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.)
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     //                        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