Remarks by Commissioner Kevin J. Martin
Federal Communications Commission
To the Kaufman Brothers Fifth Annual Communications Conference
New York, New York
September 4, 2002
As Prepared for Delivery



I.	Introduction

      Thank you for that kind introduction, and thank you very much for inviting me to 
speak with you today.   Although Im a native Southerner, at speaking engagements up 
here I always feel a certain type of kinship with New Yorkers - - this is one of the few 
places in the country where my tendency to speak too quickly is actually appreciated. 

      I would like to spend a few minutes speaking with you about some of the issues 
we are facing down in Washington.   I would also like to take any questions you may 
have.  I find that your questions are extremely helpful to better understand your 
viewpoint and concerns.
      
      
      
II.	September 11th Remembrance and Public Safetys Critical Role

      I know that you are all anxious to hear my views on the current turmoil facing the 
telecom industry, but before addressing that, we should spend a few minutes 
remembering an even greater crisis that this country and New York faced.  Next week, 
we will pay our respects to the innocent victims and fallen heroes of the tragic events of 
September 11th.  On that day and in the months that followed -- the nation witnessed the 
true character of our country and this city and its people.  In the face of evil, this 
community responded with acts of bravery, valor, and selflessness. It showed the world 
its resolute spirit to persevere.  

      Beyond remembrance, our greatest tribute and responsibility to the fallen must be 
vigilance and preparedness.   Every level of government can and must contribute to this 
effort, including the FCC.   At the FCC, it is also part of our statutory mandate.

      The Commission was created in 1934.  In so doing, Congress made it crystal clear 
that one of the Commissions primary purposes is to make communications services 
available to all in order to promote safety of life and property.

      Under Chairman Powells leadership during the past year, the FCC has taken 
several steps to strengthen our communications infrastructure for homeland security.  We 
have also taken steps to ensure that public safety, public health, and other first responder 
emergency personnel have effective communications services available for any public 
emergency.

      Of the actions we have taken, the most important has been to improve 
communications among public safety personnel.  

      Since September 11, we have learned that communications failures between 
firefighters and police helicopters may have contributed to the tragic deaths of many 
firefighters at the World Trade Center.  

      This type of failure is unacceptable and cannot happen again.  Emergency 
personnel deserve reliable communications to carry out their missions.  

      The FCC is currently addressing the problems faced by public safety radio 
communications. 


A.	Interoperability

      For example, we are trying to improve interoperability-- which is the 
coordination of communications between public safety personnel from different 
departments and jurisdictions. 

      Today, interoperability is a real challenge because the public safety networks used 
by many different organizations are not integrated.  It is key to managing any future 
large-scale emergency where multiple response teams must be deployed. 

      If New York City Police cannot talk to the Levittown fire department, we lose the 
benefit of bringing these different groups together.  And such inability to communicate 
could even cause additional unnecessary danger.  

	We must solve this problem.

      The Commission is moving forward to make sure that there is adequate spectrum 
available for interoperability purposes.  We have begun to adopt rules to make this 
spectrum usable and to permit shared use of public safety systems by different 
jurisdictions. 


B.	Interference

      Another communications problem that public safety personnel face is 
interference.  Public safety systems in the 800 MHz band, one of the most important 
bands available for use by public safety, have been subjected to increasing instances of 
harmful interference from certain types of cellular phones.   This happens because the 
FCC made public safety channels and cellular communications channels very close 
spectrum neighbors when they assigned this spectrum many years ago. 

      Such interference makes public safety communications difficult, and in some 
cases, impossible.  There are several comprehensive proposals currently on the table, and 
we hope to resolve this issue as soon as possible. 


C.	E 911
      
      In addition to improving the ability of public safety personnel to communicate 
with each other, the Commission has worked hard to ensure that public safety can 
respond quickly to citizens in an emergency.  

      The FCCs enhanced 911 (or E911) rules require wireless carriers to provide 
public safety officials not only the phone number of a 911 caller, but also information on 
a callers physical location.  This information will also allow emergency personnel to 
locate people who have been trapped or abducted.  Such information is crucial to the 
success of rapid responses in an emergency.

      So far, several nationwide carriers are well on their way to making E911 
operational, and I applaud their efforts.  At the same time, other carriers have fallen 
behind.  

