NEWS                                                       December 6, 1994

          FCC COMMISSIONER SUSAN NESS EXPRESSES HOPE FOR QUICK 
         CONGRESSIONAL ACTION ON TELECOMMUNICATIONS LEGISLATION

     In a speech delivered yesterday at the 12th annual FCBA/PLI Institute on
Telecommunications Policy and Regulation in Washington, DC,  FCC Commissioner Susan Ness
discussed telecommunications legislation, the recent elections, and what this means to the
Federal Communications Commission's plans and responsibilities.  

     Discussing the need for an updated policy framework, Commissioner Ness declared,
"We are in a time of momentous change.  I believe the forces in motion may be as seismic
as at the time of the first of these FCBA/PLI conferences in 1983.  Then it was the eve of
divestiture . . . .  Now, we can feel the rumblings of equally earth-shaking developments.  
This time, the epicenter will be Main Street.   Cable companies, interexchange carriers,
telcos, and others will all be battling for the heart, the voice, and the pocketbook of the
consumer."  

     Commissioner Ness also supported the plans of congressional leaders to make
communications legislation a priority in the new year.  "I agree with Senator Pressler that
legislation is vitally needed.  I have been glad to hear Senators Dole, Packwood, and
Hollings and Congressmen Gingrich, Fields, and Markey all express their intentions to make
communications legislation a priority in the new year.  I applaud the bipartisan spirit that has
characterized many of the initiatives to date and hope that it will continue in the new
Congress."  

     She also noted, however, that Congress has found it difficult to legislate in this area
and that passage of legislation in 1995 is not assured.  "In my judgment, the Commission
must continue to move forward with an agenda for competition.   Pending the enactment of
legislation, there are ways in which we can build on the bipartisan consensus reflected in
recent legislative proposals, continue the momentum resulting from overwhelming votes on
the floor of the House and in the Senate Commerce Committee, and provide the opportunity
and certainty sought by industry." 

     In particular, she emphasized her interest in expanding competition in the two markets
where there remains a genuine issue of monopoly power:  cable and local telephone service. 
"Pending the enactment of legislation, we can continue to tackle the tough issues  -- number
portability, intelligent network architecture, expanded interconnection, support for universal
service, and the like -- associated with the introduction and expansion of competition."  

                                  (over)

                                   - 2 -

     Commissioner Ness declared that the Commission is "taking one enormous stride
forward on the path to competition with our actions on video dialtone."  
She stated that the Commission's reconsideration ruling was "based on a careful assessment
of consumer and competitive concerns" and that it "reflects sensitivity to legitimate concerns
of states."  

     Commissioner Ness supported consideration of local exchange competition in the
context of VDT Section 214 applications.  Such an approach, she explained, is "forward-
looking and pro-competitive . . . , fair . . . , and prudent."  She further emphasized that the
Commission will strive to render decisions on all pending video dialtone applications
"expeditiously" and pointed out that extra resources are being deployed to process the
applications quickly.

                                  - FCC -

     Contact:  James L. Casserly, Office of Commissioner Ness, 202-418-2100.

Remarks of
                       FCC Commissioner Susan Ness
                          FCBA/PLI Institute on
                Telecommunications Policy and Regulation
                            Washington, D.C.
                            December 5, 1994
                                    
                                    

Thank you for the kind introduction.

I want to begin by congratulating the Federal Communications Bar Association and the
Practicing Law Institute on 12 successful years.  I understand that this program has
always been timely and informative, and I am certain that this year will be no exception.

I should also congratulate the planners of this conference for your prescient decision
months ago to select Senator Larry Pressler as the congressional keynoter.

One need not look too far into the future to assert with confidence that we are in a time
of momentous change.  I believe the forces in motion may be as seismic as at the time
of the first of these FCBA/PLI conferences in 1983.

Then, it was the eve of divestiture.  The Modification of Final Judgment was about to be
implemented, shattering the integrated structure of the Bell System and fundamentally
altering the landscape for competition in information services, long distance, and
equipment manufacturing.

Now, we can feel the rumblings of equally earth-shaking developments.   This time, the
epicenter will be Main Street.   Cable companies, interexchange carriers, telcos, and
others will all be battling for the heart, the voice, and the pocketbook of the consumer. 

To take one example, the largest auction in history will be opening just one hour from
now.  This auction represents an electronic version of the gold rush -- except this time
the taxpayer gets some of the gold.  

And this auction will lead to a booming business -- PCS -- that has the potential to
change Main Street, as well as Wall Street.

A second set of rumblings is occurring across the globe.

Although the focus here today is largely domestic issues, we clearly have reached the
point where most of our domestic decisions have international ramifications, and vice
versa.

As so many of you who are finding yourselves negotiating international deals or working
to open foreign markets can attest, it is truly becoming a global information
infrastructure.

