In re: ) ) PUBLIC FORUM ON A NEW ) FCC FOR THE 21ST CENTURY ) ) Pages: 1 through 135 Place: Washington, D.C. Date: June 6, 1999 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In re: ) ) PUBLIC FORUM ON A NEW ) FCC FOR THE 21ST CENTURY ) ) Commissioner's Meeting Room Federal Communications Commission 445 Twelfth Street, S.W. Washington, D.C. Friday, June 6, 1999 The parties met, pursuant to Notice at 10:06 a.m. APPEARANCES: WILLIAM KENNARD FCC Chairman ROBERT PEPPER, MODERATOR FCC Chief, Office of Plans and Policy ROB ATKINSON Progressive Policy Institute PATRICIA AUFDERHEIDE American University NOLAN BOWIE Harvard JFK School BARBARA CHERRY Northwestern University PETER CRAMTON University of Maryland APPEARANCES CONTINUED: JANNETTE DATES Black College Communication Association JEFF EISENACH Progress and Freedom Foundation AL HAMMOND University of Santa Clara School of Law JUDY HARKINS Gallaudet University School of Communication THOMAS HAZLETT University of California at Davis Resident Scholar, AEI ROBERT LITAN Brookings Institute PAUL J. McGEADY National Obscenity Law Center Division of Morality in Media PHIL NAPOLI Rutgers University Department of Communications W. RUSSELL NEUMAN Annenberg School for Communication PETER PITSCH Intel STEVE POCIASK Joel Popkin & Company Economic Consulting MICHAEL RIORDAN Boston University GREGG ROSSTON Stanford University JORGE SCHEMENT Penn State University APPEARANCES CONTINUED: MARVIN SIRBU Carnegie Mellon LARRY SPIWAK Phoenix Center for Advanced Legal and Economic Public Policy Studies JONATHON WEINBERG University of Michigan PATRICIA WORTHY Howard Law School P R O C E E D I N G S 10:06 a.m. MR. PEPPER: We're going to go ahead and start now. And we'll -- the Chairman is supposed to be -- will be joining us in a few minutes. But since we have a limited amount of time, I thought what we would do is -- is begin. This is the third in a series of public forums that we've convened looking at the FCC in the 21st century. The first forum about three or four weeks ago was with primarily industry people. We had another forum last week with primarily consumer groups. And today what we wanted to do was hear from academic experts and scholars from around the country who have been thinking about the telecommunications and communications industries, where they're going, and how the FCC in the future fits into that role, and what role there is for government in the future in a world of increasing competition in the communications industry. Just a couple of housekeeping things. We have some of our professors participating by teleconference, since unlike most of the industry people who could afford to pay their own way to fly in. And some of you I know have done this out of your own pocket. We really appreciate it. There are some other professors who could not make it. But they are on-line I think. UNIDENTIFIED VOICE: We're trying to get them on- line. MR. PEPPER: We're trying to get them on-line. And they will be participating by audio conference. In addition, the session is being carried live on the internet. And there will be an opportunity for people to ask questions that if we get it up and running here, which we've been able to do at the previous session, is to have questions come in off the net which we can then ask people to respond to. Also, if you want to speak, once we go through the first round of introductions and statements, if you could just put your -- your name card up and it will be easy -- easier for us to see that you want to make a comment or -- or intervene. Cathy Brown, the Chief of Staff, will be joining us in a little while, as well. What we've done as -- as I think the participants here know, is broken the session down into really three -- three discussion questions. The first is what should the FCC's role be in the 21st century. And I'll want to come around and have people give me their perspectives on both where they believe -- or where you believe the industry is going to be over the next five years and where you think the Commission fits in to that. Second, questions about the Commission's structure, not just the role. But how should the FCC be -- be structured in the future to meet the objectives and the goals that you believe we should be fulfilling in the new environment. And then third, how can the FCC work more efficiently and effectively to deliver services to the public. And this is really more in terms of our functioning vis-a-vis the outside world. And as scholars, some of your interests and needs in terms of the Commission, in terms of data and doing research and studies are different from the needs of -- of consumers and -- and users and industry participants. But if we could ask you to think, put a consumer hat, how can we better serve effectively our customers, the American public. With that, what I would like to do is start -- and we can start going around the table and maybe start with -- down there with Bob and have each of you just take a few minutes, very short few minutes to identify yourself and maybe say something about where you think the industry is going; what is the trajectory; where do you think the industry is going to be over the next two, three, five years; and then where you think the FCC fits into that, what do you believe our role is. I know that most of us either are or have been teachers and we are used to talking in 50-minute increments in front of captive audiences called classes. But if you could try to keep your -- your opening statements fairly succinct to, you know, two or three or four minutes, and that way we'll be able to get around. There is a lot of people here. And then what we're going to do is open it up for -- for discussion and conversation. So maybe if we could start with Bob. DR. LITAN: Hi. I'm Bob Litan from Brookings. And I formerly worked on telecommunications issues when I was in the Clinton administration. I am going to be deliberately controversial. I think the FCC should be viewed like the RTC, as an agency with a definite life span that will eventually go out of business. The only question is that unlike the RTC, the termination date is somewhat indefinite. The main rationale for the FCC to continue to exist is during this transition to a competitive environment. And I have no doubt that we will -- that we will see more competition in all phases of telecommunications. Once the markets become reasonably competitive, the rationale for the FCC largely disappears. During this transition, number one, the FCC has a role to play in getting the long distance entry of the RBOCs right under the appropriate circumstances so that we don't see the kind of abuses that we saw in the AT&T case. Two, the FCC needs to supervise the transition of cable toward a de-regulated industry. And I -- I'm confident that eventually wireless will be fully competitive with -- with cable. Third, the FCC will have a role to manage the auction of the spectrum subject to interference constraints. I can see a small continuing role for the FCC to arbitrate boundary disputes on the spectrum. But in an ideal world, if I were philosopher king, I would auction off everything and would not have use restrictions on the kinds of spectrum. I know there are transition problems in achieving that nirvana because you have people locked into existing uses of spectrum. But I think the first best solution is an unrestricted auction. Fourth, on universal service, again, in a first best world, the FCC would not be in this business. If there is a political and economic case to be made for subsidies to any particular areas of the country or for particular uses, it ought to be funded out of the federal budget. Rates should not be distorted in the process. Now, in a second best world, if the FCC is going to be a tax collector and redistribute the money, there are Constitutional issues with that I think that are worthy of addressing. Bear in mind, I am not against subsidies. I think there is a case for subsidizing by income class, but not necessarily by regional location. I'm well aware of the politics that dictate the way the universal subsidies have been constructed. But I don't think it can support those economically. And finally, on merger review, I think a limited case can be made for an independent role in the FCC in mergers on a rationale, what I call anti-trust plus. Namely, that because of the First Amendment, we have a strong Constitutional interest in having as many voices heard as possible. So, therefore, it is possible to construct a more competitive test, if you will, than would otherwise be justified under Clayton 7 and, therefore, allow more entrants into broadcasting than may otherwise be justified under the anti-trust laws. But, again, this is a relatively limited function that the FCC would perform. I guess the final thing you asked is should it be in the information business. I'm not sure exactly which information is not supplied by the market that the FCC has needed to supply. But I have an open mind on it. I told you I would controversial. MR. PEPPER: Thanks. Larry? MR. SPIWAK: Hi. My name is Larry Spiwak. I'm -- I'm President of the Phoenix Center for Advanced Legal and Economic Public Policy Studies. We're an international think tank based here in Washington. For those of you who don't know me, I worked at the Commission for about four and a half years at the now-dissolved Competition Division. I think when you talk about -- first off, talking about industry structure and then the role of the Commission in that, unfortunately it's my view that I don't really see very -- although there has been some advancement, it's more of an in-spite-of story rather than a because-of story for really getting good performance in the markets. We're seeing a rapid reconcentration in the markets. We're seeing a lot of barriers, regulatory barriers to entry erected in the name of promoting consumer welfare. And so to the extent that there are workably competitive markets, the Commission absolutely should. It should not have taken 15 years to get the AT&T non-dominant petition done, along with all the political concessions that were made on that. It was just the wrong -- wrong thing to impose as actual conditions. So then the question becomes what is the appropriate role of the FCC in the 21st century. I happen to be of the -- I think the key thing, and it should be, is that the public interest standard is the consumer welfare standard. And when I talk about a consumer welfare standard, I mean getting good market performance in the form of lower prices and more services. And to do that, that means that the FCC should have some sort of vision of getting a market structure that is characterized by a low-switching cost, low barriers to entry, etcetera. And so when the FCC is faced with the issues that it's faced with today, let's take a couple of the things. Spectrum auctions, I think that's a very valid thing. Merger reviews is very timely. Personally, I am of the view that the FCC has a very valuable role to play in merger reviews. I think the FCC unfortunately has not done a very good job with that. But I think the FCC -- the difference between the FCC and the DOJ is that the DOJ takes the facts as given. It takes a very static approach. The FCC, and the case law bears this out, is responsible for sort of managing overall long-term industry structure. The case law also bears out that if the agency does not review competitive concerns, that that is arbitrary and capricious and could be resolved. So I think this notion of sort of going, "Oh, the FCC shouldn't be reviewing mergers", is -- is as bit -- is a bit black and white. I think the FCC's merger review could be subject to vast improvement. I have personally been very critical of that. But I think the FCC has a very valid role and should continue to take active -- an active role in that. I think what the FCC should not be doing is engaging as an international trade agency which the agency has been doing over the last couple of years. I do a lot of international work and a lot of lecturing abroad, and unfortunately the animus towards the FCC is exceptionally high in the rest of the world. And I think when that happens, it makes it very -- it's a self- defeating exercise because it makes it more difficult for American firms to do business abroad. In fact, Alan Greenspan just did a speech about a month ago calling U.S. tactics essentially adversarial. I think that's very sad and it's not maximized at consumer welfare. I'm also of the view that in terms of universal service, while certainly aware of the social goal, when it has sort of expanded to become a political project, then again it becomes a self-defeating exercise. If the Commission I think appropriately focuses on removing barriers to facilities-based entry and aggressively focuses on that -- I think a very positive step was the recent co- location rules the Commission came out with last month. Then I think true competition will happen and consumers will benefit. And that's where I see the market and the role of the FCC in the 21st century. MR. PEPPER: Thank you, Larry. Chairman Kennard who has joined us. Chairman Kennard, if you wanted to say a few words. CHAIRMAN KENNARD: Sure. I just wanted to make some brief remarks, first of all, to thank you for -- for being here and helping us in this very important project that we're undertaking to try to design a blueprint for this agency's future. And I -- I look around this table and I see a lot of familiar faces, people who have worked with us or worked here. Our former Chief Economist I see is here. I will be very interested to see what Dr. Riordan has to say today. Peter Pitsch who has spent a lot of time with the FCC. And this is, as you probably know, the third in a series of forums that we have been having. We had one with industry groups and then we had one with consumer groups. And this panel is one that we're hoping will take sort of the -- a broader view of things. I am -- it's my hope that you folks are more liberated from sort of the day-to-day pressures that a lot of the folks that are writing pleadings and appearing before us day-to-day are under. And as I look around this room, I see, you know, a number of you have particular points of view or some of you have represented people or do represent people before the agency. But it's my plea that you sort of focus on the public interest side of the equation today and to try to put yourselves in our heads. We have a huge challenge ahead of us today. We have a -- a lot of very pressing pending matters that we have to deal with. But at the same time, we're trying to restructure and reorganize the Commission for the next century. And it's -- it's sort of like redesigning a 747 in flight, you know. You have to be able to get the work out and deal with the current legal and regulatory structure, but at the same time try to advance the ball. And the way that we've looked at it is sort of on two levels. What can we do today at the FCC to try to reconcile some of the -- the very difficult conflicts that we have in our statute. We're not going to be able to re- write the statute overnight. That's Congresses prerogative and it probably is not going to happen any time soon. But we do know that right now we're dealing with some very challenging issues because of the -- the convergence that's happening in the industries. I get asked all the time, "What are you going to do about this disparity in regulatory treatment between the telephone industry and the cable industry as they both roll out high-speed internet access and services that to the consumer are going to look very much alike, but they come to it from very different regulatory heritages?". And my answer is that, well, in a perfect world, you know, if I were king, we would go back and we would re- write the statute and put everybody on an even keel. We can't do that. But in the meantime, we have to deal with mergers pending before us. We have to deal with requests that we order people to unbundle their -- their elements. So I would really like you to help us out not only with the long term because, frankly, it's not that hard to think how we could re-write this statute and put everybody on a level playing field, but what do we do between now and then. You know, how do we deal with the regulatory challenges that are ahead of us. And -- and I think that this group could be uniquely helpful to us because you are able to liberate yourself from some of the day-to-day constraints that some of the other folks have when they talk to us. So that's my pitch. I'm going to be -- I can't stay with you all day. But I will be monitoring this on close circuit. And if I rush back down, you will know that -- I think that would be fun. But anyway, thank you all for coming. I really appreciate your being here. And I'll stay for a while. MR. PEPPER: Great. Our three audio link people in fact are on. So, actually, we'll go to them now that we've had sort of the first two openings. Professor Al Hammond is at Santa Clara in California. Professor Jon Weinberg at Wayne State in Detroit. And Professor Gregg Rosston at Stanford. So why don't we start with Al. Are you there? PROFESSOR HAMMOND: Yes, I'm here. MR. PEPPER: Great, okay. Welcome. PROFESSOR HAMMOND: Thank you very much. And hello to everyone there. My regrets for not being able to be in person. And a special hello to the Chairman. We were asked to speak on the role of the FCC. I guess I would say the role of the FCC remains absolutely central in terms of issues with competition and equitable deployment which, as far as I'm concerned from my research, cannot be easily or timely resolved by the Courts or Congress or the Executive Branch. I think, as we traditionally know, the expertise of the FCC and the fact that the FCC remains probably the most open forum for the community at large make the FCC central in resolving many of the issues that we are currently faced with, whether they are the short-term issues of how to get long distance and local into -- well, get the local telephone companies into long distance or encourage competition between cable and the local companies, or to prepare the economic framework or the industry framework for multi-media competition, which is where we're going. The FCC's role remains central. In terms of the mandates of the FCC, I think equitable inclusion via widespread non-discriminatory deployment of technology becomes absolutely essential. The FCC has been critical to that policy goal in the past, whether you look at the decision to not choose a -- a form of color TV technology that would exclude so many people who had black and white TVs before. The FCC is poised to have to make the same sorts of decisions with regard to digital TV and certainly the same decisions will have to be made in terms of the interconnection of various telephone companies and cable systems irrespective of the expectation that the market will do much of this work. In terms of public information and consumer protection, there will be a tremendous amount of information which the public will simply not have. It is clear even now that the public is not as sophisticated about their telephone bills, their cable bills, what technologies are available, what services are available. And while the market will provide some of that, it's simply from the standpoint of watching TV, recently becomes a great deal of gobblety-gook. Someone has to be available. Some forum has to be available. Some place has to be available where a citizen who has some basic concerns about the quality of service or about what services are available can go to get straight-forward information about just what they're entitled to or what they have access to. In terms of public resource management, it goes without saying, I don't think there will be anyone who disagrees that the FCC has to remain the primary responsible party for spectrum management. But I think there is also a role in terms of the interconnection of interoperability of the national infrastructure. While we view the lines that are owned by the various telephone companies, cable companies, wireless carriers as private property in one sense, they remain in a very public sense the -- the nervous system of the entire nation. But if everyone is not interconnected, if various portions of that infrastructure are not easily connected to the other, there will be people left out. And it's very important that that not occur. In terms of staffing, how can the Commission change or evolve its structure? It seems to me that the Commission has historically moved from an emphasis more on engineering when it first came into existence to emphasis on law and more recently during the '80s and '90s, to an emphasis on economics. I think we've now come full circle. We're back to engineering because of the technology and the conversion. And I think that one of the things we ought to be concerned with or the Commission should concern itself with is becoming more expert in the areas of computer science. More social scientists and anthropologists involved in looking at the long-term