Telecom/1996-04-telecom-walnutcreek.iso/legal-fcc/reed.hundt.speech-S.1822

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From: TELECOM Moderator <[e-mail]>
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Subject: Reed Hundt's Congressional Testimony on S.1822


Bob Keller has passed along the congressional testimony of Reed Hundt
which many of you may have seen on television a couple days ago, par-
ticularly if you watch C-SPAN.  Thanks, Bob.

PAT

  From: Robert J. Keller <[e-mail]>
  Subject: Reed Hundt's Congressional Testimony on S.1822


Pat --

You may already have this ... but if not thought I would pass it
along.  It is one of the first items other than routine Daily Digests
and Press Releases to show up on the FCC's new ftp site.


Bob Keller (KY3R)    [e-mail]    Tel [phone]
[e-mail]        CompuServe 76100,3333    Fax [phone]

           --------------- cut here ---------------

                       Statement of
                       Reed E. Hundt
                         Chairman
             Federal Communications Commission

                        Before the

    Committee on Commerce, Science, and Transportation
                   United States Senate

                            on

       S. 1822, the "Communications Act of 1994" and
        "Telecommunications Equipment Research and
          Manufacturing Competition Act of 1994"

                     February 23, 1994

                       Introduction

  Mr. Chairman and Members of the Committee:

   It gives me great pleasure to appear before you today to testify on
S. 1822.  This is my first appearance before the Committee since my
confirmation.  I am very gratified that the President nominated me,
this Committee unanimously recommended my confirmation, and the Senate
confirmed me as chair of the Federal Communications Commission
("Commission" or "FCC").  I am privileged to serve in this position
during these very momentous times in our ongoing communications
revolution.

   I am particularly pleased to have an opportunity to appear before
this Committee at the outset of its hearings on S. 1822.  If enacted,
this bill would implement the first comprehensive revision of the
Communications Act since its passage 60 years ago.  The scope of this
bill and the potential benefits that it offers to all Americans are a
tribute to your progressive leadership, the bipartisan support of
Chairman Inouye, Senator Danforth, and the other co-sponsors, and the
enormous amount of work that you and your staff have done in
developing this legislation.

   S. 1822 embodies a vision of a new era of innovation and growth for
what may be the most important sector of our economy in the next
century.  This bill seeks to introduce competition in
telecommunications markets currently dominated by a single service
provider and to increase competition in markets already served by more
than one firm.  At the same time, the bill reaffirms our national
commitment to universal service in order to ensure that all Americans
can participate in the information economy.  The means to these ends
chosen by you, Mr. Chairman, and the other authors of this bill is a
commitment to a carefully monitored and regulated transition from
currently non-competitive markets to competitive markets.  This
crucial transition will protect consumers from unreasonable prices as
competitive markets develop.  S. 1822 seeks to create a flexible and
adaptive regulatory model that is likely to promote substantial
investment and lead to economic growth and job creation.  I commend
you, Mr.  Chairman, and the other authors of this legislation for your
comprehensive approach to the difficult policy questions that this
bill addresses.

   I am also very encouraged, Mr. Chairman, that President Clinton and
Vice President Gore have endorsed the same goals of enacting
telecommunications reform legislation in order to promote private
investment in the nation's telecommunications infrastructure while
ensuring access for all.  In his State of the Union address, the
President called on Congress to pass such legislation this year.
President Clinton stressed that revitalizing the national telecommuni-
cations infrastructure will increase productivity, help us to educate
our children, improve the provision of heath care services, and create
jobs.  The President also joined with the Vice President in calling on
the country to meet the goal of connecting every classroom, hospital,
and library to the national information infrastructure by the year
2000.

   Mr. Chairman, I believe that the President and Vice President share
with you and the other authors of this legislation a common vision of
the potential benefits that our national information infrastructure
offers and a common commitment to making those benefits a reality for
all Americans.  I applaud that vision and commitment and I am excited
by the challenge that lies before us.

