In Re:                   )
                         )
FCC BANDWIDTH FORUM      )


















Volume:   1

Pages:    1 through 208

Place:    Washington, D.C.

Date:     January 23, 1997
                                   Before the
                        FEDERAL COMMUNICATIONS COMMISSION
                             Washington, D.C.  20554
          
          
          In Re:                        )
                                        )
          FCC BANDWIDTH FORUM           )
          
          
                         Room 856
                         FCC Building
                         1919 M Street, N.W.
                         Washington, D.C.
          
                         Thursday,
                         January 23, 1997
          
          
                    The parties met, pursuant to Notice, at
          
          approximately 9:00 a.m.
          
          
                    BEFORE:  REED HUNDT
                             Chairman, FCC
          
          APPEARANCES:
          
              On behalf of the FCC:
          
                    MR. REED HUNDT, Chairman, FCC
          
                    COMMISSIONER NESS
          
                    MR. ELLIOT MAXWELL, FCC
          
                    MR. STAGG NEWMAN, Bellcore
          
                    MR. ROBERT PEPPER, FCC
          
                    MR. KEVIN WERBACH, FCC
          
                    APPEARANCES (Continued):
          
              Additional Appearances:
          
                    PANEL I:
          
                    MR. JOHN CURRAN, BBN
          
                    MR. DOUGLAS MORGAN, Winstar
          
                    MR. DAVID REED, Cable Labs
          
                    MR. LES VADASZ, Intel
          
                    MR. PAT WHITE, Bell Atlantic
          
          
          
                    PANEL II:
          
                    MR. LEE BAUMAN, Pacific Telesis
          
                    MR. KEITH FOX, Cisco
          
                    MR. MATTHEW KORN, America Online
          
                    MR. JAMES LOVE, Consumer Project on Technology
          
                    MR. MIKE TREST, ATM Net
          
          
          
                    PANEL III:
          
                    MS. GLEE HARRAH CADY, NetCom
          
                    MR. PETER HARTER, Netscape
          
                    MR. DANIEL WEITZNER, Center for Democracy and
                    Technology
                    APPEARANCES (Continued):
          
              Additional Speakers:
          
                    MR. DAN BERNENGER, Vocal Tech
          
                    MR. ALAN CIAMPORCERO
          
                    MR. ROY DAHNKE, SETA Corporation
          
                    MR. KEN DEUTSCH, Issue Dynamics
          
                    MR. RUSSELL DOYAN, Saylor
          
                    MR. IHOR GOWDA, Newbridge Networks
          
                    MR. GORDON JACOBSON, IRAP Network
          
                    MR. DAVID LaPIER, Cisco
          
                    MR. JOHN MAZER, General Datacom
          
                    MR. BROCK MEEKS, MSNBC
          
                    MR. STEVE NEVAS, Cyberbridge Associates
          
                    MR. CHARLES ROSS, President, Canthos Corporation,
                    BNET
          
                    MR. BOB SCHMIDT, National Digital Network
          
                    MR. ANDREW SHAPIRO, Twentieth Century Fund
          
                    STEVE STEWART, IBM
          
                    MR. JEFF WALDHUTER, Executive Director, Nynex
                    Science and Technology
          
                    MS. GWENDOLYN WOODARD, President, Worldwide
                    Education Consultants
          
                    
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          Hearing Began:  9:00 a.m.           Hearing Ended:  3:40 p.m.
          