impact of the technologies on the society in particular. And I think there is probably a role for someone who -- or someones who are more adept at looking at human- computer interface research and engineering because a lot of the emphasis so far has been on equitable deployment of technology. But I suspect that not many of us has thought long or hard about the down side risk of deployment of technology without making sure that everyone has mobile access. And by that I mean -- I'll give you a metaphor very quickly. I know I'm probably running out of time. If you look at dyslexia, it is a problem that comes from an inability to process information that's in a set of characters going across a page. If you look at the history of how people have been treated who had dyslexia, many have been labeled as dumb, stupid. They've been basically pushed out of the social structure up until recently. And now we have laws that basically protect them. We could be doing the same thing with the deployment of computers and with the deployment of certain types of software. And it would be useful for the Commission, if -- if in no other way, to develop, perform what people could discuss, the ways in which the society at large is interfacing with these technologies; not just from the standpoint of how much they cost, but also from the standpoint of their utility. And I don't think that that is beyond the Commission's mandate. I know that's controversial on the other end of the spectrum. But I'll hold my remarks for there and wait for the open forum. MR. PEPPER: Thank you, Al. Yes, we are going to have to keep the opening comments fairly succinct if we're going to get around the -- the table. Why don't we go to Jon Weinberg. Are you there? PROFESSOR WEINBERG: Sure am. MR. PEPPER: Welcome. PROFESSOR WEINBERG: Thank you. I'm talking to you from beautiful downtown Portland, Oregon. We're in for my wife's college reunion. I want to talk a second -- speak a second to the Chairman's concerns about short-term issues because I was looking through the transcript of the May 20th industry forum. And there seemed to be a whole lot of agreement on the inevitability of convergence and the ultimate competitive nirvana that we're going to get. And I just want to be a bit concerned in here about that because I want to emphasize that I don't think convergence is inevitable. It depends on the notion that video programming and voice telephony and other services can all be digitized and packitized and delivered over a commodity broad band pipe into the home. That way we can divorce content from conduit. But that's not going to happen unless a variety of other things happen first. Number one, we need actual deployment of broad band pipes to the home; not just some homes, but enough of them to satisfy our concerns about universal service. We're going to want open architecture so that various people can offer competing services over that same broad band pipe. And it seems to me we're going to have a whole lot of challenges in achieving that. Massive DSL deployment is beginning to seem like an uphill battle as the engineers fight to squeeze every last bit of functionality on a twisted pair. Cable modem deployment is still real slow. And the folks who are in the position to do the most about deployment may end up presenting the biggest obstacles when it comes to open architecture. So the public notice here asks for our vision of the communications future. I think we've got more than one future ahead of us. One of them is the competitive nirvana. And once there are several fat pipes into the home and an open architecture basis, different people competing to provide video programming, IP telephony, what have you over those pipes. And the FCC's role there is largely going to lie in making sure that the underlying architecture doesn't get messed up. So it's going to want to enforce and update its competition rules. It's going to want to do spectrum management, implement the 21st century equivalent of its universal service policies. But on the other hand, another future might be a closed architecture vision in which the folks providing the one or two fat pipes sound successfully tied; the consumers' purchase of their pipes with their purchase of their brand of video programming services or IP telephony. And under that vision, the communications marketplace may not look so different from the one we have today. Yes, we might get another vocal telephone competitor as cable companies offer voice-over IP. But it would be just the one. We might not get a whole lot in the way of new video programming services. And I can see why a cable company might not be interested in cannibalizing its existing services. Then there is a third future in which we never get serious broad band deployments at all. And that's going to look even more like the one we have today. So the bottom line is that the nature of the FCC's functions in five years is going to depend a lot on the future the FCC ends up getting us over the course of the next five years. And I think as the FCC puts in place and formulates this really important strategic plan it's working on now, that's something important not to lose sight of. And with that, I'll stop myself and pass the microphone on to the next speaker. MR. PEPPER: Thank you, Jon. Gregg, are you there? PROFESSOR ROSSTON: Yes, I am. MR. PEPPER: Go ahead. PROFESSOR ROSSTON: Can you hear me? MR. PEPPER: Yes. PROFESSOR ROSSTON: Okay. I guess I read through -- and like Jon saw, the things about convergence in the first industry panel. And I don't think that's the real problem facing the FCC. I think that's sort of a convergence of what kind of communications and who provides what sorts of content. But what the FCC should really be -- the goal right now should be to promote the infrastructure for information transmission. It's not necessarily communications. In the past, it's been really hard to regulate content even with a limited number of transmission methods. But now and in the future, it's going to be impossible to do that. So the FCC should focus on areas where it can make a difference. And that's sort of the -- the infrastructure necessary to -- to get information to households. One of the things that in thinking about this is that the lessons of economics are going to still -- the classical economic lessons are still going to apply to the new economy or the information economy. Whatever rules the FCC sets are going to create incentives for firms and they're going to try maximize their profits given the constraints. They're either going to try and attack the constraints directly in court or others are going to use them to their own advantage. But whatever the FCC does, it's got to keep in mind that it's going to create incentives for firms to try to maximize their profits no matter what happens. And given that, what -- what's the world going to look like? It's not going to be -- no matter what people are talking about, sort of the competitive nirvana in the future, it's not going to be the classic textbook perfectly competitive markets. There is going to be a lot of deviation from the perfectly competitive market. You have economies of scale and scope including demand side economies or network effects. You're going to have product differentiation like -- like Jon just said, where you have different people providing different things possibly. And you're going to have information asymmetries. Consumers may not known enough or some different consumers know enough to make the right decisions. So these -- some of these are inevitable and beneficial. Economies of scale and scope can be very good. On the other hand, you can get exclusionary practices that may harm consumers, as well. And so what -- what I -- in thinking about it this way, I agree almost completely with Bob Litan's controversial opinion from before. Unfortunately he said them first because I had a lot of them written down on what I wanted to say, as well. So I don't think they were that controversial, or maybe they're just economists' views on what should happen. But basically the FCC should try and get as much spectrum out in the market as possible and let the market decide how spectrum should be used; get it out there so that spectrum can be used to create this infrastructure. The FCC should also make sure that there are clear rules and rights for interconnection because if you're going to have several different networks, interconnection is going to be the key piece of making sure that everybody enjoys the benefits of network size, the network effects and can communicate with everyone else. In the interim, in the short run, the FCC has got to be aware of pricing from monopoly elements so that you can get a transition to competitive networks. And finally, I think two things that are going to be long things for the FCC to worry about are universal service and consumer information. Hopefully, both of these would not be necessary. I agree that universal service -- with Bob Litan, universal service should be strictly income-based and not on geographic areas. And consumer information, hopefully private firms or -- would have the incentive to provide consumers the correct information and make it easily accessible. But if in the case that that's not there, there is I think a role for government to do that. Some of the specifics are, you know, get -- get rid of a lot of the rules that may apply, for example, to broadcasting where the world has changed a lot since the network affiliate relationship rules were put in place and things like that. Make sure that we have -- try and get local channels for satellites so that they can compete with -- compete with cable for -- for multi-channel video programming. Try and create the rules that facilitate competition for the infrastructures that deliver the information. And that's -- that's my view of how we should do it. And finally, there was a question about, you know, one of the -- one of the things that Larry Spiwak talked about was internationally. We need to make sure that we set the rules for competition so that we can go and advocate competition without being hypocritical in the rest of the world, so that we can have a truly world network that is competitive, as well. And I think I'll stop there. MR. PEPPER: Thank you, Gregg. Nolan? MR. BOWIE: First, the brief part is to -- I would like to incorporate all of Al Hammond's remarks as my own. I agree with everything he said. First I would like to take a jab at the short-term issues. These meetings were being carried on the internet which reaches potentially 30 million U.S. households which means that 70 million cannot hear and participate in these meetings. The issue is television. Most of the people get most of their news and most of their information and most of their entertainment from television. We cannot just forget about it. I think the policies regarding digital television, HDTV, with a deadline of 2006 is an important, short-term issue in which the public is under-informed, ill informed or just not informed at all. And I think it potentially can have a devastating effect on everything else the FCC does in terms of having legitimacy in protecting the public interest, the public's interest, as well as what it does in all of the areas. Television is still the primary means, not only where people get their information, but the technology utilized for candidates for statewide and national elections. That's where they spend most of their money for the campaigns. It's important to our -- the quality of the democracy that we have. And I think that most people are uninformed because broadcasting has no obligation to inform people. It has no legal obligation to provide any news or informational programming. They may even move away from news because it's a bottom-line consideration. There is no issue access. There is no fairness doctrine. And at the same time, we have very important issues that we're talking about here today that does not reach the public. Ultimately, the quality of our democracy, the legitimacy of our Government is at stake when the public is in the dark. Long-term issues. The -- the first question was where is industry going. And I think there is a general consensus that convergence is taking place; not only of the technologies, but of the firms which in the past viewed themselves as competitors. Many strategic alliances, either through mergers or acquisitions or joint ventures are taking place very, very rapidly. I think what is different for the near-term future is a environment based on an abundance of channels, but not necessarily on any abundance of viewpoint diversity. I think that that's where a scarcity remains. The issue of scarcity itself is important because the FCC's jurisdiction rests on assumptions about scarcity and scarcity rationale which I think is Constitutionally suspect in an error with so many channels for the distribution of -- of programs and information; that I thing one of the keys is to re-examine the -- the holding in Red Lion, to re-examine the Commission's arguments that it made to repeal the Fairness Doctrine in 1987 regarding content regulation. I think the FCC should realize that regulation should, so far as possible, be technologically neutral. But I think that its primary goals ought to be to reduce so far as possible First Amendment tensions to zero and at the same time, to maximize First Amendment values and consequently maximize democratic principles and values by stimulating and promoting a demosphere, as I call it, or a public-sphere, or where a marketplace of ideas can be established and where we can have the kind of competition that is necessary for democracy to flourish and evolve. By treating various technologies neutral, I think that at the same time, it would begin to level the playing field. I think right now, competition is not equal or level or fair. As a matter of fact, there is no even -- there are no standards for what is sufficient competition to de- regulate or to relax regulation. For example, I think currently broadcasters are free writers. And I think that status ought to be eliminated that -- whereas a cable systems pay a franchising fee of five percent of their revenues. Perhaps I think that the Commission in its new role should not be a landlord or air-lord only because they don't own the spectrum either. The public -- the public owns the spectrum. But I think it ought to intervene on behalf of the public under the mandate of Title 1, Section 1 to ensure that all of the people of the United States have access to a worldwide and nationwide network of communication, state of the art, to ensure that no one gets left behind, not only the basis of income, but on the basis of literacy. I note that while the internet might be the future and the dominant technology for the delivery of television and maybe radio, right now it's a text-based technology. And close to 40 percent of the adult population in this nation are only functionally literate at best. I have a lot more to say. But I'll reserve that for the second round. MR. PEPPER: Thank you. If we're going to actually be able to get around the first round before we have discussion, we're going to have to try to keep our comments even more succinct than people are making. Marvin? MR. PITSCH: Why don't you just give people two minutes -- MR. PEPPER: Okay. MR. PITSCH: -- and say two minutes are up. MR. PEPPER: Good suggestion. MR. SIRBY: Okay. I'll -- I'll talk fast. UNIDENTIFIED VOICE: You're in the new regime. MR. PEPPER: Okay. Do we already have a proposal for streamlining and moving the process along? MR. HAZLETT: And the people who have already spoken, are they grandfathered in or do they have to give time back? MR. SIRBY: I'm one of those firm believers that those who are ignorant of history are condemned to repeat it. So it's useful to go back to the nineteenth century prior to when we had a Federal Communications Commission and look at some things that we can learn about various forms of -- of open regimes and un-regulated regimes in communications. The first un-regulated regime was for the telegraph companies in the 1840s and 1850s. And what we saw in that time period is the companies refusing to interconnect with each other and carry each other's traffic in order to attempt to maximize monopoly positions. And with the first real regulation of communications was Post Roads Act which forced companies to act like common carriers and to carry each other's traffic on a discriminatory basis. We had a repeat of that in the 1890s with the telephone companies refusing to interconnect leading eventually to the Kingsbury commitment. So I think the important comment I want to make is that we're going to need to retain some form of what I would call a common carrier obligation to interconnect no matter what the forthcoming regime is for telecommunications. And whether the obligation is imposed strictly by the Courts through common law or would benefit from an expert agency who better understood the particular areas of communication, I think we have to make sure that that obligation is preserved and -- and that there is an appropriate enforcement mechanism. And that is a potential role for the FCC no matter what the competitive landscape. The second comment I would like to make has to do with whether in fact competition is viable in all sectors of the communications industry. We have had great success in satellite communications, in long distance, in customer premises equipment. But in the local access and particularly the wire that goes to individual homes, we have today only two such wires. Part of the reason we have two is we've prevented the phone companies from carrying videos. So we created an arbitrary situation where somebody else had to run a wire in order to run video. And in an open environment in which I believe the first company to run fiber to the home will capture the market for all of the services and no investment banker will fund a second company to run another fiber. MR. PEPPER: Two minutes. MR. SIRBY: Okay. MR. PEPPER: Actually, Jeff, before you leave, I was just going to give you a heads up that in order so that there is to be a little bit more equity here, we'll go to Jorge. And then we're going to start at that end of the table so that all of the people here don't -- okay. MR. SIRBY: Two sentences to finish. MR. PEPPER: Yes. MR. SIRBY: The only viable competition to fiber is spectrum-based. And my comments on spectrum are I would be very cherry of awarding property rights which would prohibit such things as ultra-wide band, open entry as we've seen in the NII band and in wireless lands where essentially a commons approach with a spectrum etiquette serves the public very well and I think in ways that are superior to a property rights regime. MR. PEPPER: Jorge. MR. SCHEMENT: Jorge Schement, Co-director of the Institute for Information Policy at Penn State. My friend, Marvin, said I think very eloquently what I was prepared to say only in one sentence which is that with complete de- regulation, you get lord of the flies; not chaos, but the imposition of rules on behavior by a very small number. And to the extent that we're happy with that, the FCC can bow out. To the extent that we're not happy with that, the FCC has a role. I don't want to focus on competition per se. I want to focus on the -- the poor step-child of the FCC and that's access. Focusing on access it seems to me is the ultimate justification for any mission of an organization like the FCC in a democracy because short of that, it's not anchored to anything that we hold dear in terms of our basic values. It's anchored basically to behavior and at the point that the behavior is either resolved or the players don't chose to play, that justification goes away. It seems to me that where the FCC has failed in the past and where it has to in a sense face up to its future regarding access is that we increasingly know the local circumstances shape the opportunities for access all across the nation. And the FCC has basically taken a federalist view of access. That federalist view of access has reached its limits quite a while ago I would argue. And we now have an opportunity -- the FCC has an opportunity to both enable and to coordinate local organizations and local governments or government agencies in order to increase access for Americans. Will universal service go away? Well, perhaps it will go away as a policy as some of -- some around the table are arguing. But it will never go away as a democratic vision. Americans are always going to be unsatisfied if they particularly don't have access or if others don't have access. And they're always going to hold it against government and against government's agencies as a standard that -- that should be met. The -- the history which Marvin I think brought up very well also includes a portion of tremendous amount of discontent on the part of Americans, especially those who are left out. That is content and is still with us today as anybody who travels across rural America for example can see. How