   S. 1822 recognizes that the current phase of the telecommunications
revolution represents a transition to a new telecommunications world
in which the average consumer will be able to choose among competing
suppliers of local, long distance, video and wireless telephone
services.  In managing that transition, we in government at the
federal and state levels should seek to promote competition wherever
and whenever possible and to enhance access to competitive markets for
consumers and providers of services and products.  At the same time,
we must continue to exercise regulatory supervision over telecommuni-
cations markets that are not -- or not yet -- competitive in order to
replicate, as nearly as possible, the results that a competitive
market would produce.

   Some have argued that the promotion of competition in all
telecommunications markets, including the local telephone market, is
inconsistent with our historic commitment to universal service.  I
disagree.  The principal goal of universal service is to ensure the
availability of telephone service at reasonable rates to all
Americans.  A competitive marketplace is the best way to foster lower
prices.  Competition creates incentives for service providers to
reduce both their cost of furnishing service as well as the prices
charged to consumers.  Competition also fosters technological
innovation and the development of new services.

   At the same time, opening new telecommunications markets to
competition, including the local telephone market, and the entry of
new service providers into these markets will require the Commission
to review and revise current universal service policies and
regulations, including financing mechanisms.  Existing universal
service policies and programs were developed when the local telephone
market was considered to be a natural monopoly.  The emergence of
competitive access providers and the prospect of even greater
competition in the local market from new wireless services and cable
television operators are part of the growing evidence that undermines
the assumption that local telephony is a natural monopoly.
Consequently, new universal service policies will be needed to achieve
the public interest objectives in a manner that does not distort
efficient investment or competitive markets.  This bill recognizes the
need for such a comprehensive review and directs the Commission to
commence it promptly after enactment.

   Of course, telecommunications markets that have been dominated by a
single firm for many years do not mature into competitive markets
overnight simply by the removal of entry barriers.  The transition to
effective competition must be managed and supervised by the FCC and
state regulators who are charged with ensuring that the rates that
consumers pay for service remain just and reasonable.  That is what
the FCC has been doing for many years in managing the development of
competition for telephone equipment and interstate long distance
services and what we are now doing in conjunction with local
franchising authorities with respect to the cable television market.
The changes that have occurred in the telephone manufacturing and
sales, and long distance markets over the past 30 years provide an
instructive example of the benefits to American consumers that can
result from properly managing the transition to competition in a
telecommunications market.

   When I was growing up, the telephone was a black, rotary dial
instrument that was owned by the telephone company and was considered
part of the telephone network.  Beginning with the Hush-a-phone case
in the 1950's and the Carterfone case in the 1960's, regulation of the
customer premises equipment ("CPE") market was gradually relaxed until
the FCC eventually deregulated this business and unleashed the forces
of competition.

   Today, the benefits of competition in the CPE market are tangible.
Consumers can buy telephones of all shapes, sizes and colors with a
bewildering array of features and functions.  They can buy telephones
with built-in answering machines, telephones with memory, telephones
with speed dialing, and cordless telephones.

   Since deregulation, prices for this equipment have fallen, and as
prices declined, sales increased.  Sales of cordless telephones, for
example, increased from approximately 4 million units in 1985 to 9
million units in 1992.  Competition in telephone equipment has given
businesses the ability to purchase their own private branch exchanges,
or PBXs, which enable an office, in effect, to operate its own
internal telephone network and to link remote locations in a single
system.  Competition has also led to the widespread availability of
facsimile terminals.  The purchase of fax machines soared from 137,000
in 1986 to 3.5 million in 1992, while the installed base of this
equipment grew from 300,000 terminals in 1986 to 10.7 million in 1992.

   The long distance market has also benefitted from competition.
Initially, the new entrants in this business were hampered by AT&T's
control over the local telephone networks that its competitors needed
to reach consumers.  AT&T's practices in the long distance (and
equipment) markets caused the Department of Justice to file an
antitrust suit against AT&T in 1974.  That litigation culminated in
1982 in a consent decree, known as the Modification of Final Judgment
("MFJ"), that led to the break-up of the old Bell System in 1984.

   The divestiture of AT&T was the seminal event in the development of
a truly competitive long distance business.  Since 1984, Judge Greene
has done an able job in enforcing the MFJ to ensure that providers of
long distance service compete on a level playing field.

