Remarks of Commissioner Rachelle Chong to the Cellular Telecommunications Industry Association New Orleans February 1, 1995 Good morning. It is a great pleasure to be here at CTIA -- in New Orleans, one of my favorite food cities. By last count, I've been to six CTIA conferences, but this is my first in my new role as an FCC Commissioner. Funny, I'm much more popular this year! I feel that I am among friends here because I know so many of you. Before I came to the FCC, I used to represent cellular and paging companies in the San Francisco Bay Area. In my law firm days, I was the typical communications lawyer -- I wore suits and I talked in funny acronyms. The bad news is I still wear suits and I still talk in funny acronyms. The good news is that you now have at least one FCC commissioner who speaks your lingo -- you know, MTSOs, ESN/MINs, NPA, MFJ, dual NAMs, and CDMA versus TDMA. At the outset, I thought I would answer two timely questions that I'm told you have on your minds: One: Will there be a telecom reform bill this year? Beats the heck out of me, but I sure hope so. I had great expectations for a bill last year. I was quite disappointed when they ran out of time to work out their differences last year. My sources on the Hill this year tell me that there is great bipartisan support to update the 1934 Communications Act. I would welcome an updated law that would take into account how much the telephone industry has evolved from a monopoly to a competitive model. Two: Will the FCC be roadkill on the Republican version of the Information Superhighway? Darn good question. I'll first say that there is strong bipartisan support for bringing advanced telecommunications systems to our country. So I think the concept of an Information Superhighway is still alive and well on the Hill. As to whether the FCC is going to be roadkill, I do check the newspaper each morning to see whether I still have an agency. With all this government downsizing, I half expect that the Commission will be reduced from five to three Commissioners. Economics teaches us the principle of LIFO -- the last Commissioner in is the first out! Today, I came here to share with you what the view looks like from the seat of an FCC Commissioner who a year ago sat where you are now. That seat is hot. After eight months at the Commission, I can attest that it's a wild ride at this moment in history. The Information Age is already fast upon us, and we policymakers can hardly keep up. There are three "C" words that characterize what is going on at the Commission: competition, convergence and change. Your industry -- characterized by aggressive entrepreneurs -- is right in the middle of the action. You have always welcomed and thrived on competition. You are unafraid of the challenges and changes brought by convergence. Your industry has grown beyond anyone's expectations, as you post success after success in terms of the number of subscribers served. I salute your accomplishments to date. The Commission understands that your industry is important. We are working to streamline the regulations for the wireless industry so that you can continue to be successful. The Commission has had a busy year making significant changes in how we deal with our wireless licensees. Under the leadership of former Chairman Jim Quello and Chairman Reed Hundt, here are a few highlights of what has been done this year for your industry: * We created a Wireless Telecommunications Bureau that will deal with all of your industry's issues in a single place, instead of splitting them between two different bureaus. * We established licensing and auction rules for the next generation of wireless devices -- Personal Communications Services, or PCS. PCS promises to bring the concept of personal communications to new highs. * We have made a historic change from comparative hearings and lotteries to an auction method of licensing. We've conducted three auctions and are in the midst of our fourth auction. These auctions have been a huge success. They will license applicants faster than ever before, ensure that service gets to the public quickly, and, as a sidenote, will raise billions of dollars for the U.S. Treasury. * We also have reworked our rules to create a more level playing field among wireless competitors, such as cellular, SMR, ESMR and PCS providers. This work continues. * We have revamped our tower registration process to make it more efficient and centralized, and to enhance the safety of air travellers. We still have much to do at the Commission. Today, I would like to focus on some important issues for your industry, and give you a hint as to how I plan to approach these issues. Overview I can't really talk about your issues without giving you some context. As I mentioned earlier, the biggest themes that drive our decisions are convergence and the movement towards truly competitive communications markets. As you know, every day brings another set of headlines about mergers and joint ventures, technological breakthroughs, and speculation about new legislation. Everybody wants to get into the act. Telcos want to get into cable and long distance, cable wants to get into telephone, and satellite companies want to get into telephone and cable. But current laws and regulations sometimes act to thwart the benefits of free and full competition. I have come to see my overriding goal as encouraging and facilitating full competition in as many markets as possible -- as quickly as possible. Why? Because we know that competition leads to lower prices, better service quality, and more innovative service offerings. Look at cellular as a good example of how competition has brought a popular new service to Americans quickly and at reasonable rates. So, what I learned from my days as a cellular lawyer is that competition works. So, my primary goal as an FCC Commissioner is to work towards policies that allow any company to enter any sector of the communications services market and compete according to the same ground rules. I keep this overarching