NEWS March 27, 1996
COMMISSIONER CHONG ENCOURAGES WIRELESS PROVIDERS
TO ENTER THE LOCAL LOOP "SOUP" AT CTIA CONFERENCE
At the Cellular Telephone Industry Association's (CTIA) Wireless '96 Conference on
March 26, Commissioner Rachelle B. Chong encouraged wireless companies to provide
competition in the local telephone market -- which she called "getting into the soup of the local
loop." She described some of the "ingredients" that Congress and the FCC were giving wireless
providers to help them enter the local exchange market including spectrum flexibility, reasonable
rates and terms of interconnection, unbundled network elements and number portability.
Analogizing spectrum to a "place to make . . . local loop soup" Commissioner Chong
stated that the FCC had made a significant amount of spectrum available and was in the process
of auctioning more spectrum. She said she supported flexible use of spectrum for fixed as well
as mobile uses because such flexibility encourages competition in the local exchange market,
promotes efficient use of the spectrum and enhances customer choice. The Commissioner
expressed concern that PCS licensees be able to quickly relocate microwave incumbents so that
they could begin providing new services soon.
Acknowledging the significant capital investments needed to establish a competing local
telephone company, she noted that wireless carriers should be able to combine pieces of their
network with pieces of the existing wireline telephone network to get into the local loop. She
expressed concern that the Commission's existing interconnection policies did not do enough to
encourage local loop competition. She reaffirmed her support for the adoption of an interim
interconnection policy because "the Commission ought to move quickly to establish sensible,
efficient, and fair interconnection policy."
Commissioner Chong described some of the ways that the 1996 Telecommunications Act
will make it easier for wireless carriers to obtain and permit sites, namely RF emisisons and
number portability. She encouraged carriers to make their local loop service more enticing to
customers by adding some spicy applications or offering a menu of services.
She noted, however, that with wireless providers' new status as a provider of basic
telephone service comes certain social responsibilities. She said that wireless providers may be
the most economically efficient universal service providers in rural, remote or insular areas.
She concluded by encouraging wireless providers to get out there and start cooking their local
loop soup, noting "If Yan can cook, so can you!"
Remarks of Commissioner Rachelle Chong
to the Cellular Telecommunications Industry Association
11th Annual Convention and Exposition
March 26, 1996
Dallas, Texas
Getting into the Soup of the Local Loop:
Wireless Competition in the Local Exchange Market"
Good afternoon. It is always a pleasure to be with my
friends at CTIA. I have here in my hand the speech I gave last
year. The big question we kicked around together was whether we
would have a new telecom bill. Well, that question is about as
useful today as a Pet Rock -- or discussing the virtues of new
Coke!
As you all know, the communications universe realigned
itself on February 8th. And one of the future benefits of the
Information Age is that it is going to be interactive. So I
thought I'd have an interactive moment in my speech. Here's a
trivia challenge: What favorite character from the hit Sixties
show "Laugh In" attended via cyberspace the signing of the
Telecommunications Act of 1996?
The answer is Ernestine the Operator. To be absolutely
clear for the Generation X ers that we have in this room,
Ernestine is not the dime lady, she s the lady with the bun who
used to say: one ringey dingey, two ringey dingey.
Anyhow, Ernestine really did surf in via modem from
Hollywood, and she livened up the signing ceremony by calling the
Vice President a "techno-nerd." She even flirted with the
President!
All kidding aside, it was a very exciting moment to watch
the President and Congress deliver to all Americans the keys to
the Information Age. And now it is in the Commission s hands to
implement the bill.
The big question that I keep getting this year is whether
the FCC will be able to implement the 1996 Act within the
statutory deadlines. My answer is that the Commission is ready
and up to the task -- although, if the crazy pace of the first
six weeks are any indication, we aren t going to be getting much
sleep this year. Just this once, I will agree with those that
describe the FCC as a sleepy little agency.
One of the key things the 1996 Act does is to eliminate any
remaining barriers to competition in the local telephone market.