   During the past ten years, the Commission has played an important
role in assisting the efforts of the court to increase competition in
long distance.  The FCC, for example, developed and implemented a
system of non-discriminatory access charges that permits competing
long distance companies to use the local telephone system to originate
and terminate their long distance calls.  This system requires the
Regional Bell Operating Companies ("RBOCs") and other local exchange
carriers to provide access to the local telephone network on a
non-discriminatory basis to all long distance companies.

   The Commission also oversaw implementation of the technological
changes to the RBOCs' local networks that enable consumers to select
their carrier for "1+" interstate long distance service instead of
being forced to use the incumbent monopoly carrier.  Although the MFJ
required the RBOCs to offer this "equal access" service, the
Commission extended a similar requirement to non-Bell companies
located in markets that competing long distance providers wished to
serve.

   Today, there are approximately 400 interexchange carriers, both
facilities-based and resellers.  Since 1986, the number of carriers
serving 45 or more states has grown from two to nine. The total long
distance market has grown from $38.8 billion in 1984 at the time of
divestiture to $59.4 billion in 1992.

   The introduction of long distance competition has been accompanied
by substantial reductions in toll rates.  For example, the price of a
10 minute daytime call from Chicago to Atlanta, expressed in 1993
dollars, was $6.28 in 1984; today that same call costs only $2.30.

   Consumers responded immediately to this decline in rates.  In 1985,
AT&T carried approximately 133 billion of the total 167 billion
minutes of interstate usage.  Over the next eight years, AT&T's market
share steadily declined from over 80% to 60%, but its traffic volume
grew by about 60% to 212 billion minutes and the volumes of its
competitors increased more than four-fold to 138 billion minutes.

   The remarkable increases in long distance calling since divestiture
reflect two of the principal benefits that competition in the
telecommunications industry has produced over the past decade:
declining prices and increased usage of our telecommunications
network.  The more competitive telecommunications environment has also
led to an expanding array of new long distance calling plans and
services for consumers.

   Economic growth in the telecommunications industry over the past
decade has contributed significantly to improving consumer welfare in
this country and has played an increasingly larger role in the overall
domestic economy.  In 1982, the telecommunications equipment and
services sector generated approximately $94.6 billion ($143 billion in
1993 dollars).  By 1993, that figure had grown to $171.9 billion.  The
growth in the communications and information sector as a whole over
this period also has been impressive.  In 1982, the total sector
generated approximately $317 billion; $478 billion in 1993 dollars.
By 1993, the total sector amount had grown to about $718 billion.

   The history of the CPE and long distance markets over the past
decade shows that competitive markets serve the interests of consumers
by creating strong economic incentives for product and service
providers to reduce their costs, lower their prices, promote
technological innovation and respond quickly to changing consumer
demand.  The FCC played a critical role in the evolution of both these
markets by removing regulatory barriers to entry by new competitors
and taking steps to ensure that consumers would have access to
competing service providers.  The emergence of competition in these
markets was accompanied by a gradual relaxation of the Commission's
regulatory controls.  In the case of the long distance market, certain
of AT&T's services, most notably basic Message Toll Service used by
residential subscribers, remain subject to greater regulatory
supervision than other services, such as 800 service, because of
concerns that competitive forces alone may not be adequate to protect
consumers.  We intend to follow the same policy of promoting
competition while maintaining close regulatory supervision over
markets that are not yet competitive in carrying out our
responsibilities under the 1992 Cable Act.

   The goals of efficient competition and economic growth should
continue to guide the development of our policies for regulating
telecommunications common carriers and cable television systems.  The
reform legislation that you have proposed, Mr. Chairman, will furnish
the Commission with additional regulatory tools to further those
objectives.  As this bill recognizes, however, those goals should not
and need not be promoted at the expense of important social
objectives.