does this translate into long-term goals for the FCC? I would suggest the FCC actually has three long- term goals that it needs to confront and promote. And those are the goals of participation for Americans; participation in the social sphere, that is connecting to a network to pursue their own ends; participation in the economic sphere, not only encouraging the participation of a couple of big players, but encouraging the use of the network to in a sense accomplish their own economic gains; and democratic participation. If Americans don't have access to the means of communication and the means of informing themselves of its access to the network, they're not participating in a functional democracy. And that makes people unhappy for -- for all the right reasons. MR. PEPPER: Okay. MR. SCHEMENT: Has the FCC made its case? No, but it should. MR. PEPPER: Thank you. MR. SCHEMENT: Thank you. MR. PEPPER: Jeff. MR. EISENACH: Okay. Thank you. I'm not sure this system is any fairer, but it feels fairer at least over at this side of the table. UNIDENTIFIED VOICE: It's like waiting in line at the post office. MR. EISENACH: A little alternation feels good. Let me start by just referencing a document that we passed out that a number -- some of the people at this table actually participated in helping to produce. And that's a report. It's called, "The Telecom Revolution", that the Progress and Freedom Foundation released in 1995. And what it argued in 1995 and what I would argue today, as well, is that the unique circumstances that led us to create an independent federal regulatory commission to oversee the telecommunications and broadcast marketplaces have ceased to exist and that we -- while there are many functions for government, and I think there is -- may not be a lot of consensus about exactly what those functions are. But there would be no disagreement that there are very important functions for government in this marketplace; that those functions are no longer suitable to a five-member and independent regulatory commission to carry it out. I would begin I think by referencing in terms of what is this big change. The big change is the one that's referenced in the first couple of pages of the report that creates the premise for this whole series of hearings. And that is the fact that as best we could collectively judge today, this marketplace is headed in the direction of being fully competitive. It's not a perfectly competitive marketplace. But I would ask folks at this table to find a perfectly competition marketplace. The question is, is this marketplace less imperfect in its competitive structure than other marketplaces for which we do not have five-member independent regulatory commissions to oversee those markets. And the answer I think in the future at least is that it is no less competitive than most other marketplaces and -- and therefore ought not receive special treatment. That's the conclusion that you will begin with. We certainly heartily endorse that conclusion. With that in mind then, the question is what remaining functions are there to be carried out and what is the appropriate forum or format for doing those functions. One of the functions that I think there is complete agreement on is some form of spectrum management and really in a sense another form of property rights management goes to the question of interconnection. It is the question of - - of in terms of contracts how one firm may have access to property owned by another firm, another form of managing property rights. Those functions may indeed be -- be to some extent appropriate for an adjudicatory body of some sort. And a five-member commission may not be an inappropriate way of carrying those out. That may be a function for something that might in the future be called an independent regulatory commission. But as one looks at some of the other kinds of functions that are proposed for the continuation of an FCC, one looks at, for example, universal service. There are lots of reasons to have universal service. We have, for example, subsidies for urban mass transit. If we're going to have subsidies for urban mass transit, one might argue that we should have subsidies for rural telecommunications. There are disproportionate costs borne by people in different parts of the country. And there may be a case for subsidizing urban residents in some ways and rural residents in others to sort of even those out. Maybe that's something we do want to do as a country. Certainly there is a case for a -- for an income- based universal service policy. Different people can disagree about this. But the question that I think needs to be asked is, is a five-member independent regulatory commission the right framework for doing that, for accomplishing that function. And let me just -- let me close with just a historical point that I think I can do in 20 seconds. The FCC was created in 1934 to regulate the pricing of railroad -- of -- of telephone rates on a model that goes back to how we regulated the pricing of railroad rates. It was assumed that this marketplace was a natural monopoly. Destroy that assumption and you destroy the underpinnings for an independent regulatory commission. I don't think anyone at this table would -- would believe that we have in the future of the telecommunications marketplace an AT&T-style, Ma Bell 1934 natural monopoly to be regulated here. I think that calls into question the structural issue in the most profound and fundamental way. Thank you. MR. PEPPER: Thanks, Jeff. Paul. MR. McGEADY: I'll be brief because I want to save my remarks for the third part of this session. But what I do want to say is that I'm from Morality in Media. And our concerns and the concerns of the American people are related to the fact that they are being assaulted by indecency and programming, both on broadcast TV and cable, and of course we can't even mention the internet. The -- the FCC, as you know, has a monopoly on enforcing indecency. There is no state in the union that could pass an indecency law. So the monopoly in -- in broadcast TV and radio rests with the FCC. What we assume the Chairman mentioned about the focus on the public interest is that this is as public interest question that the FCC should concentrate on, not only now but for the next five years, and do a -- do a much better job of vigorously enforcing the 18 USC 1464 and the Communications Act in this respect. MR. PEPPER: Thank you very much. Pat. MS. AUFDERHEIDE: I want to thank you for letting me sit at this table and offer you some quick remarks here to open things up. Where do I see this industry going? It's clear that we're going to more of a pattern of interlocking platforms that are networked. But at the same time, some of these same companies are increasingly acting like they really want to be mass media providers. And in the same way, I think the FCC has new jobs and old jobs. It is now clearly the architect of managed competition in -- in an industry that is emerging in very murky ways. It's -- it's absolutely unclear what's going to happen even in the next few years. And certainly the FCC stimulus will affect how it -- how it emerges. The FCC, however, is now the primary site for data collection that will allow us to assess over the next few years what the consequences of this dedication both de- regulation and competition get us. Second, it's going to be in its -- in its new role as architect the agenda-setter for how we ask, partly as a result of data collection and partly as a result of what kinds of conversations you open up here, the research questions around those two basic issues: Are we getting competition; and if so, competition among whom and for whom. And second, if we're getting it, what good is it doing the rest of us and how do we measure that. At the same time, in the same way that some industries are not changing -- some parts of this industry are not changing and some parts of the newer parts of these industries are wishing they were acting more like older parts of this industry. It seems to me that the FCC has some continuing -- well, old fashioned roles to play. Public trusteeship has not gone away. Broadcasters are still acting like broadcasters. And they now have some digital spectrum they have to be public trustees over. Scarcity continues to be the law, even in DBS -- especially in DBS. Diversity continues to be a social and a democratic issue. Bad market behavior, the opportunities are only proliferating. Spectrum management, as we all agree, continues. And the historic role that the FCC has had in designing non-commercial spaces, reserving non-commercial spaces which has had a very successful history pointing in, for example, to public television and radio, continues to be an opportunity that it can seize in the newer environments. Thank you. MR. PEPPER: Thank you, Pat. Patricia. PROFESSOR WORTHY: I am a Professor now at Howard Law School, a former utility regulator which is an interesting combination to be sitting at a table with the FCC, having been a state utility regulator. But let me respond to the questions that have bene posed. I want to make two -- two brief points, both of which have been touched on by some previous speakers. One is that I am not as convinced as apparently some of you are that competition is -- is rolling out and -- and I would disagree, Jeff, that perfect competition is not something that we should attempt to achieve in this industry. I point to the fact that this industry, telecommunications, particularly in the broadcast area, is so overwhelming, such a powerful media that I think that we must look at it and watch it very carefully. I think these recent merges in the industry raises the question of diversity of viewpoint. And I think that the FCC has a role. I think that the Lutheran Church decision was bad law. I think that the FCC should continue to look at minority ownership issues. And I think that we must find a way to ensure that there is continued effort in this regard. So that's one point. My second point is that the NTIA is coming out with a report the end of this month. It's the third report in falling through the net. The report seems to suggest that the digital divide between information have and have- nots has increased substantially. And, therefore, I think that we should look again at universal service from a different perspective. I think we need the FCC to play a role in determining whether or not access to this technology is really an educational tool that will level the playing field for the poor and -- and those who do not have access to this technology. Once that is determined, then I think we should revisit the definition of what is to be deemed a universal service. I don't want the industry to get nervous to suggest that I am suggesting we increase the subsidy through the industry, but perhaps to look at other funding possibilities including a re-targeting of federal funds for poverty-type programs. So I will leave it at that and pass it back. MR. PEPPER: Thank you. Peter. MR. PITSCH: Better be careful that I don't go over. Gregg, I didn't mean any slight on -- on how long people previously spoke. I'm just a believer in rules in these kinds of situations. The first thing I want to say is I'm here because I was a former Chief of Staff and a former Chief of the Office of Plans and Policy. And I've previously written on this. These are my own personal views. These are not the views of my current employer, Intel. The second thing I wanted to say is I want to praise Chairman Kennard and the FCC for doing this. I think this is a very good idea. This is the kind of thing that businesses, smart businesses have been -- need to do and have been doing of late. And I thought the Chairman's direction was basically on track. In my initial comments, I want to be pretty high level. I think the defining feature of the current world is the heightened pace of change in all sectors of society, but particularly in technology; and that this has led to increased uncertainty and riskiness and complexity for decision-makers in all institutions. And at the same time, it's created enormous potential from getting things right. So the important objective of this exercise should be to come up with a better discovery process at the FCC, both on policy issues and administratively so that you can be a more streamlined, responsive agency, relying -- doing a better job of getting information, relying on incentive, decentralizing, injecting more accountability into your process. Policy-wise, I subscribe to a lot of the arguments that people have made by inclination. Now having fettered away my youth at the FCC, I tend to be much more pragmatic and not worry about what laws can be changed and whether or not we can go to an EPA model for the agency. But instead, I think what the -- on the policy side -- and we can get into this later -- I think the FCC needs to focus in on some new efforts, particularly in the area of essential facilities for the telephone companies that can be established, a trend that can be demonstrated to work and become the basis for getting to where we want to go. On the administrative side, I think three big things: Go in the direction the Chairman has said in terms of structuring the agency along function. I also believe you need to streamline. There are way too many layers of management. People are too far removed from information. There are too many levels of review. And lastly, I think the agency should be delegating more to the staff. I think the Chairman and the Commission should be asking the bureaus and all of the people who work for them, "Where could we delegate more responsibility within some broad parameters and act more as an appellate court providing guidelines and reversing on appeal when necessary", but very much speeding up the process because the cost of delay today has never been greater. Thanks. MR. PEPPER: Thanks, Peter. Jannette Dates had joined us on this side. So why don't we go over to Jannette and then we'll come back over here. MS. DATES: Sure. Sorry that I was late. I am Jannette Dates, Chair of the Black College Communication Association. My organization represents 39 of the historically black colleges and universities which have communications programs. In addition, I have the great honor to serve as the Dean of the Howard University School of Communications. Prior to my career in academia, I worked in television as an anchor and producer for NBC and ABC affiliates in Baltimore. Let me start by thanking Chairman Kennard and the FCC for inviting me to participate in this forum. I think it's a very, very important one. As we stand on the brink of a new millennium, we are reminded of the realities of public opinion by incidents such as the murder by New York police officers of African merchant, Amidou Dialo; the gruesome, dragging death of James Bird; and the recent shootings at Columbine High School, and then in Georgia. Given my broadcasting experience, I realize that there is no single tool for shaping public opinion that is more powerful than the media. Thus, the responsibility for creating and now changing public sentiment that has fostered such hostilities lies with the media. While the Federal Communications Commission may be presented with Constitutional restrictions on its ability to directly influence content, this agency I believe has a unique capacity to effect immense change within the communications industry that will ultimately bear on programming. In the 21st century, the Commission has the obligation to undo some of the damage caused by what some analogize to ethnic cleansing within this country. Specifically, the Commission should focus on creating greater opportunities for black and other ethnic minority groups in three areas: employment, ownership and access to communications goods and services. Rather than scaling down as equal opportunity initiatives, the Commission should significantly augment these programs to ensure that our children do not have to face yet another millennium marked by racial hatred and unrest. To end my opening remarks, permit me to reference a review by columnist, Lee Hamilton, of a recent film depicting how harmful stereotyping is of blacks and other ethnic minorities may shape the public's perception of life in the 21st century and beyond. Scores of us have watched George Lucas' film, "Star Wars: The Phantom Menace" with our children or grandchildren oblivious to the subliminal messages being transmitted. Hamilton points this out when he writes, "In seconds, viewers are introduced to the Evil Trade Federation which is attempting to shut down and dominate the trade routes of the peaceful Nabu people who are white." "Nate Gunray, the sinister, slant-eyed viceroy of the Federation and his aid talk in broken English, reminiscent of Asian characters in the past like Charlie Chan. In outer space, creatures come in all sizes and shapes. But the accent of the Evil Trade merchants of the Trade Federation cannot be disguised. And this continues throughout the film." "The action in the film is so enthralling that one doesn't pay much attention to this. But the second foreign- like character in the film, Jar Jar Binks, is disturbing. Binks is an amphibious creature, clumsy and childlike. He has protruding lips, bug eyes, floppy ears that look like dreadlocks. And he speaks in a manner that resembles a West Indian dialect. While his looks were disturbingly ugly, his voice and accent were uglier." "He answers one question, 'Me so don't think so', and there are other examples. This could have been enough stereotyping for one say, but 'Phantom Menace' went for a triple with the character of Watto, a hooked-nose, slave- owning junk dealer who spoke in a Middle Eastern accent reminiscent of a Jew or an Arab." Hamilton goes on to remark, "As people laugh at Binks, I couldn't help wondering whether I was in on the joke. The buffoonish image would make Kingfish of Amos and Andy look like an international statesman", he said. The communications industry of the 21st century holds the prospect for tremendous opportunity, but with a dual edge. Since this industry is driven by the use of public resources, it is imperative to have a strong and independent commission led by individuals with the courage and the brilliance, as Chairman Kennard has, to ensure that the opportunity of the 21st century benefits rather than harms the public. Again, I thank you and I look forward to the rest of the session. MR. PEPPER: Thank you very much. Steve. MR. POCIASK: My name is Steve Pociask. I am Executive Vice President and Chief Economist for Joel Popkin & Company. I've worked in communications issues for 20 years, primarily in the area of research and strategic planning. And I am pleased to be here today to talk about the FCC in the 21st century. And I do want to take the -- the broader view, the perspective that you've asked, serving the American public and the public's interest. I think those are the right framework in which to -- to address this. My piece will be very short. I wanted to go right eventually to the whole issue of what the organization of the FCC should be like in terms of a more efficient and streamline organization. But just starting out here, I think we should go back to where telecommunications and communications industries have been from the 1934 Act forward when we had a very stable, growing industry with distinct markets, those markets being cable TV, radio, telephone, broadcast radio, broadcast TV, very distinct industries which now we've talked about the convergence that we see happening today. And while that convergence has occurred, we still have many of the same rules in place that dealt with these distinct industries. And I think this is a primary area for -- for -- in which the FCC should focus its attention because this is exactly the problem that I see today with where the regulation is with the FCC. And that is that the industry is changing so quickly that the FCC needs to -- to reorganize itself to be much more agile to these changes, to recognize the convergence that's currently underway. And I would like to just make a couple of broad recommendations. And we can talk about this later. But what I see as a primary focus of the Commission is that first it should look and redefine the market properly so it recognizes the convergence that's currently underway. Once it does that, it needs to collect better information. The current information that the FCC has inadequate for many of the analyses and decisions that it makes. Decisions on pricing flexibility are occurring. And we do not know what the market is for access services, for example. That's troublesome. My -- my office manager, as an example, you know, has a Jones Cable -- uses Jones Cable for telephone for at home and other things. I don't think that that's really being counted in the way people look at telecommunications. While we talk about it, we don't collect the numbers on it. And that's a concern. Today, we have more originating switched access minutes traversing off the network than traverse on the