Error! Main Document Only."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.
  
       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 21st 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 from the marketplace means less government 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 of technologies, but procedures that apply
  to all 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 
  21st Century. 
  
       Thank you.
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