          Recess Began:  1:15 p.m.            Recess Ended:  2:19 p.m.
                                        P R O C E E D I N G S
             MR. PEPPER:  Good morning and welcome to the --
          okay.  Now I can say good morning.  We are, by the way,
          putting this broad band forum online with both video as well
          as audio on the Net.  There will be demonstrations of this
          beginning at noon down in room 845 that you can see.  I'd
          just like to welcome everybody to the FCC's broad band forum
          and very quickly turn it over to our Chairman, Reed Hundt.
             COMMISSIONER HUNDT:  Thank you all very, very
          much.  I'm very pleased to see you and I'm especially
          impressed by the very distinguished panelists that we're
          going to have over the course of the day.  You never know
          when you say that something is a first, you never know if
          that isn't a tremendous criticism of the fact that you
          didn't do whatever it was a lot earlier.  Or if instead it's
          just a self-complement about the fact that you've had some
          kind of epiphany and you finally recognized that that thing
          that is a first is very important.
             I don't know whether this is an epiphanic moment
          or an appropriate moment for self-doubt and criticism for
          the FCC.  Maybe it's a little bit of both.  We have never
          had a forum like this.  It's David Reed's fault really.  He
          told us to have it a couple of years ago, but he wasn't
          persuasive enough when I first got here.  I'm just kidding,
          David.  It's great to see you.
             We've never had a forum just like this, but we
          have for the last couple of years been increasingly
          concerned at the FCC about what we call the problem of
          access and band width.  We're not 100 percent sure exactly
          how to state the problem.  We're not exactly sure what are
          the dimensions of the issues here.  We have some grasp that
          public policy is becoming increasingly important to the
          emerging industry of band width delivery if I can call it
          that.
           But part of the purpose of this forum is to define what
          are the interactions between conventional telcom public
          policy and the band width issues that increasingly are
          preoccupying so many of the industries of the world, but
          particularly now as never before are an important part of
          the function of our traditional telcom industry.
             So I think what you're helping us do today is
          define the questions.  Now, because we're dealing with
          communications, actually you can already look the answers up
          in George Gilder's article, for example.  In many ways,
          we're just trying to take George's answers and those of you
          who like me have enjoyed reading George's answers for many
          years, you will understand that the problem with George's
          answers is just making sure that you do have the question
          matched up correctly with those answers.
             George has pointed out, for example, that we
          should not have the options of the spectrum because the
          spectrum as a band width possibility is now infinite and
          that spread spectrum technology means that we have no band
          width issue with respect to spectrum.  $24 billion has been
          paid by people who don't seem to agree with George and who
          desire to have exclusive licenses.  Possibly today you all
          will tell us that those people are all wrong.
             If you do say that, try to be just a little low
          key about it would you please?  Because we have a number of
          other options coming up and Congress in fact believes that
          the balanced budget depends on George being wrong, at least
          in the next couple of years.
             I've also read Economist's answers to the
          questions that I hope you all will frame today.  The
          Economist announced that time and distance have no meaning
          in telecommunications.  This came as a very welcome relief
          to those of us working on interstate access reform and we
          suggested last night to a number of people in the industry
          that meant time and distance have no meaning and intrastate
          and interstate therefore is a concept that is of no
          relevance.
             This is a little bit of a problem to the world as
          we know it.  $23 billion in charges to the telcom industry
          based on the definition of state lines, something that's
          actually part of our constitution.  The Economist being
          published in Never-Neverland was kind of indifferent to the
          taxation system that in fact is built on the notion that
          time and distance have if not meaning a presumption of
          meaning.
             What are we supposed to do in short about the real
          world in which it may be true that in many technological
          ways time and distance have less significance than they ever
          had before in terms of communication, but it is not at all
          the case that they have no meaning in terms of the reform of
          the systems that currently exist so as in fact to provide a
          climate in which we can create the maximum incentives for
          the proliferation of band width and for the proliferation of
          access.
             I also read I guess it was last July that Bill
          Gates and Andy Grove had a fascinating dialogue in which
          Andy -- and Les is here to explain this today I hope.  Andy
          said, if I remember correctly, the following.  And I'm
          remembering this by reading the quote.
             "As exciting as the Internet is though, there's
          one big problem.  Telecommunications bad width.  And Gates
          responded, band width bottlenecks.  No question.  That's the
          biggest obstacle to where we'd like to take the PC."
             We actually found this particular colloquy to be
          immensely interesting and we are curious to know whether it
          is a synonym for a colloquy that we are having here in
          public in a variety of proceedings.  In our colloquy, we
          talk about the exclusive facility bottleneck problem in
          communications.
             We talk about whether or not the last mile of the
          local loop, the spread of wire from the consumer to some
          centralized aggregation point.  We talk about whether or not
          that is a bottleneck.  We talk about that in antitrust
          terms.  We talk about it in competition terms.  We also talk
          about whether the current local exchange market is a
          bottleneck.  That is the key issue in access reform.
             When we're having that conversation, what we'd
          like to find out today is are we also having a conversation
          on the same topic that Andy and Bill were talking about.  Do
          they mean the same thing that we mean?  If we don't mean the
          same thing, let's find out the difference.
             But if we do mean the same thing, then it should
          be the case that this obstacle to where we'd like to take
          the PC in fact is the topic that we are spending hundreds,
          indeed thousands of hours on right here at the FCC.  And so
          now we've discovered that maybe our traditional public
          policy pursuits are directly related to the future of our
          information economy in an even bigger way than we may
          previously have thought was the case.
             The FCC for many years has had a group called the
          Network Reliability Council.  It's primarily been run by the
          incumbent telephone companies.  Although it's been open to
          participation from all the other industries that have ever
          wanted to be involved and many have wanted to be involved.
             The Network Reliability Council concerns itself
          with, among other things, failure rates for our
          communications system.  The Network Reliability Council is
          the principle way in which the telcom industry creates the
          protocols that allow it to use redundancy in the network so
          as to make communications continue to work in the event of,
          and this has all happened while Rochelle and Susan and I
          have been here, earthquakes in California, hurricanes in
          South Carolina, numerous other calamities.
             We don't like to spend a lot of time dwelling on
          this, but the fact is there are dozens and dozens and dozens
          of incidents of this kind every year of various levels of
          magnitude.  And when we say that we have the greatest
          communication system in the world, what we mean in this
          country, among other things is that our system does not fail
          in the event of these crises.
             Now, one thing that we're very curious about is
          why does my 11 year old get a busy signal when he tries to
          get on America-On-Line?  And is that part of what ought to
          be the mission of the Network Reliability Council?  Or in
          fact, should it be the case where we say, no, it isn't
          important that the Internet be reliable in the same way as
          the circuit switch network?
             Is that really what you all want to tell us, that
          isn't important?  Remember that the Network Reliability
          Council is not guided by regulations.  It is an
          intra-industry group that we bless and participate with. 
          But fundamentally, it is a means for cooperation that allows
          everyone to take advantage of the redundancy that is built
          into the circuit's network.
             So one of the things we'd like to find out is
          whether or not reliability, certainty, the ability to
          utilize redundancy is in fact an appropriate policy issue
          with respect to the packet switch network?  Or would you say
          to us, no, that's not of any particular importance and if I
          happen to rely on packet switch technology to get my sports
          or news or make stockmarket trades?  Well, that's not
          terribly important if that doesn't work for several hours or
          days.  Hmm.
             Don't misunderstand us.  We do not in any way
          intend in this forum to be empowering government to do that
          which it does not need to do.  Please understand the
          opposite to be the case because the opposite is true.
             What we would like is to have help from all the
          relevant industries, users, consumer groups, participants in
          our information economy.  We'd like their help in figuring
          out  the traditional telecommunications policy problems to
          the degree that they have any bearing on what I read in all
          of these articles is the fundamental issue of building the
          information highway by providing more bandwidth, cheaper
          access and greater availability.
             So I'm terribly, terribly excited about this forum
          because I think that it will in fact lead to that kind of
          help and it will permit us to get to what we're ultimately
          looking forward to and that is a profoundly deregulatory era
          in the communications system.  Right now in this country,
          there are 10,000 people employed in regulating the
          telecommunications industry.  There's about 200 here and
          9,800 in the states.  There are approximately 25,000 pages
          of orders and decisions that regulate the communications
          industry.  There's about four dozen pages here and all the
          rest are issued at the state level.  None of us, not our
          friends at the state level and none of us here at the FCC,
          desire to have this level of micromanagement be a necessity
          or even be desirable as the communications era unfolds.  But
          none of us should fool ourselves.  All of that requires a
          lot of change to do away with or to alter or to modify.  So
          when I say we need help in effecting this change, I know
          you'll have to believe me and it's your help that we're
          counting on getting today.  Thank you all very much. 
          [applause]
             MR. PEPPER:  I believe Commissioner Ness has a few
          words.
             COMMISSIONER NESS:  Thank you, very much.  That
          was a terrific introduction to the problems that we are
          looking at globally as well as domestically.  And I'm
          delighted to have the opportunity to join everyone here
          today to explore some of these issues.
             We've reached a new stage in the long standing
          debate between the telephone companies and the Internet
          community.  For too long, the argument has been one of
          whether enhanced service providers should pay access
          charges.  The telcos say that the ESP exemption should be
          ended.  The ESPs say they aren't carriers and shouldn't be
          required to pay carrier charges that aren't assessed on
          other users of the telephone network.
             A recent MPRN on access charges and the forum
          today represent a new stage in that debate.  The discussion
          shouldn't only be about money, however, but it should really
          be focused on technology.  The needs and expectations of
          computer users are different from those of consumers using
          the telephone network only for voice calls.
             We need to understand better how networks might
          more efficiently carry voice and data traffic, how new or
          different equipment and technologies could enable telephone
          companies and other service providers to better serve
          computer communications.  And what costs are associated with
          existing and new ways of transmitting computer traffic.  Our
          inquiries should go beyond the traditional wired voice
          network and consider non-traditional providers such as
          licensed and unlicensed wireless operators and equipment.
             We must also explore how increased competition in 
          the provision of transmission services can alleviate the
          concerns we've heard, both from the telephone companies as
          well as from the computer industry.  The more that we can
          rely on market forces to determine both the technologies
          that will be employed and the means by which costs will be
          recovered, the better will be served Congress's goals of
          competition and deregulation as the Chairman so beautifully
          stated.
             I want to congratulate the staff who put together
          a stellar program and as a computer user myself with a
          dedicated ISTN business line at home, two children fighting
          for time on our family's information service provider and my
          husband being online with his office interfering with my
          trying to send faxes, I'll be personally interested in
          seeing how the solutions are formulated today.
             Moreover, I look forward some day soon to
          following the proceedings in my office on my computer as
          many people will be doing today thanks to the FCC's online
          capabilities.  So thank you very much and I hope it's a
          productive day for us all.  Thank you.  [applause]
             MR. PEPPER:  I'd also like to recognize
          Commissioner Chong who's here.  So you can see that there's
          a great deal of interest among our commissioners on these
          questions.  I was reminded by our transcriber, I forgot to
          introduce myself.  I'm Robert Pepper, Chief of the Office of
          Plans and Policy.  I'll be joined today by Kevin Werbach who
          really, from our office, who really deserves kudos for
          putting this program together and Elliot Maxwell, our Deputy
          Chief of the Office, as well as other staff here from the
          Common Carrier Bureau, Wireless Bureau and other Bureaus.
             As I mentioned earlier, the forum is going out
          live on the Internet in both audio and video.  Beginning at
          noon until 5:00 o'clock we have demonstrations in Room 845
          of a variety of new band width technologies including ADSL. 
          We have a demonstration of the direct PC, MMDS access and
          some other examples.
             And also the transcript of the proceeding today
          will be put into the record in the access charge proceeding
          that Commissioner Ness referred to.  So this will become
          part of the formal record in that proceeding as well as the
          NOI, the Notice Of Inquiry, that specifically relates in the
          proceeding, that docket, to the ISP and Enhanced Service
          Provider questions.
             We'd like to make today informative and also
          interactive.  We will start with a presentation of the
          various bandwidth technologies.  We'll then move into panels
          that are going to be discussion oriented.  We'll be asking
          questions.  There will be opportunities for those of you in
          the audience to ask questions.  And we hope that the
          panelists also ask one another questions since this is an
          area in which there are no fast and hard answer, but lots of
          questions which we all need to learn about.
             Our first presenter this morning is Stagg Newman. 
          I'm missing page one of his bio.  So I'll do it from memory. 
          Stagg, as he told me earlier this morning, received a
          totally useless Ph.D. in mathematics.  But since then, since
          the mid-1970s has been first I guess at Bell Labs.  Stagg is
          responsible for work on fiber optics now with Bellcore. 
          Fiber optics, wireless communications, battery technology,
          other band width technologies.
             Battery technology is really fascinating.  Last
          night he came in and he showed me their new battery for his
          cell phone.  He gave me the battery and it didn't weigh
          anything.  And he showed me some plastic and it's twistable. 
          It's very light.  And from my perspective it's a radical
          breakthrough in battery technology.  So Stagg is in the
          applied areas at Bellcore working on all kinds of new
          technologies that are going to help all of us in the
          communications industries.  But this morning he's going to
          walk us through really a technology talk about these various
          bandwidth technologies and try to help us get a better
          understanding of what the test of the day is going to be all
          about.  Stagg.
             MR. NEWMAN:  Thanks, Bob and Elliot.  I'd like to
          thank you for inviting me here and basically -- I don't have
          my glasses on.  So I can't see which side says on and off. 
          Thank you for inviting me.  What I'd like to talk about
          today is the bandwidth bonanza and basically there's no
          question in my mind that there will be a tremendous band
          width bonanza for corporate America.  We will see the same
          type price performance improvements we're already seeing,
          that we've seen in the computer world.  That is a doubling
          every -- you can argue how many months, 18 months, 12
          months, 24 months, of the price performance characteristic
          for obtaining bandwidth.
             But what happens to the mass market?  The mass
          market is the key issue I think and that's a real challenge
          for all of us, both from a technology side, from a
          regulatory side and from an operations side.
             Said another way, Bill Gates was quoted recently
          over the Internet, of course, or misquoted, as saying in the
          year 2000, 90 percent of all the users of the Internet will
          still access it over dial up modems over the telephone
          network at 28.8 kilobytes per second or in reality usually
          less for those of you who have been on certain networks
          recently.   Unfortunately, our analysis is he's probably
          right.
             Where are we today?  Today it's estimated
          worldwide there are about 30 million users of the Internet. 
          So we have this large wave overtaking the communications
          industry in ways that we can't understand.  What I want to
          do is put a context setting in what I think the evolution of
          the Internet means.  Basically replacing the universal
          service we've had today, dial tone, with a new universal
          service called IP dial tone.
             And I think for, you know, say in the early 1990s
          there was lots of debate over what the NII should be, okay. 
          And what it should look like and what technology should it
          be?  I think the Internet has answered that for us.  NII
          will be IP, that is the middle protocol in the Internet
          stack, the Internet IP protocol, over networks.  And the key
          to really unleash the potential is having a broad band
          Internet, having broad band access on and off the Internet.
             Why is this so key?  Basically, we're in an
          environment where we've got a tremendous flux in services. 
          What are going to be the real services people will pay for
          and drive this?  And I think the answer is nobody knows and
          they're being invented faster than we think.  You know, is
          it going to be just doing E-mail?  Clearly not.  Is it going
          to be down loading video?  Possibly.  Is the network going
          to be used in ways that we don't predict?  Absolutely.  One
          of the early cable modems trials got into trouble because
          they assumed a high asymmetry downstream which is the way
          I've been thinking.  Most of the data will come out of
          content providers, downstream.
             So in this particular trial, there was an MIT
          professor who had a young kid at home.  And at work he
          wanted to be able to see his kid.  So he put his videocamera
          in his home, started pumping video upstream.  Totally blew
          the network out of the water.
             So we'll invent all sorts of ways to do new
          services and it's a very unpredictable environment.  When I
          started in the telephone network, we worried over whether
          the voice network traffic was going to be 3.7 or 4.1
          percent.  It made a tremendous difference to the engineering
          economics of the Bell system.  Now network providers out
          there are doubling their network every six months.  A little
          bit different ballgame.
             At the same time, technology's in flux.  We used
          to worry about how far do you have to -- can you drive
          copper pairs before you had to put in repeaters?  Nowadays,
          do you go with ADSL, XDSL, VHDSL, hybrid fiber coax, fiber
          to the home, which is clearly a long term answer, but how
          soon?  Switch digital video?  So there are a multitude of
