Background on Information Superhighway 1993-12-20 Part 2 of 2

[David Farber <farber () central cis upenn edu>]

me say, if you look at the companies who are now making a living by
gathering taxi cab radio frequencies and bundling them together for
cell networks.  There's a great opportunity here to convert one form
of use of the frequency into another form that has a much better
economic potential.


             Q    One of the reasons the local phone companies have
been kept out of long distance, and it's obvious they're a monopoly,
how much of their monopoly do they have to lose in order for them to
be allowed into this new area?  I mean, is it 90, 80, 70, 60?


             SENIOR ADMINISTRATION OFFICIAL:  That's the same
question we got just a second ago.  The Justice Department will have
to be setting up those kinds of models.  The important thing is, are
we going to start the process of addressing that question and dealing
with proposals like Ameritech's and others who have said, we'll let
you into our area if you'll let us into yours.  And we have to
decide, what do we mean by effective competition before we let the
regional companies into other areas and prevent monopolies.



             SENIOR ADMINISTRATION OFFICIAL:  Let me give you another
perspective on your point.  I said that we're in a period of
transition that'll last a decade or more.  After all, the
Communications Act of '34 is now 50 years old -- 60 years old.  And
we're not in the legislation that will be considered this next year,
going to get to the point that you've stated.  But very, very
respectable people in the business and in the academic fields that
look at it, say that we're getting to the point where you really
ought to think of these different kinds of companies as bit companies
-- they're as bits companies.  And some of them sell them by over-
the-air broadcast, and some of them sell them by other kinds of
wireless technologies, and some of them sell them through wires under
the ground.  And that, ultimately, the point is that they're all
going to be selling bits, and they ought to all be regulated in a way
that recognizes it in certain fundamental ways that are in the same
business.


             Q    Is that going to affect newspapers having
restrictions on TV stations they can own and vice-versa, in the same
market --


             SENIOR ADMINISTRATION OFFICIAL:  Not the current
legislation.  The current legislation does not, and largely, I think,
because the system can only accommodate so much at any given time.
We really are in a period of transition.  But if you follow the logic
of what I just said, yes, ultimately.


             Remember, the fundamental switch that is occurring here
is from scarcity to plenty; that the reason why most of the
regulation has been in effect for so long is the basic underlying
assumption that the ways to the consumer were limited; and therefore
control over them was antithetical, both to the nature to our economy
and also to a democracy.


             If you've reached a point where spectrum space, because
of the many different ways of using over the air and also
fiberoptics, coaxial cable is essentially unlimited, then you begin
to reach a point where you care less about the nature of regulation
as it is now and you begin to look for a change.


             Q    Are there some companies -- I'm not an expert in
this -- but are there some companies like an AT&T or whatever that
are not going to care for this kind of change that you're talking
about?


             SENIOR ADMINISTRATION OFFICIAL:  The devil's in the
details -- if you went around to the industry and you said do you
subscribe to the -- any company through any network, any information
service to any set of consumers, everyone would agree.  It's in the
answering of the specific questions, like how do you judge
competition, what particular rules do you have in effect where people
are going to -- out.


             Q    Well, on that note, what specific provisions in
bills on the Hill do you like?  And could you talk about what you're
looking at as far as some of the subsidiary guidelines, pricing
things -- what do you see up there that you like, and what might the
Vice President be endorsing?


             SENIOR ADMINISTRATION OFFICIAL:  Well, first of all, all
of the bills that are currently introduced on the Hill are a step in
the right direction.  They tend to compliment each other -- there's
some overlap.  There's very little contradiction.  You'd have to get
into the details to see some areas where there would be some real
disagreements.


             In his speech tomorrow, the Vice President -- well,
first off, the Vice President has spoken with the spoken with the

sponsors of all of the bills that are on the Hill in the last month
or two and has met with many of them personally, and has had an
interagency group that has been reviewing all of that.  Tomorrow in
his talk he will address where he would like to go with some of those
bills, although the administration proposal and which of the bills we
will incorporate and which provisions will be announced in the
January speech in Los Angeles.


             Q    That hasn't been decided yet then?


             SENIOR ADMINISTRATION OFFICIAL:  Some of the basic
principles -- let me put it this way -- the basic principle that we
are going to change our regulatory system to allow for -- to decrease
the restrictions on the cable companies, the telephone companies, the
information services provided by telephones and to provide for easing
of the MFJ, modified final judgment restrictions.  That decision is
clearly made.  The details of the architecture of how you do that and
the timetable under which you do that and the tests, both entry and
post-entry that you use to guard that, is still under discussion.


             Q    To what extent are you worried that deregulation
might have the same effect on the telecommunications industry that it
did on the airline industry or the breakup of the phone companies?


             SENIOR ADMINISTRATION OFFICIAL:  Well, first off, we're
not talking about instant deregulation; we're talking about a
transition period from a system that is well-known but not well-
working and a system that is not yet in place which we think will
provide much better market measures -- or market incentives for
competition and for in investment.  The difficult time is the
transition.


