TESTIMONY
Of

MICHAEL K. POWELL
Chairman
Federal Communications Commission



Before the
Subcommittee on Commerce, Justice, State, and the Judiciary
of the Committee on Appropriations
United States House of Representatives



On the
Federal Communications Commission's
Fiscal Year 2002 Budget Estimates


Tuesday, May 22, 2001


SUMMARY OF TESTIMONY OF
FCC CHAIRMAN MICHAEL K. POWELL
BEFORE THE
SUBCOMMITTEE ON COMMERCE, JUSTICE, STATE AND THE JUDICIARY
OF THE HOUSE COMMITTEE ON APPROPRIATIONS
May 22, 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 
facedeach industry segment in our portfolio is in the midst of revolution, and is attempting to 
adapt to fundamental economic and technological changes.  There are new markets, new 
competitors, and new regulatory challenges.

Our Fiscal Year 2002 budget reflects the Commission's mission to keep abreast of 
industry changes and set rational productivity and regulatory goals.  We are asking you to invest 
$248.5 million dollars to ensure that the FCC has the tools to facilitate its reform efforts, upgrade 
its technological capabilities and further enhance its workforce.  My goal is not only to make the 
Commission an example of efficient management practices, but to create and maintain an 
employee friendly environmenta place where employees can hone their skills and take pride in 
their service to the American people, as well as a place where employees have plenty of time to 
invest in their families.  We can work together to encourage participation in telecommuting 
programs, build internal training programs, and utilize programs designed to lure the best and the 
brightest to government service.  We can do this by purchasing and maintaining state of the art 
technological equipment to ensure better service to the public as well as a productive workplace.
  
My request for funding is tied to a specific business plan that I present here today for 
your evaluation.  We have developed this plan 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 levelsand to make many of these 
changes within the next year.  To that end, I have been seeking opinions from a wide range of 
participants, including Members of Congress and their staffs, the businesses that come before the 
Commission, consumer groups, and our own skilled employees. 

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 unitone 
well suited to an uncertain future.

Mr. Chairman, Ranking Minority Member, and Members of the Commerce, Justice, State 
Appropriations Subcommittee, thank you for inviting me to appear before you today to present 
the Federal Communications Commission's ("FCC") Fiscal Year 2002 Budget and discuss our 
priorities for the year ahead.

I feel truly privileged to be here today.  I believe that a critical part of my job is to be a 
leader and steward of the Commission, 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 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 facedeach industry segment in our portfolio is in the midst of revolution, and is 
attempting to adapt to the most fundamental changes.  There are new markets, new competitors, 
and new regulatory challenges.  

Serving as Chairman of the FCC at this juncture in history gives me a unique opportunity 
to take stock and assess our regulatory framework, and to develop guiding principles that will 
encourage economic growth in the communications sector.  Our Fiscal Year 2002 Budget request 
represents a critical part of our efforts to make the Commission more cost-effective and results-
oriented.  Today, I will provide you with a summary of our Fiscal Year 2002 Budget Estimates 
and discuss our plans for using these funds to enhance the Commission's productivity, and 
ensuring that we are capable of meeting the future needs of both consumers and the 
communications industry. 
A Fresh Start
	I am pleased to note Mr. Chairman that you and I begin this process of reviewing the 
Commission's budget unencumbered by past concerns and agendas.  We have the opportunity to 
forge a new working relationship focused on the future.  I want to state my commitment to 
working with the Members of this Subcommittee, as well as our authorizers, to develop and 
maintain a common perspective of the Commission's core mission.  Although the Commission is 
an independent regulatory agency, the assessment, development and implementation of 
communications policy is a team-effort, with shared responsibilities between the various 
branches of government.  It is my primary responsibility to ensure that the FCC follows its 
statutory mandates in enforcing communications laws.  Indeed, one of my principal objectives is 
to make the Commission a place of transparent, consistent, and decisive action.  This process 
will necessarily involve reform and restructuring, and I will turn to the other members of the 
government, as well as outside parties, to carry out our objectives.

