The Chong Legacy

Rachelle Chong has returned to her old stomping grounds in San Francisco. Her offices at Cordert Brothers in the Embarcadero Center actually are a stone's throw from Graham and James, the law firm where she worked before packing up in May 1994 for Washington, to serve as an FCC commissioner. She has returned to practicing international law in the private sector. Although she has returned, she is forever changed, having served on the commission during one of the most tempestuous periods in telecommunications history.

Before her commission work, you might say that Chong had seen it all in the wireless industry. She started working in cellular back in 1984. She watched the industry evolve from $2,000 handsets, early tariff negotiations and application licensing fights to a mature service that today includes PCS and next-generation services. This experience proved invaluable as she stepped into the role as commissioner.

Although she retired from the FCC six months ago, she still keeps an eye trained on activities of the new commission. You can tell she still feels a bond there. In fact, it is clear that the passions that drove her at the commission burn just as brightly now in the private sector. Her experience at the FCC obviously will be in her blood for a long time to come.

As she reflects upon FCC actions, then and now, she still uses the collective "we" as if she were still a commissioner.

"I haven't been able to shake it yet," she laughs. "I have still been making speeches where I am reflecting a commission opinion, and I have to consciously cross out 'we' and write 'the FCC'." She promises herself that she is going to break that habit in the next couple of months. Even as old habits die hard, her passionate advocacy for the FCC and its role in wireless continues to brim.

Chong stepped up to the role of commissioner at a dramatic time. The Telecommunications Act of 1996 passed just as she stepped on board.

"I was in dog heaven because it is a communications lawyer's dream to have a brand new statute and be the first guy to take a crack at what it means," she said.

TEMPERING THE WIRELINE MENTALITY Besides interpreting the Act, what does Chong see as her legacy? Chong said she personally tried to make sure there was fair and technologically specific competition.

"The biggest thing that we did there was to implement the Telecom Act through trying to fairly implement interconnection and universal service."

Because of Chong's 10+ years of experience in wireless before joining the FCC, she said she was sensitive to documents that strongly reflected a wireline mentality and a mindset of how to regulate them.

"One of the things that my office stood for during that process is that we kept looking at those decisions and saying, 'But does this work for wireless carriers?'" she said.

Chong claims this was important in anticipating the future, particularly for such evolutions as the wireless local loop.

"I wanted to make sure that any rules we put into place as to interconnection and to universal service would make sense when applied to wireless carriers, particularly when they became wireless local loop," she said.

However, according to Chong, it became a strong bone of contention on the FCC floor. She explained that one other commissioner usually agreed with her, while the other two took opposing views. Because there were only four commissioners at the time, the FCC didn't have a tiebreaker.

"We actually had a pitched battle over it, among many other issues," Chong said. "In the end, I feel that I got what I needed for it to make sense for the wireless industry."

According to Chong, the excitement of seeking the best for the wireless industry was tempered when the Eighth Circuit decision came down. One of the things the court upheld was the 332B jurisdiction that the FCC had retained. That was one of the sticking points that Chong had fought for during the negotiations. Although she said she was glad that it had been vindicated in a small way, she was disappointed with the balance of the decision.

"It was my opinion that we should not give up our 332B jurisdiction over wireless interconnection," Chong said. She explained that initially the staff and the chairman had recommended that the FCC do just that. "I thought that was not wise because a federal agency should never give up jurisdiction unnecessarily," she said. "It turns out I was right."

Chong advocated a more cost-based approach to interconnection so that it would encourage lower rates. What she has heard from carriers is that the rates are better, but that they continue to have difficulties in negotiations. Many still end up in arbitration.

She said many carriers are trying to do 50 states at once, which increases the difficulty.

"It is not going as well as I would have liked. The Eighth Circuit case certainly didn't help that," she said. "Onthe other hand, I think by setting some benchmarks, hopefully it has helped the carriers start negotiations at a more reasonable point than perhaps we had before the Act. But it is still an area of great concern for me. I know the current commission is very concerned with what is going on with interconnection."

Chong said she thinks the courts eventually will resolve the jurisdictional issues. She also said that for wireless, the federal agency still has the jurisdiction under 332B.

"I know that some BOCs disagree," Chong said. "Some states disagree, but generally I hope that part will stand up in court and that will result in lower rates."