   Various segments of the telecommunications industry -- telephone
companies, long distance companies, competitive access providers --
support reform of our existing telecommunications laws because they
believe that it will advance their commercial interests.  The role of
the FCC, in my view, is to support legislative initiatives that also
will serve broader, public interest objectives.  This bill represents
such an initiative because it charges the FCC with promulgating rules
that will enhance the accessibility of classrooms, health-care
facilities and libraries to advanced telecommunications services.

   Promoting the widespread accessibility of such services to
students, health-care professionals and their patients, and the
general public is sound public policy.  Accomplishment of that
objective offers the promise of enduring benefits that would result
from a better-educated workforce, nationwide access to w advanced
health-care services, and public accessibility to a wide array of
information services, including government services.

   I also think it important that this goal is established at a time
when much of the design of the network needed to provide these
services is still in the planning stage.  I believe that the cost of
achieving this objective will be significantly reduced if it is
included as part of an overall plan for delivering advanced
telecommunications services to the public.

   In sum, Mr. Chairman, this bill addresses three essential aspects
of the reform of our telecommunications laws.  The bill returns to the
Congress principal responsibility for formulating national
telecommunications policy.  It furnishes the Commission with the
legislative mandate necessary to open markets that have been dominated
by a single provider and to foster competition in those markets, while
ensuring that consumers are protected during the transition.  And it
makes explicit this nation's commitment to ensuring that all Americans
share in the benefits that the emerging information economy will
offer.

S. 1822
I. Local Exchange Competition
   Entry

   I applaud S. 1822's objective of promoting competitive entry into
the market for local exchange and exchange access services.  The local
network is almost the only telephone market today that continues to be
dominated by a single provider.  The advent of new, wireless
technologies, such as Personal Communications Services ("PCS"), the
growing presence of competitive access providers, and the expanded
capabilities of cable systems create the potential for an effectively
competitive market for local telephone service.

   S. 1822 would eliminate governmental barriers to entry into the
local market that would undermine the development of competition for
local services.  The removal of these barriers should foster the
continued development and deployment of advanced, reliable
technologies.  New entrants can be expected to both utilize and
compete with the service offerings of the local telephone companies.
The introduction of competition for local services on a broad scale
also will create strong incentives for competing firms to increase the
pace of technological innovation, develop new services, and reduce
their cost of providing service.  All of these efforts will contribute
to economic growth by stimulating demand for telephone service.

   Safeguards

   S. 1822 correctly recognizes the need for safeguards to ensure that
new entrants can interconnect their facilities with the existing local
networks.  Although Section 201 of the Communications Act of 1934, as
amended, currently empowers the Commission to order common carriers to
offer interconnection to other carriers, the bill's explicit treatment
of reasonable non- discriminatory access and interconnection issues
properly highlights their importance in a world of many
facilities-based telecommunications service providers.
Interconnection and interoperability are essential to the full
realization of the benefits that vigorous competition in the local
exchange market can produce.

   S. 1822's proposal to require exchange carriers to offer
interconnection at any point that is "technically and economically
feasible" establishes a workable standard for the FCC to apply in
formulating regulations to govern interconnection arrangements.  Many
of the issues identified in S. 1822 related to unbundling, access, and
interconnection, however, involve considerable technical complexity
and implicate network reliability and integrity concerns.  We would be
pleased to work with the Committee staff in refining and clarifying
these sections of the bill.

   Regulatory Flexibility

   I am pleased that the bill gives the Commission forbearance
authority.  The Commission's exercise of its limited existing
forbearance authority under Title II has produced substantial
benefits.  The permissive detariffing policy contributed to the
development of a competitive long distance market, and more recently
to the emergence of competition for access services.  I share the view
expressed in S. 1822 that inter-carrier compensation arrangements and
flexible regulation for non-dominant and, at the appropriate time,
formerly dominant carriers will be critically important to fostering
local exchange competition.

   New carriers entering the local market to compete with incumbent
telephone companies need the discretion to package and price their
service offerings so that they are attractive to potential customers.
By the same token, as competition increases the incumbent telephone
companies will require pricing flexibility to respond to competitive
offerings.  This legislation would grant the Commission the discretion
necessary to manage this transition.