          technology choices out there.
             How do you couple this technology with the
          services without bogging everything down?  And that's where
          the role of IP comes into the network.  In effect, in this
          environment there's obviously tremendous amount of risk. 
          Risk if you're the network provider in putting the wrong
          capital in and seeing that stranded very quickly.  Risk in
          the service provider if you assume certain network services
          are going to be available.  Certain capabilities and
          performance, if it's not there, then you've developed your
          services and nobody can get decent access.
             So let me real quick high level toil on network
          architectures.  What we did in the past and in effect
          learning from some of our mistakes in the past.  Voice
          network.  We had a vertically integrated network.  Services
          were inclined with all the technology in the network.  We
          wanted to introduce a new service.  We went into large
          switching machines and developed new code for voice
          services.
             Pat White, who's one of our speakers, was
          instrumental in developing some of that in the SS's. 
          Tremendous software development, long development time to
          get new services out there.  But a lot of them are doing,
          you know, are tremendous service winners today such as call
          waiting, call forwarding, et cetera.  But the network, the
          services, everything is tightly entwined.  Furthermore, it
          was analog.  You know, traditional voices analog, it was
          okay to have an analog network.
             The next step we went to was ISDN.  ISDN was
          digital and is faster.  So that's an improvement.  But ISDN
          still had service specific technology.  You had circuit
          switching.  You had packet switching.  And you design
          circuit switches around the underlying technology.  And that
          worked if the framework was a monopoly environment where the
          services would be provided by the monopoly carrier.  And
          ISDN came out of the standards environment, driven largely
          by the view circa 1980 and the European.
             Next we moved to ATM.  We got closer to getting it
          right, but still not -- and let me make it clear.  ISDN I
          think has a real role, particularly over the next five to
          ten years.  Because as you'll see later, getting a broad
          band mass network out there quickly is a tremendous
          challenge.  And today almost all Internet services are much
          better over -- well, they're all better over ISDN than over
          POTS modem.  And actually at ISDN speeds of 150 kilobits per
          second.  That will be adequate for most of the services
          people envision over the next five years.  Apparently that's
          the view when we talk to people like Microsoft and others. 
          so I think ISDN does have a very important interim role.
             ATM, which also came out of the telephone network
          world, now has a single underlying transport packets and
          cells and all that allow you to do a variety of services
          over top of ATM.  But it still requires, before you can
          realize it, changing all the network out to ATM.  Tremendous
          capital impediment to doing that and it ties still the
          service evolution through something called bearer services
          through the underlying technology.
             Meanwhile, the computer world developed the notion
          of IP and a separation of the service layer through IP in
          the middle from the underlying network layer.  And that's
          been one of the beauties of Internet is this simple protocol
          set in the middle.  People had developed all of these
          services on top of that protocol and they can work over any
          underlying technology.  The only question is performance as
          we'll see a little bit later.  But we've separated the
          service evolution, the competitive service market, from the
          underlying technology and that's why I think IP and
          internets and intranets will be the broad band network.
             So then the real question is how do we provide the
          best possible access to that competitive world of IP through
          the competitive alternatives of access technology?  The
          result, adding new networks and services is low cost and
          straight forward.  At least adding new services is
          relatively low cost.  One can argue about the low cost
          networks.  For corporate America, for high speed lines, it
          was fairly straight forward.  For the mass market where you
          have literally 100 million access lines out there, you still
          have a challenge.  But you decouple that evolution.
             Another important corollary which will drive the
          services, if you have services tied to a particular network
          provider, those services will never reach the same market
          mass that Internet.  Internet will always reach more
          customers worldwide than any other network because you just
          have this narrow, well-defined protocol in the middle.  So
          if you're a service provide, you want to get your services
          on the Internet to get market reach.
             That, of course, means it will attract more
          service providers, leading to more rapid service evolution
          and therefore more pull for more and more network demand. 
          And what's going to happen on the Internet?  In addition to
          all the services we're used to using today, from E-mail to
          any time I need to know about a corporation I go into their
          web page, see what the corporate information's all about, to
          images, all of these new services, games, et cetera, are
          coming.
             But I think there are going to be two important
          additional services that says Internet IP really will become
          sort of the universal service of the future.  One is voice
          and video.  By 1998, I think you will start to see
          substantive voice and video on the Internet.  It's not
          saying, I'm definitely not saying it's going to replace the
          telephone network.  But you'll start seeing these services
          in a very real way.
           Let me give you an example of one of the things we and
          other companies are doing today.  Voice mail and fax. 
          They're not real time two-way services.  You're not trying
          to talk and tell time when you're doing voice mail.  You're
          just listening, sending your message back.  Fax is obviously
          not a two-way communication.  Although sometimes they fly
          back and forth fast enough you think they are.
             Okay.  What's happening today?  People take a
          local server, dial up a local call through the local network
          where basically there are no charges to minimal charges, to
          a server.  That server then takes the fax or takes the voice
          mail, okay.  Packetizes it.  Puts it over the Internet, POTS
          it out on a server say in Hong Kong or Taiwan if you started
          in New York City.  Then goes back through, dials up at the
          other end through a modem and to the fax machine that set
          the destination.  And now service is available to take care
          of all the intelligence.
             So that to the user it looks like a normal fax
          call.  You just dial the fax number and send it.  But what
          have you done?  You've avoided all triple -- all long
          distance charges and all IDDD, all overseas charges.  A
          tremendous savings, you know.  Well over the order of
          magnitude savings.  And to give you an idea of the impact of
          this, over half the traffic today that goes overseas on the
          telephone network is actually fax.  That traffic is all set
          to leave the current phone network and go on the Internet.
             The same thing for voice mail.  And I do know
          people who are even doing voice over the Internet today to
          overseas locations.  They're willing to put up with the
          lower quality simply because of the lower cost.  And
          particularly over corporate Internets where you can have
          high speed back bones and you control the performance.
             So what's our network of the future will look
          like.  Basically, I'm proposing a network that says you need
          a broad band access network from the home.  That's supposed
          to be a fancy looking home with I guess they even have the
          coffee pot into the network into the home.  I think that's a
          little fanciful.  But we've got people at Bellcore who could
          get into that.  Your TV, your fax machine, et cetera.  We've
          got somebody at Bellcore who sits in bed at night with his
          PC typing.  So who knows?  Techies.
             Over the broad band network which then gives you
          access either to today's voice network, which will still
          have a very vibrant roll for a long time to come, or out
          over the Internet.  And this will become the universal
          Internet.
             Now, what are the obstacles to getting there?  At
          the risk of offending many very good engineers who are
          trying to solve difficult technical problems, I think the
          critical problem is the mass market access.  The Ciscos, the
          three coms, et cetera, of the world will make their routers
          and switchers get faster and faster.  In fact, a Cisco
          router circa 1997 will have ten times the band width of the
          largest voice switches in the networks today.
             So the backbone switching technology will get
          faster.  The backbone fiber optic technology we and others
          are working on will give us a 20 to 100-fold increase in
          that very shortly through wavelength multiplexing.  We'll
          solve the traffic congestion problems.  They are challenging
          problems, but those are being solved.  The competitive
          marketplace will solve those.  The real problem is how do
          you solve the mass market access?  And that's what we'll
          spend the rest of the time looking at.
             What are the options today?  Today you've got the
          Internet backbone network, Internet access points and ISPs. 
          How do you get on and off the highway?  Well, if you're a
          corporate user or if you don't mind paying $200 a month, you
          can get a private line from your home or your office into
          the network.  And the private lines are getting faster, the
          price performance is improving all the time.
             So again, no problem here as long as you're
          willing to pay a fair amount of money.  But if you're not,
          what are the alternatives?  POTS?  You know, 28.8 bit per
          second, limited to 64 kilobit, but in many applications
          those won't really be anywhere close to that.  ISDN which
          can get you up to 128 kilobits per second.  They both have
          the advantage that they work over today's copper network
          just by putting something into the copper loop.
             Then there's a whole family of what are called
          digital subscriber lines, so-called XDSL, ADSL, VH or Very
          High speed digital subscriber lines, et cetera.  And I'll
          talk more about those.
             The other alternative's going through the cable
          network.  So those are the there alternatives and then one I
          will talk about but don't show on that viewgraph is
          wireless.
             Now, to give you an idea what's that like and why
          would this be better, I'm going to show a very short tape. 
          Elliot asked for demonstrations.  Well, demonstrating access
          technology is sort of like demonstrating a microprocessor. 
          Nobody cares what happens inside the microprocessor.  The
          applications are where the action is.
             So this is just going to show a very simple
          application downloading over four different technologies so
          that you can see the speed advantages and why it becomes
          attractive.  If you could role the first tape.  The first
          one, and I'll explain what the -- the others are going to go
          pretty quickly.
             This is downloading an image over the POTS network
          today.  So if you want to download a busy image today, this
          is what you'd see.  And what you'll see is, yeah, you might
          be willing to do it, but it's not the world's most
          interesting thing to sit there and watch this slowly
          download.
             Now, in order to kill time, I could tell bad jokes
          but Elliot told me he'd break my kneecaps.  So what you're
          going to see next is the same image downloaded over ISDN and
          you'll see that that's quite acceptable.  Then you'll see it
          downloaded over a ADSL link and finally over a cable modem. 
          And what you're seeing at the bottom is the number of
          seconds it takes to do the download.
             AUDIENCE QUESTION:  Do you know the file size on
          that?
             MR. NEWMAN:  See me afterwards, I'm blanking in
          real time on this image.  But it would be a typical fairly
          busy photograph.  I could figure it out, but I'll do it
          offline because I didn't memorize that data.
             AUDIENCE QUESTION:  Modem speed?
             MR. NEWMAN:  It's a 28.8.  The question was the
          file size.  I said I'd have to address that offline.  And he
          asked the modem speed.  That was a 28.8 modem functioning at
          28.8.  And this should be the ISDN.  And you'll see that's
          not bad.  I sit there and wait for that on the PC.
             In fact, I'm a horse person.  Actually, there are
          horse people now putting up pictures of their horses that we
          download.  Now what you'll see is this becomes real
          acceptable.  In fact, it takes longer to put up local
          graphics than to download the image.  Boom, okay? 
          Seven-tenths of a second.  That's not bad.
             And you'll see in this particular example cable
          modem will actually beat that.  So don't wink or you'll miss
          it.  Boom, okay.  That's why we won't broad band access.  It
          will open up a whole new field of applications.  Hopefully,
          we killed the tape at this point.  Yeah, good.  Okay.
             Let's examine these alternatives.  First, let me
          state the customer requirements.  Well, we think the
          customer requirements are -- and we get a lot of debate on
          this first one, but ideally we think users want a flat rate
          because you don't want to really worry about a meter ticking
          while you're doing applications.  Now, that has some
          problems from the service provider side, but if you ask
          users, flat rates awfully nice.  User friendly.
             It should be customer installable.  I'm going to
          say a little bit more about that because we have a real
          issue.  Competitive corporate America has to tackle how do
          we get these signals around the home?  I think it should be
          as easy to use as the telephone network.  I recently had to
          convert at work from a Mackintosh to a Microsoft environment
          and everything is not yet user friendly.  I think it should
          be as easy to use as the telephone network.
             It should be non-disruptive.  Right now, last
          night I was visiting with Elliot and I went to use the
          telephone downstairs not realizing his wife was on the modem
          upstairs and guess what?  Her connection was blown away.  So
          it should be non-disruptive to the TV and telephone users in
          the home.
             And finally, ideally what we want is an online
          throughput.  I believe 128 kilobits today would be a
          tremendous step forward and that's what ISDN gives us.  But
          ultimately we'd need megabits per second.  Said another way,
          basically the cable industry's figured out the right price
          structure.  The telephone industry's figured out the quality
          of service and the computer industry's figured out the
          performance.  How do we put them together and still make
          money?
             Let me start with a customer environment.  This is
          not a slam dunk, getting digital signals around the home. 
          Analog access has some real advantages.  It's much more
          forgiving than digital.  We have done a lot of studies,
          cable line did some studies and say getting digital signals
          around a coaxial network in somebody's home is hard.  It's
          bad news.  We did some more detailed studies at Bellcore and
          found out they were far too optimistic.
             Some of the problems you get into is when people
          put in these coaxial networks in the home, they frequently
          staple right through the coax.  It doesn't bother analog TV. 
          It does wonders for digital signals.  They leave things
          unterminated like ports here.  One of the early cable modem
          trials, the network kept going down about 7:30 a.m. every
          morning.  I mean, everybody had noise and unacceptable
          performance.  It was very regular.  What happened?  There's
          a woman who's very regular in her habits and every morning
          about 7:30 she used her hair dryer right next to one of
          these things.  And her hair dryer spewed electromagnetic
          noise all over the network.
             So there are lots of issues in the home.  And in
          effect you need a home network.  Now, for the average
          Bellcore engineer, no problem.  They go in and put a ten
          base T network in their home.  I don't think my parents are
          going to do that.  So we really need to solve the home
          networking problem because otherwise we're going to be stuck
          with using that telephone wiring and 28.8 modem.
             I think this is a real opportunity out here for
          corporate America also, but it's a tricky environment.  Just
          dropping this inside the current coaxial network environment
          of trying to go to high speed, not that easy.  And for those
          who are interested, Bellcore and others have fairly detailed
          studies of that environment.
             Okay.  So what do we do?  Well, there are three
          solutions out there.  First is to use the twisted pair
          that's out there today.  Now, that has an advantage that
          architecturally it's modeled after in the data
          communications network what's known as twisted pair
          allocations routing out of the wiring closet.  That's been a
          nice architecture because it's gotten rid of a lot of the
          suggestions of shared bus architectures.  So it looks good
          and once it's in deployment, it works quite well.  The
          problem is all the deployment problems.  You're no longer
          just inside a building.  You're going out over the telephone
          network.  What happens when the customer is more than say,
          well, we're talking kilofeet which is a weird measure, but
          ten kilofeet from the central office.  You may not be able
          to get the signal out to that customer without a lot of
          additional expense.  Some of the early ISDNs have gotten
          into trouble because they filed the universal tariff
          assuming a certain distribution of people because it turns
          out once you get out about 10,000 feet from the central
          office it costs three times as much to provide INSD as you
          are close in.  They assumed most of the people would be
          distributed in the same population as the telephone network
          users today.  It turned out no.  The people who really
          wanted ISDN lived far away from the central office and want
          to telecommute are the people who can live up in the canyons
          in California, et cetera.  So their users were all far away
          from the telephone office.  Capital expense far greater than
          anticipated.
             So that's one thing.  The other thing is we put
          this high speed digital technology out there.  It starts
          interfering with other technologies in the loop.  So there
          are a lot of performance problems to be solved to get this
          out there economically and that's a lecture in itself.  It
          does get the performance out there and if the economics can
          justify it, it's one way to the future.
             When I first used this viewgraph, probably a lot
          of the cable industry would have disagreed.  But Don Malone
          I think has even now been quoted publicly as saying in
          effect these were cable modems.  I think the hype got out in
          front of the reality.  And you'll see that in a demo a
          little bit later.  Again, there is constant problems here. 
          In the ideal environment, this technology works great.
             But now you're putting in a shared bus environment
          in a public network and there are lots of performance
          problems to be solved.  Furthermore, this only works when
          you have a very high quality cable network out there.  And
          it has to be two-way capable.  Less than ten percent of the
          cable networks in the U.S. today fall into that category.
             In this category, you get fiber out to the coax
          and then you use your coax as your last distribution.  The
          problem again is you get a lot of noise in this type of
          shared environment.  So you have to have a very tightly
          designed network without a lot of noise.  You don't know how
          much upstream traffic you'll have so engineering network is
          tricky.
             And so again it's one of these that follows the
          rule of thumb.  Engineers are always too optimistic about
          what will happen in the next two years and that definitely
          happened here and I'd be happy to talk offline with a lot of
          the difficulties that need to be solved for this to be a
          reality.
             On the other hand, I think it's one of these
          technologies where engineers always underestimate the impact
          of their technology within a decade.  So it's getting there,
          but lots of problems to be solved.
             Now, how about wireless?  Well, I think we're
          going to see some very interesting wireless solutions evolve
          in the marketplace, particularly with all the spectrum being
          granted.  There are going to be some entrepreneurial people
          who I believe will figure out how to use that spectrum for
          very effective international access.  Maybe at 128 kilobits,
          not at the three megabits or something we want in the near