      The Commission has made clear that wireless carriers must deploy 911 location 
capability in a timely manner.  We will thoroughly scrutinize any additional requests for 
extensions to ensure that the carriers are doing all they can to provide E911 capability as 
soon as possible.  If delays are truly beyond the carriers control, the wireless carriers 
should not be penalized.  Otherwise, enforcement action by the FCC may be necessary.  
We are examining whether manufacturers are meeting delivery dates and whether the 
incumbent carriers are updating their location information databases as necessary.  In any 
case, we are committed to completing nationwide E911 deployment by 2005.


D.	Reliability and Security

	In the aftermath of September 11th, all segments of the industry played a crucial 
role in responding to the network failures in lower Manhattan.  Working together, 
incumbent and competitive carriers were able to ensure that the Citys critical 
communications were restored and maintained.

	The events of that day taught us the value of having redundant and diverse 
facilities-based networks.  New entrant carriers answered the call on that day and in the 
weeks that followed by making their wireline and fixed wireless backbone networks 
available for the Citys communications needs.

	September 11th has only reinforced the need to promote policies that advance 
local competition which enable facilities-based service providers to enter the market and 
invest in new infrastructure.
      
      We hope to harness that spirit by rechartering NRIC  the Network Reliability 
and Interoperability Council.  This industry group will develop recommendations to 
assure optimal reliability and security of our public communications systems.  

      In the same vein, the Commission established a new group  the Media Security 
and Reliability Council  to advise the Commission on homeland security issues for 
broadcast and multichannel video programming media.  



III.	New York Citys Fiscal History 

      Turning away from public safety concerns to the financial heartbeat of the 
industry:

      High debt payments, fear of bankruptcy, flight of capital, restructuring and 
reorganization, survival, renaissance, and prosperity.  Newspaper headlines read:
      
*	Time of Reckoning Nears for Billion in Debt
*	After Years of Massive Spending, Road Back to Solvency Formidable.
      
      Does this story sound familiar?  It should.  But no, I am not talking about the 
telecom industry. 

      Instead, I am talking about the history of New York City.

      Some here may be old enough to remember  present company excluded  but 
just over a quarter of century ago, New York City stood on the brink of bankruptcy.

      After years of imprudent expenditures, increasing debt, and declining tax 
revenues, New York faced the likelihood of bankruptcy by the mid 1970s.

      The fiscal crisis shook New York to its core.  Facing a declining tax base, nearly 
crippled by huge debt payments, and witnessing the flight of human and economic capital 
- - the City could not continue with business as usual. 

      New York City and State tackled the impending crisis by instituting numerous 
fiscal and budgetary reforms.  Government also turned to expertise from the private 
sector.  They sought the assistance of a Wall Street investment banker (Felix Rohatyn) 
who helped to successfully restructure New Yorks debt and slowly guide it back to 
financial health.

      Such quick action provided the necessary foundation for market stability.  In turn, 
greater marketplace certainty allowed for capital creation and private sector development, 
which led to the slow and gradual path back to full economic recovery and prosperity.

      New York Citys renaissance rising from the ashes of the financial crisis of the 
mid 1970s is a testament to the policies that promoted fiscal responsibility and created 
greater market stability and certainty.  

      While not exactly identical situations, the telecom industry today faces many 
similar challenges.  Excess expenditures, increased debt, and declining revenue are all 
challenges facing the telecom industry today.  As  we confront the telecom industrys 
current financial crisis, we in Washington should learn from the lessons of  New York 
Citys experience.



IV.	Current State of the Industry

      During the past year, many industry executives have shared their concerns with 
me regarding the state of the telecom industry, as well as the near term challenges facing 
them in these very uncertain times. 

      The industrys current troubles are well documented.  Im sure many of you 
complain that they are too well documented.  As we look into the rear view mirror we can 
now see with greater clarity how we got here.  

      During the late 90s, the promise of competitive markets in the Telecom Act of 
1996 along with the developing internet -- created aggressive demand projections for 
network traffic and bandwidth.   

      As traffic grew, both incumbent and competitive telcos raced to deploy 
infrastructure to meet expected demand.  The capital markets, in turn, willingly provided 
the funds necessary to fuel this aggressive nationwide facilities deployment.  Most of the 
investment was predominantly in backbone facilities, leaving the last mile alone in the 
hands of the incumbent LECs.