   Preemption

   Another merit of S. 1822 is that it would authorize the FCC
to preempt any state regulation of entry or state policies that
restrict the exercise of interconnection or access rights
provided by the bill or the FCC's implementing regulations.  I
think it would be advisable to extend preemption to inconsistent
state rate regulation requirements.  Rate regulation of non-
dominant service providers may hamper their ability to compete
effectively with the incumbent carrier.  By the same token,
continued rate regulation of previously dominant carriers may
prevent the local market from becoming effectively competitive.

II.
Universal Service

   Enthusiasm for promoting new competitive markets and encouraging
new technologies and services must not distract our attention from the
critical task of ensuring that all Americans have access to basic
telephone service.  Currently, approximately 94 percent of all
American households have telephones.  That is an impressive, but not
completely adequate, achievement: almost 6 million households do not
have active telephone service.  Furthermore, a disproportionate
percentage of households without active telephone service are
low-income, particularly African-Americans and Hispanics.

   The continued deployment of new telecommunications technologies
capable of delivering a wide range of advanced services will require
the FCC and the states to address on an ongoing, evolving basis
whether access to basic dialtone (voice grade) service should continue
to be the only goal of universal service.  I share the authors' view
that it is imperative to redefine the term "universal service"
periodically over time, as technology advances.

   In my view, the FCC and the states must work together to formulate
and administer a consistent, national universal service policy.  S.
1822 assigns to the states the "primary responsibility for defining
universal service."  It may be worthwhile to consider, in particular,
whether this approach is the most effective for establishing a
national universal service policy and, more generally, what the
respective roles of the FCC and the states in this process should be.

   In addition to embracing an evolving definition of universal
service, it is also quite appropriate for the bill to impose the
obligation of contributing to universal service "on a competitively
neutral basis."  This principle is fair and consistent with promoting
competition and efficiency.

   As I discussed earlier, I share the view of the authors that
telecommunications has a vital role to play in the education of our
children and the provision of high quality health care services.  I
applaud the provisions of the bill that direct the FCC to promulgate
rules that will "enhance the availability of advanced
telecommunications services to all public elementary and secondary
school classrooms, health care institutions, and libraries."


III.

Modification of Final Judgment

   The MFJ prohibits the RBOCs from engaging in certain
telecommunications businesses, most notably the provision of interLATA
interexchange services and the manufacturing of telecommunications
equipment.  Initially, the decree also barred the RBOCs from providing
information services, but the court eliminated this prohibition in
1991.

   Since the divestiture of AT&T in 1984, the structure of the
interexchange and equipment markets has changed substantially.
Although AT&T continues to control by far the largest share of the
interexchange market, there are now hundreds of domestic interexchange
carriers.  Further, over the past decade MCI and Sprint have become
established nationwide competitors.  Competition in the telecommunications
equipment market also increased during this period, as the RBOCs and
other exchange carriers substantially increased their purchases of
switching and other equipment from non-AT&T suppliers.  Moreover, the
development of effective competition in the local telephone market, as
contemplated by S. 1822, would limit the incentives and ability of the
RBOCs to engage in cross-subsidization.

   In light of the changes over the past 10 years, I agree with the
authors of S. 1822 that the time has come to develop a plan for
lifting the remaining MFJ line-of-business restrictions and returning
primary responsibility for regulating the practices of the RBOCs to
the FCC.  I also agree with the authors of this bill that any plan for
removing these restrictions must provide adequate safeguards to
preclude the RBOCS from using their existing market power in the local
exchange to undermine competition in the markets they seek to enter.

   RBOC Entry into Interexchange Services

   I support the objective of allowing the RBOCs, over time and
subject to appropriate safeguards, to provide interexchange services.
With their capital resources and technical expertise, the RBOCs have
the capability to increase the competitiveness of this market.
Consumers of long distance services would be the principal
beneficiaries of increased competition in this market.

