REED E. HUNDT
  CHAIRMAN, FEDERAL COMMUNICATIONS COMMISSION
  ACM97 CONFERENCE
  SAN JOSE, CALIFORNIA
  MARCH 4, 1997
                       (As prepared for delivery)
                                    
                           Bandwidth and Pizza
                                    
         Last year, on Valentine's Day, Vice President Gore kicked off  your celebration
  of the 50th anniversary of the invention of the electronic computer.
          
         Now as it happens the Vice President and I were born a year after the compu-
  ter, 49 years ago this month; my birthday was yesterday, his comes 28 days later.
  
         I know you each have handheld computers -- heck, you each can probably
  make handheld computers -- that can do that addition so you can figure out when to
  send him a birthday card.
  
         But yesterday, March 3, was my birthday and incidentally also the birthday of
  Alexander Graham Bell.
  
         How did you think I happened to be selected as Federal Communications
  Commission Chairman?
  
         March 3 is also the birthday of the inventor of the railroad sleeping car, George
  Pullman.
         
          That was a close call for me.  I could have been selected as Chairman of the
  Interstate Commerce Commission, which was put out of business by the new
  Republican Congress last year. 
  
         The Federal Communications Commission they only thought about shutting
  down; but I'll get to that later.
   
         In any event, as it also happens, being of similar age and growing up in the 
  same town, it came to pass that the Vice President and I went to high school together.
  Now there were differences between us: he was slightly younger, had the prettiest date
  at the senior prom (a girl with the nickname Tipper), was captain of the football team,
  was a National Merit Semifinalist, and went to Harvard.
  
         He also truly loved all science and if he hadn't gone to Harvard I believe he
  might well have become a computer wizard.
  
         I didn't say that quite right. It wasn't that he went to Harvard. Bill Gates
  explained this to me.  It was finishing Harvard that was Al's mistake.
  
         In any event, now that I've turned 49 (slightly earlier than the Vice President),
  and I'm holding on for one last spring-in-my-step, irrationally exuberant year to what
  could at least colorably be called youth, frankly I'm delighted to remark with disdain
  the birthday of anyone or anything on the other side of the Great Divide of the Big
  Five-Oh, such as Mr. ENIAC, the electronic computer, now a dusty, decrepit, defunct
  50.
  
         Now fortunately a truth of life, vouchsafed to one only as one reaches the 40s,
  is that you're always as young as your ideas.
  
         Back home in Washington the telephone and broadcast lobbyists sometimes call
  my ideas juvenile, as opposed to fresh and youthful, but I'll get to that later.
  
         In my job I should have all the young ideas in the world in order to cope with
  the wedding of Bell's progeny and Mr. ENIAC's descendants, also called the
  convergence of communications and computing.
  
         But instead I've just got questions for  you.
  
         First, your computers have made my three children -- age 8, 11, and 14 --
  infinitely more knowledgeable than I was as a kid. They seem to be getting the "top
  sight" described by the brilliant Yale computer scientist David Gelernter -- the ability
  to use the machines you make to manage and manipulate their complex world. 
  
         But my kids have access to computers. What about kids that don't? Is it a
  problem that they do not have the opportunity to use the amazing things that you
  invent?
  
         Second, all three of my kids want to use our single delightful computer that
  Michael Dell sent me and millions of other Americans by mail a few months ago? But
  I can't afford two more. So where and when can I buy a top flight $500 PC, including
  a monitor and a real fast modem? And maybe the answer to this question is the answer
  to the previous question about the have-not's of the information age.
  
         Third, my kids want faster and more reliable access to the internet. If we give
  them the policies that will drive massive,  network-wide bandwidth growth I think that
  might change the things you build. Will it?
  
         And fourth, my kids want library-like and TV-like convenience when they get
  to the Internet. It's easy, entertaining and sometimes edifying to turn pages and
  channels. By contrast, the Internet's display of pages behind pages is not much more
  fun than a cluttered desk, and a long scroll seems to roll right out of those tiny little
  monitors that CRT technology has stuck us with for now. So I'm not complaining, but
  could you please get us big cheap better-shaped monitors and better GUIs and a
  different look to the Internet in general?   If that means more of the push of TV
  instead of the pull of the web, that's okay -- as long as the consumer has choice of
  push technologies.
         