      The law of supply and demand, however, ultimately kicked in.  There is an 
abundance of excess capacity in fiber.  Such excess capacity has depressed bandwidth 
pricing.  These falling prices have negatively impacted revenue growth of both 
incumbents and new entrant carriers.

      Unfortunately, the aftermath of the infrastructure boom has also left many 
companies with a heavy debt burden.  Today, the total U.S. telecom industry debt level is 
estimated at over 200 billion dollars.

      In the shadows of the dot.com bust, telecom stock prices tumbled as revenue 
growth projections flattened and debt levels continued to climb.  Wall Street and 
investors reacted quickly by turning off additional sources of funding.  

      As alternative sources of capital dried up, bankruptcy and reorganization was the 
only option for many carriers.   In the past year we have seen many large 
communications companies seek Chapter 11 bankruptcy protection.  Certain analysts 
predict that many more publicly traded communications companies are at risk of filing 
for bankruptcy in the coming months.  


   
V.	Corporate Responsibility and Transparency 

      In these turbulent financial times, I believe we can draw on the New York 
experience to chart our course.

      We must first acknowledge that no magic bullet exists.  Restructuring and 
economic recovery of the industry will happenmaybe not overnightbut I am 
confident it will come about.

      But we can also help speed this process.  Joint government and industry efforts to 
restore investor confidence and public trust in our markets is a critical first step.
      
      Corporate responsibility and corporate accountability are the keys to a sound 
American economy.  Of equal importance, the private sector should be able to expect and 
rely on a transparent and efficient government process.

      These are not new expectations.  As Teddy Roosevelt, a former New York City 
Police Commissioner, once said: We demand that big business give the people a square 
deal; in return we must insist that when anyone engaged in big business honestly 
endeavors to do right, he shall himself be given a square deal.    

      Wall Street and the telecom industry must recognize that the integrity of the 
financial market is its most precious commodity.  The success our nation has had in 
attracting capital to our markets--from both at home and overseas--is based primarily on 
our system of disclosure and veracity.  Only by adhering to this strict code of conduct and 
corporate responsibility will we be able to retain investor confidence, thus ensuring the 
continued flow of capital in the future.

      As for the Commissions processes, I have often expressed my strong belief that 
the FCC must conduct its reviews and make its decisions in a more transparent and 
reliable fashion.  In turn, regulated parties must assist the Commission in its work by 
providing accurate information regarding their businesses and practices.

      Indeed, we could not function effectively without a certain level of trust that 
regulated entities will give us good information.  Incorrect or unreliable information 
cripples our ability to ensure open markets and free competition.  It hinders our ability to 
conduct our work in an efficient and effective manner.

      Similarly, when the Commissions processes are opaque or clouded by bad 
information, the capital markets will respond accordingly.  Only by demanding the 
highest level of transparency possible can we ensure the fairest decisions and create the 
most consistent and predictable regulatory environment for investors to make their 
decisions.

      At the end of the day, we must have a rigorous system of transparency in our 
processes, as well as a proactive commitment from corporate officers to ensure our faith 
in the information they provide.
      
      In this era of renewed emphasis on corporate responsibility and focus on public 
trust and the importance on proper accounting, allegations such as those that Qwest had 
entered into secret agreements giving preferential treatment to certain competitors and 
their failure to certify financial statements as GAAP compliant are of particular concern 
to me.  The matter is currently before the Commission, and I plan to review these 
allegations very carefully.

      To the extent the Commission appears to demand anything less than full 
compliance and integrity, it will be that much more difficult to restore investor 
confidence in the telecommunications markets.



VI.	Responding Swiftly 

      Once the Commission has obtained accurate information, however, it can also 
contribute to market stability by establishing a stable and reliable regulatory environment.  
Broad proceedings that remain pending for extended periods can contribute to 
uncertainty.  Regulatory uncertainty and delay function as entry barriers in and of 
themselves, limiting investment and impeding deployment of new services.

      We should act quickly on our major pending rulemakings.  Prompt decision 
making will provide greater certainty and stability to the marketplace.

      I know there is great interest out there about the future rules of the road for the 
telecom sector. 