Like most of you, I am a parent first and a public servant second.  I worry about the 
impact of my decisions on my two small children, both as an ordinary parent and a federal 
regulator.  What we, at the FCC, do today could affect their quality of life tomorrow.  I want it to 
be a positive impact, not a negative one.  When I leave my post, I want the Commission to be an 
example of how a federal regulatory agency should operate.  I intend to leave the Commission 
better than it was when I got here, to improve its ability to function today, tomorrow and in the 
next century.  Let us take advantage of our fresh start, our new relationship, to implement real 
change at the Commission.
  
New Beginnings for an Old Commission
In order to understand our budget request, it is important to assess where we are now, and 
how we plan to use our resources in the future.  The Federal Communications Commission 
received its initial statutory authorization when Congress passed the Communications Act of 
1934.  It was a time of severe economic depressionbut also of technological change 
necessitating regulation of the cacophony of voices on the nation's airwaves.  The Commission 
became part of Washington's alphabet soup, and developed a culture and structure designed to 
handle the licensing of radio stations.  When change came in the beginning, it was slow and 
gradual, from the hardwiring of American homes for telephones, even in rural areas, to the 
advent of television, and the introduction of cablethese are the issues that the Commission had 
to deal with in the middle part of the twentieth century. The Commission divvied up the airwaves 
according to what was seen as the highest and best use of the spectrum and often decided who 
would receive the spectrum based on the subjective evaluation of the character of the applicants.  
As valuable as the spectrum was, it was free, with no benefit for its use going to the American 
people.

The Commission's processes and mission have evolved during the past 70 years.  While it 
is true that we still spend a great deal of time on spectrum management, the number of potential 
users and uses increases dramatically each year.  Instead of primarily focusing on broadcasters 
and hardwired phones, we concentrate on expanding the spectrum to accommodate new 
technologies like third-generation wireless and ultra-wideband.  Our goals and regulatory 
mission are defined in a host of adjustments to the Communications Act of 1934, including the 
Telecommunications Act of 1996.  Our responsibility to auction the spectrum is a creation of the 
budget and appropriations process, and it currently represents both a mechanism for encouraging 
competition and a valuable source of revenue for the U.S. Treasury.  Today, the Commission's 
primary mission is to promote a fully competitive marketplace as well as access for all 
Americans to communications services.  We achieve our mission with a combination of 
manpower and technologyfrom electronic auctions, to automated licensing, and innovative 
spectrum management techniques.  

No one in 1934, or even 1964, could have foreseen the revolution in communications that 
we have experienced in the last decade alone.  We know that communications developments are 
not finite and that they will no longer come slowly.  The winds of profound and dynamic change, 
unleashed in part by the 1996 Act, 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 also 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.  During the next part of this decade, we expect the communications 
markets to expand exponentially, and develop in a competitive environment that will reduce the 
need for regulatory intervention and oversight.  

This is not your father's FCC, nor should it be.  And in thirty years, the Commission will 
not be our FCC, but our children's FCC.  To facilitate progress and not stand in its way, we must 
review our mission and goals within the confines of Congress' mandate and develop an internal 
mechanism for improving our ability to foster competition in an ever-changing marketplace.  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.  And 
with your help, that is precisely what we intend to do.

An Investment in the Future: The FCC's 2002 Budget
Reform takes productivity enhancement, management review and retraining, as well as 
technological upgrades to integrate all of these facets into a productive work environment.  
Today, I ask you to invest in achieving these objectives.  Our Fiscal Year 2002 Budget requests 
that you commit $248,545,000 to the future of communications policy.  Our total budget request 
is $18.5 million over last year's appropriation, representing slightly more than an eight-percent 
increase.  This increase is critical to financing programmatic and mandatory costs. The budget 
also represents a staff ceiling of 1,975 full-time equivalent ("FTEs").  This level includes FTEs 
funded from both appropriations and auctions resources.  