goal in mind as I address issues in a world where industries are converging. In my view, one problem that we currently face is an outdated law -- the Communications Act of 1934. For historical reasons, this Act regulates each segment of the communications industry in isolation of others. For example, certain rules govern broadcasters, other rules govern cable operators under the 1992 Cable Act, yet different rules govern common carriers. And those common carrier rules differ depending on whether it is a wired or wireless carrier! Yet, most communication players want to enter new lines of communications businesses and provide new competition to the incumbents. This convergence is driving the FCC's work to introduce competition in all markets. But our procompetitive policies are often constrained by the language of the 1934 Act, which does not give us enough latitude for all we would like to do. For true reform, we must look to Congress, although the FCC does not intend to stop its procompetitive work. I think most of us realize that the Act was a reliable old horse, but it's time to put it out to pasture. Under the Act, the historic ways in which we have regulated industries in isolation often don't make sense anymore. Both Congress and the Commission must have the courage and the foresight to rewrite communications policy with an eye toward open competition and ensuring a level playing field. The wireless industry is a perfect example of how some of these issues play out in the real world. It was born with two cellular facilities based providers per market. Competition was enhanced with cellular resellers, but not in all markets. The cellular industry suddenly faces fierce competition from new entrants: Enhanced Specialized Mobile Radio and the future PCS providers. This added competition will have great consumer benefits. But, each of these players entered the wireless market in a very different way. The cellular providers were licensed via a comparative hearing or lottery process and are regulated as common carriers. ESMRs, on the other hand, grew up out of a private radio service -- Specialized Mobile Radio -- which has very different rules from those imposed on the cellular carriers. Finally, PCS licenses are being awarded via auction. Although PCS providers will also be regulated as common carriers, PCS rules differ from cellular rules. Because of how this all came about, the ground rules by which all these wireless players operate are unequal. In August 1993, Congress passed the Omnibus Budget Reconciliation Act which, in part, sought to address the disparate regulation of cellular carriers and ESMRs. This law required the FCC to equalize regulation of substantially similar commercial mobile radio services. Last year, the Commission adopted new Commercial Mobile Radio Service rules which go a long way toward this goal. However, there is still more to do. For example, given our recent adoption of rules governing PCS providers, it is time to go back and review the cellular rules in light of these new PCS rules. Are there inconsistencies, and if so, do these inconsistencies make sense? What impact will ESMR and PCS entry have on cellular and what changes should be made to cellular rules? It is my understanding that the Commercial Radio Division of the Wireless Telecommunications Bureau is in the early planning stages of doing a side-by-side comparison of cellular and PCS rules. I support this endeavor. We want to hear the industry's suggestions about how we can improve our rules. There are several representatives of the Wireless Bureau here at the convention -- Gina Keeney, Chief of the Wireless Bureau; Roz Allen, Chief of the Commercial Radio Division, and others. I urge you to seek them out to talk and to give them your ideas. Local Zoning and Land Use Issue Another issue of great concern to me has to do with local zoning and land use issues related to the siting of wireless facilities. Having spent seven years representing cellular carriers before local agencies, I see this issue as a critical one to the future development of wireless communications in this country. Last night at your Board of Directors meeting, I got an earful from many of you about this topic. Without question, given the new ESMR systems and the PCS licenses, there can be many -- as many as seven -- new entrants in some markets. So, we can expect to see an avalanche of applications to local jurisdictions for permission to install new transmission facilities. In the case of the maturing cellular industry, I recognize the fact that the search rings for new fill-in cell sites are shrinking. This sharply reduces a company's options as to where it can locate a new cell site. It is increasing difficult to avoid residential areas. CTIA estimates that cellular carriers will need to add 15,000 new cell sites over the next 10 years to complete coverage and meet demand. That doesn't even include the 100,000 additional sites estimated for new PCS providers, or the thousands of sites that are planned by the ESMRs. You don't have to be a psychic to know how this scenario is going to play out: I predict that local and state governmental agencies will become completely overwhelmed by the sheer number of site applications, and substantial delay may result in obtaining necessary approvals. Some jurisdictions will decide they have enough wireless sites, thank you very much, and begin rejecting your applications. Further, I predict that some agencies will pass local ordinances or other policy statements that directly or indirectly act to keep your facilities out of their jurisdictions. In fact, this has already occurred in some areas. As Tom Wheeler noted in the Opening Session this morning, some local officials also may see wireless companies as a new source of revenue for their dwindling budgets. They may impose new surcharges on your revenues generated from sites located in their districts, or charge a tax on each cell site. What's the answer here? Well, one thing that can help to some degree is something the