SPEECH BY REED HUNDT CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION NETWORK RELIABILITY COMFORUM WASHINGTON, D.C. (AS PREPARED FOR DELIVERY) APRIL 18, 1996 INTEROPERABILITY: THE FOUNDATION OF COMPETITION I want to begin by thanking Bob Janowiak and the International Engineering Consortium for hosting this symposium. This is the second time that IEC has provided the Network Reliability Council a forum to discuss its findings. Two years ago, the Federal Communications Commission asked the Network Reliability Council to investigate and report to us on a number of areas of concern. We asked the Council to focus on ensuring continued high reliability of the network while permitting even greater network interconnection and interoperability. Things we wanted to know included: -- what options do providers of emergency services have to make their telecommunications services more secure; -- whether there are geographic or demographic variations in the reliability of telecommunications networks; and -- what could be done to promote the use of telecommuting services during emergencies. We also wanted the Council, representing technical experts from service providers and service users, to tell us and the American public whether there are reliability risks that are raised by the new technologies and interconnection arrangements that we believe are coming, and what could and should be done to address those risks. The Council has provided answers to these and other questions. On behalf of the Commission and the public we represent, I want to thank each of you for the work you put into that effort. The Council has offered specific recommendations to facilitate that process. Those findings will be a point of reference in the future. The Council's reports are particularly timely because the Commission is working to implement the Telecommunications Act of 1996 and to usher in an era of a network of competing local networks. Congress passed and the President signed the Telecommunications Act of 1996 to give communications companies a more competitive, deregulated playing field on which to compete. The new law assumes that all parts of the communications marketplace can be made competitive. The goal of the new law is to let anyone enter any communications industry -- to let any communications business compete in any market against any other. The goal is to remove the legal and economic obstacles that have frustrated competition for too long. What the FCC has to do now is to write fair rules of competition. These should be simple, clear, and easily understood. That's what we are doing. We will shortly issue our Notice of Proposed Rulemaking to begin to establish competitive rules of the road. We are also moving rapidly to implement the law's mandate that universal service be provided to all Americans, and to our nation's schools and rural clinics. But you can't have a world of interconnected competing networks without some standards that ensure interconnectivity, reliability, and interchangeability. Congress addressed this job in Section 256 of the new law. It is the technical foundation for competition. We need the NRC to help us implement Section 256. Section 256 is designed to promote three primary objectives: 1. nondiscriminatory accessibility by the broadest number of users and vendors of communications products and services through coordinated public telecommunications network planning and design; 2. network interconnectivity and the interconnectivity of devices with the networks; and 3. the ability of users and information providers to seamlessly and transparently transmit and receive information across telecommunications networks. The scope of the statute is very broad. It applies to telecommunications carriers "and other providers of telecommunications service." And it applies to devices that are interconnected with such networks to provide telecommunications service. Under Section 256, we must establish procedures for oversight of coordinated network planning. We also may participate in industry standards-setting in a manner consistent with our prior authority. Congress is telling us that while competition and market forces generally can be relied on to achieve the best economic outcomes, they may not be able to ensure connectivity and interoperability -- and connectivity and interoperability are things Congress wants preserved. Congress wants them preserved because they support and promote competition and the benefits that come with it, such as diversity of service offerings, lower prices, and innovation. Congress has stated this policy clearly, and it is requiring the FCC to be involved. We cannot rely on competition alone to assure connectivity in telecommunications. History tells us we cannot. In the very early part of this century, nearly half of the communities in the United States that had telephone service had competing service providers. Many residents had to have separate lines and telephone numbers for each service provider because competitors did not connect to each other. Some have argued that the main reason for this is because the government did not require carriers to interconnect. Some have identified technological reasons, including incompatibilities between some independent local exchange networks and the Bell telephone network. Whatever the reasons, competition earlier this century did not bring interconnectivity. Congress and the FCC anticipate an increasingly competitive future. And Congress wants the FCC to make sure that this increasingly competitive future includes accessibility, interconnectivity, and interoperability of communications products and services. It also wants to make sure that companies make their equipment and services accessible to people with disabilities. As for the issue of standards setting, the FCC has taken a variety of approaches. The FCC has consciously avoided standards setting in some areas, monitored standards setting in others, and participated in standards setting in still others. The FCC has even set detailed standards, such as in the satellite, wireless, and wireline areas. Part 68 of our rules, which includes detailed standards for connection of customer premises equipment (CPE) to the network, grew out of the emergence of competition in the CPE market. We want and need your advice on how to oversee coordinated network planning. Which gets us to the Network Reliability Council. The purpose of a federal advisory committee such as the Council is to enable the government to obtain consensus expert advice from diverse sources. In the case of the Council, that advice comes from the folks most familiar with the operation of telecommunications networks. We want you to tell us how you, the stakeholders, the people who understand and operate networks, believe we should ensure accessibility and interoperability and oversee network planning. To this point, as the Council's report tells us, it is mostly a case of "so far, so good." The telecommunications network has grown to accommodate new technologies and new service providers. That network now includes more than 500 interexchange carriers, 1,500 local exchange carriers, and 1,000 wireless service providers. The existing standards processes have enabled us to connect these carriers and service providers, and more. We also have added thousands and thousands of pieces of customer premises equipment. But while things on the interoperability front have been good, we need to make sure we have truly competing networks. In other words, we need to do even better. How do we assure interoperability, and at the same time realize the primary benefits of competition -- diversity and choice? The Council's report tells us that leadership for the standards processes that has made this interoperability possible has been provided by the traditional telephone industry, and in particular, by Bellcore. We are grateful for Bellcore's contribution, but where will this leadership come from in the future? Will increasing competition brought on by the law tolerate continuing the historical leadership provided by the wireline telephone industry? This Council has wrestled with funding and resource issues. Where will the resources for future standards work come from? And how do you enforce voluntary standards? These are important questions because we are talking about the efficiency of an industry that constitutes nearly one-seventh of our economy: our telecommunications industry. We trust that more competition will make this industry even more effective. Section 256 asks that the Commission verify that trust. I want to thank all of you who have invested so much time and effort in the Council's work so far. And I want to particularly thank Dick Notebaert. Public service isn't always highly valued by private organizations -- or by anyone, for that matter. And I certainly know it isn't always risk free. But Dick devoted a great deal of his own time to this during a very busy time at Ameritech. He devoted even more time of one of his Senior Vice Presidents, Jim Eibel. But Dick has given at the office, and he has asked to step down. I have asked Ivan Seidenberg, Chairman and CEO of NYNEX, to lead the Council in the next important phase. Ivan and the Council need to tell us how to accomplish the goals of Section 256. That is your great challenge. The answers the Council provides will be enormously important for you, for us at the Commission, and for Congress. But they are most important for the American people. I look forward to working with Ivan and with all the rest of you as we proceed to chart new communications territory. Thank you. -FCC-