          future.  There are three megabyte solutions, but they have a
          lot of limitations and economic -- are much more expensive. 
          But let's look at some of the practicalities.  And what I've
          shown here is an MMDS type environment.  Although some of
          the same lessons apply to a satellite environment.  In this
          case, the digital signal goes out over the air, into the
          home.  It has to be received in the home, processed, sent to
          the PC and come back out over the telephone network.  One
          advantage of this -- one of the problems of this is you're
          still tying up the telephone network.  So you haven't solved
          the problem of congestion on a telephone network that was
          designed for five minute holding times and people like
          myself go home in the evening, put it on and leave it on for
          three hours, you know, I got down, eat dinner, do everything
          else.  But why disconnect and reconnect the phone line? 
          It's a free local call.  Sorry for my friends in Bell
          Atlantic, but we all do it, right?
             But let me talk about some of the radio problems
          that are subtle here.  This is a digital signal.  Digital
          signals are fragile.  What we found, the FCC in the same
          lessons that they learned when they looked at advance TV,
          ATV, apply in this environment.  The person on one side of
          the street gets a beautiful digital signal.  The person on
          the other side of the street, no signal.  So what percent
          coverage can you get?  It makes a big difference if you're a
          service provider trying to provide this service to know
          whether you can cover 50 percent of the homes, 80 percent of
          the homes or 100 percent.  And can you predict ahead of
          time?  And do you have to send somebody out and do
          measurements before you can serve them?  It makes a big
          difference in the economics.
             This one's even trickier than that though.  This
          is a digital signal and you get interference.  Therefore,
          you may have to build a certain amount of what's called
          adaptive equalization into this.
             But suppose the customer's sitting there getting a
          beautiful signal.  Now, clearly since this is the line of
          sight, somebody builds a tower across the street from them,
          they lose their signal.  It's more subtle than that. 
          Somebody builds a tower offline, not in their line of sight,
          but offline so that they get reflections.  Now their service
          goes away.  Okay.
             How do you predict those type of things?  So here
          you have a happy customer.  A year later somebody constructs
          something.  They're not even aware of it.  And they lose
          their signal.  Then you have to go out and reposition their
          dish or whatever.
             So again, while this is not an easy environment to
          work in, I do think there will be some good solutions and we
          and others are working on that.  I think it's really the
          wild cared that may open up Internet access.
             Let me just show you this in more real terms.  We
          have at Bellcore a test bed in which we can take the same
          applications, streaming video, live media, et cetera, put
          them through an Internet with routers, catchers and all that
          and use POTS, ADSL cable modems.  You know, this is a
          working network with all these different technologies
          employed.  So we can deploy the same application over
          different technologies, put network load on it and see how
          it performs.
             What we'll now show you is ADSL downloading a
          video clip.  So now you download the five minute videoclip
          of your child or grandchild or whatever to the grandparents. 
          We'll do that over ADSL and cable modems.  We're going to do
          it twice.  One is in a downloaded network and the other is a
          loaded network.  Could we roll the last tape?
             Okay.  So what you're seeing is a video clip being
          downloaded and the cable modem's already done in eight
          seconds and ADSL's going to take about twice that long. 
          Both those are pretty good.  Waiting 17 seconds to then
          watch a video clip on your PC's pretty good.
             Now let's do the same thing.  And now we've put a
          fair amount of load, but we think a realistic load, on the
          network.  And this shows why the network engineering is
          going to be tricky.  If we could fast forward this up to
          just before the ADSL and I'll tell you when to go back to --
          okay, what you're seeing now is under a reasonable network
          load, that's now gone to over a minute.
             Okay.  Slow it down for a bit.  Okay.  I think
          it's just -- is it just under two minutes?  Yeah.  What
          you've seen now is in this particular load because of the
          shared nature of the cable modem in this example, the cable
          one is only halfway there.  So what went from under ten
          seconds is now over two minutes.  Why don't you go ahead and
          speed it up to the end?  I think it ends up around four
          minutes.
             Okay.  Real quick.  Where will the prices come out
          on this technology?  This is the price per customer for
          capital costs assuming the cable network and the ADSL
          network are already in place and you already have an MMDS
          network in place to provide video service.
             So this is the incremental capital cost.  Is this
          accurate?  I don't know.  If I had to make a pick today,
          this is my best guess in reasonable volume deployment.  And
          one of the implications here is all of these are greater
          than $500 per customer.  So if we're trying to solve, you
          know, serve the mass market, a non-trivial capital
          deployment problem, we multiply that by 100 million
          customers.  And as I said, these prices are best picked. 
          They'll change over time.  But that is I think is reasonably
          optimistic when you're down the growth curve.
             Everybody's taking that down.  I'll deny I ever
          said that later if you take it down.  Okay.  I promised
          Elliot and Bob to keep it down to about a half hour.  So let
          me just for those who want I'll talk with you offline.  But
          basically, I put up the user requirements earlier.  And what
          we see is none of these really meet the ideal user
          requirements.
             So we've got to face up to what are the
          compromises?  What are the price performance?  In fact, the
          ultimate answer is going to be fiber to the home.  And I
          believe within five years that will be the economic choice. 
          But it's not here yet technically and now you're talking
          about totally rewiring America with fiber which Corning and
          companies like that would love.  But that's again a large
          capital expense.
             On the other hand, I think what you can't do is
          sit on the sidelines.  It's clear to me that because of
          what's happening in the Internet, it will increase the
          capital outlay if you're in the network business.  It will
          increase your expense to serve these customers if you're a
          network provider.  And if you do it -- and it will change
          customer perceptions, for better or for worse.  If customers
          can't make telephone calls because of Internet congestion,
          that's going to change the customer's perception.  The same
          thing's true in the cable industry.  Ultimately, if you do
          it right, I think it will be a significant increase in
          carrier revenue.
             What should we do about it?  Develop service
          independent loop technology so the services don't obsolete
          the network, drive the industry towards IP dial tone.  Start
          deploying these new services towards getting experience
          because any new service introduction takes at least a
          decade.  But now's the time to start getting experience. 
          And finally, I think what we're going to see is the surfing
          the net worldwide we'll probably see 120 million users. 
          It's a terrific market to reach.  And what you see is that's
          now become a tidal wave.  Thank you, very much.  [applause]
             MR. PEPPER:  Thank you, Stagg.  What we're going
          to do is we're not going to take a break other than to have
          somebody come move the podium.  And we're going to invite
          our panelists up.  A couple of things of a housekeeping
          nature.
             One, since we don't really have time for direction
          questions of Stagg, we're going to ask Stagg to sit up here
          with us.  I imagine a number of the panelists including
          David Reed from Cable Labs might have some comments on some
          of the things that Stagg said and we can involve Stagg in
          the discussion.
             Second, please because we're transcribing this,
          please use microphones for asking your questions so that we
          can actually get that over the net as well as transcribe it. 
          And then also we would be putting up on our web site, the
          FCC's web site, the transcript of today's proceeding.  Plus,
          if Stagg promises to get us the graphics electronically,
          we'll put all of the viewgraphs up on the web site as well.
             So if I could invite our panelists up and see
          whether we're going to have somebody -- I don't think we
          have any other viewgraphs.  If we could get rid of the
          viewgraph machine.
             Our first panel, Jeff is the mike on?  I think it
          is.  Our first panel we've asked to focus on competing
          models for higher band width.  We're very, very lucky to
          have the group that we have with us.  Les Vadasz is Senior
          Vice President at Intel.  For those of you who follow Intel
          on the computer industry know how important Les is to the
          entire computer industry because of his importance at Intel. 
          He's one of the real deep thinkers there.  It's always a
          pleasure to see you.
             Pat White is Vice President for Research and
          Development at Bell Atlantic and prior to his current
          assignment he was VP in the Strategic Planning Organization
          where he had responsibility for telcom strategy.  Pat is an
          engineer, has his Ph.D. in engineering from Northwestern. 
          Pat has been in our early discussions and inquiries into
          this issue has been extremely helpful to us in understanding
          the local exchange network architectures and how they are
          having to adapt to data services.
             John Curran is the Chief Technology Officer at
          BBN.  Of course, BBN is one of the parents of the Internet. 
          Doug Morgan is Vice President of Marketing for Winstar
          Communications.  And Doug we asked to come specifically to
          talk about some of the wireless issues that Stagg raised. 
          and Winstar, of course, is really developing a brand new, a
          business for providing wireless access to networks.  And, of
          course, we see this as being I think maybe Stagg we wouldn't
          call it a wild card.  We see this as really one of the
          exciting alternatives to solve some of these band width
          problems or questions.
             And then finally, David Reed who was here for a
          number of years as a highly valued colleague.  And we were
          extremely sad to see Cable Labs lure him away.  But I think
          it was more the environment of Boulder, Colorado that lured
          him away.  And this was actually a very wise choice. 
          Anybody who is faced with the decision of living in
          Washington, D.C. and living in Boulder, Colorado and didn't
          choose Boulder, Colorado, we'd have to question his sanity. 
          But David I think is very sane.
             And by the way, David was critical in many of our
          decisions in the PCS proceedings here developing what was
          really the only technical model of demand on band width and
          on market projections and he turned out to be very, very
          accurate.  So we always rely very heavily on David's advice
          on issues.
             There's no particular order here.  We've asked
          each of the panelists to start off with two or three minutes
          so that we can get this discussion going.  So why don't we
          just start with Les and move right down the table.  Les.
             MR. VADASZ:  I guess this is on, is it?  Okay. 
          I'd like to thank you for the opportunity to participate in
          this broad band forum.  I think this is a very timely event
          and I'm glad that I have a chance to address this issue with
          you.
             Intel is a major supplier of microprocessor
          components and systems and particularly to the personal
          computer industry.  And we are very familiar with the needs
          of this user community and this will be the basis for my
          remarks this morning.
             Let me begin with the obvious.  A consumer wants
          to use their PCs to communicate.  I think that the enormous
          growth that we have seen in the Internet access and the fact
          that electronic mail has now become an integral part of our
          everyday life is a very good indicator of this trend.  And
          if you look at how consumers buy personal computers,
          virtually all of the personal computers that go to the home
          come equipped with a modem these days.  We are living in the
          information age and the consumers participate in that by
          using their PCs.  Millions and millions of homes are online
          already.
             Unfortunately, despite the government's call to
          build a national information infrastructure and despite the
          Telecommunication Act of 1996, the personal computer user is
          more of an after thought in all that happens when it comes
          to deploying network capabilities.  This is a rare
          opportunity to address some of those issues.
             What is our problem in effect is there is no
          meaningful PC communications service available.  And that's
          kind of obvious.  The consumer can purchase many services. 
          He can purchase electricity services, gas, telephone, TV,
          and in fact the FCC has addressed many of these consumer
          demands over time.
             But we cannot buy a reasonable PC communication
          service.  We merely piggyback on the telephone service and
          get a very inadequate connection.  I think that we have
          heard earlier that there are many technologies available to
          solve some of that problem and certainly an Internet
          connection through a telephone line and a modem is not one
          of the adequate solutions for the future.
             This is happening in spite of the fact that nearly
          40 percent of the U.S. homes -- that's nearly 40 million
          homes -- have personal computers.  So any numbers that you
          add up in this arena is going to be big financial impact to
          all considered.
             So what are these basic communication services?  I
          think it's important that we characterize this and band
          width is only one of the elements.  I think Dr. Newman did
          an excellent analysis of what are the various
          characteristics and I believe I will be redundant in some of
          my discussions of those, but he characterized them well of
          what the consumer needs.
             First of all, high band width.  There are many
          technology choices.  Virtually every service provider has an
          opportunity to upgrade their networks with new technologies
          to provide more meaningful PC communication services.
             Second, instant access.  It is unacceptable to
          wait two minutes to connect to a network.  You wouldn't
          accept that from your TV.  You wouldn't accept that from
          your local area network at work.  There is absolutely no
          reason that you should accept that in your home environment.
             Third, plug and play service.  It ought to be easy
          to just take your computer and provision a service.  We are
          not there.  Most of you, many of you who have tried to
          connect through services like ISDN I'm sure know the
          problems that you go through in trying to provision a
          service for your PC.
             Fourth, multimedia capability.  Voice, video and
          data communication ought to be seamlessly integrated into
          the service.
             Fifth, store forward capabilities.  Voice mail,
          electronic mail, fax and other store forward capabilities
          ought to be service offerings.
             Sixth, security.  Security options ought to be
          available because both electronic commerce and workplace
          connection requires protection from intrusion.
             Seventh, affordable pricing.  What's affordable
          pricing?  Well, telephone service is affordable.  We know
          that.  TV service is affordable.  We know that.  I believe
          that a PC communication service has to be in the same order
          of magnitude as those services available.
             Now, with these characteristics in mind, a
          meaningful communication service need to offer the
          following.  First Internet access.  As Dr. Newman said, this
          is baseline.  This is the digital dial tone.
             Second, multicast broadcast services.  News and
          other information services ought to reach the user when they
          happen.  There are many technologies occurring, happening,
          that allow you to deliver these kind of capabilities.
             And third, our connection to our workplace through
          a modem is inadequate.  We need these capabilities and we
          need telecommunication services offered through this
          infrastructure.
             Now, volumes have been written about the economic
          impact of the Internet and all of these in my opinion depend
          on deploying a meaningful baseline PC communication service. 
          And the economic potential of this service in my opinion is
          enormous.  If you look at the 40 percent of our homes,
          40 million homes with personal computers, a baseline service
          should represent in excess of $10 billion revenue.
             On top of that, if you think about the investment
          that both the consumer will make and the equipment
          suppliers, the service providers will make, there is a
          significant equipment business associated with this as well. 
          And we know that the consumer will pay for value.  The
          current investment rate, current demand for PCs for the home
          and rapid increase, rapid demand for satellite TV services
          is indication that the consumer will pay for quality
          capabilities.
             Now, I do not intend this to be a call for a new
          set of regulatory regimes.  And in fact, I don't even intend
          this to be a call for some technical specifications to
          deploy the services.  I believe that it is the industry's
          job to do that.
             However, I would hope that the Commission when it
          faces the issues that it struggles with looks at these
          capabilities, looks at this PC communication service needs
          and makes those decisions with those issues in mind.  How
          will our decision impact the development of these PC
          communication services?  What will the service providers do
          as a result of our actions?  How will a competitive market
          be developed where different service providers using
          different technology means are going to compete for the
          dollars of the consumers.
             Those are critical decisions that I believe are
          going to impact how the future national information
          infrastructure will develop and how the economic benefit
          from all this technology will develop for all of us.  Thank
          you, very much.  [applause]
             MR. PEPPER:  Thank you.  If we could also try to
          keep these statements to two to three minutes.  Otherwise,
          we're going to run out of time for any discussion.  Thanks. 
          John.
             MR. CURRAN:  Good morning.  I'm John Curran.  I'll
          keep my comments brief.  This will be facilitated by the
          fact that I'm from Boston and I speak rather quickly.  If
          you need to catch up, there will be transcripts I'm sure
          somewhere.
             Basically, my job would be to live between 12 and
          24 months out in where the Internet is today.  I used to try
          to live three years out, five years out, seven years out. 
          Now if I can keep 12 months in advance, planning and where
          we're going I consider myself lucky.
             The fact of the matter is that the Internet is one
          of the most remarkable changes that's come across
          telecommunications to date.  And I want to highlight how the
          Internet works for this forum to describe some of the
          interesting cultural differences that are happening and
          things that we need to keep in mind when we try to look at
          the issues of access reform and how we're going to bring
          about broad band infrastructure for everyone to use.
             In the U.S. alone, we have over 3,000 Internet
          service providers.  You know of probably, oh, the top ten of
          them, the people who run some of the national backbones. 
          But you're probably not aware of the other 2,900 that are
          out there.  Some of them are in every community.  One of
          your next door neighbors almost certainly is an Internet
          service provider.
             The fact of the matter is that the Internet
          service industry has grown at such a dramatic rate and had
          such remarkable success not because of the degree of its
          coordination at the end, the amount of architecture that
          we've put in place, but in fact the exact opposite.  The
          Internet is an example of success in decentralization.  The
          fact of the matter is that in the Internet we work in a very
          simple basis where we standardize and we work on cooperation
          on the bare minimum facilities necessary to keep things
          communicating and leave the rest to an open market model.
             Just to give you an example of this, over the last
          three years, the Internet has gone through three different
          backbone models.  We went through a model that we had one
          single nationwide backbone.  We went through a phase in time
