To be successful, Arizona requires a twenty-first century telecommunication system. Such a system requires capable providers and significant capitol investment. Unfortunately, current progress to that end is hampered by a general malaise in the telecommunications industry, and specific current events. Qwest, the major provider of telecommunication systems in Arizona, is under significant financial pressure and faces investigations of wrongdoing. Build out of broadband internet service to Arizona's schools is only partially completed while costs far exceed projections. Worldcom, which calls itself "the pre-eminent global communications company for the digital generation," faces likely bankruptcy. If only for these three reasons, the next two to four years will be difficult for all concerned.

Arizona must foster competitive entrants into the telecommunications marketplace. Where competitive forces do not foster such a system the Commission must take the leadership to identify the specifications for such a system and aggressively seek providers. This is particularly relevant to areas outside of Maricopa and Pima Counties.

The Commission must work with all interested parties and inventory Arizona's telecommunication needs. Promised infrastructure improvements should be completed by incumbent providers and then areas of additional deficit identified. Whenever possible, all government entities in a region should coordinate telecommunication system purchases, not only to obtain economies of scale, but to make projects more attractive to potential providers.

Qwest should be allowed to sell long-distance services in Arizona when all competitive requirements have been met and when allegations of improper influencing of testimony related to their application (to become a long-distance provider) have been resolved.

Though I am not an economist, I do know that Arizona businesses require telecommunication systems at least equivalent to that in other states and nations in order to compete successfully. Because of its rate of growth, Arizona needs a rapidly expanding system in order to serve the needs of citizens and businesses in a timely fashion. As a result, the Corporation Commission places a high priority on the development of basic and advanced telecommunication services.

I believe the Commission (and all of the state's leadership) must clearly identify the specifications of the telecommunication system needed in Arizona and aggressively seek out providers. To the degree that the Commission streamlines its hearing and approval processes, the process of government will be less of a roadblock to business success.

This inventory of telecommunication needs should be a first step toward the formation of a broader strategic plan for Arizona's utility infrastructure, including the telecommunication component. Even though Arizona is evolving into a market based, competitive provider system, the leaders of the state must chart a course for the state as a whole. Like our system of highways, the key utilities (electricity, natural gas and telecommunications) are simply too essential to our success. The Commission's regulatory role will be an important factor in implementing the plan.

Electric service became available first in the capitals of government and finance. Radio and television broadcasts began in our larger cities and only years later became common in rural communities. In terms of technological innovation there is always an evolution that begins in the most economically vibrant areas and expands over time to rural and economically challenged areas. An example is the lack of cutting edge telecommunication infrastructure outside Maricopa and Pima Counties. The primary reason for this pattern is availability of capital for infrastructure investment. This pattern of evolution will be similar for current technological advances though the pace of buildout will likely be quicker than the historical norm.

The Commission, in cooperation with other state leaders, must first determine for Arizona a base level of service and then work to secure capable providers of this base level for all areas of the state where deficiencies occur. Priority should be assigned based on level of deficiency weighted by population density.

Historically, Universal Service has referred the policy of ensuring that basic services are available to everyone who wants them. It may refer to health, education, telephone, electricity, or any number of other services considered essential to quality of life by the proponents.

In Arizona there is a small fee (or tax) of about two cents on our telephone bill that goes into a fund to provide Arizona citizens in remote rural areas with access to basic local exchange telephone service (voice grade line with touch tone capability plus directory listing, 911, information, and accommodation for hearing handicapped and speech impaired). In essence, the fund subsidizes the cost of providing services in areas where population is low and thus cost of providing services is higher than in more densely populated urban centers. For Arizona's rural telephone consumers this has meant, in essence, that a portion of their bill is paid by the fund.

The fund contains about $1 million dollars annually, most of which is dispersed to Citizens Telephone in the White Mountains and Midvail Telephone (operating in several parts of the state.) Few companies apply for the funds because they are presently required to make application through an cumbersome and expensive rate case. One improvement that the Commission can make is to provide a less onerous means of applying for Universal Services Fund support.

We can consider subsidized residential rates and free inbound calls another benefit. The FCC has gone further and offers universal service support to: (1) telecommunications carriers in rural, insular, and high cost areas, where telecommunications services are often more expensive to provide; (2) low-income consumers, through the Lifeline program (which provides monthly reductions in service charges) and Link Up program (which provides reductions in initial connection charges); and (3) schools, libraries, and rural health care providers.

There are still regions of Arizona that have poor basic telephone service. My priority would be to complete the process of ensuring quality voice connections. Once that is achieved, we should look toward improving service such that data quality connections are obtained statewide.

Clearly, success of homeland defense is imperative. Electronic systems and data are targets for terrorism. Yet, the greatest threat is still domestic. Whether malicious mischief or vengeful assault, a great many non-military, non-terrorist individuals and groups seem determined to destroy our systems with denial of service attacks, virus infected messages, inappropriate access and use of systems, and other damaging acts.

First, Commissioners must make best use of all funds available for this purpose. The Sept. 11 terrorist attacks on the United States have created a wave of new government spending reminiscent of the space program in the 1960s or the savings and loan bailout of the 1980s. New federal outlays for homeland defense are expected to hit $57.2 billion by next year, and President Bush has made it clear the investment will continue for years to come. It will be up to government agencies to exercise extreme care in their buying decisions. The stakes are too high to waste a single penny.

Secondly, the Corporation Commission should participate with other state agencies, in particular the Government Information Technology Agency, in insuring our state's IT system is free from unacceptable risk. We must do all that is necessary to protect confidentiality of information, integrity of data, assets, efficient and appropriate use as well as system availability. Further, the Commission can cooperate with state and federal programs that offer early detection and warning of system intrusion and the dissemination of threat information. As to specific privacy protection policies, the essence of the Gramm-Leach-Bliley Act should apply universally. Every business has an affirmative and continuing obligation to respect the privacy of its customers and to protect the security and confidentiality of those customers' nonpublic personal information. They should establish appropriate standards relating to administrative, technical, and physical safeguards to:

1. insure the security and confidentiality of customer records and information;
2. protect against any anticipated threats or hazards to the security or integrity of such records; and
3. protect against unauthorized access to or use of such records or information which could result in substantial harm or inconvenience to any customer.

As a member of the Superior Court Committee to Study Public Access to Electronic Court Records I have come to the conclusion that different classes of information warrant different degrees of confidentiality. Clarification and formalization of a data policy by the Commission is an important first step. I would further support a legislative action that would review and suggest increased penalties for unauthorized us of personal data and information.

Key factors are timeliness and accuracy of the service, information, and advice provided. Timelines should be established for all major services. Benchmarks should be established for improvement where problems are found. The length of time that the Commission's procedures take should not unnecessarily burden business operations nor be the primary reason for choosing alternative courses of action.

Three important issues stand out at present. I will focus on these issues until they are resolved:

1. Oversight of Arizona's electric competition plan including a decision regarding Arizona Public Service's variance request.
2. Qwest's request for entry into the long distance market amid revelations that Qwest may have pressured competitors not to oppose the request and is facing potential criminal charges in other matters.
3. Defending against California's attempts to take a larger share of the natural gas flowing through Arizona from Texas. Encompassed within this issue are the needs for additional natural gas pipelines and storage facilities.

Commissioners serve as the representatives of Arizona citizens in dealing with large and powerful corporations. I will work to ensure the Commission's policies and actions are fair and provide benefit to all Arizonans.