   The bill establishes different standards for assessing RBOC entry
into interLATA interexchange services within and outside of the areas
that they furnish local exchange services.  I agree that the risk of
anticompetitive discrimination and cross- subsidization by these
companies may be greater in their service territories than in areas
outside of their operating regions.  The RBOCs continue to control the
local exchange bottleneck that long distance companies need to reach
their customers.  Moreover, the RBOCs may use the same trunking and
other plant and facilities for long distance service that they use for
local exchange and access services.  Joint use of these facilities
potentially could increase the risk that an RBOC might attempt to
cross-subsidize its entry into long distance by assigning costs
associated with interexchange service to local exchange ratepayers.
These concerns are diminished significantly in my view if the RBOC
provides long distance service outside of its region, whether over the
facilities of an unaffiliated company or over facilities used by an
affiliated company to offer cable television service or wireless
services.

   Mergers between RBOCs and out-of-region cable companies or wireless
services have the potential to advance competition in the local
exchange.  Allowing an RBOC to use out-of-region facilities owned by
an affiliated company for the provision of long distance service could
promote the use of the same facilities for local service as well,
providing competition to the local telephone company in that area.
Moreover, although the risk of anticompetitive behavior outside of an
RBOC's operating territory may be significantly lower, S. 1822 would
still require prior approval by the FCC before an RBOC would be
permitted to offer out-of-region interLATA services.

   I believe that it is appropriate for this legislation to exempt
from the general restriction against interexchange services certain
services that are clearly "incidental" to other services that the
RBOCs are permitted to provide.  Judge Greene granted waivers for
several of these types of services over the past ten years.  As a
result, for example, RBOCs currently are authorized to provide
cellular service in various areas that cross LATA boundaries.  In view
of the continuing evolution of technology and changes in
telecommunications markets, I would suggest that the Committee
consider whether the FCC should be given authority to identify other
"incidental" interexchange services that the RBOCs should be permitted
to provide.

   RBOC Entry into Manufacturing

   I also support S. 1822's objective of permitting the RBOCs to
engage in the manufacturing and provision of network equipment, and
the manufacturing of CPE, subject to effective and appropriate
safeguards.  RBOC entry into these markets can enhance competition,
promote continued technological innovation in CPE and other equipment,
and foster lower prices.  Further, their direct involvement in
research and development should facilitate the production of equipment
that is suited to each company's requirements and improve network
reliability.  Entry of the RBOCs into manufacturing, subject to
appropriate safeguards, should benefit both consumers in the equipment
market as well as the U.S. economy generally.  From telephones, to fax
machines, to wireless cellular telephones and pagers, telecommunications
equipment has become a ubiquitous presence in our lives.  Consumers
throughout the United States, residential and business, urban and
rural, would gain from the additional competition that the RBOCs could
provide in these markets.  The additional economic activity spurred by
their entry should benefit the economy as a whole.

   Our experience with long distance telephone service and CPE has
shown the tangible benefits to the economy and consumers that arise
with more competitive markets.  I believe consumers will realize
similar benefits in telecommunications equipment markets with the
passage of this legislation.

   As product and geographic markets develop and change, however, it
may be necessary for the FCC to adopt regulatory safeguards that will
protect consumers and competitors against anticompetitive practices
without hampering the ability of the RBOCs to compete.  Generally, I
believe that it would be wise to confer upon the Commission
appropriate regulatory tools to accomplish the legislative goals of
safeguarding competition and consumers.  I believe that the Commission
can and should be able to meet these goals under changing economic
circumstances by flexible implementation of both structural and
especially non-structural safeguards.

   Because the RBOCs currently are permitted to provide (although not
manufacture) CPE, the Commission has enacted regulations designed to
reduce the ability of the RBOCs to engage in anticompetitive practices
in this market.  The Commission's Part 68 rules govern the compatibility
standards between the network and CPE.  The "no harm to the network"
standard for compatibility has contributed significantly to making the
CPE market robustly competitive.  In addition, the Commission has
imposed a series of nonstructural safeguards to protect against
discrimination and cross-subsidization.  Specifically, the Commission
has adopted unbundling, network disclosure, and non-discrimination
reporting requirements on the RBOCs, as well as comprehensive
accounting regulations.

   The significant competition already present in current
telecommunications equipment markets provides an additional safeguard
to discipline the behavior of the RBOCs.  As competition among
communications equipment suppliers continues to evolve into a global
market, the potential for the RBOCs to cause anticompetitive harm will
diminish as well.