          where we had several nationwide backbones of large IP routed
          networks that were interconnected through a few key
          locations and most recently we've actually gone to a model
          where the major backbone providers, providers such as some
          of the inter exchange providers BBN and others have built a
          model where our backbones are interconnected in multiple
          locations.
             Those are three dramatic changes that happened in
          36 months.  I can't emphasize more strongly the fact that
          the Internet has to be able to evolve rapidly and in fact
          what we're really looking for going forward for the ability
          to continue to evolve the Internet is to create the same
          market conditions in areas such as local access that have
          existed in the abilities to purchase wide span high speed
          broad band communications.
             If we have that open market, the Internet service
          community, and I mean thousands of entrepreneurial
          businesses, will explore every backbone model possible, will
          explore every access architecture.  We will see a rich
          tapestry of these coming forth.
             The fact of the matter is that the Internet
          service provider industry is using the infrastructure as any
          other business.  Today there are corporations out there that
          have hundreds of dial up lines and there are bulleting board
          servers and others who make use of local access circuits and
          local switching infrastructure.
             The Internet service providers have done the same
          thing.  They are looking at the rates that have been
          provided and they're trying to do what makes sense.  I don't
          think there's an ISP out there that doesn't want to pay
          their fair share of the cost involved in servicing that
          infrastructure.  It is not a case that there's an industry
          looking per se for a free ride.  
              What you have is you have a case of certain pricing in
          place and people trying to do the best business decisions to
          deploy it.
             Now, clearly there are some hard issues here.  We
          have a situation where all of these pricing, all the pricing
          for local access has been setup with certain assumptions
          such as loading rates and busy rates that no longer apply
          because of the popularity of the Internet.
             To this end the fact of the matter is we need to
          fix some of those basic underlying economics.  We need to
          make it such that the price of a local access loop and the
          price, for example, of going through the switching
          infrastructure is clear to the industry.  So that they can
          make intelligent decisions about some of the technologies we
          saw presented earlier today.
             I can't think of a better way to decimate an
          industry than to establish an artificial form of cost
          recovery for these functions.  The fact of the matter is
          that the FCC in its wisdom has already undertaken open
          interconnection activities which will over time provide a
          way for this robust industry to look at the complete
          components that it's using and make sure it's paying the
          adequate cost.
             And if indeed there are areas where the current
          models don't make sense in a different architecture for
          surfers, whether it's different service architecture or
          different technology is necessary, these will be made
          naturally by a robust marketplace.
             I asked that this forum and the Commission in
          general take these comments into effect when going forward. 
          Because what we have here is a remarkable success which
          under the appropriate forms can be turned into a remarkable
          opportunity to deploy new technologies and to harness the
          incredible dynamics of the information in advancing
          technology and communications to the mass market.
             If we should make a mistake of trying to architect
          a particular reform or a particular solution on behalf of
          the entire industry, I think we can safely predict that the
          robust entrepreneurial vision of the Internet won't be able
          to be harnessed and in fact we'll lose that energy going
          forward.  That concludes my remarks.  Thank you.  [applause]
             MR. PEPPER:  Thank you.
             MR. WHITE:  Okay.  I guess it's my turn.  I'm Pat
          White from Bell Atlantic.  Is the microphone on?  Thank you. 
          I know that from the previous comments from Stagg Newman and
          others on this program so far that the rest of the comments
          have tended to focus on the access to the network being the
          focus for most of the problems.
             Well, I'm in Bell Atlantic.  I have access to a
          ten megabyte LAN within the company premises.  And this LAN
          is connected to the outside world over a T1 or T3
          connection.  And I can say when I'm downloading the files
          I've never ever seen my PC record anything approaching even
          a megabyte per second.  It's usually a few kilobits per
          second at most that you get.
             So clearly, no matter what we do with access,
          we're still going to have a significant problem accessing
          the Internet.  And in fact, if you start to carve things up
          a bit you'll find that a lot of problems exist in the
          firewalls in the premises.  A lot of problems also occur
          within the PC.  Because as my friend at Intel keeps
          increasing the processor speed, Bill Gates keeps using it up
          with more and more bloat ware.  So the amount available to
          actually handle all of this processing is very, very small.
             We also have congestion on the Internet because
          with the kind of structure that the Internet has, with
          everyone engineering their facilities according to their own
          rules, there's no end to end performance or end to end view
          of the Internet.  We find that there are a lot of times when
          you could experience packet loss going in excess of 10 to 20
          percent on some occasions in the Internet.
             And finally, there are the servers on the
          Internet.  They're also heavily congested too.  So what I'd
          like to offer here is that instead of focusing excessively
          on just one aspect of the Net we begin to think about it
          more expansively, more globally.  There are a lot of things
          that have to come together before we can see the performance
          capabilities that Stagg Newman talked about.
             I couldn't agree more with my colleague at Intel
          on the needs for the PC.  I agree completely with him.  We
          need Internet access.  We need multicast and broadcast
          capability.  We need some kind of direct connection.  And
          furthermore, I'd want more.  I think you also need to have
          continuous connection available at all times.
             The only problem I think right now, in fact we
          know how to solve a lot of these problems, both the cable
          industry, the phone industry, wireless companies and others,
          is the real question in my mind is who's going to pay for
          it.
             Clearly, there are forces who believe that the
          vast majority of telephone customers who don't use or need
          these capabilities at least at the present time should all
          pay more than their fair share.  And I think that we really
          have to examine that carefully.
             It seems to me that as a minimum the cost for
          providing these services should be more focused on the
          people who are actually using, accessing the Web.  We might
          have 40 million people with PCs in this country, but if you
          look at Internet access or online access you find it's less
          than 15 percent of households in the U.S. today who ever
          access the Web.  So should the rest of us who don't need or
          use these capabilities have to finance the 15 percent who
          need to access it?  That's the end of my remarks.
             MR. MORGAN:  Good morning.  I agree with Pat too. 
          You have to take a look at this thing from a total network
          perspective.  And on Stagg's comment about the wireless
          being the wild card, very frankly, I'm just glad that the
          industry has moved.  You know, a year and a half ago if I
          was sitting here in this chair, you wouldn't have heard the
          word wireless.  And now with a company like Winstar that can
          serve 150 cities around the U.S., possibility of a million
          circuits of DS1s, people are looking at us and saying, these
          are a real part of the network.
             So I'm glad to be mentioned.  You can kind of tell
          me whatever I want.  Just keep mentioning us a whole lot
          more.  We're really happy about that.
             Let me say a little bit about what Winstar does
          and we are the company that really has the largest
          experience base as far as providing broad band access using
          wireless technology.  Our businesses that we provide
          services and technologies that really complement the local
          carriers by providing them local access communications using
          a bit of different technology.  that being broad band radio
          communications.
             We also take maybe a bit of a different view than
          some of the carriers.  and I've had experience on both sides
          of the house.  Mr. Hundt in his comments this morning talked
          about the last mile.  A lot of people talk about the last
          mile.  My view is if the consumers are really going to come
          to the fore and get what they need to move their businesses
          and their homes forward, we need to think about this as the
          first mile.  Take a different view of the network.  How do
          you get that first mile connection into this wealth of
          information that's out in the backbone?  Let's take a little
          bit different view of this thing.
             As I said, we use a bit of a different technology
          here.  We're using 38 gigahertz spectrum with digital broad
          band radios to get the connectivity.  And from the
          standpoint of where we are today, Winstar is operational
          today providing service really to a variety of people in the
          industry from caps like ACSI and ELI and Brooks Fiber and
          the range of competitive access providers as well as long
          distance carriers like MCI, Arbucks.  I think that we have
          Pacific Bell on the panel in the next session is a client of
          ours also.
             So we provide a number of services to the carrier
          marketplace today.  We do know how this stuff works.  We
          know how to go in and we do know how to make it reliable and
          I'm sure that we'll get some questions on that.
             I had mentioned capacity.  There is a tremendous
          amount of capacity available within this 38 gig spectrum
          that we have.  We've done calculations within our major
          markets that we can provide well over a million DS1s of
          capacity over the next couple of years within our major
          markets alone.  So there's a huge amount of capacity
          available.
             I also agree that you have to take a look at this
          at a whole network view.  The intrigue of wireless is really
          quite simple.  It's an incredibly fast time to market.  the
          capital gets optimized because I'm not digging up streets
          and houses and everything else.  So you don't have any of
          the construction costs.  I never have stranded plant.  If
          bodies and people and buildings and businesses move around,
          I don't have stranded plant to worry about.
             So all of those benefits are a tremendously
          appealing case for wireless.  You still have to take an
          entire view of how you role a product out to the
          constituency to make sure that you can keep the five nines
          of reliability that we built in this network that runs this
          country.  It means you have to understand network
          engineering, how you provision your services, how you have
          your logistics in place to spare all of these and everything
          else.
             So what I'll say for all of our folks that are in
          the technology world, and I've had the benefit of working
          with Intel and actually quite a bit with Cable Labs in a
          prior life.  The technology here, we have the greatest
          technologists in the world that sit in this country and many
          people sitting in this room today.
             The technology isn't the issue.  The issue is how
          do you deploy this and keep a network that runs end to end? 
          How do you provision it?  How do you maintain it?  And how
          do you manage it?
             So what I'll say to everybody that's sitting here
          in the room is you can get very excited about the technology
          and about the promise of the technology.  The hard work
          becomes how do you deploy it in an end-to-end,
          cost-effective solution to bring services to the people?  We
          think we have an incredibly important part of the solution,
          but we all need to work together to bring it to the people
          like you that need these kind of services.  Thank you. 
          [applause]
             MR. REED:  Well, Bob, with two or three minutes,
          one of the results of moving to Boulder is that I do speak a
          little slower I think in contrast to my earlier colleague. 
          I wanted to comment a little bit on the presentation earlier
          by Stagg Newman that set the paradigm as being IP dial tone. 
          And perhaps I'm still hungover from my video dial tone days,
          but I don't like the term dial tone.
             The paradigm about the cable industry I believe
          will likely be a winner here has got nothing to do with dial
          tone or any connotations that might be associated with that
          term.  And what I'd like to do is to address some of the
          technological characteristics of the high speed data service
          delivered over cable systems.  And specifically I want to
          make two points.  One is that the shared access network
          architecture delivers several key benefits to subscribers.
             So from the other presentation I'm going to spin
          that entirely on its head.  I do believe, like I said, I
          think the cable industry is a winner with the shared access
          architecture.  And as a result of the benefits you get with
          that approach, the performance of cable based high speed
          data service will far exceed most Internet access service
          available over telephone lines.  And to that we all agree
          from the earlier presentation.
             The second point is that the cable based service
          for high speed data is being offered today in several areas
          and the overall deployment that is accelerating.  Those who
          do have it commercially available are somewhat looked upon
          as the privileged few now I understand.  But it is being,
          the roll out is being accelerated by many of our member
          companies.  The next result to date of that roll out is that
          the subscribers are very enthusiastic about the service. 
          The modems work well.  The system works well.  And it's a
          positive experience.  And so I think you'll continue to see
          that roll out.  So those are two important points.
           Now, turning to the benefits of the shared access
          medium, what are they.  Very briefly, what I mean by the
          shared access to begin with is in contrast with the
          dedicated switched network paradigm that you had over the
          telephone network today that's a single high band width pipe
          that's shared among users.  In the context of the cable
          industry, you're talking anywhere from 10 megabits to 30
          megabits that will be shared by multiple users.  And because
          it is shared and there is a need to set rules to share that
          band width in a fair and efficient manner.
             And that set of rules is often referred to as a
          Mac layer, the Mac protocol.  And the Mac stands for Medium
          Access Control.  That's the true performance enabler here
          and that's what really causes the performance to be
          substantially better with this service.
             So the benefits of the shared access, one, is it's
          well suited for the bursting nature of today's Internet
          traffic.  If you look at how the traffic varies if
          somebody's surfing the Web, they need a very high transfer
          rate for very short period of durations.  The picture we saw
          earlier had burst.  And to the extent to which you have the
          band width available to accommodate that, it can be served
          up very quickly.  And in fact with 10 to 30 megahertz per
          second, the band width you have over a cable service is
          faster than your PCs can handle today.
             Now, with Gates laws we discussed earlier, that
          will probably change.  As there's availability, it will be
          gobbled up.  But to be sure right now it's quite a bit
          faster than what PCs can do today.
             And at Cable Labs we've modeled a 60 second surf
          and in fact I don't have it available with me now, but if
          anybody's interested give me your card or contact Cable Labs
          and we have a little primer on cable modem performance.  I'd
          be happy to share that with anybody that goes through
          exactly how the performance of a cable modem will operate.
             But the traffic itself because the bursting lends
          itself, the good news is that it lends itself well to what's
          called statistical multiplexing.  And so that means many
          more users can use and share this access pipe than just
          dividing the band width up on a dedicated basis to each
          user.
             So that's the first benefit.  Second is that the
          cable's large band width permits excellent performance.  In
          its primer, for example, up to 200 simultaneous users can
          jointly do this simulated surf with no degradation in
          performance.  Now, this architecture I'm talking about is
          the target architecture that the next generation modems will
          be operating under.  But that's where the cable industry is
          going.
             And under the loading scenario, if you double that
          to 400 simultaneous users, that takes twice as long to
          complete.  So if this is a 60 second surf, it takes one
          minute with up to 200.  If you move it up to 400
          simultaneous users, it takes two minutes.  And that's still
          faster than 128 kilobits per second ISDN.  
              So clearly the performance here is quite acceptable.
             The third benefit is the cable network
          architecture delivers a scalable approach.  We're not
          talking about two simultaneous users over Washington, D.C. 
          We're talking about 200 simultaneous users over one fiber
          node.  And the hybrid fiber coax architecture of the cable
          system.  And those nodes are being designed typically now
          anywhere from 500 to 2,000 homes.  So you can go through the
          numbers there.  You can see that you need quite a heavy
          loading for you to start experiencing any degradation in
          performance.
             Fourth benefit is that subscribers can stay on
          line and not consume network resources.  So for E-mail
          perspective, hopping on to get information quickly, it's no
          problem with the shared media approach.  Another benefit is
          that our users are connected to the same information pipe
          and therefore broadcast applications can be efficiently
          offered.  So the streaming audio and video, for example,
          from this conference to the extent someone wants to view
          that or more than one user wants to view that on a
          particular node, with the multicast capabilities that are
          being built into the Internet, you're going to be able to
          efficiently provide that.  So that's in a small way doing
          some future proofing in terms of the new services.
             The final benefit here is that designing the
          architecture to the extent it's possible and no one's a
          perfect predictor of the future to accommodate the new
          services.  The Mac software will be downloadable.  With the
          HFC architecture, you have ways to scale capacity to meet
          the need.
             So the upshot here is the cable industry thinks
          this looks like a real market winner.  Because the real
          benefits are tangibly better than what you can do today.
             Second key point quickly is that the service is
          rolling out today.  The customers are very happy with the
          performance.  By Cable Labs count, there's over two dozen
          vendors who are building, in an advanced state of building
          cable modems.
             Future direction.  Cable Labs has been
          participating in a specification process that will help put
          out a standard cable modem so that we'll be in the paradigm
          where you'll be able to take the modem from across cable
          systems throughout the country and that's very far along. 
          Vendors are commenting on that.  It's already been proposed
          to the vendors and they're coming back to the cable
          industry.
             So that is nearly complete.  Several of our member
          companies have the commercial services available and they're
          really too numerous to list at this point in time.  To be
          sure, different business models are still under
          consideration and we're still developing system-wide
          considerations and solutions to address the band width that
          the last mile you do have to address the other parts of the
          Internet.
             So in summary, the two key points.  There are very
          substantial benefits and we think this is going to be a very
          dominant paradigm in the future for how folks will use the
          Internet.  And it is happening and does take time to roll
          out.  There are a substantial number of folks who use the
          service today.
             MR. PEPPER:  Jeff, if you could just leave the
          mike's on the tables now that would help.  When we get to
          the questions, there will be somebody I assume with a
          microphone who will walk around and people can ask questions
