Telecom/1996-04-telecom-walnutcreek.iso/legal-fcc/reed.hundt.fcc.95.budget

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Date: Thu, 28 Apr 94 14:23:05 CDT
From: [e-mail] (TELECOM Moderator)
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Subject: Reed Hundt's Testimony re: FCC FY'95 Budget Estimate

Too long for inclusion in regular Digest, submitted FYI.

PAT

   Date: Tue, 19 Apr 1994 12:18:01 -0400 (EDT)
   From: Bob Keller <[e-mail]>
   Subject: Reed Hundt's Testimony on FCC's FY95 Budget Estimates

The FCC Daily Digest pointed to spreh410.txt as the Internet filename
for the following, but that file at ftp.ftcc.gov was a formatted word
processing document.  Appended below is the same file converted to
ASCII.

 Bob Keller   Robert J. Keller, P.C.           Internet: [e-mail]
 ----------   Federal Telecommunications Law   Telephone:  [phone]
    KY3R      4200 Wisconsin Ave NW #106-261   Facsimile:  +1 301.229.6875
              Washington, DC 20016-2143  USA   CompuServe UID:  76100.3333

           --------------------------------------

                       Statement of

                       Reed E. Hundt
                          Chairman
             Federal Communications Commission

                         before the

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

                      April 18, 1994

Mr. Chairman and Members of the Subcommittee, I appreciate the
opportunity to review with you the Federal Communications Commission's
Fiscal Year 1995 Budget Estimates.  This opportunity is a special
privilege for me as it is my first appearance before the Subcommittee
since becoming Chairman last November.

Our 1995 Budget Estimates propose a total of $167,400,000 and 1,964
full time equivalent positions.  Over half of the $167,400,000, $95
million, will be obtained from fees assessed against parties subject
to the Commission's regulatory authority, as specified in legislation
enacted by Congress in 1993.  The fees collected are considered
offsetting receipts.  The estimate of $167,400,000 represents an
increase of $7,100,000 over our fiscal year 1994 appropriation.  The
increase is confined to uncontrollable fixed cost increases.  Approx-
imately $6.1 million or 86% of the requested addition, relates to
increased personnel costs, including annualization of the FY 1994
locality pay, an anticipated 2% pay increase for all employees during
FY 1995, and step in grade increases.  Funds to cover increases in
health insurance and worker's compensation accounts are also included.
The remaining $1.0 million reflects anticipated inflationary increases
in travel, printing, miscellaneous rentals and supplies.

We have not adjusted our original request to reflect the proposed
amendment to the FY 1995 Budget to be submitted by the President.
This amendment would reduce government rental costs of approximately
$568,000 as well as procurement costs of $197,000. Since final action
on this proposal is pending, our original request remains unchanged.

The Commission is responsible for regulating interstate and foreign
telecommunications and managing the licensing of common carrier and
broadcast radio and television services.  This includes the licensing
and administration of the broadcast spectrum as well as those entities
providing interstate common carrier communications services.  We
exercise regulatory supervision over telecommunications markets that
are not competitive in order to replicate, as nearly as possible, the
results that a competitive market would produce.  Equally important,
we seek to promote competition wherever and whenever possible and to
enhance access to markets by consumers and providers of services and
products.

In carrying out our responsibilities, the Commission seeks to further
two fundamental public interest goals: providing the public with broad
access to telecommunications services and encouraging domestic
economic growth.  We strongly embrace the Administration's commitment
to manage government more efficiently and effectively.

Virtually every item before the Commission, ranging from the
regulation of interstate and international telephone rates and
services, to the rules governing the emerging technologies, requires
extensive analysis.  Our commitment to consumer access and economic
growth involves the development of initiatives that will foster
competition in markets that are presently non-competitive and increase
competition in markets that are in transition.  These responsibilities
demand a rigorous and integrated pursuit of several disciplines that
ultimately must be merged in the actions of the Commission.  For
example, we must evaluate the engineering and technical merits of
particular technologies, calculate the economic impact of their
proposed use and determine the extent of any legal restrictions
involved.  The dramatic growth of the telecommunications and
information industry and its increasingly significant role in the
national economy underscores the vital importance of the Commission's
deliberative decision-making process.