And I don t have to tell this crowd that the local telephone
market is ripe for competition. Almost everyone who comes to
lobby me has a plan for getting a piece of the action.
And these plans are like music to my ears! I have always
believed that it would be this industry that would give ordinary
people like Ernestine more choice for basic telephone service.
You see, I envision a world where consumers have choices
galore for their communications needs. In this world, the paths
that deliver these communications services may be wired, wireless
or both.
I am sure you are all strategizing about how you can jump on
the local exchange bandwagon. How do we get from here to there?
Our current challenge is how to achieve the transition from our
current world to the pro-competitive, deregulatory world that
Congress envisioned.
Consistent with the new Legislation and the theme of CTIA
'96, I have entitled this year's speech Getting into the Soup of
the Local Loop: Wireless Competition in the Local Exchange
Market." Congress has given us a great recipe for getting you
into the local loop. So let's get cooking.
Spectrum
First, you need to have a place to make your local loop
soup. The government has granted you some spectrum in which to
cook -- uh, I mean to operate. Together, Congress, NTIA and the
Commission have already taken steps to make available more
spectrum for wireless applications. And we will continue our
efforts.
In addition to the cellular spectrum, the FCC has been
auctioning PCS spectrum, and 900 MHz spectrum. On deck for the
remainder of 1996 are auctions for the D, E & F blocks of PCS
spectrum, for LMDS spectrum and possibly for 800 MHz.
PCS Microwave Relocation
Okay, so you've got your place to cook your local loop soup,
but there's one little problem. There are already some other
cooks in the kitchen where you want to operate -- unfortunately,
no one as famous as Julia Child or the Frugal Gourmet! No, the
cooks slicing and dicing away in your kitchen are the microwave
incumbents. And you need to move them out of the way in order to
make your soup.
Now you can't just toss the microwave incumbents out of the
kitchen, because they've been cooking for a long time with great
success. You need to help them pack up all their pots and pans,
and move them to another kitchen that the FCC has waiting for
them.
Last April, relocation negotiations between PCS providers
and microwave incumbents began when we granted the A and B block
licenses. In October, we issued a Notice of Proposed Rule Making
that raised a number of issues geared toward ironing out some
wrinkles in the negotiation process to date. We have three big
tasks in this rulemaking proceeding: establishing a cost sharing
plan, creating a clearinghouse to administer the cost sharing
plan, and clarifying our existing relocation rules.
With respect to the first task, most people favor adoption
of our proposed cost-sharing plan. We proposed this plan because
it would let PCS licensees that pay to relocate microwave links
collect reimbursement from other PCS licensees that benefit from
the cleared spectrum. We are now working out the details of the
plan.
With respect to the second task, we are looking to the
industry to take the lead. We proposed that the clearinghouse
would be industry-supported. We are counting on the major PCS
players to get together and agree on the best way to implement
the plan.
The third task -- clarifying our relocation rules -- has
sparked the most controversy. Our existing rules provide for a
two year period for voluntary negotiations followed by a one year
period of mandatory negotiations. Public safety incumbents have
a slightly longer period.
Now that negotiations have been going on for almost a year,
we are hearing that, for the most part, deals are being made.
This is great news.
Nevertheless, I am still hearing from PCS licensees that a
small number of incumbents are not considering reasonable offers
to relocate. They tell me that a few incumbents are seeking
unreasonable premiums well over their costs to relocate. I am
concerned about these reports, and we are carefully considering
how to best address this issue.
We realize that you are anxious to start your local loop
soup. We intend to act very quickly so you can get your spot at
the stove.
Unbundling
Once you've secured your kitchen space, get out a large pot,
and take stock of what you have for your soup. Now, you may need
to buy some ingredients from some one else. You might need some
local loop call completion, some switching, or some transport
from another cook who's been providing reliable PSTN fare for
years. You might need some links from the butcher -- microwave
links, that is.
