VP Gore on Telecom Reform

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

Remarks by Vice President on Telecommunications Reform
October 17, 1994
                         Prepared Remarks
                     by Vice President Al Gore
                  to the Center for Communication
                           New York, NY
                         October 17, 1994


Good morning.  About 120 years ago two Colorado mayors had a big
decision to make.  One was the Mayor of Aspen.  The other:  the
Mayor of Ashcroft.


The railroads were expanding through the West.  The Union Pacific
had to decide where to route its tracks through Colorado.  Should
they go through Ashcroft?  Or should they go through that smaller
town about twenty miles away?


As the story goes, the Mayor of Aspen saw the future.  He sold the
Union Pacific on the virtues of his town.  And that's why today,
when you think of ski resorts, dinner theaters, buying jeans at
Boogie's and vacation homes for Barbra Streisand, you think of
Aspen.


Ashcroft?  Literally off the beaten track; it's a ghost town.


The President has often said that the choice we face as a nation is
whether to embrace the opportunity for change or try to hold it at
arms' length, hoping we last long enough to survive.


That's not much of a choice.  And the President's decision has been
clear.


When the President fought successfully -- without a single
Republican vote -- for a real program of budget deficit reduction,
it was because he understood that the challenges we face require
enormous change -- and concrete action.  Action that has brought
lower unemployment, low inflation, solid growth and more jobs.


When the President fought successfully, against strong political
opposition, for NAFTA, it was because he understood that our only
hope in the marketplace of global competition is to compete, not
retreat. And that's what we are doing.  When Congress returns
before the end of the year to approve the GATT agreement, it will
follow the course that President Clinton has set out -- to base our
future on the simple belief that American companies can be the most
competitive and American workers the very best in the world -- and
that we must master change if we are to be the masters of our fate.


Are we prepared to take advantage of the coming information
revolution?


In today's -- and tomorrow's -- marketplace, no information company
will be able to stand intransigently in the path of change.  To be
rooted in one spot will be, inevitably, to become rooted in the
past.


And among all the trends, there is one inexorable shift that we
ignore at our peril --the shift from monopoly competition.


In an era in which the Soviet Union has fallen and capitalism is
ascendant in Eastern Europe, it should be no surprise that
competition is about to reach even our local telephone exchanges.
Competitive access providers are increasingly providing interstate
telephony service to businesses that were once the sole domain of
local telephone companies.  Cable companies are seeking authority
to provide local telephone service, and a recent survey reports
that a third of cable subscribers would be willing to subscribe to
comparably-priced telephone services provided by their cable
company.


New technologies offer the promise of competition.  Consider the
growth of wireless services.  The number of cellular subscribers in
the United States is expected to double by 1998, while
entrepreneurs are planning to ring the Earth with satellites that
will bring telephone services to people everywhere on the planet.


The auction of PCS spectrum that begins in December, as a result of
this Administration's leadership, may well reshape the structure of
the marketplace by introducing wireless telephony competitive with
traditional telephone wires.


Some believe that, by the end of the decade, wireless telephone
service could offer service at prices broadly competitive for some
customers with traditional, wire-line telephone companies.  That
change alone would bring additional competition into the local and
log-distance telephone markets.


In the long run, competition will come.  But we must confront, as
well, the short run -- a time when significant regulatory
monopolies exist and when policy makers must confront the choice:
Towards competition or towards monopoly?


What would happen if we tried to resist the trend to competition?
First, technology and innovation would suffer.  The opening of the
long-distance market to competition drove down prices, improved
quality, fostered innovative services and spurred the deployment of
new national fiber-optic networks.


Second, and perhaps more importantly, failure to end monopolies
might, in fact, bring higher prices to residential telephone users.


Surprised?  You shouldn't be.  State regulators are, quite rightly,
permitting alternative carriers to provide telephone service to
business customers == a trend that will continue even in the
absence of new federal, deregulating regulation.