The incredible expansion of the telecommunications industry over the
last decade, including equipment, services, communications and
information sectors, affirms our Nation's global leadership in this
area.  In constant dollars, the industry has grown from $478 billion
in 1982 to $783 billion in 1993.  This remarkable growth has occurred
during a period of unmistakable and fundamental industry
transformation.  Once reflecting discrete and separate enterprises,
the telecommunications industry has become a model of how technology
and competition can create economic advancement.  The Commission's
ability to structure sound policies, to review applications
expeditiously, to promote the deployment of new technologies and
services, and to undertake prompt, fair adjudication and enforcement
actions directly relates to the viability of the industry.  The
movement of various telecommunications markets toward a more
competitive environment demands that the Commission fashion policies
that will encourage this development while protecting consumers from
unreasonable prices and practices during the transition.

The manner of regulation has also changed dramatically.  The
engineering and scientific, economic and legal analysis required is
not limited solely to present circumstances, but is linked to the
direction of technological advances and entrepreneurial initiatives.
The Commission must continue to establish regulatory policies that
will promote creativity, innovation, efficiency and growth.

The historic and present role of the Commission is reflected in its
oversight of interstate communications services.  The telephone
company of yesterday was thought to be a classic, natural monopoly.
Because it was thought economically infeasible to have multiple
service providers, all services, facilities, rates and practices were
subject to regulation.  Technology and entreprise have shattered this
preconception.  The telephone company of today faces competition as
well as being a source of it.

Today, a single company may offer services in a market for which there
is little competition, such as regulated local telephone service,
alongside competitive services, such as data processing, which is not
regulated.  The Commission has established safeguards to ensure that
ratepayers of the regulated service do not subsidize the unregulated
data processing service.  Through audits and enforcement actions, the
Commission ensures the effectiveness of these safeguards.

The Commission and state authorities have developed a regulatory
regime that offers incentives to local telephone companies to reduce
costs and increase efficiency by replacing traditional rate-of-return
regulation, which requires establishment and enforcement of an
elaborate set of cost allocation rules, with regulation that caps
prices.  With "price caps", a benchmark is established that reflects a
fair estimate of a company's costs over time for standard service.  If
the regulated company is efficient and innovative and lowers its
costs, it keeps any additional earnings generated below the benchmark
to invest in new services.  Ratepayers benefit from the development of
new and better services while potentially enjoying lower prices than
with rate of return regulation.  In a current proceeding, the LEC
Price Cap Performance Review, the Commission is considering how to
ensure that consumers share in the benefits of these efficiency gains.

In fulfilling its responsibility to maintain the viability of
affordable telephone service, the Commission must ensure that
regulatory barriers do not artificially preclude competition.  In the
previous era, one company provided equipment, local or long distance
service.  Access by competitors remained limited even after the 1982
judicial consent decree, the Modified Final Judgement (MFJ), which
divested the Bell system.  Recently, the Commission has undertaken
actions to bring about a more competitive environment.  In both the
long distance and telephone equipment markets, the Commission has
played a critical role in the evolution toward competition by removing
regulatory barriers to entry for new competitors and taking steps to
ensure that consumers have access to competing products and services.
It has resulted in the availability of more services as well as
decreased prices.

Lack of competition in cable and the presence of unreasonable prices
lead to passage of the Cable Television Consumer Protection and
Competition Act of 1992.  This month, the Commission completed its
revision of regulations implementing this law.  The regulations assess
whether rates for cable services are reasonable, and provide a
structure for consumers and cable operators to resolve complaints.
The future compatibility of cable systems and consumer electronics
equipment is also addressed.

Inherent in the Commission's responsibility was the need to achieve
quality cable service at a reasonable price while ensuring the cable
operator's ability to earn a return sufficient to encourage continued
investment in the business.  The Commission's orders establishing the
appropriate rate formula reflect the diversity of the industry as well
as our obligation to explain fully the Commission's decision.
Notably, in addition to the full orders, the Commission presented a
streamlined explanation to cable operators on how to use the formula,
computer spreadsheet programs that perform the rate calculation, and a
facsimile center wherein the Commission can compute the calculation
for the cable operator.

The Commission has undertaken action to increase competition in the
cable area.  While restricted by law from providing direct video
programming, local telephone companies are authorized by the
Commission to furnish non-discriminatory access to multiple video
programmers within their territory.  This program access has the
potential of providing a competitive alternative to present cable
monopolies.