          into the mike.  Is that person in the room yet?  Great,
          thanks.
             Maybe I'll start off with the first question.  I
          think it was John who said, maybe it wasn't.  It was
          somebody -- I think it was John.  Technology's not the
          issue.  Or maybe it was Pat.  It was Pat.  Technology is
          here.  David said it's a matter of time.  If it's a matter
          of time, how soon?  I mean, realistically.  And if it's not
          a technology question, is it a market question?  Is it a
          competitive question?  Are there regulatory issues?  Are
          there things that are now in the regulatory process that are
          impediments to the deployment of these technologies?
             Because I think these are the kinds of questions
          that people are asking.  We're certainly asking ourselves. 
          Does anybody want -- Pat, do you want to start off with
          that?
             MR. WHITE:  Okay.  I'll start off with that, Bob. 
          Within the Bell Atlantic region currently, some 98 percent
          of our central offices are capable of providing ISDN
          services.  And we are indeed marketing ISDN services pretty
          aggressively.  We also have done trials of ADSL1 which is
          the version of ADSL that Stagg Newman talked about earlier
          which is the 1 1/2 megabyte version.
             We are also planning to deploy ADSL2 which is a
          six megabyte version of ADSL.  You know, those
          considerations are underway right now because the technology
          is available to support up to six megabits downstream to the
          customer.
             One of the, and I guess I should also point out
          that we have an SDV, Switched Digital Video trial going on
          as we speak in Dover township in New Jersey and there is a
          more up to date system being planned for Philadelphia.  With
          our switched digital video system, we will be capable of
          delivering up to 52 megabits over a twisted pair, very short
          twisted pair distances directly into the home.  So some of
          those things are beginning to happen.
             However, there is an element of risk I should
          point out.  Because investments in the network like any
          other investment, maybe unlike most investments, tend to
          have a pretty long lead time.  You know, there's a lot of
          money, a lot of construction to be spent.  And generally,
          you find that consumers are more interested in a new
          capability when a lot of people have the same service. 
          Communication services generally have that property. 
          They're useless for one person.  But millions of people
          they're more interesting.
             So we need to see or at least we need to have
          regulatory policies that are consistent with the fact that
          you have to basically lay out a lot of money over a long
          period of time before you begin to see a return on that
          investment.  And the extent that the regulatory framework in
          fact we're still trying to struggle with the implementation
          of the Telecommunications Act to the extent that that
          increases the risk for new investments, then I think that
          could have an impact on the willingness of operators to
          basically aggressively deploy SDV or ADSL technology.
             MR. PEPPER:  Les, you're shaking your head.
             MR. VADASZ:  I have a more pessimistic view of it
          obviously.  I think if you look at our telecommunication
          carriers today, they spend more significantly, orders of
          magnitude more effort in trying to get into each other's
          business rather than trying to develop new business based
          for PC users.  And this issue of who pays, well, in real
          businesses, in real competitive markets, you have a right to
          compete and you have to earn a return.  You have to put
          capital at risk.  And what we would like to see is the
          communication carriers recognize the PC user as a real
          viable economic opportunity.  I guess that's what I --
             MR. WHITE:  Bob, can I respond to that?
             MR. PEPPER:  Pat.  Yes, please.
             MR. WHITE:  Bell Atlantic currently spends in the
          neighborhood of $2 billion a year every year on new
          construction and maintaining the network equipment within
          our territory.  I would hardly say that that is compatible
          with not investing in the network and looking elsewhere for
          returns.  Indeed, we spend most for capital right here
          within the states that we currently serve.
             MR. PEPPER:  Doug, I was just actually going to
          ask Doug, wireless, you pointed out that long lead times
          were maybe not the same in wireless.  You can have more of
          an incremental approach.  You don't have to worry as much
          about stranded investment.  How does wireless and your
          business plan?
             MR. MORGAN:  Our paradigm is much, much different. 
          And today we're serving business communities and
          multi-dwelling units.  We're not at the residential level. 
          But I certainly assume when this technology comes down we'll
          be able to spread that.  But where the technologies play out
          if you look at the cost of any access provider to go into
          the building, today it's somewhere between $40,000 and
          $100,000 depending on what city you're in and how much
          construction you're in and everything else go into that
          building.
             And I can understand -- Bell Atlantic saying I
          don't want to spend $100,000 to go under a building.  Our
          approach is much different.  We put a 12 inch dish on the
          roof, a couple of small radios inside and I have access to
          the building.
             So we're actually a unique competitive advantage
          for the carriers that we work with that they can use us to
          go into buildings to get entry to provide high capacity
          services and quite frankly if the carriers find that after
          they're in a building that there's enough capacity that
          warrants putting fiber in.
             We're a big believer in fiber.  We use fiber
          ourselves to connect the nodes together.  We think it's a
          tremendous technology, just not financially feasible if you
          have to build it on a building and hope that it will become
          kind of a model.
             So we give people a unique advantage.  They can go
          into a building when there's enough capacity that they want
          to go ahead and build fiber behind us, they can go ahead and
          do that and we can take our plant and move it somewhere
          else.  So we see ourselves as a real enabler to move some of
          this new technology forward with a much different financial
          plan than anybody else has in the industry.
             MR. PEPPER:  Now, there's a question Stagg raised
          about wireless and its ability and interference
          characteristics and potential problems which leads to the
          question of the network liability issues that the Chairman
          raised.
             MR. MORGAN:  Sure.  I'd be glad to address that. 
          As the largest provider of these kind of services, I won't
          tell you that we haven't had a learning curve as we've gone
          through this.  If you take a look at vendor literature that
          talks about a 38 gig range, four and five mile distances and
          things of that sort, it will certainly work on those kind of
          distances.  It won't work to the level that any of you will
          be happy with.
             So we have found that the nice point about the
          technology in our range is it's very much a point and shoot
          technology.  This is not difficult.  If you have line of
          sight, we can do a distance.
             The real thing we've had to find out is you have
          to make sure that you keep your distances short which means
          that depending on the region of the country that you're in,
          somewhere between a mile and a quarter to a mile and a half
          to a little bit longer as you go past, if you want to keep
          the five nine path reliability.
             Physics are physics.  They haven't changed in 100
          years.  And the real thing you have to do is make sure that
          you have to keep the paths right.
             So once we have gone through the proper types of
          network engineering, you'll lay out your connection points
          in such a manner that you keep all of your paths short.  And
          that also reduces the reflection and other people getting in
          the way of it.
             Once you do all that, you can build an incredibly
          reliable robust network, but you have to understand the
          engineering pieces and don't believe all the things you read
          from the vendors.
             MR. PEPPER:  John.
             MR. CURRAN:  Let me pickup on the Internet
          reliability issue.  Certainly there's a real issue here. 
          We're in a situation because again of the wide number of
          providers going forward and the very diverse technologies
          being used to deploy this, where we have different standards
          of reliability.  In fact, there are some pieces within the
          work that I'm sort of pleased have different standards.
             The Internet has made it into countries where 386
          PCs are state of the art, where the modems are older than
          many of my staff.  And the fact of the matter is that the
          Internet is unique in its ability to connect all of these
          communities.
             There are rural networks out there, for example,
          for educational purposes that wouldn't meet the requirements
          of my business customers.  I have 3,000 business customers
          connected to the network.  They have very high requirements. 
          That doesn't mean I don't want to connect to those other
          networks.
             You have to recognize when we talk about ability
          that we want a core network that is very robust, but the
          Internet accommodates almost anything from multi gigabit per
          second links all the way down to 1,100 baud VLF
          communications.  That's all on the Internet somewhere.
             So I think it's important -- two things to keep in
          mind.  First that when we talk about Internet reliability, I
          don't think we want to talk about ubiquitous in that
          reliability until we're sure we're willing to pay the cost
          for every corner of the Internet, where the Internet today
          is still going to corners that are fairly rough.
             The second item was just the fact that the
          Internet technology's changing very rapidly.  I routinely
          run into people who are waiving around 15 year depreciation
          schedules and 30 year depreciation schedules.  And I think
          about the fact that we're doing doubling every year.  We're
          doing upgrades on a 12 to 18 month basis of all our key
          technology.
             I think that there's going to be a period of time
          when the Internet settles down and those periods lengthen
          out, but it isn't today.  And I think that it would be wise
          for the Internet to have one-tenth the number of years that
          the telecommunications industry has had before it has to go
          tackle the reliability issue right now.
             MR. PEPPER:  But how does this resolve Les's
          question of the real issue is mass market?  Les.
             MR. VADASZ:  I think that reliability is very
          important depending on the application.  For example, today
          electronic mail has become a mission critical application in
          many of our corporations.
             However, I think that we have time to evolve.  I
          think something like our telephone network is probably the
          most reliable, most impressive reliability that I've ever
          experienced in my whole company.
             MR. WHITE:  Accepted.
             MR. VADASZ:  We will get there.  We need to get
          there.  But I don't think we have to be there today.  I
          think we have time to evolve as we deploy more and more
          applications on the network.  I think that where we have to
          get very rapidly is broad band connection to the home.  And,
          yes, indeed there are many other issues to be solved, but
          again, they will be solved incrementally.  But I don't want
          to lump that issue of broad band connectivity to the home
          into just one of the issues that we have to solve along the
          way, among the 100 issues.  That is critical now, urgent,
          and it's not happening.
             MR. PEPPER:  Stagg.
             MR. NEWMAN:  I just want to echo that.  I believe
          the competitive marketplace will solve a lot of the
          problems.  There are certainly major engineering problems in
          the backbone connectivity performance, et cetera.  And there
          are going to be, there are lots of technologies available. 
          There will be even more.  I think what's key is, one, we're
          allowed to use all of those.  We'll need wireless to get to
          some homes.  We'll need cable to get to some.  We'll need
          ADSL.
             So you need to let all those deployment
          technologies, all those technologies roll.  LMDS, Local MDS
          is one.  It's 28 megahertz, wireless technology.  My guys
          weren't very enthusiastic about it.  HP and TI are pretty
          enthusiastic about it.
             Finally, we observed, my guys are in New Jersey,
          fairly foliage rich, rain intensive area.  You know, TI's
          out in Texas and HP's in San Jose.  And the short form is
          your enthusiasm for LMDS is inversely proportional to the
          number of leaves you see when you look out the window.
             So we need to allow all those technologies to be
          deployed.  But I agree with Les.  The critical issue is the
          mass market.  That's where the tremendous cap X will have to
          be spent.  That's where you either have to dig up streets or
          have access to spectrum.  And frequently, it's not the
          technology costs.  It's the digging up the streets that
          drives construction.  And so I think that is the critical
          issue that we need regulatory, economic, all of our best
          thinking to solve.
             MR. BERNENGER:  Dan Bernenger from Vocal Tech.  I
          just wanted to add one other point to the reliability issue
          in that this time around reliability is also an application
          issue, that there's nothing I can do to my telephone to make
          the telephone network more reliable.  If you give me
          unlimited band width and you tell me, well, I'll give you
          ten meg, but I lose ten percent of my packets, I can do
          things on the application level by sending multiple packets
          out of the same quality or the same content and deal with it
          at the other side.
             So reliability is now also an application issue,
          but it's kind of a tradeoff.  If I'm paying a lot for each
          of my packets, then I'm not going to put redundancy in there
          and I'm not going to do various interpolation things or
          whatever.  So consider that as well.  The applications has
          contributions to the reliability.
             MR. PEPPER:  Thank you.  Are there other
          questions?  If you could stand up and identify yourself. 
          And if you could raise your hand in the back so the
          microphones can get to the next people.
             MS. WOODARD:  My name is Gwendolyn Woodard.  I'm
          President of Worldwide Education Consultants.  The questions
          are for Mr. Reed and Mr. Morgan.  Mr. Reed, if I am a
          subscriber and I subscribe to the cable network services
          that you have to offer, if my lights go out, will I still
          have access to your network?
             MR. REED:  The issue of whether you have emergency
          powering typically the way the cable industry is approaching
          that right now is for cable television services, there are a
          number of our member companies -- there's no uniform
          strategy, but a number of uniform companies do put in backup
          power to handle that situation.  Unfortunately, if your
          lights go out, the television's out.  So you can't really --
          there's no reason.  The same thing's true with the personal
          computer.  So there's not a lot of value in backing that
          power up typically.
             GWENDOLYN WOODARD:  Okay.  Mr. Morgan, you talk
          about wireless technology.  From my understanding, if you're
          going to go from Point A to Point B and I send information
          over the wireless technology, it's still going to have to
          hit somebody's network before it gets to its destination,
          whether it's wired or wireless.
             MR. MORGAN:  The technology that we deploy is for
          your access to the backbone networks.  So you're correct. 
          If you're going from one educational institution to another
          that's five miles away, you'll use me as the access to get
          onto the network and then you'll hop off at the other side. 
          Within a campus type environment or within a private network
          environment, many people will use our technology right
          within their campus.
             If you don't want to tear up a campus or something
          of that sort, they'll use it as a private network within
          their school.  But anything that goes off the network,
          they'll use us to get off the network to a public network
          somewhere.
             GWENDOLYN WOODARD:  Okay.  And also from my
          understanding, no matter what we do, we're going to still
          have to use the wires or wireless capabilities of the LECs
          and IXCs in order for you to get anywhere as far as the
          Internet is concerned.  You're still going to have to use
          them.
             MR. MORGAN:  I guess it all depends on where you
          take your definition there.  We do have places where we'll
          go from a school directly to an Internet service provider. 
          Obviously, the service provider is connected to the LECs and
          to the PSTN somewhere.
             MR. PEPPER:  In the back.
             MR. SCHMIDT:  My name's Bob Schmidt.  I'm with
          National Digital Network and we have a PSTN test here today
          that we would invite all of you to see.  But my question is
          really to Mr. Pepper and the people here on the panel from
          the FCC.
             Today we have to come to the Commission and play
          mother may I to do what we are capable of doing from a
          technology standpoint right now.  And the people in the room
          who are users and the gentleman, Mr. Morgan has a system up
          and operating and I commend him.  Because I think wireless
          has flexibility to do some things.  But we've got to get the
          regulatory scheme caught up with the reality of the
          marketplace.
             And I think what Mr. Newman said about MMDS is
          true.  It is another wild card.  But we want to be in the
          game.  And in order to be in the game, we need to have the
          regulatory environment allow people like ourselves to bring
          forth the capacity to deliver these services.  So my
          question is how soon will we have that, Mr. Pepper?
             MR. PEPPER:  Well, actually we can put this record
          in that proceeding as well for the MMDS flexibility.
             STEVE STEWART:  Steve Stewart with IBM.  Two
          questions for Pat White.  And I would like David Reed to
          also answer the second question.  And then if Stagg Newman
          has any comments on that, that would be useful too.  First
          of all, Mr. White, you mentioned that Bell Atlantic is
          investing about $2 billion a year in networks.  Can you tell
          us roughly what percentage of that is going to ADSL
          investment or other broad band networks?
             The second question is if you look at your ADSL
          and other broad band technology deployment over the next
          five years, can you give us a rough percentage of the number
          of homes that would have to be available at the end of '97,
          at the end of '98, et cetera.  And then for David Reed, if
          you could offer the same percentage deployment over the next
          five years for cable modems.  Thanks.
             MR. WHITE:  I don't have that data off the top of
          my head, but I'll be glad to get back to you with it.
             STEVE STEWART:  Okay.
             MR. PEPPER:  Kevin Werbach wants to ask a
          question.  Kevin.
             MR. WERBACH:  Well, a little more than a year ago,
          some of us remember the 1996 Telecom Act passed.  And back
          then everyone was talking about, gee, you are going to have
          these big band width networks.  Cable is going to provide
          broad band to the home.  Phone companies are going to
          provide broad band to the home.  It's all going to be
          glorious.  And here we are a year later and none of that
          seems to be a reality for the mass market we're talking
          about.  What has held up that sort of development?  Is that
          just international exuberance?  Or are we really going to
          see those kind of developments taking place?  Who wants to
          take a stab at that?
             MR. MORGAN:  Wait until after the market closes.
             MR. WERBACH:  Pat, do you want to take a stab at
          that first?
             MR. WHITE:  I guess I get all the tough ones, huh? 
          Well, I'd like to start commenting on that by going back to
          a point I made before that there are a number of
          uncertainties right now in the industry.  We talked about
          the fact of the technical uncertainty that exists.  We do
          know that a lot of the technologies we're planning to deploy
          work well in lab environments.  When you take those
          equipments out into the field, you find a different thing, a
          different situation altogether.  So we have to make
          adjustments for that.
             On top of the technical uncertainties, there's the
          new uncertainty with how the Telecommunications Act will be
          implemented.  The extent to which we have to price our new
          technology below cost and make it available to people who
          are not taking an investment risk that we're taking, you
          know, leads to some caution that I think any prudent manager
          would have to take into effect before making a bet.
             But in spite of all of these things, Bell Atlantic
          has been as I said before moving aggressively with upgrading