             And in that transition, you will still need to have
government regulation; you will always need to have anti-trust review
of the market as it exists to prevent monopoly advantage.  So, we are
not talking about a black or white situation.  We are talking about
walking a line between the current antiquated system and a system in
which market principles would apply except in those areas where
either geography or economic benefits create a monopoly that we find
unacceptable based on the values that the Vice President is going to
talk about tomorrow.


             Q    When you talk about easing the MFJ, are you talking
about letting the regional phone companies get into long distance --
because you know the fights that exist between the long distance
companies and the regional phone companies about crossing into each
other's territory?  So, are you just going to -- are you going to
open that up and say let's get rid of the MFJ, or are you talking
about contingent on something else you can get rid of this part of
the MFJ?


             SENIOR ADMINISTRATION OFFICIAL:  Well, remember we're
not operating in a vacuum.  The Dingell-Brooks bill lays out, for
instance, a timetable for the regional companies to get in on the
long distance going through certain entry barriers and Department of
Justice and FCC reviews.  We are -- we think that that provides a
very good model.  We are looking at how that could be incorporated.
We have some issues that we still need to understand about the bill.


             But we're not talking about just taking two opposing
groups and throwing them in the same room together.  We're talking
about coming up with rules of the road when we get to this
intersection.  And even today, AT&T said that although they had been
skeptical, historically, of this kind of relaxation, they now see
some good things about it.  So we think there's a way to work this
out.



             Q    To borrow a phrase from health care, is this sort
of like "managed deregulation"?  Is that what you're talking about?


             SENIOR ADMINISTRATION OFFICIAL:  Well, any kind of
deregulation is going to be managed.  And somehow I don't think that
I -- it's a nice term, but I don't think it's a appropriate analogy.
We face next year -- have the opportunity of seeing next year the
largest single change in telecommunications regulation and law that's
occurred since 1934.  And the changes are really absolutely
substantial.


             There is, I think, with respect to the kinds of values
that my colleague underlined, which is to say, privacy, competition,
access, there is a responsibility to make certain that certain kinds
of values get built into the system.  But if by "managed," you mean,
do we think that we have some sense that we can make this a careful,
stately kind of transition irrespective of the way the technology is
flowing, no.  Technology is occurring extremely rapidly, and
government doesn't affect that rate of change much.


             Q    Would the administration's bill include some
provision on these mergers -- like, for instance, TCI-Bell Atlantic
-- AT&T?  Did you all address those issues --


             SENIOR ADMINISTRATION OFFICIAL:  No.  The
administration's bill -- when those mergers were announced, the White
House statement on those was that we favor competition, we favor
improved opportunities for information provision to all sectors of
society, and that there are formal reviews going on on all of those
mergers, and we let those processes run.  We are not going to try and
pick and choose among all the mergers in the legislation.


             We are trying to, in the proposals we will put forward
-- and the Vice President speaks tomorrow -- talk about the market
that's out there, how the market is changing, and how the technology
improves communication.  This isn't so much about technology,
although that's what we read about every day, as it is about
technology's effects on the way we communicate and the way we're
going to communicate, and who will have information and who will not.
And the provision of information to the public, to schools,
hospitals, libraries, as well as to the economically well-off sectors
of society is a crucial point that we want to make sure is included
in any reforms that happen.


             Q    Well, you mean, he won't outline what his plan is;
he'll just do an overview of --


             SENIOR ADMINISTRATION OFFICIAL:  He will do an overview
of some of the questions we're going to address as well as the
principles he thinks need to be incorporated in the blueprint, as
well as principles that we anticipate, or that we would like to see
in the marketplace that the private sector creates as well, because
there are many responsibilities we think the private sector should
take on that relate to the values of universal service and open
access, some of which are governed by anti-trust principles, others
are governed by the value we put on information's importance to any
democracy.


             Q    I missed who the Vice President is going to talk to
tomorrow.


             SENIOR ADMINISTRATION OFFICIAL:  The National Press
Club.


             Q    What the difference between the January 4th and the
January 11th speech?


             SENIOR ADMINISTRATION OFFICIAL:  Ron Brown will do the
January 4th speech, primarily on the economic aspects of the --



             Q    And what -- the January 11th speech is going to be
about?


             SENIOR ADMINISTRATION OFFICIAL:  Is the Vice President's
blueprint in Los Angeles.


             Q       public institution, so is there going to be a
universal access for poor people so they can get phones, and are they
considering television and cable television now, something that that
should also be available no matter how --


             SENIOR ADMINISTRATION OFFICIAL:  The extent of how we
define universal service is actively under discussion.  And the
question of subsidies or rate subsidies is also a very difficult one.
As you know, the definition of universal service has gone to having a
party line phone to having an individual line.  Is call-waiting part
of universal service?  Is a modem hook-up part of universal service?
Those are some of the questions that we have to answer.  We don't
expect to have all of the answers, because the market will surprise
us down the road in terms of what's available.


             One of the issues we want to propose to deal with that
question is how to make the regulatory system more responsive more
quickly to technology changes.  We can't wait 60 years at a pop to
catch up with technology.  So that's one of the problems we're going
to reach is, how can we make the regulatory system more responsive to
the technological opportunities.


             THE PRESS:  Thank you.


                                 END3:43 P.M. EST