      Let me briefly highlight some of these proceedings and why we need quick 
action:


A.	Performance Measures

      On performance measures, I have heard from many of you regarding the critical 
need for national performance standards and metrics for UNE and special access facilities 
used to provide competitive local telephone service.

      As I have said before, I believe that a competitive market is not viable unless new 
entrants to the local telephone market can obtain the facilities they need in a 
nondiscriminatory, reasonable, and timely manner. 

      As you know, State Commissions, such as New York and Texas, have taken the 
lead in analyzing and implementing performance standards and metrics.  I have and will 
look to their experience as we move forward to craft national performance standards that 
will continue to spur facilities-based competition.

      I strongly encourage you to share your input and expertise from the markets you 
serve with my colleagues at the Commission.
      
      
B.	Enforcement

      On enforcement matters, I have said before and repeat again - - the Commission 
can and should do a better job on enforcement and on being tougher on those that break 
our rules.
      
      As many of you know, the rocket docket has not been as successful as the 
Commission hoped it would be.  Because either party can opt out of this procedure, the 
process has thus far been relatively ineffective.
      
      Today, it takes over a year to resolve a formal complaint.  Such delays make it 
difficult to provide regulatory certainty in these rapidly changing markets.
      
      We need to commit to acting faster.  In my view, the Commission should commit 
to having draft orders on formal complaints before the Commissioners within eight 
months of their filing.
      
      Committing to act within a specific time frame may allay the concerns of many of 
the competitors that any complaints they might file will never be acted upon if they or the 
defendants raise any novel issues.  Such a public commitment would not only hold out 
feet to the fire, but might also encourage parties to take advantage of the complaint 
process.


C.	Draw on Developed Expertise

      Another lesson from New Yorks handling of the 1970s financial crisis is the 
importance of relying on others expertise.
      
      As many of you know, the U.S. Court of Appeals for the DC Circuit recently 
remanded the UNE Remand Order  the FCCs most recent effort to set out a list of 
network elements that incumbent local exchange carriers must make available on an 
unbundled basis to competing carriers.   The Commission has sought rehearing of the DC 
Circuits decision.

      The Court criticized the FCCs unbundling requirement as being overly broad.  
The Court found the FCC had failed to take into account the competitive nature of 
particular geographic and customer markets. 

      Before the Courts recent decision, the FCC had already started a proceeding to 
review how incumbent carriers should provide network access to requesting carriers on 
an unbundled basis.

      The Commission has also sought comment on the impact of the Courts decision 
on the UNE triennial review proceeding.

      Several states have requested that they become more involved in the process.  For 
example, if the FCC chooses to establish geographic, more granular unbundling 
standards, we adopt broad rules that will afford state commissions some flexibility to 
examine market conditions within the states.  I am sympathetic to their requests.

      In my view, states are better positioned to conduct fact-specific inquiries.  They 
can best judge the level of competition and the system of retail price regulation that 
applies to incumbent carriers in their respective states.  To restore confidence and rebuild 
trust, we need a coordinated effort in which federal and state decision-makers work 
together to address our common concerns and to achieve our common goals.

      Similarly, I believe we should listen carefully to the concerns that have been 
raised by our state colleagues with regard to the Broadband proceeding, I am generally 
supportive of the Commissions tentative conclusion to classify broadband Internet 
access as an information service.  However, I do have some concerns with this 
approach. 

      For example, I do not support the FCCs proposal to extend universal service 
contributions to providers of broadband Internet access.

      In my view, the contribution requirement is essentially an Internet access tax that 
represents an unnecessary financial burden on service providers and actually creates a 
barrier to broadband deployment.

      I also believe that the Commission must carefully consider the impact of a 
regulatory classification change on the ability of competitors to enter new markets.  For 
example, some states have expressed concern that a change in regulatory classification 
could adversely impact some state efforts to ensure that all telecom carriers have easy 
access to local rights of way and to building access.

 

VII.	CONCLUSION

	So as you can see, we are quite busy up in Washington.  By the new year, I 
hope that I will be able to report to you that the Commission has taken significant steps 
towards resolving some of the issues we discussed.  Thank you again for inviting me to 
speak with you this afternoon.  Good luck with the rest of your conference.  I am happy 
to take any questions you may have.
         


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