public switch network. And it's just because we don't measure -- other than the incumbent's data, we don't measure that market. So until we do that, until we collect that information that other data collecting agencies do such as Census, Labor, Commerce, I don't think that we can improve the analysis that we currently do making our decisions and substantiate them. I don't believe that we can make decisions that enhance consumer welfare. I don't think we can know that our decisions have benefits over cost. And those are some areas that I think we should improve. And the last points, I will talk about more later, are simply that there should be a transition to more market forces. And the FCC should re-deploy its savings. But once it reorganizes itself to recognize this convergence and makes its rules more common, it should then re-deploy those forces into helping the public and public concerns and harms and safety. And I'll talk about that more later. Thank you. MR. PEPPER: Thank you, Steve. Tom Hazlett, another former Chief Economist of the FCC, has to leave a little early because he has another commitment. So why don't we go to Tom. MR. HAZLETT: That was Chief, right? You didn't say, "Cheap economist", because it sounded a little like cheap economist. MR. PEPPER: Well, all our Chief Economists are cheap. MR. HAZLETT: Thanks. My thanks to the FCC for inviting me, although I have the sneaking suspicion that as soon as we all leave, the FCC is going to go back to their offices and chortle about the fact of getting a bunch of academics in a room and giving everybody two minutes is vengeance for something there. I am, first of all, going to have to go back to AEI where I'm working this year and check the computer network for security problems. Obviously, the Brookings people have snuck in and gotten our comments. I have some written comments that are somewhat remarkably similar, you be the judge, to what Dr. Litan was talking about earlier. And I concur with almost everything he said. And we have just a moment. So I'll -- I'll make a quick hit on a couple of things. First of all, I'm part of the Marxist contingency here that is advocating withering away of the state. And we're -- I think some of us Marxists today are interested in historical revisionism. And we do like to look at history. And it's very important to see that there have traditionally been interconnection problems in an unregulated telecommunications market. It's also equally important to see that there have been interconnection problems in a regulated telecommunications market. And for many decades after the FCC came into existence in 1934, it prohibited interconnection from competing telecommunications provider on the pro-monopoly model. Also, in the world of spectrum, it's very important to look at the history of spectrum regulation to see what happens in 1927 with the Federal Radio Act and the exclusion of a lot of broadcasters, small competitors mainly, non-profits and so forth; a very pronounced bias to commercial broadcasters who were very much in favor of the system. And a problem that is strikingly similar happens after 1927 with public interest licensing that you see even today with the micro-radio problem and the problems of exclusion and a bias in -- in the -- in the administration of public interest regulation. I would talk about moving the FCC to essentially two quasi-judicial functions. The world is much too complicated to plan. And now it's time for the FCC to focus on first principles and to think of itself as sort of devolving into a network interconnection court on the one side and a spectrum registry or a spectrum court on the other. And the idea that property rights are going to exclude new technologies is a shocking, a shocking argument to me. Maybe at some point, we could -- we could talk about it more later. But the whole argument for vesting flexible and full property rights for radio spectrum in a competitive manner in the private sector is exactly to bring out and to make protein, the dynamic forces of competitive entry that are out there with the new technologies today and to allow the technologies that are currently blocked an opportunity to negotiate or -- or simply to petition in the case of un- used radio spectrum, unoccupied frequencies and -- and get into the market in a fast and efficacious way for customers. MR. PEPPER: Thanks, Tom. MR. HAZLETT: Thank you. MR. PEPPER: Barbara. MS. CHERRY: Good morning. I'm Barbara Cherry. I am currently at Northwestern University. And this fall, I will be joining Michigan State University in the Department of Telecommunications and as Associate Director of the new Quello Center for Telecommunications, Management and Law. I'm recently in academia. I have spent 15 years in the industry, ten with AT&T and five with Ameritech. So I hope to bring hopefully an integrated view. I would like to stress at this point that I think that we need to step back for a moment and make sure that we're applying the correct kind of analysis, what level of analysis that we're looking at. And I think a critical problem is that we haven't suitably looked what kind of institutional environment we are creating to sustain private investment in telecommunications. The famous Nobel Laureate, Douglas North, won his Nobel Prize for recognizing the important role that institutional factors play. And Levy and Spiller are two economists now that are doing a lot of research to show how the different institutional structures of government affect the performance of the telecommunications sector across the world. And in light of that, what we have to keep in mind is that the institutional environment includes not just regulatory rules to affect private parties' behavior, but includes the governance structure; how does government itself function and what is the path or the forces of inertia that come from history that put constraints on where we can go. To date, I think I agree with Levy and Spiller that we've placed too -- too much emphasis solely on looking at the regulatory rules that govern the incentive of private parties and that we have to, as well, put focus on what kind of constraints are being placed on arbitrariness of government behavior. Levy and Spiller point out that there is three critical roles that are key for an institutional environment that's suitable for private -- sustained private investment and sectors such like utility sectors. One, there has to be adequate limits on the arbitrariness of government behavior. Two, there have to be adequate limits on how there can be changes in regulatory roles. And number three, you have to have a strong judiciary to enforce the prior two points. I think we need to concentrate more on whether or not we are satisfying these three key conditions in the governance structure; in other words, how is government behaving to support private investment in light of also history. And two quick points about that. One, I think history is showing us that I think we're fooling ourselves if we think this industry is going to go to total de- regulation. Long-standing legal history of common carrier regulation, the roots of this I was amazed to find in my own research go back to medieval times of England and were carried over to the common law here. And it persisted through various periods of laissez faire economics. And as a result, I believe that we are going to continue to need some form of common carrier obligations, some form of intervention. In this industry, that is different from other commodities in general. Second of all, in light of the governance structure itself, I think we need to go back and make sure, are we identifying the causes or just symptoms of what are our government problems. I'm suggesting the fact that we're seeing a lot of litigation and judicial review is a symptom of an underlying problem. The underlying problem is that there is not enough clarity; there is not enough consistency in government behavior about what they're expecting from this industry. It's reflected, as Chairman Kennard indicated, in the tensions built in to the policy objectives of TA-96 itself. It's manifested I think as symptoms also eloquently stated by -- in the decent by Furchtgott-Roth in the Billing -- Truth and Billing Docket where he went to great lengths to explain that really what's going on is blame avoidance behavior by government. Nobody wants to really in a final analysis be accountable for the fact they're making certain decisions about where they want universal service to go, and then it's got to be paid for. And nobody wants to -- everybody is passing the hot potato about whether it is a tax or not. And there -- and finally as another symptom is some of the indecision and delay that comes from the FCC. They do feel it difficult to make decisions because of all the political pressures that are based on them. MR. PEPPER: Wrap up. MS. CHERRY: Okay. And the wrap up is I think we need to look at the root causes and I think we can learn from international experience. I believe we should be involved in international, but not to go and just preach our position. But there is much to learn from them. In my own research, I am finding there is a lot of ways that I think the European Union is doing things better in terms of government structure than the United States. And we ought to be prepared to learn from them, as well. MR. PEPPER: Thank you. Mike? PROFESSOR RIORDAN: I'm Mike Riordan, Economics Professor and a recent former Chief Economist at the FCC. In my two minutes, I would like to focus on some of the issues that are related to what Steve Posiask said, the structural issues at the FCC because I think they're quite important. The business historian, Alfred Chandler, hypothesized that structure follows strategy. What he meant was that the administrative structure of an organization should be well adapted to its missions and goals that the organization needs to succeed. This is a good lesson for the FCC. The FCC today has a new strategy. And we've heard a lot about it already, competition de-regulation. We'll hear a lot more about it. But it has an antiquated organizational structure. Consider just for example the market for the delivery of video programming. The Mass Media Bureau oversees over-the-air television. The Cable Bureau is responsible for cable TV. The International Bureau does satellite TV. The Wireless Bureau does the emerging so- called wireless cable technology. And the Common Carrier Bureau, not to be left out, covers video signals delivered over telephone lines, traditional telephone lines. This is sheer madness. It's all the same product market. These are just different technologies for producing video products, video programming. Asking these five bureaucracies to promote competition and de-regulation in the market for the delivery of video programming is a lot like asking a committee of futile lords to design the nation state. The new FCC requires a leaner, more centralized administrative structure. The creation of an Enforcement Bureau is a step in the right direction. But the FCC should go further by consolidating the five existing bureaus and creating a single competition bureau with two principal mandates. The first mandate is to right rules that enable competition by lower barriers to entry. And notice that I said nothing about orderly competition. True competition is not orderly. Joseph Schumpeter described it as creative destruction. That's a very apt description. The second mandate should be to de-regulate where facilities-based competition is vigorous or entry barriers are low. And for this, the FCC does need information to have the confidence to do that. Use aggressively the forbearance authority of the Telecom Act. Sound economic analysis needs to be even more prominent and institutionalized in FCC decision-making. The swiftest, best way to do this in my opinion is to add an economic advisor to the staffs of each of the Commissioners. This change is consistent with overall downsizing of the FCC because consolidation of the bureaus will eliminate a tremendous amount of redundancy. Chandler began his treatise on the modern corporation on a cautionary note on which I'll close for the moment. Chandler said the following: "Historically, administrators have rarely changed their daily routine and their positions of power except under the strongest pressures. Therefore, a study of the creation of new administrative forms and methods should point to urgent needs and compelling opportunities, both within and without the organization." I think we all agree that the FCC faces urgent needs and compelling opportunities. It also has a wonderful staff. It has a good strategy. Structure should follow. Thanks. MR. PEPPER: Thanks, Mike. Bill? MR. NAPOLI: Hi. My name is Bill Napoli. Currently I am a faculty member at the graduate -- at Rutgers University, but I will be moving to the Graduate School of Business at Fordham University in a month or so. I taught three hours of summer school last night, so I can be brief. And the points actually I just want to make focus on the new core functions that are -- that are being proposed and some thoughts I had on -- on them and how they need to sort of be conceptualized and approached. First, the concept of consumer protection I think is an important and an interesting one. But given the industries that we're talking about and the types of social, political effects that we often can associate -- and responsibilities that we associate with many of the industries that fall under the FCC's authority, I think that concept of consumer protection needs to be pretty expansive to include things like diversity and -- and First Amendment freedoms. The concept of consumer protection for these industries means a bit more than -- than rates. Second, and I think I'm sort of echoing a bit of what Pat Aufderheide had said, which is that the -- when we approach competition, we need to approach it primarily as means to other economic, social and political ends, and that there needs to be a lot more analysis and focus on those ends and how they're -- how they're being achieved rather than competition of an ends in and of itself. And these two points together I think both suggest a bit of a more expansive analytical orientation within the Commission. Even as perhaps the policy-making and regulatory functions contract a bit, I think that should happen only in response to information and data that -- and conclusions that are drawn from a more expansive, analytical orientation about the effects that the policy changes are having at the level of how citizens are responding and how they are using and taking advantage of new services and how they are accessing information. MR. PEPPER: Thanks, Bill. Peter. MR. CRAMTON: Peter Cramton from the University of Maryland. The FCC's mantra, both today and in the 21st century, should be, "Make markets work better." How does the FCC do this? First, they play a very important role in defining and enforcing property rights, in particular spectrum management and interconnection rules and rights; designing market rules. One example would be price transparency. Markets can't work if consumers don't know what the prices are. So in the implementation of caller pays for wireless, the consumer -- when I place that call, I should -- I should have some indication of what price is going to be charged; and many other examples of price transparency, as well. The FCC should provide public goods that stimulate competition, reduce barriers to entry, reduce transactions costs in communications markets, provide data where they have a better access to data than private companies would. When we focus on spectrum management, in spectrum management, the FCC -- and in other areas, the FCC should rely on market-based tests. The use of auctions has been a tremendous advantage and breakthrough of the '90s. They should make more spectrum available. There has been huge consumer benefits to increase competition of wireless that we've all benefitted from. Licenses need to be made even more flexible than they currently are. The FCC needs to deal with the difficult problems of encouraging efficient relocation of spectrum incumbents in situations where it's -- technology has changed and there are incumbents sitting there that need to relocate or be terminated to avoid the hold-up problem and -- and reduce transactions costs. There are many difficult questions the FCC needs to deal with. The timing of release of spectrum, setting limits on aggregating spectrum, band allocations. The best way to do this is really a very difficult question and when technology is changing so rapidly. But the FCC should err on the side of making more spectrum available, making it more flexible. And the FCC should also continue their leadership role in continuing to enhance auction designs. They should develop the commentorial auction to expand the set of questions which market-based tests can be relied upon. They should explore the use of two-sided auctions where -- where they're not just selling spectrum, where -- but if I've got spectrum that I want to sell, I can put that into the auction, as well. And I believe they should continue a collaboration like this with academics; that that's very -- has been beneficial to both the academics and the FCC and consumers. MR. PEPPER: Thank you. MR. CRAMTON: So FCC, make markets work better. MR. PEPPER: Thank you, Peter. Judy. MS. HARKINS: I started out being terrified that I was going to be first. So I'm glad to see I don't have to be terrified about being last. I'm Judy Harkins from Gallaudet University. And my area of background has to do with accessibility of telecommunications and television to people who have disabilities. And primarily my work, because of where I work and my background, is in the area of access for people who are deaf and hard of hearing. And the FCC does have an important role to continue to play in this area. There is a long legislative history that indicates that. The federal government wants the telecommunications products and services of the country to be accessible to people with disabilities. And the FCC will need to remain involved in -- in that issue. I think the FCC has done an exemplary job by establishing an internal task force so that one person in each division has responsibility for monitoring this area and communicating with the public. And I would like to see something like that continued because I think it's been very effective in -- in getting the staff learning curve up very quickly. And the staff have been absolutely excellent. I'm very impressed with the FCC staff. I agree with someone's earlier comment that we are moving back to a place where we need more engineering. And I'm talking as an outsider in that area, but I'll give you an example. We do not want to be in a situation where we are constantly fighting with industry about having to retrofit problems that have popped up for people with disabilities. We would like for the FCC to help us to be proactive and to -- to get hooks built into infrastructure so that this will not be necessary. And to do that, I think we need some help in the international standards arena where we don't have an easy place at the table. And I hope the FCC can be our partner in that and helping -- I think it will benefit all of us including industry if this can be done as early as possible because that's when it's the most cheap way to do it. And so that -- in terms of one unique thing, I think that's an area where the FCC can be helpful. In terms of transitional issues, we have quite a few those because the technologies that people with disabilities have used for access, for example, to the telephone are quite antiquated. But they work. And right now what's beginning to happen is that people are starting to have problems -- or we're seeing products introduced that cannot be negotiated by these types of products. For example, the text telephone. We can't all of a sudden not allow deaf people to make phone calls. So this has to be -- we have to deal with it. And industry resists strenuously -- and I can't blame them -- having to accommodate very, very old technologies. So we need to -- we need some help in migrating forward those specialized technologies so that, first of all, they can be integrated to the maximum extent possible and not be special anymore. But to the extent that they do need to exist, that they can be updated and easily integrated. MR. PEPPER: Thank you, Judy. Rob? MR. ATKINSON: Rob Atkinson with the -- Director of the Technology and New Economy Project for the Progressive Policy Institute. I, first of all, want to commend the Commission for doing this. I'm going to focus most of my comments more on where we should -- where you should be in the next few years as opposed to where you should be in five years because I think five years, essentially that's 20 web years. It's really kind of hard to figure out where anything is going to be in five years. So clearly, competition is the goal that Congress and the Commission have embraced, I think correctly so. But