industry can do by itself. I learned it in kindergarten. It's called sharing. By this, I mean voluntary collocation as a way to ease some of the problem. Those of you who have site locations can offer to collocate with those who do not. Now, I can hear you grumbling already. I know that this isn't an easy thing to ask of companies who have already spent millions of dollars building their networks. And, I also know it isn't easy to ask fierce competitors, who compete on coverage area, to consider sharing their site locations. But, I urge you to collocate because of simple practical realities. Namely, with over 115,000 new sites to go in nationwide, local jurisdictions are simply going to demand that collocation occur. And I don't think this is unreasonable. When you make your case to local jurisdictions, it will help if you can say that you and your fellow wireless providers have tried to minimize the number of sites that are needed in that area. I encourage you keep working cooperatively with local jurisdictions. You well know that you are members of these communities. So, of course you will want to be a good neighbor, and be sensitive and responsive to their concerns about your transmission facilities. Many citizen objections still center on aesthetics; I encourage you to continue to strive for less obtrusive and more pleasing looking equipment. I commend those of you who have been cleverly hiding your antennas behind false parapets, on the sides of office buildings, on water tanks and mechanical penthouses, hidden in signage, or even in fake trees. Often, a big problem in the land use or zoning process can be the health issue that is raised relating to portable telephones. I recognize that the health issue is an emotional one which is still of great concern in many communities. It can be an impediment to your siting process even if you are able to show that the emissions from your facilities fall well within the safety standards set by ANSI, the American National Standards Institute. For example, I read an article reporting that in West Hollywood, California, two cellular carriers were denied sites because a woman testified that the emissions from cellular antennas killed one of her dogs and gave her other pets headaches. Elsewhere, a television station was denied a use permit for an antenna due to complaints about alleged radiation from nearby residents. It is reported that a member of an environmental group testified before the Planning Commission that because the ANSI standards were devised by a "former Nazi," they were clearly meaningless. This took place in Eureka, California. Hmm, California again -- there seems to be a disturbing pattern back in my home state. While those of us who have studied the scientific evidence may be amused at these incidents today, I do not mean to minimize the controversy or to denigrate citizen concern about the health issue. They want and deserve answers -- and I understand CTIA's Scientific Advisory Group is working with scientists to get those answers. I expect this work to continue apace, and look forward to updates on your progress. There are many federal agencies involved in the health issue besides the FCC. After all, the FCC does not specialize in health issues. I have encouraged the FCC to continue to be active in its work with other agencies to resolve this issue and help educate the public. Meanwhile, I urge you to continue your educational campaigns and funding of research to address the public's fears about RF emissions. We should ensure that facts, not emotions, guide our decisions in this area. Preemption Next, I want to talk a little about preemption. Traditionally, cell siting issues are handled at the local level. Up to now, this seemed generally appropriate, given that zoning and land use issues involve uniquely local issues, such as aesthetics and compliance with local building codes or other health and safety codes. However, as the demand for sites for wireless carriers continues to mushroom, I am very concerned about the ability of both incumbent wireless providers and new competitors to build out their networks swiftly. There can't be any doubt as to the national benefits of wireless communications systems. Moreover, PCS licensees will pay billions of dollars to the federal government for their licenses, which are regional and national in nature. I think it's fair for the federal government to ensure that these licensees are able to build their facilities throughout their service areas without undue delay imposed by local jurisdictions. For this reason, I believe the Commission has an important leadership role to play in the next year. As you may know, CTIA recently has filed a petition at the FCC seeking federal preemption of state and local regulation of tower siting for CMRS providers. CTIA has argued that siting regulations that function to preclude tower construction are in direct conflict with the federal objective of promoting commercial radio services and must be preempted. The petition raises several concerns that are worthy of note -- about the potential delay and added costs in the rollout of PCS and other mobile services due to local regulations. Let me fill you in on the status of this petition. It was placed on Public Notice on January 18th. This means the Commission put out a notice saying we had received this petition from CTIA, and solicited comments on the petition from any interested party. Comments must be filed at the Commission by February 17th. Anyone who wants to reply to the comments filed must do so by March 4th. Once this comment cycle closes, the Wireless staff will review the comments filed, and recommend to the Commissioners what action to take. The major issue will be whether the FCC has the authority to preempt state and local policy under the Communications Act. The FCC must balance the federal interest in ensuring the development of a competitive, efficient mobile services infrastructure against the legitimate interests of local governments in regulating local zoning matters. I do