She cited the current rates associated with PCS as a sign that her efforts have been successful.

"I think that is wonderful. Competition does tend to do that."

Calling-party-pays advocates suggest that it is another way to achieve lower rates. Chong recalled that Reed Hundt, former FCC chairman, was very interested last year in trying to get calling party pays in.

"I was not convinced absolutely that it was such a wonderful thing just because there are certain consumer expectations when you pick up a wireline phone to make a phone call that you are not going to be paying wireless rates if you are connecting to a wireless subscriber," she said.

Chong said there was a little preliminary activity regarding calling party pays. However, to move forward, she predicts that carriers will need to provide massive amounts of consumer education so consumers will understand the charges.

"I think rates would have to be coming down so that it is not a 30 charge a minute, but something lower," she said. "That would make it more palatable to consumers."

CARRIER VS. GOVERNMENT Chong recalled a specific panel discussion in which one carrier advocated calling party pays. He made an impassioned argument that calling party pays should be the way it is and questioned why everyone (including the FCC) was resisting it because, after all, that is exactly how wireline phones work.

"I looked at him and said, 'Look, don't tell me it is government's problem that we made you do this. Remember when the tariffs were first put in, they came from the carriers. You told us that you had to be reimbursed for all of the airtime because you were using the equipment when the call is placed as well as when the call comes through on the wireline side. So it is within your power to take that charge away if you decide that is the right thing, but don't act like the government made you do this because you guys did it yourselves.'"

She chuckled as she recalled how taken back the carrier was at the truth of the statement. She said she understood his position, but there needs to be a healthy argument about whether the benefits will outweigh the detriments.

Carriers obviously are interested in calling party pays because it will encourage consumers to give out their wireless phone numbers. However, Chong said she is not so sure consumers are clamoring for it.

"It is mostly from the industry because it recognizes that the movement is toward wireless local loop or having wireless as the primary phone," she said. "In order to do that, it makes sense to have calling party pays."

COMPETITION LOWERS PRICES For prices to decrease further, all of the licensed competition needs to be unleashed. However, a large segment of the initial PCS auction -- the C block -- has been slow to come to market. This leads to discussions of the evolution of the C block and the inevitable issue of headstart, about which Chong is still passionate. After her departure from the commission, C-block licensees were given a continuance and extension to choose their options for paying licensing fees.

"I regret that there was an extension because one of the things I thought was most important was for the commission to decide the issue, get the decision out as quickly as possible and to lend some certainty to the marketplace, and then move on," she said.

Admittedly, she commiserated with how the new commissioners needed time to study the issue and understand all of the nuances that went into making the original decision. But the delays have concerned her because in the meantime, the A- and B-block players have been blessed with a tremendous headstart.

She recalls the headstart advantage that wireline cellular carriers had over non-wireline in the formative cellular years. Despite being the second carrier and the delay experience caused by settlement issues, the non-wireline carriers were entering a formative market where coverage was just being established. Today, however, there is complete coverage offered by as many as four cellular and PCS carriers as well as the Nextel contingent.

"That is why I think we should have stuck to the rules because in an auction scenario, you really have to trust market forces to do it right," she said. "To try to bail out the C blockers who are having financial difficulties, whether through their own faults or not, did not serve the whole auction process and the idea of having a fast and efficient licensing mechanism."

TRIAL BY FIRE Chong said she is proud of the work she did on the auctions in general. Two weeks after she arrived at the FCC, the commission put out its first decision on auction rules and service rules for PCS.

"It was sort of trial by fire," she reminisced. "It was a lot of hard work, but I never felt so proud as the day we had the first PCS auctions. I was kind of slumming around over at the auction site, just to feel the excitement in the room, the charged tension. It was a special experience to be part of what I knew was going to be a very exciting next generation."

Chong said her service at the FCC was characterized by long hours and voluminous reading and preparation. Even though she thought she was conditioned for heavy workloads from her previously vigorous work at law firms, "nothing compares to the workload that we (the commissioners) had after the act passed."

Despite the hard work, she said she and her peers exhibited tremendous commitment.

"We had a certain esprit de corps, a certain feeling that we were doing something very important that I don't think I can ever match in private practice," she said. "Yes, I worked my tush off, but it was worth it because I know that I made a difference. I know that the work we were doing was important, and I would not trade that experience for anything."