The ability to buy what you need for your particular soup
from others is critical to your ability to deliver local loop
soup to your hungry diners. You see, broad-based facilities
entry into the local exchange market requires significant capital
investment and will take many years to achieve.
I believe that carriers should be able to create a competing
local exchange service by combining pieces of their own wireless
networks with pieces of the existing networks.
For example, a wireless carrier may want to carry calls via
its system all the way to the central office, and then use the
telephone company's copper wire for the last mile to the
customer's home. In order to be able to freely "mix and match"
elements of the networks, the wireless carrier will have to be
able to purchase network elements on an unbundled basis.
The 1996 Act recognizes the importance of unbundling the
local exchange network. Section 251(c)(3) of the Act requires
incumbent local exchange carriers to provide nondiscriminatory
access to network elements on an unbundled basis "at any
technically feasible point." LECs must also provide the elements
in such a manner that another carrier can combine them to provide
a competing telecommunications service.
If you need to buy ingredients for your local loop soup, and
you probably will, it's important that you buy only what you need
at a reasonable price. Luckily, Congress agreed. Section
251(c)(3) also requires that the network elements be offered at
rates that are "just, reasonable and non-discriminatory."
The Common Carrier Bureau is working on a notice addressing
unbundling and related issues under Sections 251 and 252 of the
Act. We plan to issue the Notice within the next two months.
Interconnection
Now that you have your basic ingredients, the first thing
you have to do is make the soup stock. The stock is the base of
the soup; it is what holds the soup together.
Although it is not a perfect analogy, I think of
interconnection as the stock of wireless local loop. Just as it
is impossible to make good soup without a good stock, it is
impossible to create a viable local loop service without fair and
reasonable interconnection rates and terms.
On December 15 of last year, we issued a Notice of Proposed
Rule Making on LEC-CMRS interconnection. We were concerned that
the current interconnection policies may not do enough to
encourage the development of CMRS -- especially in competition
with LEC-provided wireline service. We were troubled by reports
that LECs refused to pay CMRS providers to terminate calls
initiated on the PSTN.
We were also told that CMRS providers are typically paying
about three cents a minute for interconnection, even though the
cost to the LEC appears to be closer to 2/10 of a cent per
minute. We were concerned that any significant delay in the
resolution of these issues would harm CMRS providers.
We tentatively concluded that, on an interim basis,
interconnection rates should be priced on a "bill and keep" basis
-- in other words, that both the LEC and CMRS providers should
charge a rate of zero for termination of traffic on each other's
networks.
Well, this tentative conclusion on bill and keep really
woke up the local exchange carriers and must have gotten their
economists creative juices flowing. All of a sudden, I began
getting visits from telephone companies who are very upset about
our proposal to use "bill and keep" as an interim policy.
There are a number of difficult issues in this proceeding.
As a threshold matter, we must decide what the impact of the Act
is on our current LEC-CMRS interconnection proceeding. We must
also decide whether the Commission has jurisdiction to establish
requirements for interstate and intrastate interconnection.
We need to decide whether an interim interconnection policy
is needed and if so, what it should be. Finally we need to
decide on a long term interconnection policy.
I supported an interim approach because I think the
Commission ought to move quickly to establish a sensible,
efficient, and fair interconnection policy. We thought that
"bill and keep" should be that interim policy, because it is
economically efficient, keeps incumbent LECs with market power
from charging excessively high rates, and is administratively
simple. Thus it could be implemented quickly.
I remain open, however, to considering suggestions for other
proxies to cost that we should adopt as an interim or long-term
approach. I stress though that what I am looking for is a proxy
to cost -- not cost studies. In my view, cost studies may impose
too much delay and administrative burden, in an area where we
need quick action to promote competition to the local loop.
Interconnection delayed may be interconnection denied.
It is my hope that the approaches outlined above will be
transitional. A government-imposed proxy model for cost may be
appropriate at these early stages. However, as competition
increases, negotiated agreements may be adequate to achieve our
policy goals. In the long term, we will need to monitor our
interconnection decisions and revisit our policies when
necessary.