          the local access.  98 percent of our central offices are
          ISDN capable.  And in addition to that, we ran trials I
          think as far back as two or three years ago in ADSL at 1 1/2
          megabits.  And we are considering deploying the ADSL2
          version which is the 6 megabyte version.  And, of course,
          our SDV trial in Dover is still going along.
             So we are indeed proceeding with constructing
          broad band capable networks that will do high speed data as
          well as high speed video signals.
             MR. WERBACH:  Let me ask the same question of
          David.  A couple of years ago I think it was John Malone
          from TCI was on the cover of Wired saying I think end of '95
          cable will be providing broad band to homes.  That obviously
          hasn't really happened either, has it?
             MR. REED:  I'm not going to speak for John Malone,
          but our -- it is happening.  To be sure, there is a hype
          factor, perhaps an over hype.  But to the extent something's
          new, that's a natural human reaction to things.  You do have
          commercial high speed data services, but Time Warner in
          Akron, TCI in California, Cost in Phoenix and Comcast in
          Baltimore.  And these are real.  These are actual
          subscribers that are receiving this service.  And we're
          learning from those commercial deployments.  They're not
          technology trials.  They are commercial deployments.
             MR. MAXWELL:  Can we help to scale this?  When we
          talk about 100 million access lines, it would be interesting
          to say by the end of '97, what would you guess to be the
          table modem penetration?  By the end of '97, Pat, what would
          you expect to be the ISDN penetration in Bell Atlantic
          territory?
             MR. REED:  I'd like to -- to be honest, we don't
          track that kind of information in terms of market forecast. 
          It's just simply not something we do.  And so I can't answer
          that.  I mean, I can say that our member companies may have
          very aggressive roll outs.  To Bob's question earlier about
          are there any regulatory implications to that roll out, we
          think that the two-way cable high speed data services is a
          nice service that roils out independent of the regulatory
          environment since it's just a network Internet access
          service.
             Some of our member companies are looking at what
          we call a telco return model which is because it takes time
          to activate all your cable network, you would have high
          speed access, high band width, in the downstream direction
          and the telephone line in the return.  In that case, the
          extent to which anything that might impact how folks can
          access that telephone line in return could potentially be a
          barrier and that's a bridging strategy for the cable
          industry until they can do that.  So that could slow down
          roll out if something like that were to occur.
             But I don't think referring to TCI, they hit the
          brakes on capital.  I think it's a natural reevaluation
          process.  It's not that they're not going to do any of these
          things.  They're just reevaluating and figuring out how to
          do it more efficiently.  And they'll be going forward and
          they are going forward.  They have built a lot of state of
          the art 750 megahertz plan.  And so you will see these
          services rolling out.
             But, for example, with high speed data service,
          it's associated -- it's not just the local access.  You
          know, they have at home which working on trying to work on
          some of the other bottlenecks in the service.
             MR. PEPPER:  Do you have any idea what percentage
          of the cable network today in terms of homes passed actually
          have been upgraded to the 750 megahertz so that they would
          at least be capable?  Stagg's point we first have to do the
          hybrid fiber coaxial upgrade before you're then ready to go
          to the next step.  Do you have any idea --
             MR. REED:  I mean, that percentage varies.  I
          don't have an industry number.  I know for member companies,
          it varies anywhere from 20 to 50, 60 percent.
             MR. PEPPER:  And Pat, a comparable question.  What
          percentage of lines or households could be provisioned with
          an ADSL or XDSL without having to significantly upgrade the
          networks other than just putting on the box in the home and
          a box in the central office.
             MR. WHITE:  Yeah.  I hate to answer questions like
          that off the top of my head, but I think you're probably
          talking 20 to 30 percent could probably be satisfied that
          way.  And the rest would require some fiber --
             MR. PEPPER:  So in some ways it's very comparable
          to the cable industry situation which is basically that
          someplace between 50 and 70 or 80 percent of households
          would have to have their basic networks upgraded before you
          could deploy the latest of the consumer technologies.
             MR. WHITE:  Right.
             MR. PEPPER:  The higher band widths.
             MR. REED:  Well, not necessarily.  I'm saying with
          the telco return model, for example, if that were to roll
          out, that would be one example of having band width in the
          downstream direction.  But that's just, that's a bridging
          strategy and the industry's learning right now about the two
          way and how long it will take to roll it out and how rapidly
          they can do it.
             MR. PEPPER:  Les and then Stagg.
             MR. VADASZ:  If I may, I'd like to rephrase that
          question.  I think it's a very good area to try to put some
          meat on the bone.  We all know the various technologies that
          are applicable to this area.  I'd like to understand our
          collective judgment of when is the second million broad band
          connection going to be installed in the home?  I don't care
          which way.  I don't care if it's cable, wireless or ADS or
          whatever.  When are we going to have two million homes broad
          band?  My judgment is not in this decade.
             MR. PEPPER:  Stagg?  Nobody's volunteering to
          answer that.  There's somebody in the audience volunteering. 
          Let's let Stagg ask first.
             MR. WALDHUTER:  I'd like to answer that.  I'd like
          to try to answer that question.  I am Jeff Waldhuter, Pat
          White's twin brother.  I am Executive Director of Nynex
          Science and Technology.  We have done similar trials as Pat
          has done at Bell Atlantic, both in ADSL and SDV technology. 
          What I want to say is that we've done a lot of similar
          efforts and I think the other regions as well in '96.  And
          what we learned is basically the broad band capability, the
          technology for the access piece is there.
             So I'm in support of what Les said is that the
          challenge to our industry as a whole is to move towards
          broad band Internet and that's the whole challenge that we
          have to embrace together.
             What we found with the trials is the missing part
          is now in moving to broad band Internet you're dealing with
          much higher, higher speeds of traffic.  And I guess one
          point Les mentioned when will we have the first two million
          lines?  Well, I think we have the technology.  We have it
          both in cable.  We have it in ADSL.  We have it in SDV.
             But the challenge we're trying to work out at
          Nynex Science and Technology in '97 with our trials is to
          come up with a scalable network solution that's cost
          effective to the mass market.  The public switch network
          today as we know it was never designed to carry broad band
          speeds, okay?
             So we have to upgrade that, provide that overlay
          network to carry this pack of traffic.  And I don't think no
          one telecommunication vendor, service provider, can come up
          with the solution.  We have to work together as a team to
          build that.  There are a lot of piece parts and no one has
          all the answers to that.  Thank you.
             MR. PEPPER:  So I think what I'm hearing is your
          answer to Les's question is actually agreeing with Les that
          you don't see as a practical matter the mass market, the
          second million broad band home for at least, now we're
          talking three, four years which is the end of the century.
             JEFF WALDHUTER:  I believe nothing has to be
          invented in access technology to achieve that.  I don't
          believe anything has to be invented on the network side, but
          what we have to do is come up with scalable solutions that
          are easy to provision, easy to operate, easy to maintain. 
          And that truly doesn't exist today, either for the cable
          industry or for the telco.  The technologies are there.  It
          will take time to do that.  I take all of the piece parts
          are there.  The CPE is there for the computer to support the
          traffic and the applications of multimedia.  The access is
          there, whether it's ADSL for the telco or it's cable modems
          or --
             MR. PEPPER:  Yes, I think we all understand that,
          but the timing question I guess one of the questions is the
          extent to which there are processes within the industry that
          actually work those things out to move that out more
          rapidly.
             MR. WHITE:  Let me take another angle at that.  I
          believe I might have said this before is that -- and the
          point is you have to take a really total network solution. 
          Because even in my office today, and I'm sure this is
          probably true here at the FCC, assuming you have a high
          speed LAN connection in here.  You don't see more than a
          couple, I mean, two or three kilobits a second is what you
          normally get when you download files from the Internet
          today.
             So you're looking at us to say, okay.  We're going
          to spend money to basically go out and fully upgrade, you
          know, put two million customers on the Net by the end of the
          decade.  That sounds like sending a man to the moon somehow. 
          And yet, there's almost nothing that we could do, at least
          within the immediate future, to make use of that band width. 
          I mean, the PCs are not there.  The services are not there.
             MR. PEPPER:  And I guess, Pat, that leads to the
          question for everybody here and maybe John wants to start
          with this, which is what are the industry mechanisms to come
          up with the kinds of systems that were described as
          necessary that did not yet exist.  How are all of these
          various piece parts or components -- if we're talking about
          the total network solution or the total network view, there
          are lots of different pieces of this network, lots of
          different industries competing.  Sometimes your vendors and
          suppliers, your competitors, what are the mechanisms to do
          this?  John.
             MR. CURRAN:  I'm going to pick up on that
          question, but I'm first going to start by answering the two
          million user question.  I agree.  I don't think we actually
          have a technology here.  BBN's participated in Internet over
          cable activities in places where there's HRC plant is
          already installed.  This rolls out very quickly.
             I have people in Boston telecommuting over this
          and it's a very high band width solution.  We've sat down as
          have other backbone providers in the Internet to look at
          what happens when you have, oh, fifty or sixty thousand
          users coming in at T1 speeds.  And certainly there are some
          issues there, but they're not necessarily technology issues.
             The main thing I see is that there are real costs
          associated here.  Don't under estimate the costs that are
          incurred in a broad band solution to the home and dismiss it
          as something that technology will necessarily just wash
          away.  That isn't the case.  The main issue I see limiting
          deployment of two million users is two million broad band
          buyers.  Once they appear, I don't see any other problems.
             MR. PEPPER:  Okay.  We have a request from the
          Reporter that people who speak from the floor if you could
          just provide her with your business cards so we can spell
          your name correctly.  If you do not have a business card,
          spell your name when you speak.  Because again, this is
          going into the official record.  We have somebody over here
          with a mike.
             MR. MAZER:  John Mazer, General Datacom.  Open
          question for the board.  It sounds like what we're all
          searching for is a driver to break the broad band bottleneck
          that we keep speaking of.  Is it possible to tie in the levy
          of ISP telephone access charges to the availability of a
          broad band local loop capability by any service provider?
             MR. PEPPER:  Anybody?  I think they may -- is it
          correct to interpret your question as a charge associated
          with broad band to pay for broad band?  Is that what you're
          suggesting?
             JOHN MAZER:  Sorry, it's the charging of an ISP as
          a carrier to access the telephone network which has been
          proposed by the local exchange companies.
             MR. MAXWELL:  Subject to there being a broad band
          deployment by the local exchange company.
             JOHN MAZER:  Or any of the service providers in
          our newly deregulated environment.
             MR. JACOBSON:  May I respond?  My name is Gordon
          Jacobson.  My company is IRAP Network.  We have a broad band
          Internet access network running up and down the East Coast
          and our sister company in California who has a
          representative here who would be on one of the panels this
          afternoon.  We'll be talking about the subject of broad band
          network.  The question really is broad band access.  It's
          not about the existence of a broad band network.  That
          technology is already here and it's scalable.  The question
          of the access fee should be separate and distinct from
          anything else.  That should be unrelated.
             I have a question that I'd like to address to John
          Curran if I may.  John, when we see telcos talk about the
          Internet and when Pat talks about the Internet, one presumes
          that from what they're saying one can infer that they think
          the network is all about dial up access.  I'd like to hear
          your comments about the percentage of users who do not use
          dial up access.
             MR. CURRAN:  It's a good question actually.  The
          fact of the matter is that we think of the Internet and
          people think of the most common pieces that they interface
          with, the large online service providers, the dial up
          service you use to get into your school or work.
             A vast majority of the Internet traffic is coming
          directly from those local area networks in businesses.  It's
          coming between very large servers.  People who are at work
          using it for work, people who are busy engaging in as I said
          transacting business over the network.
             We're seeing many activities that used to be done
          entirely on paper now being done online.  You see not just
          retail catalogs on line, but wholesale catalogs on line. 
          You see people removing their software distribution
          infrastructure because the Internet is there.  Why not use
          it for software distribution?
             Companies are reducing their call centers because
          they're handling the support online with interactive media. 
          So, for example, BBN's focus is entirely business.  We serve
          approximately 3,000 business customers which include the
          high technology who's who and many of the people who are
          online service providers.  There is two distinct markets
          here.
             The fact of the matter is that when we talk about
          the network, sure, there are technology hurdles, but the
          Internet providers have increasingly been working to make
          sure that we can scale the Internet traffic, the backbone to
          handle the traffic needs.  The access network and the issue
          of how access charges are reformed over time, whether or not
          that's going to encourage broad band access, et cetera, is
          very much a distinct question.
             And I just need to point out that the question of
          how people get access to the network given the wide range of
          technologies that we've seen, the most important thing is
          just to make sure that all of them are available on a basis
          that recovers their costs and shows a profit and that there
          is no artificial restraints or pricing involved that will
          skew the market decision of 3,000 ISP buyers out there.
             MR. PEPPER:  Les.
             MR. VADASZ:  I'd just like to add something to
          this.  I think that we see a very healthy competitive market
          competing for the dollars of corporations for Internet
          access, Internet service.  I think where we see a lack of
          competitive environment is the residential broad band area
          where there are no real technology deployment of any large
          scale level.
             MR. PEPPER:  Thank you.  Oh, we have time for one
          more question.  Alan.
             MR. CIAMPORCERO:  Alan Ciamporcero.  It's an easy
          name to spell.  You shouldn't have trouble with that. 
          Kevin, I've just got to say something about your question. 
          I'll go absolutely crazy if I hear another person from the
          Commission say why aren't you in the video business?
             We spent, as a lot of people here know, two years
          trying to get video dial tone applications passed and get
          through that process.  By the time I got through with it,
          the business unit had literally fallen apart.
             Now, if that were only of historical interest, I
          wouldn't bother bringing it up.  But we may be facing the
          same thing with ADSL.  Lee Bauman's going to talk about that
          later.
             The Commission needs to have policies that
          encourage investment, not that discourage investment.  And
          we believe that the interconnection policies are doing what
          the video dial tone policies did a couple of years ago,
          making it take so long for us to get into a new business
          that we can't rationally plan from beginning to end. 
          Thanks.
             MR. PEPPER:  Thanks for the statement.  Is there
          one last question?
             MR. ROSS:  Thank you very kindly, Mr. Pepper.
             MR. PEPPER:  Yeah, just talk.
             MR. ROSS:  My name's Charles Ross.  I'm President
          of the Canthos Corporation, BNET.  One technology that was
          not discussed here this morning which we're using in
          expensive Internet satellite provision by taking capacity
          overseas to international telcos in developing countries and
          ISPs is streaming data compression.  This is a new
          technology.  It does work.  And it allows us to bring bulk
          capacity from the North America and European grids directly
          into ISPs who are obviously looking to lower their cost of
          service provision so they can create what I like to call
          locally affordable services.  If the local people can't
          afford it, they're not going to use it.
             My question to the panel is being that this
          technology is new but exists today and I say with respect it
          is largely based on Intel chip technology, we would like to
          see the opportunity in the domestic U.S. market to see this
          deployed.  It is a board level technology which can allow
          users to avoid the choke points of difficult local access. 
          And while this does seem like a new technology, it exists
          today.  It is stable and we are deploying international
          satellite circuits across Intelsat and other systems to use
          this.  Thank you.
             MR. PEPPER:  Does anybody on the panel want to
          respond to that?  Thank you.  I want to just come back --
          we're going to take a quick break between panels, but I want
          to first just comment on something that Stagg started off
          with and that is that business and large business customers
          have access.  They're getting broad band access.  We've
          heard that this morning.  The question really in our minds
          is precisely the one that Les asked which is the mass
          market, the residential consumer, the small business
          consumer.  And this is really at the heart of why we are
          having the forum.  And I think unfortunately this is not
          going to be the last forum.  In fact, I suspect we'll have
          many more before we hit the first million residential broad
          band consumers.  I want to thank the panel very, very much. 
          This has been a great discussion this morning.  We will
          reconvene by that clock at exactly 11:30.  And so we have a
          ten minute break.  And if the new second panel can come up
          in the interim, I'd appreciate it.
             (Whereupon, a break was taken.)
             MR. PEPPER:  We promised we would start again at
          11:30.  We are close to that by that clock.  Kevin Werbach,
          our counsel for new technologies in the Office of Plans and
          Policy, is going to introduce the panelists for the next
          panel and take over some of the moderating responsibilities
          for this panel.  Kevin.
             MR. WERBACH:  Well, we've had one session looking
          at some of the different ways of delivering band width.  In
          the second panel, we wanted to focus more specifically on
          one underlying network which is the public switch telephone
          network as a starting point and then to move out from there. 
          It's clear that today the public switch telephone network is
          the primary way most people get to the Internet.
             But at the same time if you open up the papers or
          magazines over the last several months, there have been
          front page articles about congestion in terms of the growth
          in Internet use and the implications that that might have
          for the network and also issues about congestion on the