In 1993, Congress mandated that the Commission design and implement an
auction procedure for the licensing of personal communication services
(PCS).  The wireless PCS technology has the potential of creating new
markets, enhancing competition in present ones, providing greater
public access to myriad communication services and raising billions of
dollars for the U.S. Treasury.  The Commission is presently engaged in
the complex and delicate task of structuring a fair auction process
that will fully realize the potential of PCS and ensure access of
competitors into the wireless communications markets.

Another area where competitive opportunities exist involves a
previously separate sector of communications called broadcast
television.  Through the advent of Advanced Television Service, in
particular High Definition Television (HDTV), many telecommunications
uses are possible, including forms of PCS.  In the context of spectrum
allocation and licensing, the Commission has structured a process
where the many significant technical issues involving scanning and
transmission techniques, as well as economic and legal issues, can be
raised and resolved.  The digital technology that HDTV offers can
greatly improve the quality and quantity of communications services
available to viewers.  By carefully drafting the parameters for these
advancements to flourish and ensuring that the public trust
responsibilities of broadcasters remain, the Commission stimulates
entrepreneurial initiative and encourages pursuit of economic growth.

The need to combine engineering and technical expertise, with economic
and legal concerns, goes beyond telephone, PCS and HDTV.  Implementing
digital audio services for improved radio sound quality, modernizing
the Emergency Broadcast System (EBS), instituting Mobile Satellite
Services (MSS) (with its wide range of new and low cost voice and data
transmission services), and "refarming" Private Land Radio Mobile
Services are but a few examples of other significant items before the
Commission.  In the last example, new technology can improve quality,
efficiency and capacity of the radio broadcast spectrum.  We at the
Commission should implement a transition that comprehends the
economics of change while ensuring an environment that fosters
competition.

The Commission has broad responsibilities in international
communications, including allocation and coordination of radio
frequencies, licensing of international transmission facilities and
services and development of standards and operating procedures in
international fora.  The Commission's actions in the international
area are intended to fuel U.S. economic growth through the creation of
new businesses abroad for U.S.  companies by promoting worldwide
development of new wireless technologies and infrastructure
development.  We are encouraging the licensing of United States
service providers in overseas markets and promoting private
investment, competition, and regulatory reform both in developed and
developing countries.  The Commission has played a major role in
several recent discussions with foreign governments by advocating the
benefits that accrue from privatization, competition, and regulatory
reform.  By pursuing open communication markets throughout the world,
U.S. companies that have firsthand experience in the competitive
environment will benefit dramatically.

We are witnessing an evolution of convergence of networks and markets,
whether it be telephone, broadcast, cable, wireless or satellites,
domestic and international.  A range of companies, once segregated by
product or service, will soon compete to provide voice, data, and
video services.  The products and services generated can offer great
benefits to the consumer and the economy.  The movement toward a
competitive environment, however, is not accomplished overnight.  It
falls to the Commission to be able to structure the transition,
monitor progress, and undertake corrective measures if the transition
falters.

With each effort, the Commission balances carefully the burdens that
are imposed on industry with such important decisions.  Moreover, we
are also reexamining each Commission regulation, process and procedure
to determine whether it should exist or be scaled back.  We are
reviewing the degree to which licensing areas can be performed more
efficiently, or perhaps eliminated, while upholding the underlying
intent of the law.  We are examining the number of offices we have to
determine whether any may be consolidated.  We look forward to working
with the Congress, particularly this Committee, in making the
Commission more efficient and effective.

In detailing, albeit briefly, the responsibilities of the Commission,
I have sought to relate the complexity of the issues, and more
importantly, the enormity of the task before us.  To execute the law
properly, virtually every matter involves an extensive analysis of
technical, economic and legal issues.  The substantial financial
interests at stake dictate fair, competent and thorough decisions.
The ramifications of the Commission's actions draw strenuous advocacy
from those affected.  That which is advocated, while aggressive and
extensive, usually reflects a particular private interest, not the
public interest.  Notably, while businesses welcome competition, the
welcome mat is usually laid only before its suppliers and
distributors.  It falls to the Commission to foster entry into all
markets so that the public interest is the ultimate beneficiary.