Siting, Local Land Use Issues and RF Emissions
Back to the kitchen. Let's assume that you have worked out
getting what you need from other cooks, and have your stock
simmering away on the stove. But it will be a pretty boring soup
without something in it.
Well, the good news is that Congress arrived in your kitchen
with a big bagful of yummy things to put in your soup. But
instead of carrots, celery and onions, they have delivered to you
Section 704 of the Act. This section will help you get sites
more easily.
In Section 704, Congress confirmed that jurisdiction over
siting of CMRS facilities remains with the local agencies,
subject to some important limitations. For example, locals can't
impose moratoria on construction of wireless facilities.
In addition, they have to treat PCS providers the same as
cellular carriers, and they have to treat wireless providers of
the local loop the same as the local telephone company.
State and local governments must act on permit requests in a
reasonable amount of time.
Finally, local agencies are prohibited from regulating the
placement or construction of wireless facilities on the basis of
the environmental effects of RF emissions.
Congress directed the FCC to complete its action in its RF
Emission docket by August 8, 1996. I realize that you've been
waiting a long time for this decision. Our staff tells me that
they are close to making their long awaited recommendation to the
Commission. Over the last few weeks, they have been meeting with
other federal agencies who have expertise in the areas of health
and safety, as well as industry representatives, to work out a
few remaining issues.
I know there are strong feelings about which standard
should be adopted. The industry has supported adoption of the
1992 ANSI standard. The EPA and some other federal agencies have
expressed concern about some aspects of the ANSI standard -- for
example, in the higher microwave frequencies -- and have
advocated adoption of some of the power density guidelines
recommended by NCRP.
The Commission does not have expertise in the area of health
and safety matters. Therefore, we must carefully consider the
views of other federal agencies who do have more expertise in
these areas.
However, the Commission has successfully used the ANSI
standard for over ten years. It was the standard proposed in the
notice and recently adopted for PCS licensees. And I personally
have worked with the ANSI standard and feel comfortable with it.
Accordingly, I look forward to hearing from those other
agencies who feel that we should change our standards.
The good news for all concerned though is that it appears
that the RF emissions from wireless facilities are well within
the exposure limits prescribed by both ANSI and NCRP. I am
pleased that the industry is continuing its research on the
effects of RF emission and encourage it to keep up the good work.
The other good thing that came in Congress' bag of goodies
is that they have made it easier to find a site. Section 703
requires all utilities to make their poles and rights-of-ways
available to any telecommunications provider at reasonable rates.
Section 704(c) essentially codifies an existing Presidential
memorandum on the use of Federal properties for the siting of
wireless facilities. I understand that GSA has recently issued
draft guidelines on this issue. The guidelines state that each
federal agency should revise its commercial leasing policy to
ensure it fully supports antenna siting. Agencies are encouraged
to act on siting requests in as soon as possible, but not later
than sixty days.
CMRS Flexibility
Now, so far you've got your stock, your vegetables and now
you need your carbohydrates. As a gourmet chef, you don't want
government to decide whether you should use noodles, rice, or
potatoes in your local loop soup. You want to be able to choose
what to put in, according to the tastes and preferences of your
diners.
If you are confused, I am talking about the request of CMRS
providers for spectrum flexibility. Some of you have asked for
additional flexibility to use your CMRS spectrum to compete with
wireline telephone companies.
We started a proceeding to address this issue in January.
We proposed that broadband CMRS providers be permitted to use
their spectrum to provide wireless local loop. We also proposed
to regulate fixed wireless services as CMRS so long as the
carrier also offers mobile services.
I supported these proposals because I believe that giving
carriers more flexibility as to spectrum use has many benefits.
It encourages competition in the local exchange loop. It also
promotes efficient use of the spectrum and enhances customer
choice.
Some concern was expressed by the states and the wireline
telcos about allowing fixed wireless local loop services to be
regulated in the same manner as mobile services. I share this
concern.