But partial deregulation, if it stopped there, could actually lead
to increased upward pressure on residential rates, as local
telephone companies seek to replace lost business revenues.
Residential customers could find themselves occupying the worst
place in the marketplace -- isolated from the innovation and lower
prices of competition but tied to an increasingly unprofitable
monopoly provider That would not be in the public interest.


We cannot return to the past and we cannot go halfway.  The market
for computers exemplifies the advantages of competition -- a
high-technology product with increasing power and lower prices.
Consumers for information products want what consumers always want
--higher quality, lower prices and more choice.


The only viable path is towards competition.  But as we have
recently discovered, the right course is not easy to attain.


I was tremendously disappointed by the failure of reform
legislation in this Congress.  Throughout the year, the content of
legislation increasingly conformed to the Administration's goals.
The House of Representatives, led by Chairmen Dingell and Brooks,
and Congressmen Markey and Fields, passed reform legislation by
votes of 423 to 5 and 423 to 4.  The Senate Commerce Committee
approved S. 1822 with strong, bi-partisan support.


Then reform came to a stop under a barrage of special-interest
attacks and "non- negotiable" demands.  No one was immune from
special-interest appeals.


I have often talked about a little girl in my home town of
Carthage, Tennessee sitting at her computer and traveling the
information highway to explore the vast resources of the Library of
Congress.  But this September that little girl could have found in
her parents' mail a letter from her local telephone company.
"Please," it said, "keep S. 1822 from coming to a vote this year."
Even as the telephone companies were engaged in what they described
as serious, good-faith negotiations, this telephone company tried
to disconnect its customers from the future.


But those tactics won't work.  Regulatory change will come.
Because this fight is not being fought for the benefit of
particular competitors, even competitors with entrenched market
interests.  It's being fought for consumers.


It's not being fought for partisan advantage, either.  One of the
two main House bills was cosponsored by a Democrat, Ed Markey, and
a Republican, Jack Fields; support on the House floor came from
Democrats and Republicans, including Newt Gingrich.  Seven of the
nine Republicans on the Senate Commerce Committee voted to approve
S. 1822.


But the change that we seek must truly lead us to a world of real
competition.


How do we do that?


In particular, how can we resolve the interests of the Regional
Bell Operating Companies and their potential competitors?


The RBOCs legitimately want to use their expertise to compete in
other markets --providing long-distance telephony, manufacturing
equipment, supplying video programs.  They worry that they will
become "hollow monopolies" -- the purveyor of local telephone
services, but only to customers that others do not wish to serve.


On the other hand, their potential competitors, including
long-distance and cable companies, are suspicious of the RBOCs.
These companies fear that if the power of local telephone companies
if unleashed before there is effective competition, they will
become prey to RBOC monopolists.


This debate is at the heart of the matter.


Some would solve this conflict by having government declare
"hands-off" and not trouble itself with the consequences.  But
unleashing monopoly power is not a path to competition.


Senator Dole, in his list of "non-negotiable" amendments, proposed
another approach.


He suggests, for example, that regulatory monopolies be freed from
most regulation when one -- just one -- competitor enters their
marketplace. That means that a telephone company with 99% of the
market would be treated as if it had no market power at all.
That's not realistic, and it's certainly not real competition.


We must do better than that, to protect the public interest and to
promote private competition.


We should begin with the basic principles that this Administration
advocates as the basis for legislative reform -- private
investment, real competition, open access, flexible governmental
action and a commitment to universal service.


Most fundamentally, we must remove barriers to entry, allowing
competition for the delivery of local telephone service.


But our experience, and the experience of regulators around the
world, demonstrates that free entry will not by itself be enough.


Interconnection and unbundling will be critical.  Additional
governmental action may be required to secure viable competitive
opportunities for new entrants into local telephone markets.  For
example, we have proposed that companies lacking market power be
exempt from the kind of price regulation that my be legitimately
applied to companies that retain significant market power.