I would -- I would argue we're not there yet. And until we are, we still need the FCC to play an active role. But given that competition is really what the Commission needs to be focusing on and advancing, I think there is a number of implications of that in terms of what it -- what it's role should be. And here I'll echo what Peter said. I think that one of the defining characteristics of the new economy is really all about speed, speed innovation and entrepreneurship. And I think the new telecommunications market has to -- is reflective of that. And unless the FCC really embraces speed as its defining principle in terms of the process, it's going to really delay and make this transition a lot more difficult and a lot more uncertain. Third, in this new competition environment where we have a whole series now of cross-subsidies to support universal service, I think that's working directly at odds with moving to competitive markets. FCC needs to seriously look at reforming universal service for the new economy. And I would argue the major principles of that really ought to be about reducing universal service support, but targeting it -- following several other people's points, targeting it to low income people; and then also replacing the implicit cross-subsidies of one service by another with more explicit and neutral subsidies. Fourth, needs to empower consumers with information. Several people have said that. I think that's a critical role of government in the new economy is -- is how do we make sure that consumers have the information they need to make the -- make proper choices. I would add some note to that as I think the FCC needs better data. We're just releasing a report now on -- on looking at the new economy around the country and have really been unable to get data on telecommunications around the country. And I think that we need better data, particularly on broad band deployment. And fifth and finally, I think the FCC needs to embrace what people would term extroverted or -- extroverted government. How does the FCC really engage with all these other parties that are -- certainly some of them are here, but all -- really all around the country in both large firms, small firms, community groups, others, in a sustained way that they can -- they can engage with them and at the same time still maintain their objectivity. Thank you. MR. PEPPER: Thank you, Rob. And last but not least, Russ. MR. NEUMAN: My name is Russ Neuman. I'm at the Annenberg Public Policy Center at Penn. And our first speaker this morning, Bob Litan, said the future of the FCC is no FCC. And I think I want to pick up on that, but suggest that the future of the FCC instead might be considered a new FCC, although it might not be called that. Chairman Kennard asked that we take the broad view, and I'm going to attempt to do that by arguing that over the last 50 years, the primary mandate of the Commission was as an independent regulatory commission to adjudicate in the communications sector. And in the next century and millennia, the role of the FCC, I argue, should be to enhance and advance the communications sector. And if it's not an FCC, maybe it will be a cabinet level Department of Communications whose job picks up from five other current institutions of government including the NTIA, the Defense Labs, Bell Labs and Bell Corps from the private sector, OSTP and the National Science Foundation. And that the future of the FCC, instead of processing and applying rules, will be doing research to keep the technology, the openness of markets, access on the cutting edge in the American case, and that it's hard for an existing institution growing up on the application of rules to adopt these new procedures. So this would require working with the Hill, working with the academy and the private sector, and working probably at the next transition team to take a look at five years from now, how a new Department of Communications can address really fundamental questions of research, data- gathering, making information available to the public about how the new technologies work and what their options are in a fast changing, but hopefully competitive marketplace. And I think the future of the FCC is bright, although we're going to have to change the name. MR. PEPPER: Thank you. New and approved, the new name on the -- new and approved on the box. We actually are more than halfway through our time and we've just gotten through the first round. I appreciate those who actually did try to keep to two minutes and be succinct. And again, Peter, thank you for your suggestion. That worked. A couple of themes I think have come out of the discussion so far. One that seems to be pretty consistent that actually you could almost predict from this group as opposed to the two prior forms that we've had is that there is a lack of good information. In other words, how do we know when markets are at the point you can de-regulate; how do we have basic information, as Rob said, about the telecommunications industry. You know, now this is somewhat controversial because, you know, Steve said we need to get information from incumbents; what about getting information from the new entrants. The new entrants come in and I think legitimately say, "Hey, wait a second. We're the little guys. We don't have a bunch of, you know, big Washington lobbyists and we don't have big back offices. It's an enormous burden on us to provide data that the old monopolies provide as a matter of course. So, you know, why are you imposing a new regulatory obligation on us to provide data? We're just out there trying to compete. We're little guys." So this is kind of an interesting issue about who collects the data, how do we collect the data, whether data may be -- we have other agencies in government collecting all kinds of, you know, data. The Department of Commerce, for example, revising zip codes. There is a whole project going on in terms of trying to redefine indices of the new economy. So maybe this is something that we can talk about. There seemed to be agreement that, you know, at a very core -- I mean, this -- there were three things in which there seemed to be agreement: information data and questions about how one goes about doing that. Second, a focus on interconnection disputes. Even people who said that we can, you know, sort of do away with all of our traditional functions, at a core, there are going to be these -- these disputes on interconnection. Different people had different approaches to that. And the third area in which there seemed to be a great deal of agreement was on spectrum management, kind of a core spectrum function; whether it's, you know, licensed at all and get it out right away; at a minimum, sort of define what it is people are getting. But there seems to be an enduring focus on -- yes, somebody is going to have to do spectrum and you guys haven't done such a terrible job that you shouldn't continue doing it. The one area in which there -- there was a lot of I heard disagreement were on the more social issues. Some people said, "Look, get out of this business. The markets are competitive." Other people were saying, "No, no. This is still a very important core function of the Commission. There is a public interest responsibility. And this is something that you should continue" -- "continue doing." On structural issues, I think there was wide agreement that leaner and faster, more consistent and more functional is probably -- probably some very, very good goals; and that, you know, sort of the delaying in the process -- I mean, some of the issues that -- that we heard about, some of the things that Steve raised and some of the things that Barbara raised I think are -- are important. And we have seen a consistency here. And then there -- in the future, there were a couple of questions that I think did come up in terms of what are our goals and different scenarios. Is it competition? Is it openness? What about interoperability? And some of the variables or factors that will affect getting to the competitive environment that people were -- were talking about. And the other thing that I think people also -- well, no, I guess with -- what Jon Weinberg was saying and what Al was saying -- Hammond -- that maybe we are not moving to convergence. But I was going to say that there -- there seemed to be a -- moving towards a consensus without complete agreement that the rate of change is becoming faster, that in fact we are going to be living in this sort of convergent nirvana. So there was some difference there. I think it's useful maybe to focus a little bit on, you know, some of these points that people, you know, sort of disagree with the -- you know, with -- Lisa and I have, you know, taken notes here trying to listen and pull together as themes; just take a few minutes with some very, very short interventions on that because I would like to also be able to move on to -- and focus on some of these structural questions and then go to some of the stuff that Paul wanted us to talk about, as well. I know, Steve, you sort of raised your name card and then put it down or -- did you want to say something? MR. POCIASK: Well, I guess there -- there is something I wanted to say further on -- on the information collection. You raise a good point in that while we collect a lot of data from the incumbents, it would be a burden to - - to place the same requirement on others. But that is part of -- of competition, is to have a level playing field. I would just suggest that we may dispute the rate of change of convergence. But if we don't measure it right, we'll never know we have it. We'll never know when consumers are really benefitting from something. They may benefit from some de-regulation or some pricing flexibility. But if we can't measure it, then -- then we're bound to delay in its action. And so consumers will suffer from that. I think it's also important that we have -- that the FCC has the tools, not just the data, but the tools to be measuring consumer welfare. I think that is a criteria for these rules. And it may be that what the FCC is doing today is just right. But if they were to reorganize -- and I think Michael said it right -- into like a -- a competition commission, then that -- then they would have the data, the tools. They would have the same organization to look at a bit whether it's over co-axial cable, fiber, copper or wireless. A bit's a bit. And -- and I think would go a long way in terms of reform and improving the analysis that the FCC does for the public. MR. PEPPER: Okay. Thanks. Mike? MR. RIORDAN: I was going to make a comment on spectrum management. MR. PEPPER: Okay. Any other comments on data collection? Jeff? MR. EISENACH: While good public policy is to treat like actors alike in terms of this data collection question and the impact on small businesses, your point, the fact of the matter is that when regulation of any kind imposes a fixed cost as a opposed to a proportional cost on market actors, what it does is discriminate in favor of size. It creates a false economy of scale that is not there in the marketplace. And to the extent that data collection costs are fixed costs, I think you need to be very sensitive about discriminating against the small firm. The other question though is in a world in which data and information are remarkably cheap. How big are those costs really and how much of those costs can -- can the FCC or other parts of the government shoulder on their own? One question is to the extent that the FCC is requiring somebody to fill out a form, it probably ought to re-look at that as a means of collection the data and go to more or less exclusively electronic means which can be costless with maybe a little start-up cost can be costless. And then the question is who bears the start-up cost. MR. PEPPER: All right. This is on the data collection. MR. SCHEMENT: Yes. It seems to me that it is in the nature of complex systems that they are not able to be observed directly. And so some kind of indirect observation that is quantitative measure needs to be developed. And it needs to be developed in a way that goes -- that includes and embraces evaluation which is what I hear you say, Steve, and a couple of others; but also includes description in a proactive way that allows planning and allows others to -- to utilize that information as assets for planning. We talk -- when we talk about access to the network and marginalized populations, we oftentimes talk about lack of a telephone. And others will say, "Well, those populations have" -- "have access to other technologies. Isn't that a kind of access?". And the completely honest answer is simply we don't know. But we should know. So who is going to -- who is going to collect that data? The FCC can. The FCC ought to be looking to share with others; ought to be looking to build the kind of data-collecting regime that allows others to participate in collecting the data, but also in sharing it. MR. PEPPER: Another point, of course, is that in some case, as you know, the states and local utility commissions collect those data. And one of the things that the D.C. Commission had done was collect extensive data on penetration rates and why the rate in the District was going down, that we were able to use. So part of this goes to not just putting things electronic, but finding out who else, if anybody, is already collecting stuff and coordinate data collection. MR. SCHEMENT: Coordinating it. Absolutely. MR. PEPPER: Anything else in data collection before we go to Mike on spectrum? Spectrum? DR. HAMMOND: Hello. This is Al Hammond. MR. PEPPER: Oh, I'm sorry. We have -- yes? DR. HAMMOND: I guess the other thing I want to say following up on what Jorge said is just to re-emphasize that while we're talking about data collection from various firms and competitors, we also ought to be looking at data collection from the communities that are being served, as well. I mean, part of the way to assess the utility or the success of any policy is to see how it actually impacts the society which it's being promulgated for. So I think Jorge's discussion about looking at how -- what -- what access means for various populations is just one -- one example of why we should be looking at and finding out a way to collect data with regard to the public, as well. MR. PEPPER: Great. Thanks. Before we go ahead, are there any other sort of comments from the ether, from our folks on teleconference? No? Okay. Mike. MR. RIORDAN: Actually, I do have a quick comment on data collection. MR. PEPPER: Oh, okay. Great. MR. RIORDAN: Any empirical -- it really reinforces what was just said. Any empirical researcher knows that data is not very useful unless it is collected in a uniform way. So the fact that different states are collecting it in different ways is not terribly helpful. And perhaps an important role for the FCC might simply be just to suggest a uniform methodology for collecting data so that comparisons can be made. On this sort of consensus on the need for spectrum management, I agree with that. It's almost an obvious point. But I would add that I think in embracing this mission in the future, a great deal of caution, intrepidation and nervousness is warranted on the part of the FCC because spectrum management can be misused and easily become a barrier entry. It's a lot like land management. And the idea of sort of putting land out in public hands, but then regulating its use is well established at the most basic levels of government. Many countries in the world regulate land. The government owns land. It parcels it out. It controls -- it's a disaster. It doesn't work well. I think it's easier -- it's quite possible for spectrum management to be a disaster. Anyone knows that local zoning is necessary for efficient land use. But it can also be a barrier to entry and competition. And so there needs to be great safeguards against that in whatever organizational structure is developed for a continuing spectrum management function. MR. PEPPER: Thanks. I will go to Peter Pitsch, then Peter Cramton, and then Russ. I assume this is all on spectrum. Peter? MR. PITSCH: It is. I want to use it to illustrate a point I made before which is I think there is great hope for competition. I'm a congenital optimist in this area. But incrementalism is going to be the way this industry and the regulatory structure gets changed. And in the spectrum area, I think the Commission ought to identify aggressively one, two, three areas where it is going to apply a system that is much more flexible using commentorial auctions. Peter mentioned that, which I think goes hand-in-hand with flexibility. Again, providing some track record for those who are not yet persuaded that flexibility and a more rights- oriented approach to spectrum management works. It's important to remember all these huge successes we've had in the regulatory field, the competitive field from computer two, to subscriber line charges, to transvender sales, to broadcasting and de-regulation, they were all highly controversial. Today, I don't think you would get that much argument over it. But we need to do the same thing in spectrum. By the way, I think we need to do the same thing in universal service. We need to do it in the area of regulating the telephone companies' essential facilities. Doing something like that with broad band; focusing in on the loop and co-location as the Commission has there. Again, providing an incremental way to establish a track record, to move this process forward. And then we'll see how the market evolved. MR. PEPPER: So what I'm hearing you say is be bold incrementally. MR. PITSCH: Think big, drink locally. I mean, you know, you need to -- you've got to realize where, you know -- I, as I said, was at the FCC for eight years. We did some very dramatic things. And we probably got shot down for over-reaching sometimes. But I think you've got to have this vision. And then you've got to develop concrete examples to bring the middle along. And we need to do it a hell of a lot faster than we've been able to do in the last 20 years. MR. PEPPER: Thanks. Peter Cramton. MR. CRAMTON: I would like to begin by echoing what Mike says, that with spectrum management, yes, it's necessary. But it is easy to mismanage. And I don't think that the FCC's track record has historically over the long history been very good. It's really only been in the last ten years that the FCC has made profound steps in the right direction in terms of flexible use. And sometimes -- and then there are lots of examples of where more can be done. For example, build-out requirements. That made a lot of sense in an era when people were given spectrum. But it makes a lot less sense in an era where people are buying spectrum at auctions. Why would I pay a lot of money for it if I don't intend to use in an appropriate economic way. Also in spectrum management, the flexible use has an additional advantage. And that is -- and this also goes to the rule -- simplifying the rule, like eliminating build- out requirements and using -- having flexible use and more homogeneous rules will improve the liquidity of the spectrum market. And so then it will -- then you can move towards a much more competitive situation. There are costs to specializing the use. And one of these big costs is -- and there is always going to be special interest that come in that want a very special use. But one of the big costs is making the market for spectrum less liquid. MR. PEPPER: Thanks. Russ? MR. NEUMAN: Maybe there is some useful debate yet on the issue of whether the FCC and perpetuity is going to be closely regulating and micro-managing the allocation of the spectrum. It seems to me that the distinction between wire line and spectrum allocation of -- of -- of getting broad band to the residents is going to blur as remote electronics move out, fiber gets closer to the home and the last hundred feet or thousand yards is in fact handled by spectrum, perhaps a variety of unlicensed and open spectrum use. It seems to me as a goal, through transition of the FCC, would be to open up more and more of the spectrum to a variety of purposes and not the kind of highly specific, traditional, one-function only -- and I draw my colleagues' attention to what I consider an abomination which was the allocation of a great deal of very useful spectrum to digital television which the broadcasters don't really want to broadcast. The consumers, it's not clear, really want to watch it. And the Commission itself might not have wanted to allocate it in the way it did which highly restricted the use in a restrained, a kind of technical flexibility and advancement that's been characteristics of the American private sector when it's not over-regulated. MR. PEPPER: Thanks. Jeff. MR. EISENACH: Very briefly just to elaborate on that point which is I think in saying there is a consensus on spectrum management among those of us who have argued for a residual function for the FCC or some successor to the FCC. I think there is a consensus on the need for a residual property rights