In the G7 preparatory meetings that I attended this past weekend and in the European
Union bilateral talks last week, I was struck by the fact that our vision of competitive
markets and the GII has caught on with users in Europe and with many of the
governments.  No longer is there a debate whether to liberalize -- the issue is when. The
Council of Ministers has voted to have facilities-based competition for most member
states by January 1998.  The race is on.

     *     *    *     *    *     
     
A third tremor is the rumbling sound of impending change in our telecommunications law. 

When I accepted this invitation, I thought I would be coming here to discuss the FCC's
plans to implement a comprehensive telecommunications bill, the biggest overhaul in 60
years.  I'll bet other speakers had the same expectation.  Congress, however, was
unable to complete its effort on communications legislation this year. 

I remain hopeful and supportive of congressional action in this area.  I agree with
Senator Pressler that legislation is vitally needed.  I have been glad to hear Senators
Dole, Packwood, and Hollings and Congressmen Gingrich, Fields, and Markey all
express their intentions to make communications legislation a priority in the new year. 
I applaud the bipartisan spirit that has characterized many of the initiatives to date and
hope that it will continue in the new Congress.  

Yet we need to recognize that immediate enactment of communications legislation is by
no means assured.  It can be enormously difficult to complete the legislative process. 
Consider the history.

There have been efforts to rewrite common carrier laws in each of the last ten
Congresses.  Significant common carrier issues have been considered regularly
throughout the past 20 years, beginning with the Consumer Communications Reform Act
in 1975.  Yet, despite considerable effort, no comprehensive common carrier legislation
has passed both the House and the Senate -- even in 1994, when just about everyone
said "the stars are aligned" for passage of a bill.

Time will tell whether the 104th Congress produces a different result, but in my judgment
the Commission in the meantime must continue to move forward with an agenda for
competition.   Pending the enactment of legislation, there are ways in which we can build
on the bipartisan consensus reflected in recent legislative proposals, continue the
momentum resulting from overwhelming votes on the floor of the House and in the
Senate Commerce Committee, and provide the opportunity and certainty sought by
industry.  

To do so, we must confront the complex implementation questions associated with
expanding competition in the two markets where there remains a genuine issue of
monopoly power:  cable and local telephone service.  

There are many other important issues on the table, but none more important than this -
- moving forward with efforts to spur competition in local communications markets. 
 
I believe many Members of Congress on both sides of the Hill and both sides of the aisle
would want us to press ahead.  I believe the Administration is similarly inclined.  There
is broad bipartisan support for permitting cable to provide telephone services and for
enabling telephone companies to provide competition in the delivery of video
programming.  

We fully expect that this competition can yield substantial consumer benefits -- lower
prices, better service, more choice, and increased innovation -- as has already occurred
in other communications markets. The emergence of competition will also make it
possible to ease the burdens regulation can impose on industry, on government, and on
the taxpayer.

The issue is no longer whether competition in video and in telephony is desirable but
how best to effectuate it.  Issues of implementation -- sequencing and safeguards --
were what made the legislative debates so difficult and contentious.
  
Most of the same communications issues considered in legislation also face the
Commission, with the additional complication that the FCC cannot amend the governing
statute.  The Commission cannot itself remove the cable-telco cross-ownership provision
in the Cable Act, though we have urged the Congress to do so.  (And, as others will be
discussing, the courts have been busy in this area.)  Likewise, it is not feasible for the
Commission directly to preempt those state laws and regulations that protect telephone
companies against unfettered competition.  

Nonetheless, we can continue to make progress.   Pending the enactment of legislation,
we can continue to tackle the tough issues  -- number portability, intelligent network
architecture, expanded interconnection, support for universal service, and the like --
associated with the introduction and expansion of competition.  

Our challenge is to formulate measures that remove barriers to, and stimulate,
competition, while respecting jurisdictional and political constraints.

     *     *    *     *    *

Let me take a moment to discuss one area where we are pushing ahead under our
existing statute.  We believe we are taking one enormous stride forward on the path to
competition with our actions on video dialtone, or VDT.  

Video dialtone, the courts have affirmed, fits within existing law.  It can be implemented
without legislative or judicial actions to remove the cable-telco prohibition of the 1984
Cable Act.

VDT allows telephone companies to provide a platform for competition to cable, but it
is based on a different model.  In VDT, the telco is a common carrier, and multiple
independent customer-programmers provide the video programming to end-users.

As most of you know, the Commission issued a major VDT order early last month.  This
order addressed approximately two dozen petitions for reconsideration of the
Commission's original  VDT decision.  These petitions were reviewed by a Commission
with three members (including representatives of both political parties) who were not
participants in the agency's initial decision two years earlier.  Our recent ruling reaffirms
the basic framework of the prior decision, but it makes some significant adjustments as
well.

