable carriage of local broadcasting
(even before must carry) equalized the UHF disadvantage vis-à-vis VHF,
which led to the creation of a fourth TV network (FOX), as well as WB,
UPN, PAX and a number of Spanish language networks. The arrival of DBS
is similarly revolutionizing the video market, particularly after
Congress deregulated by removing the restrictions to carrying local
signals.

It is evident to me that deregulation, though not always the right
answer, often dramatically advances the options available to consumers,
lowers their bills and brings them higher value.

Nonetheless, responsible government policy must acknowledge that
consumers can be harmed by market abuses and we must have a robust and
effective consumer protection component at the FCC. I am proud to say
that we do have one. The Consumer Information Bureau (CIB) was
established in 1999 out of recognition that we needed a staff focussed
exclusively on addressing the concerns of the American consumer. CIB
tracks complaints and works to identify patterns of consumer harm that
may require a public policy response. The Bureau also helps bridge the
gap between consumers and the industry, by facilitating discussions
between the two and by sharing consumer concerns and ideas with the
industry. This substantial organization has its fingers on the pulse of
consumers and dedicates itself and its resources to ensuring that we are
not, in fact, out of touch with consumers.

At this point, I want to take this opportunity to introduce Dane Snowden
to you, who I recently hired to head this Bureau. I have known Dane a
long time, and consumers will get to know him shortly and his Bureau as
we continue to address their concerns. I also want to publicly thank Rod
Porter for his outstanding interim leadership at the Bureau.

II. CONSUMER FOCUS IN A COMPETITIVE MARKET

It is sometimes hard to get your head around how to think about consumer
protection issues in a competitive environment. The beauty of a
well-functioning market, of course, is that consumers make the choices,
and if not served well they drop their provider and shift to another.
Government should protect consumers, but should not exercise choices or
intervene where the market will correct for bad business offerings or
practices. I brought with me today a prop. This big slide illustrates
how we might think about the role of government in consumer issues.

![](media/image1.png){width="5.997916666666667in" height="4.49375in"}

I have thought a lot about how to try to conceptualize how you focus
your consumer efforts in a competitive market. If you think about a
divide between competitive principles and regulatory principles you
might chart the focus of government efforts along a spectrum. And
certainly at this end of the spectrum \[competitive sphere\] no one
would dispute that if something in the marketplace harmed the health and
safety of consumers we would demand a government response. The same can
be said for fraud, misrepresentation, and abuse, as well as
anti-competitive effects. It is more of a regulatory function, though
sometimes defensible, to regulate the terms and conditions of commercial
relationships, or service quality, or to regulate rates. And in the
middle of no man's land we have a number of valuable non-economic
regulatory principles, such as universal service, which need to have
special focus and attention.

III. OUR CONSUMER AGENDA

We are in a period of revolutionary change and we have to think about
the rising challenges for consumers. There is a chaotic fomenting of
experimentation and change going on. Revolutions are messy things, and
consumers will experience the anxieties and frustrations of this period.
All they want are solid, reliable, low-cost, simple to use gadgets, and
they will experience the frustration of not being able to get them until
things mature. Consumers are experiencing:

-   The frustration of having their appetite whetted for grandiose
    technologies only to find that delivery and implementation are not
    yet prime time.

-   The confusion of constant changes and churn. New pricing plans
    constantly pop up. More buckets of minutes than your current plan.
    New handsets. DBS or cable? New Long Distance plans. New unfamiliar
    companies vying for their business.

-   They experience at times sour service quality, and even vanishing
    service. Consumers are heard to say: "The phone company, or the
    electric company never just disappeared!"

-   The constraints of a limited family budget. "How many ways does one
    really need to communicate with your mother?" Adults feel they need
    little IT departments in their homes to sort through the choices.
    And, they are less than comfortable to find that they do have little
    IT departments, and it is their kids, who take gleeful pleasure in
    the power of keeping it all a mystery from the grown-ups who've got
    the money.

-   Techno-overload. You know the feeling: "Does everybody have a Palm
    Pilot, a RIM?" "What does the size of my mobile phone say about me
    to others?" (I will clue you in; in this area, smaller is better.)

Let me outline for you the basics of our consumer agenda. I want to
begin with our simple, cardinal rule: [Everything we do is about
consumers]{.underline}. To my mind, consumer issues are not a separate
branch of study, though they require conscious and vigilant attention. I
challenge the staff to see communications markets through consumer
senses. See what they see. Hear what they hear. In pursuing consumer
welfare, we do so through our regulatory authority over producers, but
we should not lose sight of the fact that it is not corporate prosperity
in itself that is paramount, but only the conditions to sustain economic
viability to effectively serve consumers. The Commission needs to follow
a consumer policy that is focused in the following areas:

#### Managing Expectations

We start by helping to manage expectations about communications
services. Offering realistic assessments of what is available and what a
consumer may actually experience is invaluable to the consumer
experience. Through brochures, consumer alerts, consumer forums and our
web page, we try to provide information on what to look for and what to
ask about, when shopping for service.

#### Clarifying Confusion

Similarly, the Commission can play a useful roll in addressing consumer
confusion. A consumer must be able to make informed decisions in a
competitive market. For example, we are looking at initiatives that will
provide fuller explanations of telephone bills as well as considering
ways that we might simplify the confusion of line items.

#### Efficiently Resolving Consumer Complaints

We are working hard to improve our processes for resolving consumer
complaints and to make better use of the information we receive. We have
made dramatic progress in resolving backlogs, for example. We take in a
wealth of information at our consumer centers, and we are now developing
systems that will analyze the data and report consumer concerns to the
policy bureaus so that they can track consumer issues and integrate
solutions into rulemakings.

#### Accommodating Special Needs

We should be conscientious of accommodating special needs. There are
some areas the market often will not effectively address. In section
255, Congress recognized that perhaps the most significant is in the
area of persons with disabilities. We have a concerted focus on how
technology can improve access for this community. I am proud of our
Consumer/Disability Federal Advisory Committee that is helping us
understand how to weave into our policies and our rulemakings incentives
to serve these communities.

[Advancing Opportunity in the Communications Field]{.underline}

We may not always agree on methods, but the goals of providing a
meaningful opportunity to participate in the communications industry
through ownership and employment are important. I was disappointed that
the D.C. Circuit recently denied our motion to reconsider their
rejection of our EEO rules. Without pre-judging our litigation options,
I intend to recommend to my colleagues that we consider pursuing new
rules that increase employment opportunity in a manner that complies
with the judicial limitations of the Constitution, and that are not
unduly burdensome on the industry. I also intend to continue to explore
ways to improve the opportunity for ownership. I have been a strong
supporter of the revised tax credit bill, sponsored by Senator McCain
and supported by Congressman Rangel the most important step we can take.

[Improving access to the network]{.underline}

Our network is the envy of the world, yet there are still substantial
numbers of low-income individuals that are leaving money on the table
that is designed to help them access that network. Indeed, only 30
percent of all those low-income individuals that are eligible for
lifeline phone service actually take advantage of the service. We are
committed to working with the States to increase participation in these
low-income programs. Affordable access not only opens up voice
communication, but aides in getting people plugged into the Internet. We
will remain vigilant with regard to the deployment of advanced
communication services and constantly look at ways to accelerate
efficient deployment for all Americans, particularly those in rural
areas.

IV. CONCLUSION

My remarks today are intended to provide an overview of how we view and
will pursue consumer issues. I am hopeful we will, partly through our
policies, steadily advance consumer value in this breathtaking world of
communications.