not wish to prejudge this issue, but I do believe that, at minimum, the Commission must enunciate in no uncertain terms, the important federal interest in ensuring the development of a nationwide mobile services infrastructure. I am open to considering whether the Commission may need to engage in further actions, including for example, limited or full preemption, or alternatively, adopting an expedited review procedure for licensees whose applications have been denied at the local level. I urge all interested parties-- especially wireless companies and local jurisdictions -- to file comments by February 17th. This is especially important for your companies to do, because without a compelling record on which to base a decision, FCC action is unlikely. RF Preemption There is a second preemption petition pending before the Commission dealing specifically with the RF issue. This petition, filed by the Electromagnetic Energy Association, asks the Commission to consider preempting local regulation of RF radiation emission standards that are inconsistent with FCC-approved RF levels. This petition is being considered as part of an ongoing proceeding dealing with guidelines for evaluating the environmental effects of RF radiation. Dr. Robert Cleveland of the FCC is in charge of this proceeding. It is my understanding that we will have a staff recommendation on the RF proceeding within the next month. Equal Access and Interconnection Two other issues pending before the Commission of importance to your industry are equal access and interconnection. In June 1994, the Commission issued a Notice of Proposed Rulemaking to address two issues: First, whether equal access obligations should be imposed on all cellular licensees; and, Second, what requirements should govern interconnection services offered by LECs to CMRS providers. The Commission also issued a Notice of Inquiry seeking comment on whether CMRS providers should be subject to any obligation to provide interconnection to other CMRS providers. On the question of equal access, the Commission in its June Notice tentatively concluded that requiring cellular licensees to provide equal access to interexchange carriers would serve the public interest. The Commission argued that it promotes customer choice and enhances competition in the long distance market. But I emphasize that this tentative conclusion was just tentative. It was based on our understanding of the current position of cellular service providers in the larger CMRS marketplace. As we all know, that marketplace is evolving rapidly toward a more competitive model. We are now in the midst of the first auction for broadband PCS licenses. When all of the PCS auctions are over, we expect to see at least three and up to six more competitors in each market. We do not know at this time precisely what new services will take hold, what new competitors will enter the CMRS market, or what new forms of competition will develop. I for one have an open mind about what may be appropriate as to equal access and interconnection issues given the evolving nature of the wireless marketplace. I have talked with many of you in the last day about how important these issues are to your industry. I promise to give these issues careful attention. Numbering Another issue that has come to the forefront recently that has significant implications for your industry is the administration of the North American Numbering Plan. At our January 12th meeting, the Commission issued a declaratory ruling articulating several overarching principles to be considered when administering the North American Number Plan. We then applied these principles to an area code relief plan proposed by Ameritech in the Chicago area. This plan was an effort to relieve an anticipated shortage of telephone numbers in the Chicago area. Ameritech's proposal would have required all cellular and paging customers in the Chicago area to use a new area code. In addition, these wireless carriers and their customers would have been required to return all previously assigned numbers in the existing area code to the exclusive use of wireline carriers. This would have resulted in the wireless carriers having to change every current subscriber's number. You know how much time and trouble would have resulted from the reprogramming of every customer's cellular phone. In our ruling, the Commission stated that numbering resources must be available to all communications service providers on a timely and efficient basis. Moreover, administration of a numbering plan must be nondiscriminatory and technology-neutral. So, the Ameritech proposed plan was held not to meet these principles primarily because of the discrimination between wired and wireless carriers. Ameritech's plan is the first of several relief plans that have been proposed, or are expected to be proposed, in other major metropolitan areas. Similar numbering problems are expected in California, Florida and Georgia. We hope that the Commission's action on this particular plan will provide guidance to all interested parties. We hope this decision will help your industry avoid being the victim of discriminatory number plans. Universal Service Another issue important to all communications providers as we move into a more competitive world is universal service. Many have asked how competition in the provision of local telephone service will impact on the FCC's bedrock principle of universal telephone service. Universal service seeks to provide basic telephone service to all Americans at a reasonable cost. Currently, long distance telephone companies pay into a central Universal Service Fund, which in turn subsidizes basic telephone service provided by local telephone companies with higher than average costs. I wanted to take this opportunity to state that I don't regard competition and universal service as mutually exclusive policy goals. The way I see it, competition spurs rivals to find more efficient ways to deliver services to consumers. Competition thus helps us achieve the universal