The creation of competition in the local telephone exchanges is not
just the business of Washington.  Around the nation, progressive
states -- New York is one -- are experimenting with methods of
bringing the advantages of competition to their residents.  Just
last week, New York State approved the "Rochester Plan," which
allows new competitors, like Time Warner, to provide local
telephone service in Rochester while ensuring that local telephone
rates will not rise for at least seven years.


That's great.  By bringing competition to consumers, states can
help their consumers right now.  By experimenting with different
forms of regulation, states can provide valuable experience on how
real competition can be achieved.  By action now, states can
demonstrate the inevitability of competition.


That lesson is the most crucial of all.  Because competition in the
local telephone exchanges is a fundamental component of competition
in the information marketplace at large.


We do no impose competition as a punishment on those companies that
have been granted regulatory monopolies, whether in telephony or
cable or anywhere else.


Rather we promote competition as an achievement in which they will
be able to share.  For example, local telephone companies must
themselves be able to enter the long-distance markets, to
manufacture equipment, and to supply video services.  With
safeguards to prevent the abuse of continuing market power, we will
be on our way to the information marketplace that I described
earlier this year -- one in which any company will be able to
provide any service to any potential customer.


But the marketplace, and the interests of consumers, cannot wait.
That is why we must push forward on all fronts.  Let me mention
just a few.


First, the Administration will work with the states -- with
governors, state legislatures, and state regulatory commissions --
to encourage competition in the local loop.  We are planning a
Federal-State-Local Government Telecom Summit to take place in
early 1995, an occasion to meet and voluntarily discuss both state
and federal telecommunications policies.  We will consider
participating in state proceedings as well.


Second, the Administration will also support measures by the FCC to
promote competition by opening up interstate markets, promoting
number assignments and portability, and fostering interstate
interconnection. We will urge the Commission to move forward on
these initiatives.


We will also encourage the Commission to work with the States in
order to facilitate an interoperable, accessible National
Information Infrastructure.


Both state and FCC action will help to create the conditions for
reform. Businesses that face new markets and new competitors will
be willing, I believe, to get down to the business of change.


Third, we will continue to press for federal legislation in the
next Congress.  And we will join efforts with state governments and
industry participants that have demonstrated their commitment to
competition.


The passage of federal legislation remains absolutely necessary.
Technology may bring some additional competition in the near
future, but not enough and certainly not fast enough.  In a world
of 18-month product cycles, innovation delayed is innovation
denied.  Legislation is necessary to serve the public interest in
opening markets now, and to ensure the achievement of our other
basic goals, including universal services and flexible government
action.  Legislation is necessary to ensure that the United States
adopts national principles that permit it to remain a global leader
in information technology.  How ironic it would be if, from the
vantage point of a Global Information Infrastructure, we faced a
untied Europe but a fractured United States?


Finally, we will continue to work toward our goal of connecting
every classroom, library, hospital and clinic to the NII by the
year 2000.


Last January I challenged the private sector to work with us to
realize this goal and I repeat that challenge today.  The private
sector, as much as any citizen, has a stake in the education and
good health of every American.  We must work together, if not
voluntarily, then through progressive legislation.


I have talked today about markets.  But the impact of our reforms
will be felt by people.


This Administration will work hard to free up markets for
competition and profits.


This Administration will work equally hard to ensure that our
children and our workers and our citizens in general enjoy the
benefits of information technology to build better lives and better
communities.


We are not embarked just on grand technology policy nor even
economic policy.  When a pregnant mother can be monitored by her
doctor from home, or parents buy educational software for their
children, or workers are able to be more productive because of new
information technologies, then we have used innovative technology
to pursue the American dream.


This is our tradition.


We must make sure that our national information highway bypasses no
one. We cannot allow this country, or any community within our
country, to become a communications ghost town.  For to be left off
the beaten track in the information age is to be cut off from the
future.