CCOONNNNEECCTTIINNGG TTHHEE GGLLOOBBEE:: A REGULATOR’S GUIDE TO BUILDING A GLOBAL INFORMATION COMMUNITY WILLIAM E. KENNARD Chairman FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, DC CONTENTS FOREWORD...............................................................................................i I. REGULATORY CHALLENGES AND OPPORTUNITIES ........................I-1 Establishing and Maintaining Regulatory Independence...............I-1 Regulation and National Goals.....................................................I-3 Essential Functions of the Regulator ............................................I-4 Overcoming Resistance................................................................I-6 II. THE U.S. MODEL...................................................................... II-1 The Federal Communications Commission ................................ II-1 The U.S. Department of Commerce ........................................... II-2 The U.S. Department of State .................................................... II-2 The Office 0f the U.S. Trade Representative .............................. II-3 State Regulatory Agencies ......................................................... II-3 III. COMPONENTS OF THE REGULATORY PROCESS AND ORGANIZATION OF THE FCC .............................................III-1 Characteristics .......................................................................... III-1 FCC Proceedings ...................................................................... III-2 Licensing .................................................................................. III-2 Enforcement ............................................................................. III-4 The Organization of the FCC .................................................... III-4 Budget...................................................................................... III-8 Useful Internet Links ................................................................ III-8 IV. THE FCC AND THE PUBLIC TRUST .............................................IV-1 Standards of Ethical Conduct....................................................IV-1 Conflicts of Interest ..................................................................IV-5 Post –Employment Limitations .................................................IV-6 Financial Disclosure .................................................................IV-7 V. COMPETITION IN TELECOMMUNICATIONS SERVICES .................. V-1 Benefits of Competition ............................................................. V-1 Policy Goals to Achieve Competitive Markets ........................... V-2 Effects of Competition in the Telecommunications Sector ......... V-2 Building a Telecommunications Sector as a Part of Economic Development............................................................. V-4 Methods of Introducing Competition in the Telecommunications Sector ................................................. V-5 Interconnection, The Key to Competitive Success...................... V-9 Regulatory Tools for Protecting Against the Exercise of Market Power During The Transition to Competition............... V-10 VI. UNIVERSAL SERVICE...................................................................VI-1 Universal Service and Universal Access Defined ......................VI-1 Principles of Universal Service and Universal Access...............VI-2 Universal Service Funding........................................................VI-4 Distributing Universal Service Support.....................................VI-5 Conclusion................................................................................VI-8 Further Information...................................................................VI-9 VII. SPECTRUM ALLOCATION, ASSIGNMENT AND ENFORCEMENT... VII-1 Spectrum Management ............................................................VII-1 Spectrum Allocation ................................................................VII-3 Public Interest Considerations..................................................VII-4 Market-Based Approach to Licensing ......................................VII-5 Financing for Spectrum Management.......................................VII-8 Spectrum Monitoring and Enforcement....................................VII-8 Useful Internet Links .............................................................VII-10 VIII. REGULATING SATELLITE NETWORKS: PRINCIPLES AND PROCESS VIII-1 What is a Satellite Network?.................................................. VIII-1 Licensing of Space Stations ................................................... VIII-2 Satellite System Coordination ................................................ VIII-4 The ITU Coordination Process............................................... VIII-5 The INTELSAT Coordination Process................................... VIII-8 ITU Conferences and Study Group Meetings ......................... VIII-8 Satellite Cost Recovery and Due Diligence ............................ VIII-8 Satellite Earth Stations........................................................... VIII-9 IX. THE INTERNET ............................................................................IX-1 Overview ..................................................................................IX-1 Ensuring a Truly Global E-Commerce Marketplace ..................IX-2 A Hands-Off Approach.............................................................IX-3 Principles to Promote Internet Infrastructure.............................IX-3 Policies to Foster Internet Services............................................IX-5 Conclusion................................................................................IX-7 Further Information...................................................................IX-8 GLOSSARY.............................................................................G-1 APPENDICES INDEX CONNECTING THE GLOBE FOREWORD The communications revolution is now sweeping the globe. Dynamic developments and innovations in communications technology are transforming our daily lives—from the way we do business, to the ways in which our children learn, and our health care is provided. In 1994, Vice President Al Gore challenged us to build a Global Information Infrastructure (GII) that would allow every nation to connect with the "information highway." In some parts of the world, the vision of a Global Information Infrastructure is fast becoming a reality. For those countries, improvements in technology are expanding the potential of individuals, industries, and communities to participate in the global economy in ways unimaginable only a few short years ago. Yet, for many developing countries, the vision of a GII remains a dream deferred. Throughout some parts of Africa, Asia, Eastern Europe and Latin America, many people have yet to make their first telephone call, and many remain unconnected to the global village. Although it is slowly narrowing, there remains a gap between the information “haves” and the information “have-nots” throughout the world. This gap is reflected in the disparity in the use of communications technology by developed and less developed countries. In order to eliminate this disparity, developed nations must reinforce their commitments to pursue productive partnerships with less developed countries and to provide assistance when necessary. All of us come from nations with long and rich histories. Speaking personally, I decided to become involved in telecommunications because of my father. From the time my father was a boy, he dreamed of designing buildings. He was fortunate to fulfill his lifelong dream. He became an architect. He designed buildings to bring communities together, especially those in poor African American communities. In fact, much of his work involved rebuilding communities destroyed by race riots during the Civil Rights Movement in the United States during the 1960s. He designed housing projects and community centers, and churches and hospitals. He always believed that one’s work should be woven into the fabric of building communities that include people of all nationalities, religions and colors – and that promote values that enrich us as a people. In a very real sense, we too are architects--designing and building a dynamic international community. We too are fundamentally involved in bringing people together, connecting communities with one another. Together we can continue to draft the blueprint for this grand, global economy where individuals, communities and nations can all participate. As Chairman of the Federal Communications Commission (FCC) I have sought to ensure that the revolution in technology is broad and inclusive, and that the notable progress CONNECTING THE GLOBE taking place in the telecommunications industry benefits all people, regardless of nationality, race or income. In this effort, I have been guided by four basic principles which I believe have global applicability, and may be particularly significant for developing countries: (a) privatization, liberalization and competition; (b) deregulation as competition develops; (c) universal access to communications services and technology; and (d) opportunity for underserved populations. § Privatization, liberalization and competition throughout the communications marketplace In order to build the modern telecommunications infrastructure significant private capital is needed. Privatization, alone, however, is not enough. Monopolies, even if privatized, are far less