management institution; a registry, if you will; a land bureau that -- that prevents trespassing or enforces an anti-trespassing statute. I don't think -- I don't think we ought to have ambiguity on the question of whether those of us who take that position at least see that as being anything like the historical spectrum management function. So just to create that distinction. MR. PEPPER: One of the issues in which there -- there did appear to be differences of -- oh, I'm sorry. Marvin. MR. SIRBY: Before we get too enamored of the property rights model and the -- and the property rights enforcement, I just want to reiterate the virtues of technology development and diffusion of new services that we've seen from completely open entry in things like the ISM band where we've seen everything from wireless local area networks to metropolitan systems such as Metricom, enormous innovation that I think would not have been possible without an open entry environment. And the -- we -- we -- yes, we sell property, physical property, land, but we don't sell everything including the streets and make people pay the property owner every time you want to go from one block to the next. We have some shared use areas. And I think we need to maintain those. MR. PEPPER: Thanks. One of the issues that came up in which there appeared to be some controversy and not necessarily agreement was on the role of the FCC and merger review and in terms of questions, whether the Commission's - - what the Commission's role should be; if the Commission should have a role in evaluating mergers. I know that maybe -- Mike, you've actually, you know, spoken or written about that. So maybe do you want to say something and then see what other people have to say. MR. RIORDAN: So I was heavily involved when I was here in sort of contributing to developing the competitive framework that the Commission uses for evaluating mergers. And I thought that was clearly important work. But after I left, I sort of was forced in various ways to sort of reflect on the -- the merits of dual review of telecommunications mergers by the Department of Justice and the FCC; and have followed with great interest and some agreement and some disagreement with the -- the -- Commissioner Furchtgott-Roth's constraining view about FCC activism in this regard. And where I've come out on this in my thinking is that I think that there is a very strong case right now and perhaps for the next five years for -- for dual review of telecommunications mergers by the FCC and the DOJ because the reviews are not completely duplicative. They are different. There are different laws and they're for different standards and they're for different screens for mergers that the two agencies allow, and different processes. And so there is likely to be different conclusions that might be reached and different aspects. There is a different purview of the public interest standard than there is for the Clayton Act. The reason why I think this is important is because the telecommunications industry is so important. It's going to be determining the structure of the American economy for many, many decades to come. And the government should be very cautious with the decisions it makes now with regard to changing market structure because we're going to have to live with those decisions for a long time. Go back and read Jerry Brock's thesis on the development -- the early development of the telecommunications industry and it will smack you in the face how policy decisions made a hundred years ago are affecting what we're talking about today in a very, very huge way. Part of the reason for the role of the FCC is that the -- the evaluation of the competitive effects and mergers today has nothing -- very little to do with competition today or even market structure today. The boundaries of industries -- telecommunications industries in the future are highly uncertain which technologies will be winners, which will be losers, what will be new technologies coming out. We just don't know. And, therefore, evaluating the competitive effects of mergers is almost inherently a very speculative, difficult exercise and it puts a very high burden on the DOJ when it goes to court to prove a theory of competitive harm. It can't be by the usual standards it uses. And I think that creates a real role for an expert agency like the FCC to contribute to those evaluations. Having said that, I think that perhaps five years from now, the telecommunications industry may become a lot more like other industries and a strong case could be made for the FCC stepping away and leaving this to a normal enforcement function of the DOJ under the Clayton Act. MR. PEPPER: Actually, let's see, first I want to see whether, you know, Al or Gregg or Jon want to say anything? No? Okay. I saw actually, let's see, Jeff, Barbara, Nolan and Jannette. Why don't we do it that way. Jeff? MR. EISENACH: In referring to the merger issue, the FCC's -- and maybe at the most basic level, Mike, there has been a lot of focus here on the need for speed, number one. Number two, I think we would all -- most of us would agree that there is a very dramatic change taking place in the industry. Number three, I think we've agreed that it is important to establish an environment in which there is some certainty with respect to standards. I think all of those objectives are violated by dual review. If there is in fact a dramatic change taking place in the industry, then assets need to be restructured in order to reflect that change. A bias in that sense ought to be in favor of, not against mergers. There ought to be an expectation, a sense that mergers are taking place in order to reflect a re-allocation of assets we all understand to be necessary. The FCC's history in reviewing mergers is one that neither creates much confidence with respect to speed, nor much confidence with respect to certainty. The FCC's history of imposing conditions on mergers has a number of problematic elements to it, one of which is the opportunity that that creates to pursue all sorts of "good social objectives" which may appear attractive to the current chairman or management or commission, but which may have little or no basis in statute. It is a de facto opportunity for extortion and has been used that way I believe in the past. The -- but -- but even ignoring that issue, one then goes to the question of whether we are going to have a uniform set of rules, something that we've talked about as desirable; that everyone ought to have the same rules apply to them. Every time the Commission approves a new merger with conditions attached to it, it is attacking uniformity. Every set of companies suddenly finds itself governed by a different regulatory framework attached to its -- attached to its merger. It's the sort of worst of the MSJ at large and -- and in a much more dynamic environment, potentially much more even destructive than that. So I don't think there is any case whatsoever for the FCC's independent review of mergers. I do think there is a case for the FCC's expertise to be involved in the merger process. And clearly, the DOJ ought to have the ability to draw on the expertise of the FCC in its review and maybe with some explicit statutory provisions for that to occur and to be required to occur. But -- but the dual review process that we have now I think already has been extremely destructive in deterring mergers that should have taken place or slowing down mergers that would create benefits for consumers and lower prices. And it ought to stop. MR. PEPPER: Okay. Thanks, Jeff. Barbara? MS. CHERRY: Yes. I agree with a lot of the statements that Jeff just made. And what I would like to offer is, again, if we could look at the institutional perspective, I believe what Jeff has just described is the fact that this dual review -- and let's recall as -- Ameritech is an example. It's not just DOJ. It's not just the FCC. It's also various state commissions. All these different reviews add to the arbitrariness of government action. It adds to the uncertainty. It adds to greater instability to sustain private investor -- private investment in infrastructure. So if the overall goal is, is that you're trying to create an institutional environment conducive to private investment infrastructure, the more reviews you have, the -- the worse you're going to make the environment for that kind of objective. I think increasingly government has to be willing to be more accountable to recognizing the impacts of its own behavior on what's happening in the performance of the market. It affects what merger decisions are made or not made, whether you bother to pursue them or not. You have to take accountability for the regulatory rules it puts in place like various entry barriers actually encourage some kind of mergers over others. Some may claim that Ameritech-SBC probably wouldn't be merging if the inter-lata barrier weren't there. So the rules we have in place also affect that. And finally, I think in terms of merger review, we also have to be mindful of the fact that it's not just arbitrariness of government behavior we have to worry about. But you are creating yet another forum for strategic behavior by the industry. Increasingly, government needs to recognize the role that its processes play in creating a different fora for competition. I've worked for both AT&T. I've worked for Ameritech and I understand very well the rhetoric on both sides. And it -- this industry has become one where it's probably just as and maybe even more important to duke it out in the regulatory sector than the competitive one because there is tremendous power for the status quo. There is tremendous power that comes from the rules that are in place. And it -- the FCC has to think about and government generally has to think about how much does it want to continue to be the determining factor of where things are going. Is the marketplace going to be in the regulatory arena or is it going to be in the competitive one? MR. PEPPER: Thanks. Nolan and then we'll come back to Larry. MR. BOWIE: Yes. Well, I think that the FCC's activities in merger reviews is somewhat redundant from what the FTC and the Department of Justice does, as well as PUCs. But I think the cost of time may be justified in that consumers are somewhat protected from excessive cost and poor service. But moreover, there is a different rationale that the FCC employs that the other agencies do not. And that purpose is to ensure content diversity which is a content- neutral means of achieving First Amendment objectives to ensure that diversity of viewpoints will be aired under the assumption that diversity of source leads to diversity of viewpoint. But there may be a better alternative. And that is what Marvin suggested, which is the creation of shared youth areas by a spectrum set aside for non-commercial speech and publications, and also the provisions of subsidies to produce and distribute essential services and citizen information. MR. PEPPER: Thanks. MS. DATES: I just wanted to say something. MR. PEPPER: Yes. MS. DATES: Okay. I was going to say some things about mergers and the effects that they've had on the black community because I think that it is important in terms of how the FCC does function. And I think really when you talk about the FCC's low power radio proceedings, I think that's an example of how you can in fact use the pro-competition mandate to foster opportunities so that in fact you can serve urban communities and rural small towns and communities by means of this low power radio idea that is being set forth by the FCC. And when you think about the fact the mergers have so effect to the black community because that's the larger companies have bought up so many of the -- and -- so many of the licensees have now gone to the big guys. The number of black owners has gone down dramatically. And I think that's in keeping with what Nolan was saying about the diversity of voices and viewpoints. MR. PEPPER: All right. Thank you. Why don't we take a few minutes -- oh, you want to -- oh, you put your thing down. Okay. MR. SPIWAK: Out of courtesy. MR. PEPPER: Okay. MR. SPIWAK: Just real quick, I've also been involved with a lot of the FCC mergers when I was here. And before that, I was very actively involved in electric utility mergers when I was in the electric utility business, both at FERK and private sector. In terms of Jeff's comments, you're right. Voluntary comments have become obscene. It's become a way of sort of, as you said, shaking down the industry. And that goes everything from charging AT&T 150 million dollars to make a voluntary contribution to America's children just to become non-dominant for everything else. In fact, in my recent international article, I had a huge cite of all of them. But, again, the issue comes in as when you're looking at mergers, are they efficient or are they not. You have all these people come in going, "Oh, all these great efficiency mergers." Well, what have we seen? We've seen the reconcentration of the cable industry. We've seen the reconcentration of the broadcast industry. And we're seeing the attempted reconcentration of the local access ILEC market. About two years ago -- and this was back when I was still at the FCC -- I wrote an article on anti-trust report. And I jokingly called it my reasonable mother article because there is an old line in anti-trust law that when all else fails, would your mother be ashamed of what you're doing. And I said, well, you know -- I started the article and I said, well, I'm sitting at my office when I was at the Competition Division. And my mother calls me up and goes, "Son, you work for the FCC's Competition Division. Should I be ashamed?". I said, "Well, no. You know, there is a lot of interesting stuff coming down." And sad to say, my prognostications in that article came to be about 90 percent correct. And then just as I left the FCC, we had the Bell Atlantic-Nynex case which from all accounts, from all sides was -- was not very well handled. And I wrote a second article -- and you can download this off the website. And, again, the intro to the article was my mother called me up again and said, "Son, did you lie to me? Are you sure I shouldn't be ashamed?". And I said, "No, this time you should be very ashamed." And, again, the question is does the FCC have a role. Absolutely. The government -- and this stretches all the way back to AT&T -- FCC v. -- U.S. v. FCC -- excuse me -- where you had the Department of Justice -- it was a satellite joint venture. And the Department of Justice said no and the FCC said, "Yes, we think it's a good idea because it clearly does not fall within the confines of the anti- trust laws which is why since all the way going back to Gulf States, the FCC is not bound to enforce anti-trust laws. But on the other hand, the FCC is not allowed to move beyond the -- you know, economic first principles so much that it makes no sense. And so I think when the agency handles larger mergers that are highly political poorly, you end up getting the type of criticisms you get, for example, from Senator McCain taking pot shots at Commission staff which I thought were actually rather inappropriate. So it's a question of leadership and it's a question of doing a serious economic analysis and a view of what kind of market structure in the long run do you want to see. And I leave with this quote. A very good friend of mine who still works here -- I will not mention his name -- who was very actively involved 15 years ago with the divestiture of the AT&T. And we're driving home one day -- this is back when I worked at the FCC. And we're all talking about all these mergers. And he looked up at me and he said, "Funny, fifteen years ago we thought divestiture was the way to go." And that's not what's happening now. MR. PEPPER: Thanks. Phil. And then, Barbara, did you have another comment or -- MS. CHERRY: Technically no. MR. PEPPER: Okay. Phil. MR. SPIWAK: On the issue of the dual review, I think the big challenges made with that existence is -- revolves around if possible reducing some of the ambiguity that's always associate with that public interest component of the review. I don't know if that's something that can be done. I mean, it's something that we as academics should be trying to work on, too. And I think it also gets back in some ways to the issue we were talking about before, about expanding the scope of the type of data that's gathered and analyzed. I mean, I think about something like the issue of the relationship between source and content diversity, that's operated as an assumption for many years, but yet isn't an assumption that the Courts are too often willing to -- to -- to agree with. And I think questions like that are -- you know, could be subject to a lot more empirical investigation than they have. I know -- I think Chairman Kennard has been emphasizing issues like that. But I think if there were a greater sort of pool of information about that component of the review in ways that could somehow reduce the inherent sort of ambiguous nature of that, then it could stand on a bit more equal footing perhaps with other components of the merger review and not seem as ambiguous and perhaps unnecessary. MR. PEPPER: Thanks. Why don't we go to -- is there -- oh, I heard -- did I hear somebody in videoland? DR. HAMMOND: Is it possible for me to make a comment on this? This is Al Hammond. MR. PEPPER: Yes. Thank you, Al. Go ahead. DR. HAMMOND: Hello? MR. PEPPER: Yes, go ahead, Al. Al, are you there? DR. HAMMOND: Yes, I'm here. MR. PEPPER: Go ahead. DR. HAMMOND: On this issue of merger review, I think the public interest component that the FCC brings to the process is important. And while there certainly should be some concern about the "shake downs" that occurred in the process most recently, the flip side of that is when many communities are facing essentially red-lining that will go on for the short-term future as people debate whether or not the educational institutions get a rebate or -- or rural health care gets a rebate, there are still communities out there that are not receiving services and not going to be the ones that are being first wired or first served. And to the extent that what this public interest component does is encourage some of these merging firms who otherwise wouldn't be providing services to re-think their deployment and to provide services in areas where they wouldn't do it as soon. But it is important and I think it does serve a worthwhile public interest purpose. So I would disagree with some of the characterizations of the mergers. And I, too, agree that Congress has been a bit ridiculous in some of the criticism they've had, especially given how much money they take from the industry in donations. MR. PEPPER: Thank you, Al. I'm not going to touch that one. One more comment on mergers and let's move on to another -- another topic. Steve, did you have something on mergers -- merger review? MR. POCIASK: Right. Just -- just a short comment. I -- following up on the last comment, I think there is a lot of good that come out of these mergers as we see the convergence that we've talked about. As AT&T moves into cable, there is a lot of promise in the services that - - that they will be able to provide. And -- and I think what that adds is a -- is a level of rivalry between those distinct industries that have separate rules today. So when we look at the industry and regulating the industry as we have, we need to understand that customers don't buy industries, they buy services. And some of those services can come over different types of information transport. And so what some of these mergers do is they provide, such as the AT&T one is providing for -- for the telecommunications a sense of inter-industry rivalry which is healthy. In the case of some of the ILEC mergers, we're seeing what are regional companies becoming end-to-end providers which AT&T already is. So in that sense, we're seeing people add the capabilities and full services that consumers want. And I'm not -- it's not clear to me that when we look at the industry broader, that we have a concentration problem here. And I -- I -- my position is that I see the merger review at the FCC as a duplication. MR. PEPPER: Thanks, Steve. New topic, Russ. MR. NEUMAN: I'm surprised by how little the model of the internet has been used as a model for understanding the future of the role of what we now know as the Federal Communications Commission. When we talk about the broadcast model, we think about a channel and an owner and controlling an issue. Diversity of voices is very much linked to a backward looking notion of when each channel was dedicated to a specific function and owned by an individual or corporation. With the internet, the user goes where they want to go. And the attempts thus far to control and constrain and use portals and sticky sites to control and limit the diversity on the internet has failed because of the character fundamentally of the -- of the nature of the technology. And so my vote for the future