Much of the increase41 percentcovers uncontrollable cost increases to fund 
proposed government-wide pay raises, rent increases and other inflationary increases.  
Specifically, our request includes $6 million for mandatory salary and benefit increases and $1.6 
million for Consumer Price Index adjustments in contract services. The remaining portion of our 
budgetand, by far the most criticalcomprises programmatic increases to accomplish the 
Commission's comprehensive information technology strategic plan initiatives.  We are 
requesting $10,997,000 for these information technology ("IT") enhancements.  This amount 
includes funding for equipment originally scheduled (but not funded) for replacement in FY2000 
and FY2001. 
We intend to use our requested funding to build upon past improvements.  In the past few 
years, we have streamlined our licensing procedures and implemented electronic filing capability 
in 78 applicationsthat is 72 percent of all major information systems.  At the end of Fiscal 
Year 2000, approximately 62 percent of all applications were filed electronically.  And, 93 
percent of all applicants were acted on within our processing goals.  The use of information 
technology has led to improved processing time as well as a significant decrease in the number 
of backlogged applications.  The failure to invest in our information technology systems, either 
in the form of lifecycle replacement or technological upgrades, could lead to backsliding in our 
backlog elimination operations, and undermine our efforts to reform the Commission.   It is 
important, however, that we do not automate what may be a flawed process.  I intend to initiate a 
strategic review of our processes to ensure that they are accomplishing their intended goals.

I am cognizant of the fact that the funds I request here today belong to the taxpayer and 
not the Commission.  For that reason, we ask only what is necessary to maintain and improve the 
Commission's services and resources.  It is important to note, however, that since 1987, the 
Commission has worked to reduce the cost of government operations by implementing the 
congressionally-mandated user fee cost recovery programs. The first program, the "Application 
Processing Fee Program," was designed to recover a substantial portion of the costs of the 
Commission's application processing functions, which account for the majority of the licensing 
activity costs. 

In 1994, we implemented the "Regulatory Fees Cost Recovery Program."  Since that 
time, we have collected fees to recover the costs attributable to the Commission's competition, 
enforcement and public information services.  Unlike the Application Processing Fee Program, 
these fees can be retained by the Commission and applied to obligations incurred during the 
current fiscal year, thereby reducing the amount of appropriated funds required from the General 
Fund of the Treasury.  Since FY 1994, the fee offset to our appropriation has increased by 37 
percent to approximately 87 percent in FY 2000.  I plan to maintain that level and even increase 
it slightly to 88 percent during FY 2002.  The actual amount requested by the Commission for 
the next fiscal year represents $29,788,000 in net direct budget authority since we intend to 
collect $218,757,000 in offsetting collections from regulatory fees.  I am proud of our work in 
reducing our direct appropriation, and I believe that given the appropriate tools, we will improve 
on this record.

Keeping Our Part of the Bargain
Almost two months ago, I testified before the House Subcommittee on 
Telecommunications and the Internet concerning FCC reauthorization and reform.  I gave my 
commitment to following through on the philosophical and practical side of the reform process 
and asked our authorizers to join me in this effort.  Although the financial needs outlined here are 
an important component of our reform efforts, we already have implemented a management 
review designed to make the Commission a model agency.  I pledge to you that I will use the 
taxpayers' funds constructively as a way to improve our servicesand I provide you with a four 
point business plan below so that you can evaluate the financial worth of our efforts.  Let me 
emphasize that we are not "reinventing" the Commission, because that would be Congress' 
prerogative, and until legislation provides us with the ability to reprioritize some of our 
functions, we will work within the statutory limits set by Congress.  My plan is designed to use 
our requested funding in a constructive fashionto improve the management and employment 
environment in a way that benefits the American people.

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
The United States has a proud legacy in the area of communications services.  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 thoughwe 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 are now only beginning to appreciate and deploy the new advanced architectures and 
technologies of services like broadband.  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 and unpredictable change.  