service policy goal of providing widespread telephone service at affordable rates. The FCC currently has a Notice of Inquiry pending designed to more accurately target high cost assistance from the current Universal Service Fund to incumbent local telephone companies. However, I believe that Congress and both state and national regulators must address broader issues surrounding universal service as we move towards convergence and increased competition. For example, who should pay into a universal service fund? Should it be all communications service providers rather than just long distance telephone carriers as is now the case? And who should receive assistance from the fund -- just incumbent local telephone companies or new entrants, such as wireless providers, as well? If new entrants are permitted to draw on the fund, should they also assume service obligations traditionally imposed on the incumbent local carrier, for example "carrier of last resort" obligations? The "carrier of last resort" refers to the obligation of the local telephone carrier to offer service to everyone within their service area. While I still have much to learn about the intricacies of universal service, my gut reaction is that all competitors should pay into the fund, and any competitors should be allowed to draw from the fund insofar as it provides universal service. There may be places where, for example, a wireless provider could provide communications service more economically than a wired provider, particularly, in remote or rural areas. A wireless provider should have that opportunity to serve those areas, with the help of universal service funds. Recently, I have heard about a proposal to allow parties to bid to be the universal service provider of a particular high cost area. The lowest bidder would "win" the right to be a carrier of last resort, and could draw from the universal service fund. The idea is to ensure that the most efficient carrier provides service, thereby reducing the amount of the subsidy needed. I am quite intrigued with this idea, and look forward to comments on this proposal and other equally creative proposals. Back to the big picture. As competitive markets develop and new entrants emerge, I think that we must carefully reexamine our current notions of universal service and our existing mechanisms for subsidizing universal service. Such an important issue deserves vigorous debate and our most careful consideration of all the implications of proposed universal service mechanisms. Whatever path we choose, we should ensure that it does not impede the emergence of local competition. International Markets Briefly, I wanted to recognize the success of the wireless industry in bringing their services to international markets. One of my roles at the FCC is to help represent the FCC abroad. In cooperation with the Departments of State and Commerce, we encourage our foreign friends to open their markets to U.S. telecommunications companies. I had the interesting experience of visiting Japan and Singapore last year. There, numerous telecom ministers of various Asian countries reported to me in glowing terms that they had wonderful success with American companies who had built new cellular systems in their countries. They could not have been happier about how the systems had turned out-- they raved about the swift construction, the technical expertise and quality of service. As a result of your and other communications companies' successes abroad, the U.S. is perceived as a world leader in communications. Keep up the good work, and be sure to let our new International Bureau know if we can be of help to you abroad. Conclusion These are just some of the issues facing your industry as you contemplate your role in the unfolding Information Age. Your success has been a result of your courageous vision of a wireless future dating back to the Seventies. I wanted to tell you the story of how I became involved with wireless. Back in law school, I decided to specialize in communications law. One reason is that a kindly communications lawyer took me aside, and -- much like the kindly family friend in the movie "The Graduate" who tells Dustin Hoffman that his future is in "plastics" -- this lawyer told me the future was "cellular." Well, unlike Dustin Hoffman's character, who subsequently ignored the advice and got in some hot water with Mrs. Robinson next store, I heeded this lawyer's advice. I thought a lot about the idea of mobile radiophones, and as we say these days, I "got it" in a big way. Little did I know I would spend three years of my legal career working on cellular licensing appeals and then seven representing four cellular carriers. Now, I have the privilege to help shape national wireless policy. As I look back at the changes I have seen in your industry, I say with admiration, "You've come a long way baby." And it's abundantly clear to me that you are just starting to hit stride right now. There's a lot more wonderful innovative wireless services in store for America, given the visionary minds in this industry. The gauntlet has been laid down to your wired telephone competitors. Your success has made the traditional lines blur between the wireless and wireline telephone industries. With the new challenges of convergence and an even more competitive marketplace, I think you'll need to continue your role as cowboys of the electronic frontier. But we policymakers must also do our part to ensure that the competition is fair. I encourage decisionmakers -- both my colleagues at the Commission and those on the Hill -- to ensure that our policies take into account convergence and encourage level playing fields. We must have the courage to think creatively and without regard to traditional policy approaches that serve to constrain our vision for the future. We need to be open to new ideas by actively trying to look at the world in some way other than our usual way. In sum, we must have the courage that you exhibited to build a better future based on your vision. Thank you very much.