         I know these issues are a little out of the ACM jurisdiction. But as we all tell
  each other, computing and communications have/are/or will be converging, so I
  suspect that an awful lot of the growth I'd like to see you have will come from a
  better Internet experience, if it were available. 
  
         Bellcore just released a study showing that the number of former Internet users
  approximately equals the number of current users.  In other words, for everyone using
  the Internet, there's someone else who tried it and gave up.  Mr. Bell did not have this
  experience with the phone.  (As I recall the only person who ever told me she
  preferred to write me than continue a phone conversation was my date to that senior
  prom where Al took Tipper.)
  
         Henry Ford did not have this sort of abandonment rate with the Model T.
  
         I respectfully suggest we need big bandwidth, a very user friendly Internet
  experience, and products that fill real needs to drive computers up to the penetration
  rate of phones, cars and TV's -- goals all of us here want.
  
         Network PCs and traditional PCs should be configured on the assumption that
  highspeed data networks can be built to every home.
  
         Our primary goal at the FCC is to  create the incentives for that sort of
  network.  
  
         Under the Telecommunications Act, signed in February of last year, we are
  pursuing more quickly than any other country by far an agenda of throwing out all the
  thousands of pages of state and federal pro-monopoly rules and replacing them with a
  play book, almost exactly as long as the rules of Major League Baseball, that will give
  new entrants a chance to compete in the telephone business. If we have written the
  right rules, and if we have the courage to finish the job over the next several months,
  then in time we will see as many communications firms as we have car companies.
  And we will have as little need to regulate prices as we do in the car industry.
  
         Our ultimate goal at the FCC is simple: no rules.  
         
         Achieving a competitive market is a process that could easily take five to ten
  years, but it's worth the effort.
         
         Competition gives us many different kinds of cars, and opens the roads to new
  innovations every year.
         
         Competition too can give us many different kinds of interconnected phone
  networks -- wireless, hybrid fiber coax, SONET rings, switched and unswitched ISDN,
  ADSL, and so on.
  
         Bandwidth ought to be like pizza.  You should be able to get whatever you
  want -- small, medium, or large -- delivered piping hot to your door, with any
  combination of voice, video, or data toppings.  
  
         Nobody wants to have the status quo shaken up so that you can order
  bandwidth like pizza.  You know why?  There's a lot of risk involved.  But risk
  doesn't stop companies in competitive markets like computer hardware or software.  If
  you want bandwidth delivered like pizza, you're going to need a lot of bandwidth
  companies.  
  
         I often find computer companies just want the phone networks to work cheaply
  and well, with high bandwidth on demand.
  
         Many of today's telephone companies will be able to meet those demands. But
  they are much, much more likely to do so if we have competition in the local market.
  
         The 1996 Telecom Act can be a charter for choice among computer companies:
  if you don't think the local telco is giving you or your customers the bandwidth and
  the price you want, shop for the alternative from the new entrants.      
  
         Competition will also give us  bandwidth. There are T3 backbones, but we are
  stuck having to access them with 33.6 kilobit modems.  If our real highways worked
  that way, you could drive 55 miles per hour on the interstates, but would be forced to
  go less than one mile--per day--on the on-ramps.
  
           Tens of kilobits a second is fine for E-mail, but not for graphics and the
  World Wide Web.   And Real Audio and Real Video are great, but at 33.6, they are
  not very "real."  
  
         Last year, Lehman Brothers released a report stating that "'demand elasticity
  for bandwidth' is a key communications theme, as the unending appetite for bandwidth
  drives industry growth." The huge pent-up demand for more bandwidth means that as
  competition pushes prices down and makes more services available, usage will
  skyrocket. 
  
         On January 23, the FCC held a Forum on Bandwidth. You can read the
  complete transcript on our Web site, WWW.FCC.GOV.  At the forum, Les Vadasz
  from Intel described how he would solve the bandwidth problem.  As he pointed out,
  you can turn on your tap and get water, you can put a plug in a socket and get
  electricity, you turn on your TV and get cable.  Why can't you just connect your PC
  to an outlet and get data?
  