However, I think CMRS providers need some regulatory
latitude to develop wireless local loop services. Why? Because
I think wireless local loop will provide much needed competition
in the local telephone market.
Our goal is to issue a decision on this matter before our
remaining PCS auctions begin this summer. We want prospective
bidders to be able to factor this into their bidding strategy.
Spicing up Your Soup
Now your soup has lots of good things in it, but the big
question is, what are you going to do to your soup to make people
want to eat your soup, as opposed to other soups?
Now, when I learned to cook from my mom who was a good
cook, she always told me that spice is nice. So I've always
added to my dishes parsley, sage, rosemary and thyme. Hmm, maybe
that wasn't my mom's influence; maybe that was Simon and
Garfunkle.
Anyway, my Aunt Blanche, also a good cook, always advised me
to make lots of different dishes so people could pick and choose
what they want.
Some of you might follow my mother's advice and add some
spicy applications to your local loop services -- like those Mark
Porat of General Magic was showing us yesterday. Others may
adopt my Aunt Blanche's approach of offering a broad menu of
mobile and fixed local and long distance wireless services to
meet your customers' needs.
Of course there may be those of you who choose to ignore the
sage advice of the good cooks in my family and serve plain soup -
- but I warn you, the women in my family are never wrong when it
comes to food!
Number Portability
Once you've made up your mouthwatering soup and it's
attracted attention from a horde of hungry diners, you need to
make it easy for people to dish up your soup. You don't want to
make them buy a special ladle just to get your soup. You want
them to be able to use the ladle they already have and are used
too.
To make it convenient for your customers to choose your
wireless local loop services, the subscriber must be able to use
their current telephone number.
Number portability is crucial to your ability to compete
with LECs. Customers will not want to change their telephone
numbers when they change providers. Section 251(b)(2) of the Act
imposes an obligation on all LECs to provide, to the extent
technically feasible, number portability, in accordance with
requirements prescribed by the Commission.
Responsibilities as a Local Loop Provider
I hope what I have described this afternoon gets you excited
about the many opportunities for the future -- or at least
inspires you to go home and make some soup. However, with your
new status as a provider of basic telephone services comes
certain social responsibilities.
It has always been my contention that many unserved or
underserved communities could better be served by wireless
telephone service. Congress must have agreed. Section 254 of
the Act clears the way for any communications provider to become
a universal service provider.
In unserved areas, it allows the government (state or
federal) to choose a universal service provider and order them to
serve an unserved community. In my view, the provider chosen may
well be a wireless provider because your systems often are the
most economically efficient in rural, remote or insular
situations.
I hope that the wireless community will be active in our
universal service docket and be ready to serve its community, as
you have done so very well in emergency and other disaster
scenarios to date.
In this regard, I would like to echo Commissioner Ness'
praise of CTIA and the public safety community for reaching a
compromise on E911. The advancements in location technology that
flow from that agreement will provide a great public benefit.
Recently, however, the industry has gone beyond its
traditional role of disaster do-gooder and has begun providing
public service to their communities.
For example, I am pleased about CTIA's work on the Flathead
Indian Reservation in Montana. The CTIA Foundation provided the
Tribal Mental Health Program with cellular phones and wireless
modems that put those workers in immediate touch with doctors,
law enforcement officers, patients and their families. This
means that mobile health care workers can instantly receive
treatment authorizations and access patient histories.
You also do outstanding work in the classroom. The benefits
of the ClassLink program were readily apparent from the
enthusiasm of the students, their teachers and principal at
yesterday's demonstration.
I encourage you to continue to work with your communities
and increase the services you provide. I look forward to hearing
more success stories.
At the opening session yesterday, Jim Dwyer talked a bit
about the opportunities and challenges of this new era. He said
that the question was whether Congress and the FCC could continue
to support the industry's open competition.
Although I cannot speak for Congress, I can say that the
Commission has every intention of implementing the Act in a way
that encourages competition -- especially in the local loop soup.
So get out there and start cooking! If Yan can cook, so can you!
Thank you very much.