IV.
Competition in the Multichannel Video Distribution Market
   Entry

   The market for multichannel video distribution is dominated today
by cable television providers and I think everyone agrees that this
market should be opened to more competition.  The existing prohibition
that bars telephone companies from providing video programming to
customers in their telephone service areas should be repealed.  It is
very appropriate, therefore, that S.  1822 would remove this
restriction and allow local telephone companies to compete with cable
companies in providing one-way and interactive video services.

   Direct, facilities-based competition between cable and telephone
companies will produce substantial benefits for the American public.
Competition in this market will spur the deployment of advanced
technologies that are capable of delivering the full range of services
that customers demand.  These services include not only entertainment
services, but also the growing number of educational, health, and
social services that are accessible over broadband technologies.

   In addition, competition in this market can be expected to produce
the same positive results for consumers that we have seen in other
markets for telecommunication services that have undergone the
transformation from monopoly to competition: technological and service
innovation, lower prices, and responsiveness to consumer tastes.
Telephone company entry also will expand the electronic marketplace of
ideas by creating new outlets for video service providers.

   As you know, Mr. Chairman, the FCC already has taken steps to
enhance competition in the multichannel video distribution market.
Within a few months, U.S. consumers will be able to receive
programming from a Direct Broadcast Satellite service.  This service
is capable of delivering scores of channels of video programming
directly to homes and office equipped with 18-inch dishes.

   In 1992, the Commission authorized telephone companies to
offer video dialtone service within their operating territories
through a basic platform that provides non-discriminatory access
to multiple video programmers.  Since the rules were enacted,
four telephone companies have received authorization from the
Commission to construct and operate video dialtone systems for
purposes of testing technology and evaluating consumer demand for
the services offered.

   Elimination of the existing cross-ownership restriction should
stimulate new telephone company investment in facilities that are
capable of delivering video and advanced telecommunications services.
Consumers should be the beneficiaries of the expanded choices that
facilities-based competition in this market will foster.

   The Committee may also want to consider authorizing the Commission
to adopt rules requiring both telephone company video affiliates, as
well as cable companies, to permit non-discriminatory access to their
systems by unaffiliated video programmers.  Establishing such a right
of access is likely to enhance the diversity of program sources
available to consumers and foster competition among video service
providers, including the owners of the facilities.

   Safeguards

   Adequate safeguards must be in place to ensure vigorous and
effective competition between telephone companies and cable companies.
In recommending removal of the prohibition against telephone company
entry into video programming in 1992, the FCC cautioned that certain
restrictions might be necessary to prevent potential anticompetitive
practices, including possibly a requirement that a telephone company
provide video programming to end users through a separate affiliate.
S. 1822 would impose this restriction and I support that approach as
an initial requirement.  I believe it would be useful to give the FCC
the authority to modify the scope and nature of the separate affiliate
requirements, including, for example, modifying the broad prohibition
against joint marketing, if a future investigation shows that it no
longer serves the public interest.

   In general, we should aspire not to impose unnecessary or
duplicative regulations that increase consumer rates and hinder the
development of fully competitive markets for telephony and video
services.  Thus, S. 1822 properly grants the Commission the regulatory
flexibility necessary to permit it to refrain from imposing
obligations that would undermine, rather than foster, the continued
development of competitive markets for telephone services.  I hope
that this Committee considers granting further regulatory flexibility
to the Commission so that it may refrain from imposing on telephone
companies that offer video programming requirements that may diminish,
rather than strengthen, competition in this market.

Conclusion

   Mr. Chairman, as your hearings continue, I will commit the very
able staff of the Commission to the task of commenting on and pursuing
the topics raised by the members of your Committee and the witnesses.
Our experts will be available to consult with members of the Committee
or their staffs.

   I thank you, again, Mr. Chairman, for the opportunity to appear
before this Committee and testify about these important bills.  I also
look forward to working with you and the other members of the Committee
as the legislative process moves ahead.  I would be happy to answer any
questions that you may have about my testimony.

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