         He laid out seven requirements for this data service.  Number one, of course, is
  bandwidth.  Number two, is instant access--no dialing in.  Number three, plug and
  play service, just like cable.  Number four, multimedia capability--voice, video, data. 
  Number five, store-and-forward capability, so that voice mail and E-mail are easy and
  reliable.  Number six, security.  And, number seven, affordability.
  
         I don't think the right approach to achieve these goals is for local phone
  companies to impose access charges on Internet service providers.  The Internet
  shouldn't contribute to the subsidies that access charges represent.  But the Internet
  also shouldn't be subsidized in the form of below-cost second lines.  If someone wants
  to buy a second line to access the Internet, the phone company should be entitled to
  charge them what that line costs.   
  
         The need with bandwidth also creates great opportunities for other kinds of
  providers that don't use the local phone network to connect to their customers.  Both
  wireless and cable have the potential to break the bottleneck of local exchange carriers
  in providing high-bandwidth data connectivity to the home.  
  
         Unfortunately,  rate regulation provides disincentives for companies interested
  in deploying such a service. The sooner we get to a fully competitive market for
  telecommunications services, the sooner we can throw out the old regulations, and the
  sooner companies will deploy new technologies--rather than more lobbyists and
  lawyers--in order to beat their competitors.  
  
         Our job should be to create efficient incentives for companies to deploy these
  technologies.  That doesn't mean subsidizing industries we like. I it means allowing
  the market to work without distortion.  Companies that can provide higher bandwidth
  more cheaply won't need subsidies to be successful as long as government or
  monopolies don't try to distort the market.
  
         In April, the FCC will be starting a proceeding on innovation.  I hope the
  computer industry will follow that proceeding and submit comments.  We're looking at
  questions about how regulation can help or hinder technology development and
  deployment, and your input will be extremely valuable.  
  
         As we think about bandwidth, we also need to keep in mind where the
  bandwidth is going.  Businesses are already developing high-capacity corporate
  intranets that let them take full advantage of the potential of the Internet.  But what
  about American residents?  American consumers?  Today we have fine companies, but
  we don't have big bandwidth networks.  This highway needs to be public, it needs to
  be widespread, it needs to be ubiquitous.
  
         The universal service provisions of the Telecommunications Act concern the
  essential public benefits of the Act.  Under the Act, we are working with the states to
  completely restructure the way we ensure that people in poor areas or remote, rural
  areas can afford telephone service. 
  
         But Congress saw that doing the job also requires a national commitment, so it
  included the Snowe-Rockefeller provision in the Telecommunications Act of 1996.  In
  November 1996, a bipartisan, state-federal Joint Board handed the FCC a set of
  recommendations including:
  
  o       $2.25 billion a year in discounted telecommunications services, to cover all
       technologies and internal connections;
       
       o       Discounts ranging from 20-90 percent, based on level of economic
       disadvantage and cost of service;
       
       o       Discount levels to be applied to already-existing programs and contracts. 
       
               The FCC is now reviewing the public comments on the recommendation and
  will issue final rules on May 8. 
  
          There are those people who see the $2.25 billion per year recommended by the
  Joint Board and say, "I don't want to pay."  But we're talking about a tiny fraction of
  the revenues of the industry.  With this modest amount of revenue, our children can
  become the beneficiaries of a big bandwidth road.
  
          We spend $88 billion a year on roads.  Don't you think we could spend $2
  billion on this particular road?
  
          Late in April, President Clinton, former President Bush, Colin Powell,
  governors, mayors, CEOs, and leaders of non-profit groups are meeting to determine
  how volunteerism can help us address this country's social problems.  The computer
  community has shown that volunteerism can work, especially in our schools.  Net Day
  is just one example.  
  
          It is not too late for your companies and universities to make commitments to
  volunteer to help wire our schools and to help train teachers and students on how to
  use computers and the Internet.
  
          Thank you.