model of the FCC is its current model which is based on forbearance, and the notion that if the FCC has an important and unified and central goal for the next five or ten years, it's getting megabytes, gigabytes and ultimately terabytes to the home through a diversity of technologies including multiple spectrum and multiple wire line or optical fiber technologies. So that the need for the history of the FCC for individual channel regulation is no longer necessary or appropriate. DR. WEINBERG: Pepper, I can't resist picking up on that if I might. Jon Weinberg. MR. PEPPER: Okay. Go ahead, Jon. Okay. DR. WEINBERG: I mean, I think Russ is absolutely right, that the internet model is the way to go for the communications marketplace of the future. And in that sense, I think, speaking to your summary before, we are moving towards convergence. And I'm hopeful that we'll get there in a substantial way. My caveat is that the internet model isn't going to happen by itself; that it's -- to get there, we're going to need broad band deployment, we're going to need interconnection, and we're seriously going to need open architecture which is at the core of the success of the internet. And the FCC is going to have to make its choices perhaps including in the merger review process to try and make sure that those things happen. MR. PEPPER: Thank you. Patricia? MS. WORTHY: My only comment, Russell, would be to make sure though -- I mean, I -- I love that notion, but to make sure that everyone has access; that that's -- that's what's critical and that's the point we cannot forget. Yes. MR. PEPPER: And that actually leads into a universal service question. No, Judy. Go ahead. MS. HARKINS: Just a small comment, saying that I believe that in terms of your obligations in accessibility, that open architecture will serve those, as well, because it allows small businesses to provide products. And small businesses have always done a pretty good job of delivering products to people with disabilities. Anything that creates a barrier to entry for them is going to create problems that will be difficult to solve. MR. PEPPER: Thank you. If we could just -- Nolan? MR. BOWIE: The internet model that Russ Neuman just mentioned I think is inappropriate at this time in history. It may eventually evolve into the appropriate model. Going into the next phase of questioning dealing with the universal service in terms of access being only 30 percent of the U.S. homes versus 60 percent for cable, 93 percent for telephone or 99 plus for broadcasting. All of those models are more appropriate where there are more people using the service and benefitting from them. MR. PEPPER: Can we take maybe a few minutes to talk a little bit about other social issues on which there were disagreements such as universal service? There are some questions about indecency and the role of the Commission. Paul, do you want to say something? MR. McGEADY: Yes. We've been concerned with indecency complaints since the Pacifica case. In fact, we were makers in the Pacifica case. So we've been with it right along. And we've come to the conclusion that the present house rule of the FCC does a disservice to the American people. Your present rule requires that in order for you to entertain an indecency complaint, you must have a complete transcript or a videotape of the material. So what happens if the ordinary citizen is watching a television program and something grossly sexual and offensive comes on which you could even recognize at the FCC that is offensive? What do you do? You send a form letter saying, "Unless you've got a transcript or a videotape, we are not going to entertain it." Now, this is a terrible thing. In the Pacifica case, the FCC got the complaint, recognized that it had obvious merit, and they asked the station, "Send in your" -- "Send in your transcript." That's the way to go in the future. In other words, if you want to serve the public, then ask the station to send you the material and then make your decision. MR. PEPPER: Thank you. Everybody's sort of -- Peter? MR. PITSCH: Is this the time to make a comment about universal service? MR. PEPPER: Yes, this is -- yes. MR. PITSCH: Okay. MR. PEPPER: I would like to spend a few minutes on universal service. MR. PITSCH: Again, going back to my days at the FCC in the '80s, one of the major achievements of the FCC over these last several decades was I believe the subscriber line charge decision. And because of that decision -- and it -- you know, I'm not saying it wasn't without its bumps in the roads and we needed to work with our state conferrers perhaps better than we did. But Rob made this point. Others I think have made the point that we're all in favor of competition. But unless we reform the universal service system, we are going to skew that competitive process. We are going to discourage the deployment of new technologies. And the Commission has started to move in the right direction. And obviously a big chunk of this is in the domain of the states. But the FCC needs to aggressively more forward and handle its piece of the puzzle. And a lot of that is going to require putting more and more charges for fixed services back on customers who are enjoying the benefit of access. The first rule of fairness ought to be if there are people who can't afford this vital service, let's help them. Maybe the income targeted subsidies should be increased over time. That's something we put in place when I was here. But the second rule of fairness is you ought to pay for what you get and get what you pay for. And if, in fact, low volume users are getting the benefit of access, then they -- then they're going to have to pay for it. If they're getting the benefit of a bill that's being rendered on a monthly basis, they're going to have to pay for that. And that's fair. There are lots of rich farmers and ranchers in Wyoming who ought to pay more than they are and consistent with the statute. I think the FCC needs to move aggressively to reform universal service. And as someone else said, ought to go back to the Congress and say, "Let's fund this properly through general revenues." MR. PEPPER: Thank you. We're just going to on the universal service go right around the table. So Rob. MR. ATKINSON: Yes. I want to focus a little more on -- on thinking about universal service and advanced services. And I guess I would caution the Commission to not get too over-zealous about that issue because right now the internet is not divided between the haves and the have-nots. It's divided between the wants and the want-nots. And there are a lot more people who could afford the internet who simply don't have it because they don't want it. And to somehow say that we need to apply the telephony model of universal service to the internet at this phase I think is a -- is a fundamentally grave mistake, particularly, as Peter just said, as we're recognizing that universal services itself is a concept that is impeding competition. I don't think we want to go there. I would argue don't go there with the issue of advanced services. MR. PEPPER: Thank you. Barbara? MS. CHERRY: Yes. I think universal service is one of these areas where the political process is being driven a lot more by myths and implicit assumptions than they realize. And I think some initial research by Jorge Schement and Milton Mueller helped jump-start our realization about that with their study that showed a lot of the missed universal service; you know, which people really tend to be off the network or not. Well, I think we need to -- this gets to the data collection, as well. I think we need to extend our data collection to better verify whether or not the myths that our driving our political decisions are correct or not. So I would like to give as an example, I was recently at a conference and some other individuals here were, too, and -- at the London Business School. And I was surprised to find that they had certain data that surprised me what the results were. And I think something comparable in the United States should be done. First of all, in the United States, we are still vacillating between, well, do we have universal service that is subsidized rates for like everybody or should we just have targeted support; and then if we're going to have subsidized support, how should we pay for it. Well, in the U.K., they conducted a survey. They surveyed both a general sampling of the population as well as disadvantaged groups. And for both cases, they found that the priority for subsidizing, the price of utility service was the lowest for telephone compared to any other utility. Seventy-three percent thought we should subsidize water. Sixty-seven percent thought that electricity should be subsidized. Fifty-three percent thought gas should be subsidized. But only 12 percent thought telephone should be. Interesting. So the consumers themselves are saying, "We don't think the subsidy should be as great for telephone as other services." But even more interestingly, in the survey, they went on to say, "Well, if we should subsidize services for people who are in need, how should we fund it?". And the people at both -- if you were in a disadvantaged group as well as in the general population said their least favorite method was cross-subsidy. Only seven percent supported cross-subsidy in the price structure. Only 11 percent favored an increase and a value-added tax. Forty-one percent of the respondents said they would be willing to pay increased income taxes or some other -- and another 41 percent, some other method. And I only bring this up to mention that I think the politicians in the United States -- and it really struck me when I went to Europe -- we're being driven by a lot of myths. We think people want to subsidize more than they do and we think people would object to funding universal service for telephone like any other welfare service. But the survey at least in England shows that's not how people think. Maybe we should do more work to find out how consumers and the voters in the United States really thing so that then government won't have to be afraid to be honest about what they're doing, just like the truth in billing. We wouldn't have to go through this whole, you know, rigamorole about, well, is it really a tax or not and who is going to take -- be accountable for it. We could cut to the chase. And I think, again, this is a case where we can look to other countries to see how they can do it. MR. PEPPER: Thank you. Patricia, you were kind of chomping at the bit to say something or -- MS. WORTHY: Well, I just -- well -- MR. PEPPER: We're going down the table and you happen to be next. Why not. Go ahead. MS. WORTHY: Well, a couple of things. First of all, the telephone rates in England are low -- relatively low as opposed to their fuel rates. So, therefore, I would think that that has a lot to do with the survey results. Secondly, I would think that it would be very hard to get anything through Congress that is going to change the subsidy flowing to rural America. And if you think it can, go right ahead and try. MR. PEPPER: Jorge. Thank you, Patricia. MS. CHERRY: Again, I would just say it's an example. Let's find out instead of going on myths. Why don't we get some empirical data. MR. SCHEMENT: I'm impressed over the years that I've known Barbara that as she's gotten farther away from the corporate environment, she's begun to sound more like an academic. But I endorse the view that -- that we operate under some myths and that we don't -- we don't quite understand. And I want to just briefly review what some of the myths I think are. But first of all, I want to disagree with you, Bob, perhaps for the first time in my life, that we have some disagreement here on universal service. By my count, Pat Aufderheide, Al Hammond and Nolan Bowie, Pat Worthy, Judy Harkins, Jannette Dates, possibly Jon Weinberg and myself which is roughly 25 percent of those present all argued in favor of a role for the FCC in connecting with under-served populations and that that should be something the FCC should address. And while a few of us or others around the table seem to not be so sure about universal service as a long- term goal, I didn't hear an equal collection of individuals arguing -- arguing against it. So let me just address some of the myths that I think Barbara is alluding to. There is not very much evidence, not only gathered by ourselves, but gathered by phone companies, data that we have access to, that access subsidies increased the penetration rate for the telephone. That it appears, at least from a good bit of data supplied by phone companies and some work we've done, as well, that access charges don't have any effect at all; that what happens is people utilize the access subsidy to get on and then they can't pay the toll charge and then they fall off. And so that there is a churn rate going on across the board in the U.S. It may be as high as 15 percent of households per year that are turned on and off -- on and off the network. PacBell -- or PacTel and Bell Atlantic both claim informally and, therefore, perhaps this should be off the record, that roughly one percent of households are disconnected every month for failure to pay -- pay toll charges. So if we're going to subsidize, we shouldn't subsidize access. Access isn't the problem. We should subsidize maintenance. Helping people stay on once they're on is much more likely to keep people on and raise telephone rates from where they -- penetration rates from where they have been than if we were focusing on access. The two states that subsidize maintenance the most aggressively and most effectively are Nebraska and Pennsylvania. And they both have the highest penetration rates of all. Now, Nebraska is historic. But Pennsylvania is recent and they have achieved very high, 97 percent, telephone penetration rate. These are -- unlike Nebraska, Pennsylvania has large minority populations. It is both rural and -- and urban; has the largest rural population in the United States, yet still manages to have very high penetration rates because it is maintenance that is being subsidized rather than -- rather than access. We should also recognize, as I think we do, that Americans are increasingly accessing the network, whatever it is we want that to mean, via multi-channels and that, therefore, universal service in the future -- a future theory of universal service should in part revolve around the notion of choice. Americans make choices on how to access and we ought to facilitate those choices because what we want to do is facilitate access. It shouldn't matter to us how they access. It should matter to us that they access in functional ways and that functional is a social construction that they decide for themselves. Thirdly, we have a myth that in order to get corporations to participate, we have to force them to participate. I'm not sure that's the case. We have not explored the possibility of what it would take to create incentives for corporations to participate in enhancing access, especially for populations that fall within their markets that are themselves under-served. And then finally, back to Barbara's point which I think is absolutely on target. We have a long history in this country that Americans appreciate every subsidy that they get and resent every subsidy that somebody else gets that they don't get. And that as a consequence of that, cross-subsidies that don't go -- that go to some but not to others are always controversial whereas subsidizing systems that somehow or other manage to cover a very large portion of the population such as social security tend to be seen as relatively non-controversial. The Gore tax is seen as a tax un-resented because it is seen as a targeted cross-subsidy. If we are to move towards a subsidized system in universal service in the future -- and I'm not sure we need to subsidize very much -- but if we need to move to a subsidized system, we ought to think of it in a way where every American feels that they are getting something for it rather than where Americans feel that something is being taken away from them and given to somebody else which they hardly resent. In this same way, the corporate players want de- regulation for themselves, but want to make sure that there is regulation for others. MR. PEPPER: Thanks. MR. ROSSTON: This is Gregg. MR. PEPPER: Hold on. MR. ROSSTON: Okay. MR. PEPPER: Why don't we have Marvin and then we'll go to radio world. MR. SIRBY: Before we -- we embrace whole- heartedly the idea that general tax revenues should be used to support universal service, it's worth remembering that telecommunications exhibits pronounce network extranalities. What that means is that those telemarketers get value when some additional low income person joins the network. And they ought to contribute to that low income person joining the network in return for the value they're receiving. And it is economically more efficient to have internal cross subsidy than it is to do it out of general revenues because it's -- it's putting the cost where the value lies. MR. PEPPER: Thanks, Marvin. In the audio land? DR. WEINBERG: Let's let Gregg go first, then I'll jump in. MR. ROSSTON: Okay. I just wanted to -- earlier on, I made the point and I think a couple of other people did, that consumer information is really important in the competitive world. And I think with respect to universal service, this is one way where we could possibly make a difference in the universal service to rural areas. Right now it's implicit. No one knows how much it is and where it's going to. If we were to -- the FCC, although it can't change the statute and it can't change Capitol Hill, it can change how explicit this funding is so the people know what they're paying for. And this may be sort of one of Peter Pitsch's ways of changing things that people then may not find is, you know, a bad thing or they may revolt against it. And putting it where consumers know what they're paying for is an important fact of competition and a way we can make the system more efficient. MR. PEPPER: Thanks, Gregg. Jon Weinberg? DR. WEINBERG: This is Jon Weinberg. I think we need to distinguish here -- and someone mentioned my name before and I'm -- I shudder at the thought of anyone not knowing what I think. So I'll jump in. I think we need to distinguish between our current universal rules and the broader universal policies. Our current universal rules are a disaster. We're funneling all sorts of money on the theory that we need to equalize rates in rural and urban areas. And I can't think of any good reason why we would want to equalize -- any good policy reason why we would want to equalize rural and urban rates as opposed to simply trying to keep rural rates sufficiently low so as to keep people on the network, not have them drop off because rates are out of control. So a lot of that doesn't make sense. On the other hand, the fact that we've got problems there doesn't mean that we need to ditch the concept of universal service because I think it's going to remain the case in the FCC for the 21st century that access to information is a public good and it's a public good even without regard to Marvin's network effects. And for that reason, it's appropriate for government to subsidize it for low income users, for other users who would not have access -- and I mean that in the common language sense, not the technical sense -- absent government action. And that's a role that some government agency, whether it's the FCC or another, needs to continue to play in. MR. PEPPER: Thanks, Jon. We'll go to Al Hammond, Nolan Bowie and Larry Spiwak. And then I want to shift for the last 15 minutes to some of the questions that are both structural in terms of the Commission and then how we can do our job better because those were another set of issues that were raised in the first going around. Al? Al Hammond? DR. HAMMOND: I just want to follow up on a comment made earlier about universal service and the internet being an issue of wants and want-nots. I think that's -- that's not accurate. And this again goes to the issue of how one goes about acquiring information. If anyone looks at the price points for computers, for instance, or other price points for cable modems, you must realize that there is a substantial portion of society that just doesn't have the money right now to acquire those goods vis-a-vis other goods that are more important right now, whether it be a refrigerator or paying the rent for the month. When the price point drops farther for computers or when the price points drop farther for cable modems, maybe we can talk about it being an issue of want and want- not. But right now it's still an issue of have and have- not. And I think it's disingenuous to present it otherwise. And I think Jorge is right. And I -- I think those two -- these two things come together. If you look at the price points dropping, then it does ultimately become an issue of choice. And choice becomes the most important delimiter. But until the price points drop, that's not the case. MR. PEPPER: Thanks, Al. Nolan? MR. BOWIE: On the issue of universal service, I think first of all we have to redefine exactly what we're talking about. I think that the evolving concept of universal service is short-sided. It ought to mean 100 percent of the universe at issue herein again all of the people of the United States whether rich or poor. Those who are wealthier should pay for their services. The 1996 Telecom Act, for example, defines schools as K through 12 exclusively. It bypasses pre-schools, technical and trade schools, community colleges, places where people who will probably go back to school need resources. They won't necessarily be available. It also does not anticipate the way people will be expected to learn in the future. They're going to be more mobile. The technologies will be smaller, better, cheaper. And with the expectation of life-long learning obligations, they won't necessarily be going to a school or a physical building to learn. Universal service to what? I still don't think that that's fully defined. We need to define what essential services will be available. I think, for example, e-mail, literacy, 911 emergency are a bare minimum. But it is really a question of the quality of life. And the bigger question that we tend not to answer or even have a public discussion about is what kind of society do we want to become, inclusive or exclusive; united or divided; stable and predictable or chaotic and unpredictable? How long must the -- how wide must the gap grow before it is detrimental to the American society? What possibly will happen to the creative and productive ability of the United States work force in the global knowledge economy if we don't achieve universal service? What are the potential costs and down sides, and are we willing to pay those costs? Finally, I would like to suggest that the role of the government still is to provide for the common defense and provide for the general welfare. And I think that both of these are appropriate when we think about universal service. Thus, I think a new rationale may be required for building a national information infrastructure. Government has traditionally provided an infrastructure so that where there are market failures, where there is red-lining, where private corporations are not willing to go. I think there is a role for the government to provide the subsidies or the fiber to connect the poor and the information have-nots. And I think the national defense rationale may be appropriate. It's the same response that the Eisenhower administration used when the Soviet Union successfully launched Sputnik with the National Defense Education Act. I also point out that the national highway system was -- rationale was the national defense; that the internet as opernet was a national defense initiative. Lastly, I would suggest that -- well, that's enough. MR. PEPPER: Thanks, Nolan. Larry, one last comment on this because I think we want to be able to go -- MR. SPIWAK: I'll make it real quick. I mean, everybody knows that universal service is a worthy social goal. I mean, when I was here at the FCC, I mean, Bill Kennard had asked us in back when he was general counsel, "Do you know what you're doing?". I would say, "Look, you know, Section 1 of the Communications Act, nationwide network, fair price." This is a good thing to have everybody talking to one another. But I think one of the problems over the last couple of years is that the FCC hasn't really realized how much of a barrier to entry its current universal service policies are. And this is a very serious thing because the sad thing about this is that in its short-term effort to provide children with advanced products, what you're doing is in the long term, it's a self-defeating exercise. I mean, specifically is that if you have -- universal service, you basically have to pay about ten percent of your gross revenues into the universal service fund. Now, if you're a new entrant -- and now we're talking big new entrants here. You bleed red ink for the first three to five years. That's the way the business works. And if you're going to enter a market and you're worried about cash flow, cash flow, you're not going to enter the market because, you know, gross revenues, I've got to deal with cash flow. So this is a real problem and deal with it which is why, by the way, you see a lot of utilities for example not deciding to make an end-to-end retail strategy, but only a wholesale strategy; because they don't want to deal with universal service issues. Okay? Moreover -- and so the solution to that is that if we want true universal service, we expand supply and especially in rural areas where quite frankly there is a lot of areas where there is not much money, so nobody is going to want to invest. But, for example, municipal utility entry which I've been in, the FCC has been sitting on a petition there for the last two years. And there are some legal issues with the city of Abilene. But still, here is your solution to the universal service problem and we need to find a way around that. The other issue that I would like to bring up is that the FCC's universal service policies have also caused a lot of consternation abroad. The EC, the ITU are livid at the U.S. over its universal service policy because every call from the poorest African nation is going to subsidize an ISBN line to Ted Turner's ranch. In fact, the ITU is so mad, they used exclamation points. This is the United Nations. They didn't use that with Kosovo. But they used it dealing with the FCC's universal service policies. And so I think when we talk about universal service, we should not allow children to be used as what I described, as regulatory human shields to defend flawed legal and economic policies because it's very sad and a very self-defeating exercise. MR. PEPPER: You've never sort of over-stated your positions. I -- we only have about 11 minutes left. And so if -- you know, Jeff and Pat, I mean, is there anything really urgent? MS. AUFDERHEIDE: I want to be in the practical recommendations. MR. PEPPER: All right. Well, let's get to practical recommendations since we only have about ten minutes to be practical. MR. EISENACH: May I say two very quick things on universal service? The first is on price points. You can buy a computer today for $19.95 a month. You can get your internet subscription as part of that. It is the price of phone service. It is less than the price of owning a television set if you finance the television set. The notion that the price points are a barrier to internet access, I think the standard that Al Hammond set out is one that we passed in the last six months. And there is every indication that those prices are going to keep falling. Secondly, on universal service, given the level of taxes we levy on telecommunications service, it's the single biggest barrier to getting on the internet, particular broad band. If I were to buy my daughter a $600.00 computer today and then hook her up with a DSL line to the internet, I would probably pay i the neighborhood of 25 percent of the cost of that DSL line in taxes. That's to say $15.00 a month on a $60.00 DSL line; $180.00 a year on that DSL line; almost $600.00 over the three-year life of the computer which is to say that for practical purposes, where aggressive taxes on telecommunications services amount to a 100 percent tax on the ability of someone to connect their child to the internet with a broad band line. That's crazy. We've got to be cutting those telecommunications taxes which are regressive. We've got to be cutting those as the first step to advancing universal service, not imposing more subsidies to make up for a crazy tax regime. MR. PEPPER: Obviously, not withstanding what Jorge said, that there are some differences of opinion about universal service. And I think maybe we can continue those. And we would love to be able to get more input. And obviously, there is a record here that will mention a website, an e-mail address we can receive e-mail comments and additional information. But I really would like to spend the last few minutes here talking about things or hearing your suggestions of how to be practical about making some reforms. Pat? MS. AUFDERHEIDE: First of all, I want to say that I think it's really a great thing to have discussions like this. Looking at the three discussions that have been showcased already, one of the things that really strikes me is that astonishing impoverishment of the public sector and of the academic sector in comparison to the think-tanks and the -- and the -- the corporations and the -- the trade associations and law firms. And I think that's -- that's simply -- that's a long-standing fact that if we are to have a serious thinking and analysis on this emerging and still very confusing world, the FCC is going to play an important role in confronting how do we get better informed, long-term, academic, scholarly, thoughtful analysis into this. One very, very simple thing that I think could happen is more intermixture between different groups and not to have these groups isolated in academic, consumer and corporate sectors. Another really, really simple, straight-forward thing that could happen is that the FCC could improve and make state of the art its wonderful resource of the website which is so much more accessible to some of us even locally than the Portals, and was a terrific, terrific step forward from those awful years when the only -- you know, we had to trek down here and -- and confront those icy people at the public records office. And it would be also wonderful to -- to make more user-friendly the -- the process of having these conversations about setting standards for data collection and for conducting research. Thank you. MR. PEPPER: Thanks, Pat. Peter -- let's go Peter, Russ, Barbara, Larry. We'll have to make it really short because we do have to -- MR. PITSCH: Right. Just incorporate by reference my earlier comments about streamlining management and delegating. I want to talk briefly about the organizational function. The Commission's questions asked about licensing. I think that would be an excellent idea. Licensing, auction, try to streamline that process. Also, regarding the policy area, Michael talked about one competition bureau. I think the Chairman threw out a couple of ideas. I would argue that along with delegation, it will be important to make sure that this policy bureau doesn't become too big because that becomes a source of delay. So making sure -- it wouldn't be terrible if there were two or three policy bureaus. And also, I recommend a strong -- you'll like this, Bob -- a strong OPP, a strong OGC. I think that's important for the Commission to have input. And the other thing I want to say is someone has got to own delay. Someone in the agency has got to own delay. One of the really big problems with independent agencies and five people is it's too easy for people not to be responsible for delay. I would put the circulate item list on the website. How many Commissioners have voted? You know, don't hold me to that one. But we've got to be thinking -- we've got to be thinking about that because right now trying to get something through the Commission is a two-year process. It takes way too long. MR. PEPPER: Thank you. Russ. MR. NEUMAN: Briefly and briefly. Some of you may have thought I wondered into the wrong hearing room when I suggested a very broad review of responsibilities and communications including the Office of Science and Technology Policy and the White House, etcetera. I am serious about that enterprise. And my concrete suggestion for the senior staff of the Commission is a skunk-works that involves interdepartmental participation; that would involve leading thinkers in other agencies and perhaps even on the Hill to talk about what at a very broad level could take seriously an internet model of the future of communications. MR. PEPPER: Thanks. Barbara? MS. CHERRY: Okay. I guess the key point I would like -- like to raise is I think the key thing is to continually become more interdisciplinary in the analysis that the FCC does and how it reflects upon its own role in influencing how the industry works. I agree with the earlier comment. There is a couple of ways to do this. One is to include more fields as was mentioned before than we have before like sociologists, anthropologists, human factors engineering. Have more integrated experience within given individuals. If we can have individuals of more multiple experience, I find it incredibly helpful to work for multiple companies and then going to academia or have more people who are willing to cross boundaries. Perhaps the FCC could better facilitate some kind of internships or coordination. I think you don't really understand how government works until you've been part of it. You don't really understand how business works until you've been part of it. We need more interdisciplinary experience; more international comparative work, interdisciplinary in that way. Have more fora like today. We're actually bringing in people from different groups like academia; and more empirical research to make sure that we really are operating more out of facts and not myths. MR. PEPPER: Thank you. Larry? MR. SPIWAK: Two obvious points. Reinventing government is a bit of an oxymoron. And of course, Bismarck's famous line about those who love both law and sausages shall inquire how neither are made. I commend Mike on his suggestion of having everybody an economic advisor. But you're talking about a competition bureau. Well, I was part of a competition division which was -- which was one of these pet reinventing government projects. And the problem that we're all talking about with regulation is that everybody -- no matter what you call it, it's still form over substance because everybody is still mad over delay. And there are various things that make regulation in and of itself very obnoxious. There is regulatory capture. There is entrenchment. There is political pressure. There is all the things. One of the things -- MR. PEPPER: What's your concrete suggestion because the clock is ticking. MR. SPIWAK: Two quick points, is that I think that you need sort of a group much like the Competition Division -- former Competition Division or the OPP under Peter's watch where you have a bunch of people who are somewhat independent, indeed bordering on the insubordinate, where they can go and fire memos and, therefore, help the Commission to focus on the debate. And this time when you do it -- MR. PEPPER: Okay. And the second suggestion? MR. SPIWAK: That's it. This when you do it, have an organizational charter so that when your people are asked to read the law, do the economics, get the right answer, and it might go against the political wisdom, that they're not punished for it. MR. PEPPER: Thanks. Jannette, a suggestion? MS. DATES: Include within the new Enforcement Bureau the mission of enforcing equal opportunity requirements. Short. MR. PEPPER: Thank you. And, Nolan, the last word? DR. WEINBERG: No words from ether land? MR. PEPPER: Oh, wait, wait, wait. All right. Jon, you'll get yours. DR. WEINBERG: Okay. MR. PEPPER: Nolan? MR. BOWIE: Well, reinvent OTA or a specific OTA, Office of Technology assessment, that deals exclusively with communications and information technology. I think Russ Neuman's suggestion that the FCC do this work in addition to some regulatory authority would offer the same kind of conflicts that the Atomic Energy Commission had in the past. Second, the FCC should digitize and put on-line all unclassified information unless exempt from Freedom of Information Act discovery. MR. PEPPER: Thank you. Peter, did you still have yours up? No? Okay. Jon Weinberg? DR. WEINBERG: FCC's ripe for wholesale reorganization of the bureau structure around function, not delivery mechanism, whatever the future of special management. It doesn't make sense to spread it over four bureaus. We could have the bureau offer some spectrum management to the extent that the key new mission of the FCC is interoperability and open architecture. We could have a bureau devoted to that, taking in from the Common Carrier or Cable and other bureaus. You need to work on the 8th floor process. It doesn't -- and bring in the 8th floor offices in earlier on items. It's not workable to have items spring from the brow of Zeus full formed at -- and that's when the other Commissioners get it on the mix. MR. PEPPER: Thanks. DR. WEINBERG: The prefaces to make sure that items don't get lost on the eighth floor need processes so that the eighth floor can more effectively goose staff to take action on key items when the bureaus themselves don't give them high priority. Down with task forces to start on that, but it should be more nimble and closer to the Chairman's office. And as Peter Pitsch said, we've probably got too many layers of management and need to chip away at what Tom McGarrity would call the ossification of the agency that makes it hard to get things through the process. MR. PEPPER: Thank you. Al or Gregg, do you have anything? No? Well, I want to thank -- well, yes? No? Okay. I want to thank everybody for -- MR. ROSSTON: Quickly, get rid of the Cable Bureau; get rid of the Mass Media Bureau; and combine the Wireless Bureau as the Office of Licensing Spectrum. And put the -- I agree with Mike Riordan and get a Policy Division or a Policy Bureau that looks at competition issues. But get rid of these other bureaus that are sort of technology focused. And then have the International Bureau not be a satellite advocacy bureau, but an international advocacy bureau, trying to export competition worldwide. MR. PEPPER: Thank you. Is that it? DR. HAMMOND: I'm going to defer. MR. PEPPER: Thank you, Al. Okay. I thank everybody again. A couple of, again, procedural things at the closing. First, there is -- we have a new e-mail address for people either here or on-line or anybody who is listening or seeing this as a tape later which is newfcc@fcc.gov. Please give us your suggestions, especially just -- you know, Gregg, Al, you didn't have a chance for last word. Jon, you know, e-mail those in. Anybody here who wants to put those in the record, that would be great. Also, we urge people to check out our website at www.fcc.gov and look for the place on there which is the "FCC for the 21st Century" site because we do have, for example, access to the transcripts of these forums and other material. I want to thank all of you who are the participants for coming. And I want to thank our West Coast with Oregon to California and Oregon contingent via audio. And I really appreciate everybody hanging in for -- for three hours. I also am indebted not only to Lisa Sockett who is really heading up this effort for us here at the -- at the Commission, but the other people who have been participating in back of us, sort of unseen to us, but seen by you, who has been Maryanne McCormick who has been helping us to record all of this. And then we do take these flip charts and turn them into notes for ourselves. And that's a very, very important part of our process. So thank you very much on Maryanne. And people in Public Affairs who have been really instrumental, Brett Freedman who I think most of you met on the way in, Maureen Piertino who has been critical, Martha Contee who really made these forums happen. And certainly not least, but last is the audio- visual staff, the people who have actually put our pictures up on the screens, made the audio services work and have gotten us out on the internet. So thank you all very, very much. For those who are the participants at the round table, we're going to continue maybe some informal discussions. We have some sandwiches upstairs. And so if you could stick around, that would be terrific. Thank you very, very much. (Whereupon, at 1:02 p.m. on Friday, June 11, 1999, the meeting was adjourned.) // // // // // // // // // // // // // // // // // // // REPORTER'S CERTIFICATE FCC DOCKET NO.: N/A CASE TITLE: A NEW FCC FOR THE 21ST CENTURY HEARING DATE: JUNE 11, 1999 LOCATION: WASHINGTON, DC I hereby certify that the proceedings and evidence are contained fully and accurately on the tapes and notes reported by me at the hearing in the above case before the Federal Communications Commission. Date: __6-11-99_ __Shari R. Bowman____________ Official Reporter Heritage Reporting Corporation 1220 "L" Street, N.W. Washington, D.C. 20005 TRANSCRIBER'S CERTIFICATE I hereby certify that the proceedings and evidence were fully and accurately transcribed from the tapes and notes provided by the above named reporter in the above case before the Federal Communications Commission. Date: __6-21-99_ __Bonnie Niemann______________ Official Transcriber Heritage Reporting Corporation PROOFREADER'S CERTIFICATE I hereby certify that the transcript of the proceedings and evidence in the above referenced case that was held before the Federal Communications Commission was proofread on the date specified below. Date: __6-21-99_ __Lorenzo Jones_______________ Official Proofreader Heritage Reporting Corporation