I believe government policy needs to migrate steadily toward the digital broadband 
future, but recognize that we will be unable to anticipate every change before it happens.  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:
? Facilitate the timely and efficient deployment of broadband infrastructure. 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 favoror uniquely burden
any particular one.

? Pursue the universal service goals of ubiquity and affordability as new networks are 
deployed, and do so in creative fashion.

? 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.

? Harness competition and market forces. Drive efficient change and resist the 
temptation, as regulators, to meld markets in our image or the image of any particular 
industry player.

? Rationalize and harmonize regulations across industry segments wherever we can and 
wherever the statute will allow.

? Validate regulations that constrain market activity that are necessary to protect 
consumers, or we will eliminate them.

? 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.

? Shift from constantly expanding the bevy of permissive regulations to strong and 
effective enforcement of truly necessary ones. Request Congress' help to put real 
teeth into our enforcement efforts.

2. Operations and Management
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 these problems.  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 agencyone 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.  A 72 percent electronic filing capability is not 
enoughwe will 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 the United 
States have the ability to contact us easily and from anywherewhether by computer, phone or 
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.

Better management and a wider application of technology initiatives leads to enhanced 
productivity and an improved quality of life for employees.  The Commission should be a place 
to work, not live.  Employees should have a fair opportunity to work from home, providing 
greater flexibility to meet the demands of modern family life.  That is why the Commission 
undertook an ambitious rollout plan for telecommuting last year.  We intend to overlay our 
virtual agency concept to the benefit of FCC staff through an expansive telecommuting program, 
which is open to nearly 100 percent of the Commission's employees.  Approximately 400 of our 
eligible employees, about 20 percent, have chosen to telecommute on either a regular or ad hoc 
basis.  We began the telecommuting program to increase productivity, improve morale, improve 
job satisfaction and reduce absenteeism.  I am pleased to say that other agencies look to us as a 
model.

3. Technical and Economic Expertise
Since advances in technology are driving the communications revolution, the 
Commission must have a strong fluency in the language of technology.  We cannot depend on 
those we regulate for on-the-job tutorials while we make decisions. 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.  Like other governmental departments and 
agencies, we 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 salaries alone, however, will not do the trick, nor 
is it the sole motivator for anyone entering government service.  While government service in 
and of itself should elicit a sense of pride, we will increase our technical employees' worth by 
ensuring that they 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. 
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. 

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.  It is critical that we look to a plethora of 
information sources in gathering opinions and forming our policy.

4.	Restructuring
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.  We will be looking at what 
economic or marketplace triggers are indicative of the need for further restructuring.  The 
question has been asked whether the Commission should be aligned along functional linese.g., 
enforcement, consumer information, spectrum management, licensing and competitiongiven 
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. We are seeking the opinions and thoughts from a 
wide range of participants as we proceed down the path of reform. I also look forward to 
working closely with this Subcommittee and other Members of Congress and their staffs on this 
matter.  It is our goal to fully complete many of these changes this year.

With regard to the organizational restructuring that is likely to be necessary, I hope you 
will concur in those changes. We need to have the staff and other resources to provide those 
services efficiently, knowledgeably and decisively.  

Conclusion
The primary impetus for my reform program is to ensure that the Commission develops 
an enhanced ability to carry out its core mission: promoting communications competition in a 
cost-effective, efficient, and transparent regulatory environment.  We are not here to find a 
solution to every problem related to communications.  We cannot handle everyone's telephone 
bill, review every cellular tower siting, or ensure that everyone in the United States has access to 
the most expensive equipment in his or her home.  We can promote an atmosphere of 
competition where we step into the picture to ensure fairness of process, to stop predatory and 
anti-competitive behavior, and to make certain that the airwaves are free from clutter and pirates.  
We can and should make certain that the public interest and public safety are protected, while 
recognizing that we must work within the four-corners of our statutory mandate.  

	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 conditionsthreats 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 unitone well suited to an uncertain future.

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