The Commission has a fundamental responsibility, therefore, not simply
to discern the various arguments, but to analyze the law, the
economics, and the technology applicable to particular facts; only
then can reasoned judgment prevail and the premise of a decision be
clearly articulated.  This is at the foundation of a government
agency's ability to carry out its mission, and to make that mission
understood.

To meet this standard, the agency draws on its most important
resource, its employees.  The Commission is comprised of an impressive
cadre of honest, committed, energetic and highly competent
professional and support staff who take seriously the responsibilities
of the public trust.  The Commission's capacity, however, to act
decisively, with clearly articulated rationale, is subject to extreme
strain as the quality of work is challenged by its quantity.

While telecommunications has grown tremendously, the Commission's real
resources have actually decreased.  During an era of ever increasing
responsibilities, the number of full time equivalent positions has
dropped by almost 500 positions, from 2,200 in FY 1980 to 1724 in
1994, excluding those positions added as a result of the 1992 Cable
Act.  A parallel scenario is reflected in the Commission's
infrastructure, whether it be engineering equipment, its
communications capability, its facilities or the backlogs that plague
virtually every component of the agency.

Informal complaints regarding telephone rates and service grew to
32,024 in 1993, as compared to 16,988 in 1992.  6,656 of these
informal complaints remained pending at the end of 1993.  While the
average resolution time is 315 days, over 5,000 took over one year to
resolve.  Pending applications for land mobile service licenses
increased from 8,000 to 42,000 in the last year, doubling the
processing time from three to six months.  Private microwave licenses
require up to 80 days for review, 20 days longer than the previous
year.  The backlog of pending applications for Instructional
Television Fixed Service rose from 251 in 1990 over four times to 945
in 1993.  Of the 4,000 authorization applications applications in FM
broadcasting filed in 1993, 25% were contested and taking 24 months to
resolve.  Finally, while the Commission's efforts to process requests
for information has been assisted by placing documents on the
Internet, we continue to face over 4,000 requests per month.

There is no short cut method to analyze the technology, the economics
and the law as they relate to a particular issue.  The Commission must
have the resources to listen, gather information and analyze competing
views.  The arduous process by which our decisionmaking yields actions
must be clearly articulated, rational and comprehensive.  While
resources alone cannot produce this result, the result cannot be
achieved without resources.

If the Commission is to fulfill its responsibilities and the
telecommunications industry is to be a growing sector of the American
economy, the Commission must have a larger resource base.  The
Commission must move expeditiously on a range of matters.  It must
enhance its capability to confront, analyze and resolve the myriad
technical, economical and legal issues placed before it.  Not only is
the future of a vital industry at stake, but substantial revenues to
the United States Treasury depend upon the Commission's effectiveness.
We are discussing with the Office of Management and Budget how the
request before you can be revised.  As part of that process we are
delineating those areas where the Commission needs additional
resources, as well as examining how the Commission's workload can be
affected by possible amendments to the law, the regulatory changes
under consideration and emerging competition.

The tremendous advances in telecommunications are subject to intense
Congressional scrutiny.  Legislation reported in the House of
Representatives and pending in the Senate would, by overhauling the
Communications Act of 1934, give substantially expanded
responsibilities to the Commission.  H.R. 3626, H.R.  3636 and S. 1822
would do more than allow the Regional Bell Operating Companies to
enter previously restricted markets.  The bills seek to introduce or
enhance competition in a broad range of telecommunications markets
including local and long distance.  The legislation will establish a
comprehensive, concrete set of rules and guidelines, as compared to
the present rules which are issued on a piecemeal basis by various
federal courts, federal agencies and state authorities.  The
legislation follows a careful format for monitored and regulated
transition by the Commission to protect consumers from unreasonable
price increases as competitive markets evolve.  The legislation also
includes provisions relating to education that provide significant
telecommunications advantages for a vital constituency of our nation,
our children.  The expanded responsibilities of the Commission under
these proposals will impact its resource needs to a significant
degree.

The remarkable growth in the telecommunications industry, its
innovative future and technology driven markets, along with pending
legislation of historic proportions, makes this a time of immense
opportunity for the Commission.  This Subcommittee's support of its
efforts, particularly the establishment of the offsetting fee
structure in 1993, has been crucial.  It makes for an era of much
excitement and optimism.

This completes my statement Mr. Chairman.  I would be pleased to
respond to any questions you or the Members of the Subcommittee may
have.

================================================================