I want to emphasize that the full Commission, including old and new members, strongly
supports video dialtone.  We believe it will foster competition in the delivery of video
programming, spur investment in telecommunications infrastructure, and, over time,
increase the availability of diverse program choices.  To the extent VDT produces
increased competition, it will also lead to reduced regulation -- another worthy goal. 

This is not the occasion for a "laundry list" recitation of the salient features of the
reconsideration ruling.  I will say that our decision was based on a careful assessment
of consumer and competitive concerns. 

In particular, our ruling relies on careful scrutiny of Section 214 applications and
proposed tariffs to address cost allocation and other thorny issues.  It also reflects
sensitivity to legitimate concerns of states.  We modified our earlier preemption of state
authority and promised to initiate a new proceeding on jurisdictional separations.  We
also sought further comment on some issues we were unable to resolve on the basis of
the record compiled to date.

I want to mention one particular element of the reconsideration ruling.  In our discussion
of the importance of requiring review of Section 214 applications, we observed that the
Commission's public interest analysis can consider, among other things, the extent to
which the state in which service is planned allows for local exchange competition.

The precise contours of this provision of the VDT order were not defined.  The
Commission was not ready to say what influence the presence or absence of local
exchange competition might have on the processing of Section 214 applications.   My
view is that our analysis of each application should include consideration of the extent
to which barriers to competition have been eliminated.

This approach has several virtues.  First, it is forward-looking and pro-competitive.  It
seeks to promote competition in both video and telephone markets, not just one or the
other.  Second, it is fair.  It provides increased opportunities for telephone companies in
markets where they are most exposed to competition themselves.  Third, it is prudent. 
Our concerns about cross-subsidies and discrimination are necessarily diminished when
telcos entering into new markets can no longer exploit a protected monopoly base.

This and the other relevant factors need to be assessed carefully, but also expeditiously. 
Now that reconsideration issues have been resolved, it is appropriate that pending
applications to authorize the construction and operation of VDT facilities be assigned a
high priority.  Significant personnel resources are being assigned to process the backlog. 
We will do what we can to reach a decision promptly, favorable or not, in every case
where the record permits us to reach a final decision under the public interest standard.

     *     *    *     *    *

Through video dialtone and other measures, the Commission and other national and
state policymakers can promote market structures that enable consumers to secure
telephone and video services from multiple providers.  At the same time, we also need
to be pragmatic -- and to avoid wishful thinking.

Our hopes for video competition should not rely solely on the competition telephone
companies can provide to cable companies, or vice versa.  For one thing, there is no
way to guarantee that the future will bring widespread, sustainable, two-wire competition. 
For another, our goal should be robust competition, not market structures that allow for
only two participants in a market.

Thus, my vision of video competition is not simply a telco providing VDT in competition
with a cable company providing cable service.  Direct Broadcast Satellite increasingly
looks like a formidable source of additional competition in the video market.  Multipoint
Multichannel Distribution Service and Local Multichannel Distribution Service can also
add additional skills, resources, and competitive pressures to the market.  But my hopes
for tomorrow do not mean that "effective competition" exists in the video market today.

Similarly, our aspirations for telephone competition should not rest entirely on the
prospective entry of cable companies.  We need to explore other possibilities, such as
the potential for electric and gas companies to provide fiber-based communication
services.  We also need to promote use of wireless services as substitutes for, and not
merely complements to, local wireline services.  The national broadband auctions
beginning today are a dramatic example of market forces creating an abundance of
competitors where now there are few. 

In short, I want to explore possibilities that will lead to true multi-firm competition in the
telephone and video markets.  In this regard, I sometimes think the public policy debate
focuses too heavily on the issue of cross-entry from one industry sector to another and
that we too easily overlook the potential for intra-sector competition, for example, by
telephone companies with telephone companies.  

The evolution of fully competitive markets will not happen overnight.  At times, the
rhetoric has gotten well ahead of the reality.  Yet the Commission's decisions cannot be
based on speculative visions of the future.  

Can we reasonably expect that two telephone companies, or two cable companies, will
ever compete toe to toe for any significant share of each other's business?  Can we
realize expectations that the two wired media will compete successfully with each other? 
Or should we focus instead on the competition that can come to telephony from PCS,
and to video from DBS and other sources?

These are important questions, and the Commission will need your help in answering
them.  We need to identify all unnecessary barriers to competition and work tirelessly to
eliminate them.

     *     *    *     *    *

It was Congressional legislation that paved the way for today's auction and, sooner or
later, it will be Congressional legislation that will give us fresh guidance to solve the legal
problems the FCC lacks power to address.  

And yet, much as the Commission would welcome updated legislation, we owe it to the
public to keep moving forward in the meantime.  We need to devise creative ways to
press ahead in a variety of areas, most particularly in the areas of local telephone and
video services.  

We will welcome your help in this endeavor.  Together, we can continue our efforts to
promote competition, ensure universal service, and maintain U.S. global leadership in
technology and in the quality and value of services available to American consumers and
consumers across the world. 

Thank you.