The Internet Revolution.

Chairman William F. Kennard of the Federal Communications Commission speaks out about the future of telecommunications -- in excerpts from his speech "Regulation 2000" -- before the Summer 2000 session of the National Association of Regulatory Utility Commissioners, July 24, in Los Angeles.

In 1995, there were 3 million Internet users in the United States. Today, there are over 80 million, and 53 percent of households are on-line.

It took 38 years for us to reach that level of penetration for basic telephone service.

The Internet is the fastest-growing communications technology the world has ever known. The Internet has a voracious appetite for bandwidth. Data traffic is doubling every 100 days. Industry is scrambling to keep up with demand.

It has spawned an alphabet soup of new industries: dotcoms, competitive local exchange carriers (CLECs), data local exchange carriers (DLECs), and now, building local exchange carriers (BLECs).

Investment is up all across the board. After the 1996 [Telecommunications] Act, investment by incumbent local exchange carriers jumped approximately 20 percent. Aggregate industry investment after passage of the act, including both incumbent local exchange carriers and competing carriers, nearly doubled, increasing from $30 billion to $60 billion.

And this is just the beginning. The Internet is migrating to other platforms, such as wireless, cable, and broadcast.

A Worldwide Movement

The world also is taking notice of this revolution. One of the joys of my job is the opportunity to meet with my counterparts from all over the world. My meetings with them usually start with the formality. For me, it's sometimes a little unusual. There is often a translator who says, "His excellency, the Minister, is honored, that the esteemed Chairman of the Federal Communications Commission in the United States has sent his youngest son to meet us."

So they think I am a kid. But they are listening. They are listening because we have created a system that is the envy of the rest of the world. How? It did not happen by chance. It happened because we have the right regulatory system.

First, we established early a privatized telecommunications network and moved relatively early to break up the long-distance monopoly in the United States. We owe our thanks for this to Judge Greene [Federal Judge Harold Greene].

Second, we deregulated the customer premises equipment market before many of our foreign counterparts, so that anyone could plug in a fax machine, and later a modem.

Third -- perhaps the FCC's most important decision, we decided to leave the Internet unregulated.

To some degree, we were following our instincts: that competition drives innovation; and that there is a unique role for regulation to break open and keep open incumbent markets, and to allow entrepreneurs to innovate and grow.

Vice President Al Gore had the same ideas on an international scale. In 1994, he presented the best of what our country had learned during the early stages of the Information Revolution to the ITU Development Conference in Buenos Aires. Those recommendations were later incorporated into the World Trade Organizations Basic Telecommunications Agreement.

[He] laid out the principles for how each country can become part of a Global Information Infrastructure, or GII, a worldwide network of networks -- and how each country can participate in the new information economy. He said that the key organizing principle for the GII is competition -- multiple, privately-owned service providers that give consumers choices. In order to promote and police competition, there must be independent regulatory agencies with the power to bust up monopolies and the discipline to deregulate as competition takes hold. There must be open telecommunications networks, and government policies that embrace competition and the entrepreneurial spirit.

[In June], the European Commission (EC) issued a bold package of proposed legislation and directives aimed at bringing the Internet revolution to Europe. They took a page right our of our book that included line-sharing, local loop unbundling, collocation, and cost-based interconnection.

Some countries, such as New Zealand, are revisiting their efforts to deregulate through antitrust enforcement, and considering, instead, tools similar to those in the 1996 Act.

The world is embracing the principles pioneered ... in the United States.

Voice for the Voiceless

[The National Association of Regulatory Utility Commissioners] (NARUC) is the FCC's most powerful ally in the fight for the interests of the little guy. Regulators often fight those battles alone. Thank goodness we are allies, and thank goodness we are winning these fights.

One fight we are winning is for the E-rate program. The E-rate program has been tremendously successful. In three years it has invested $6 billion to connect schools and libraries to the Internet. As a result, 1 million classrooms will be connected by the end of this year.

Another fight we are waging is opening access to the virtual world to Americans with disabilities. We've had success in promoting closed captioning, hearing aid-compatible phones, improved telecommunications relay systems, and ... video narrative description for the blind.

Using the tools Congress gave us in Section 706 of the 1996 Act, we are also tracking and promoting advanced telecommunications services to the rural areas of our nation. Those efforts will fail unless we continue to work together. Past is prologue. We could not have made the progress we have without a state-federal partnership. A federal-state joint board did the pioneering work of drafting the blueprint for the E-rate.

The State-federal Partnership

In the fight for America's consumers, the states are often our most powerful allies. I am very proud to say that I believe we are working better today than ever before. The states and the FCC have become closer than ever because we at the FCC have come to better appreciate and have faith in your commitment to competition. We better appreciate that it is often the states that try different things and lead the way.

We've learned that when we are working in partnership - the commissions and the FCC industry cannot exploit our differences.

The sum total of this is simple: We have gained mutual respect. That is very precious indeed, and I am very proud of what we have accomplished together. We must continue this spirit of teamwork as we look to the future.

Convergence is our greatest challenge. It is challenging our jurisdictions like never before, and touching every aspect of regulation. We must ensure that convergence does not undermine the competitive gains we have made.

We must also have the courage to hold the line against mergers that threaten all of our hard work. We must help consumers navigate this transition from monopoly to competition without leaving anybody behind. It is important to maintain consumer confidence in this entire undertaking.

Turning Points

I believe the turning of the new century has also marked a real turning point in our work. It was a turning point when the telecommunications revolution produced the greatest unleashing of investment and innovation in our lifetimes. It was a turning point when people around the world discovered new ways to communicate -- ways that are dramatically changing the way people live, work, and learn.

It was a turning point when those of us in government discovered new ways to introduce competition, but also found the discipline to deregulate once competition took root.

It was a turning point when we recognized the power of technology to uplift all people and resolved that no one be left behind.

We are all so very privileged, because for the rest of our lives, we will be able to look back on this period in history - this extraordinary period - and know that not only were we there, but we did the right thing.

Not the convenient or easy thing, but the right thing.

We have fought the tough fight. And I, for one, will always be' very proud to say that we fought it together, with our partners in the states.

The Right Thing

Creating a strong telecommunications structure in the United States was not convenient or easy. But, according to FCC Chairman William E. Kennard, a system now exists that is the envy of the rest of the world because of the right regulatory system, in which the United States:

* Established early a privatized telecommunications network and moved relatively early to break up the long-distance monopoly in the United States.

* Deregulated the customer premises equipment market before foreign counterparts, so that anyone could plug in a fax machine, and later a modem.

* Decided to leave the Internet unregulated.