          Internet itself as the Chairman remarked, people getting
          busy signals, trying to get onto America Online.
             So we brought together some people on this panel
          to look at some of those issues, both in terms of overcoming
          the limitations of congestion and getting on the Internet
          and also going forward how the public switch network,
          telephone network can be optimized for delivering data.
             We also have a new addition to our moderators'
          table, Jane Jackson from the Common Carrier Bureau at the
          FCC.  Jane's been very involved in managing the access
          reform proceeding that people had mentioned earlier and
          looking at some of these issues from our perspective.  So
          we're glad to have Jane here to join us.
             On the panel we have first Lee Bauman who's Vice
          President of local competition for Pacific Bell.  Pacific
          Bell probably has the most busiest part of the Internet
          right in its backyard.  So if there's anyone who is familiar
          with the challenges of accommodating the Internet and public
          switch network, it should be Lee.  So we're interested in
          what he has to say.
             Next we have Mike Trest from ATMnet which is
          Internet network provider that's pushing the envelope of
          performance through networks and obviously that raises the
          question as someone mentioned on the previous panel all the
          bandwidth in the world that you can have in the Internet
          getting to it through the phone network.
             Third, we have David LaPier from Cisco.  David is
          a solutions consultant from Cisco who's been looking at some
          of these issues in terms of congestion on the phone network. 
          Cisco being the provider of much of the router technology
          that's used throughout the Internet, obviously has dealt
          with these kinds of challenges of filling up the Internet as
          the Internet.  So the next challenge I think is to figure
          out how to optimize the telephone network in the same kind
          of way.
             Jamie Love from Consumer Project On Technology. 
          Jamie has been very active in looking at the issue that
          everyone was talking about the last time which is how do we
          get out to those 100 million households with these
          technologies and what are some of the issues with services
          like ISDN in particular that are there now?
             And finally, we have Matt Korn from America On
          Line and Matt is the Vice President of Network Operations. 
          If there's anyone who's more familiar with the challenge of
          overcoming congestion limitations and delivering band width,
          Matt's probably the one.
             So we've got a good group of people here.  So
          we'll start once again with a two or three minute opening
          statement and I'm sure we'll have a lively debate like we
          had the first time.  So Lee, I'd ask you to go first.
             MR. BAUMAN:  Thank you, very much, Kevin.  Pacific
          Bell is both a large local exchange carrier and a large
          Internet access provider.  And both businesses are very
          important for our future.  Today as I talk about regulation
          and pricing, I would ask you to keep the following scenario
          in mind.  If you were given a choice of continuing to keep a
          service which you're using essentially for free as compared
          to a service which is better, faster and more efficient, but
          for which you need to pay more, which would you choose?
             This is the dilemma that we face given the current
          ESP access charge exemption.  The problem is made worse by
          the below cost pricing of our basic exchange access services
          in California.  Our customers in California, both end users
          and ESPs, don't pay per minute of use for Internet access. 
          And even the California Public Utilities Commission has
          agreed that line prices are set at about one half their
          cost.
             While some of have thought that the ESP exemption
          was an appropriate policy approach to encourage the growth
          of an infant industry, it has now become a critical
          roadblock to the development of new, more efficient products
          for the growing Internet market.  ESPs, including Internet
          access providers, have responded to these false pricing
          signals created by the ESP exemption by using the switch
          access network in an efficient manner.  And to no one's
          surprise, the end users have responded in the same manner.
             Now, per minute of use access charges are not the
          only alternative.  But prices that cover cost must be a part
          of any reasonable solution.  Our technologists and product
          development folks are working hard to come up with
          alternative arrangements that are acceptable to customers in
          terms of speed, flexibility and price.
             We have ISDN available and very aggressively
          priced.  We have announced the roll out of ADSL.  We have
          designed alternative network configurations that can
          eliminate the current problems ESPs have with modem poles
          and network node configuration and give customers better
          service.  Technology is not the limiting factor.  You can
          imagine the tough time we're having given the scenario I
          asked you to keep in mind a moment ago.
             While we have faster and better alternatives, from
          a pricing standpoint we can't compete with something that
          customers and competitors are using and having almost for
          free.  If we extend the current regulation into the new
          environment, we will discourage investment and innovation
          because there will be no competition on a facilities basis.
             Let me explain why.  First, competitors will not
          invest where they cannot make a reasonable return.  New
          entrants will not enter markets on a facilities basis if
          prices of the incumbent's services are below cost.
             Second, regulation will keep some prices
          artificially low while competition will drive certain other
          prices down.  The company caught in this imbalance is in
          jeopardy and certainly has reduced incentives to invest in
          this network.
             And third, regulation requires the incumbent to
          unbundle their networks beyond what we think is essential
          and to price unbundled network elements at cost.  Given
          these conditions, there is no incentive for competitors to
          invest in their own facilities because every customer is
          financially crafted to serve with minimal or no investment
          required.
             So the important question is what can we do to
          encourage investment and innovation by all competitors? 
          First, we should let the market decide whether the new
          environment is to be a one, two, three or more wire or a
          wireless world.  Today regulation seems to assume that the
          information highway depends on a one wire world and the full
          force of regulation is being brought to bear on that single
          wire.
             Second, we should resolve existing price cost
          distortions in ways that encourage investment by all
          competitors.
             And finally, we should allow the market to
          determine the winners and the losers.  Let us build a world
          on the assumption of competition, rather than a one wire
          world that assumes no competition.  Thank you.
             MR. PEPPER:  Thanks, Lee.  Mike.
             MR. TREST:  ATM Net is a relatively new in the
          market.  But in the year and a half of our existence, we
          have already established a new quality of standard by taking
          advantage of those new synchronous transfer mode
          technologies.  We provide direct access to our business,
          large and small business customers, at a 155 megabyte. 
          That's about 100 times larger than the access provided by
          most Internet suppliers at 1 1/2 megabits.
             And for those of you at home, it's still 7,000
          times faster than you can get on any modem technology.  And
          it's about 40 times faster than the cable modem plants that
          are in place today.  So it's this rather niche market that
          I'm in.
             However, we need to narrow our focus on this panel
          to look a bit at today's technology and the reported PSTN
          congestion.  The ISPs, their dial up customers, our business
          customers, have spent billions of dollars in investments. 
          We are making the likes of our esteemed colleagues at Cisco
          and others billion dollar companies in revenues every year
          by our purchases.  So unlike our telcos who are extremely
          large and noticeable in their investment, we also have made
          no similar investments.
             Our concerns about the LECs movement into the
          Internet service provider business, especially in California
          where I am located is real.  We need to address that concern
          because years of regulatory protection have provided these
          LECs with economic powers which could be inappropriately
          used to restrain non-telco related ISPs.  I have examples
          that we'll probably hear later about why we worry about
          congestion and yet Pacific Bell in my market can send a
          mailing to every telephone subscriber in the state and offer
          them six months of free Internet dial up access.
             Well, let's move to some specifics.  There are
          today's technology that can indeed eliminate some of the
          problems.
             Number one, we can rebalance our exchange hot
          spots.  Now, this is rather technical.  So I'm going to get
          rather precise on it.  Our switch congestion in exchanges,
          especially where there are concentrations of ISPs can be
          remedied today by some minor encouragements from both the
          Commission and the business practices of the LECs.
             In such simple things as market area dial up
          plans, area wide prefix coverage or reduced charges for
          remote exchange back haul can be resolved today by actions
          of the Commission's in general, the PUCs and the LECs. 
          However, these kinds of discussions with the local LEC
          usually fall apart over tariff costs, alleged regulatory
          constraints or simple inertia on the part of the LECs.
             Two, we should all look towards using alternative
          dial tone and switch server providers.  The historic LECs
          now have competition.  MFS and TCG, for example, in our
          markets provide additional switching capacity in many of the
          major markets.  If the historic LEC is not able to keep path
          with switch congestion, then the ISPs generally should move
          to these alternative vendors and eliminate much of the
          alleged congestion.
             Three, we should encourage movement away from
          switch facilities to even today's limited PS1, 1 1/1
          megabyte facilities and thereby move hundreds of thousands
          of businesses, large and small, who are today using ISDN
          dial services.  The cost differential for the consumer for
          the premises equipment of 128 kilobit ISDN and 1 1/2
          megabyte DS1 lease line service is only $1,000 one time
          expenditure.  It is my contention that business communities,
          large and small, would gladly pay that differential to
          remove themselves from the switch congestion environment.
             Now, if the LECs were encouraged by regulation and
          market pressure to work with the ISPs a little better on the
          DS1 price adjustments.  We should be able to do this and it
          would be economically interesting to both the LECs and the
          ISP community generally.
             Fourth and final.  We should improve the ISP's
          regional and local cooperation with the local LECs in the
          technology issues.  ISPs and LECs should be working together
          to better utilize the existing infrastructure, not just the
          switch path infrastructure, but also all other
          infrastructure types.
             If, for example, ISPs had the unbundled access to
          all aspects of current loop environments which we would be
          willing to pay for it, whatever the cost, we believe that
          the ISPs will lead the LECs in the deployment of these new
          technologies because we are not encumbered with the 20 and
          30 year bond debt cycles and the IRS regulations that forces
          them to amortize copper over many years.
             In the absence of greater cooperation between the
          ISP and the LECs, it should not surprise anyone in this room
          today that the ISPs and the public equity markets will shift
          their investments to non-telco related infrastructure
          projects.  Thank you.  [applause]
             MR. PEPPER:  Thanks, Mike.  David.
             MR. LaPIER:  At Cisco, John Chambers, our
          Chairman, is always reminding us that our industry is moving
          at Internet time and a chronological year of one year is
          seven years of Internet time and the various implications of
          this, and I think some of the remarks we just heard relate
          to that.  I keep wondering whether I'm going to die younger
          or live younger.  And maybe as a corollary we should ask if
          the public switch telephone network is going to do the same?
             Is there pressure on the local exchange and the
          public switch network caused by dial access?  Clearly, there
          is and the modem is not going to go away.  It's here.  We
          heard from the last panel that that's definitely the case.
             So we've got this public switch network
          infrastructure to deal with and there's a need, I mean, it's
          optimized fundamentally for a different application.  It's
          optimized for voice where with systems that are 8 to 10
          percent occupied as opposed to now reaching 70 percent
          occupancy in some places.
             So there is a problem and there are technical
          solutions clearly.  And the local exchange companies and
          their competitors, CAPs, et cetera, other telephone
          companies that are seeking to compete with the local
          exchange, utilities, are going to seek out alternatives,
          together with the LECs and how they're going to be making
          those investments.  They can make technological investments
          in the embedded switch infrastructure.  There are new ideas
          coming out from vendors every month about putting new kinds
          of switch capabilities into the network that can encourage
          new services.
             One interesting capability which would in a sense
          create an overlay network in the local environment is a dial
          up virtual private network services where access servers,
          modems and ISDNs are effectively provided on an out source
          basis.  You move the modems closer to the subscriber.  The
          dial component of the call ends and hence the switch, the
          inefficient use of the switching systems end earlier and
          traffic moves onto the packet switch networks sooner.
             Beyond the modem, the packet switch network can
          carry that traffic to enterprises and Internet service
          providers in a much more efficient manner with 10 to 1 or
          20 to 1 improvement in band width.
             So this is one example of a more efficient
          solution that companies that are interested in competing
          with a local exchange are looking closely at.
             But there's another dimension to a more efficient
          solution and that is the nature of interconnect
          arrangements.  Even separate from price issues related to
          terms and conditions.  Planning and engineering information
          being shared in a more effective manner.  Measurements of
          networks being shared on both sides in the more effective
          manner.  Order processing and customer care being provided
          in a better way.
             And in the current telephony world of large
          interchange carriers and large local exchange carriers were
          able to work out these agreements.  Now we have this
          tremendous challenge because, number one, we have many,
          many, many more stakeholders, especially the small and
          regional Internet service providers who are bringing
          tremendous value to this business and bringing services to
          customers.  So it will be more difficult.  And, of course,
          also because the rate of growth places a challenge on the
          establishment of interconnection agreements.
             So the last point I'd like to make is in respect
          to the future.  Computing power is not going to slow down
          just because the telecommunications industry wants it to
          slow down.  Those remarks that were quoted earlier by Andy
          Grove and from Microsoft, that's definitely a fact that's
          going to be here very soon.  Plus, we're going to have
          Internet appliances that will widen the framework as well. 
          Several years ago we heard in rooms like this discussions of
          come onto the Internet and build your log cabin in the
          Internet marketplace.  Well, clearly now we have main street
          on the information marketplace.  So we have to meet those
          challenges.  Thank you.  [applause]
             MR. PEPPER:  Thanks.  James.
             MR. LOVE:  Thank you.  I assume this thing about
          the three minutes for opening statements is really kind of
          an urban myth.
             MR. WERBACH:  We can ask.  Virtual three minutes.
             MR. LOVE:  I brought an ad with me that was
          referred to earlier about Pac Bell saying order a second
          telephone line for $11.25 a month and we'll give you, this
          one says five months of free Internet access with Pacific
          Bell Internet.
             Now, aside from asking the FCC to request the
          Justice Department to investigate predatory practices by
          Pac Bell which I think is overdue in this particular case
          [applause]
             MR. WERBACH:  Can we ask the audience not to
          applaud during the question?  I know people have strong
          views about all of this, but we want to give everyone a
          chance to speak and be respected.
             MR. LOVE:  You have the obvious hypocrisy of Pac
          Bell complaining about Internet use bringing the network
          down and then saying if you order a second telephone line
          for eleven bucks then you can have free Internet access for
          five months.  So they're giving away a competitive service
          for free if you order regulated service for eleven bucks. 
          They claim it's priced at half of what it actually costs
          them to deliver the service.  
              So one has to be a little suspicious of what a monopoly
          can get away with in this world.
             Now, I'd like to talk a little bit about this
          thing about congestion which I think is a product of a very
          big multimillion dollar propaganda campaign by local
          exchange companies about the way the Internet's used by dial
          in users.
             We've done surveys of Internet service providers
          and almost none of them have fewer than ten customers per
          incoming line to provide service.  And a lot of them have
          about 20 customers per incoming line.  America On Line had a
          lot more than 20 customers per incoming line.  They had
          about, they had incoming lines for maybe three percent,
          maybe three percent of their customers.  And now they're
          going to try and ramp it up with a big $350 million
          investment so that they'll have five percent of their,
          they'll be able to serve five percent of their customers at
          one time.
             Now, if you dial in America On Line and you're not
          getting an answer, that's because they haven't really got up
          to sort of the industry standards.  But the fact of the
          matter is ISPs, Internet Service Providers, typically
          provide access for 5 to 10 percent of their customers at any
          one given time and that is a hard and fast constraint. 
          That's not a fuzzy, squiggly constraint.  That's not a
          constraint you can ignore at 3:00 o'clock in the afternoon
          because you sort of changed your mind.  There are only so
          many incoming lines.
             So if only five or ten percent of the people that
          call up, dial in users, can get connected at any one time,
          how can it cause this big congestion on the public switch
          network?  Bell Atlantic says the residential network is
          provision for one in seven customers can connect at any one
          time.  That means if you're one in 20, you're way below one
          in seven.  That means that if you're one of the best
          Internet service providers and you're one in ten, you're
          still way below.
             Well, people that dial in as residential users,
          they mathematically -- it's impossible they are not causing
          any extra to be added on the system than people that use it
          for normal voice processes.
             What is happening?  Well, the telephone is busy
          frequently at the Internet service provider.  Their number
          is sort of tied up a lot and that is because the ISPs do
          what any smart business would do is they order the right
          number of lines to service their customers with any given
          level of service.  Just like Bell Atlantic doesn't provision
          one to one for the residential market.  They provision one
          to seven because they think that's enough lines or enough
          circuits or enough interoffice trunkage to serve the people
          that use the telephone.
             ISPs do that.  I work in an office.  We have a
          PBX.  We don't have as many incoming lines as we have people
          in the office and we ordered the number of incoming lines to
          roughly correspond with what we think we're going to need at
          3:00 o'clock in the afternoon.
             So I would start out with the fact that all this
          crap about congestion has really been unexamined by people
          and I would really urge people to try and pull out the old
          calculator and do a little bit of arithmetic in terms of the
          way the Internet's currently being used and look at some of
          the data.
             The issue about length of calls is really
          ridiculous.  The fact whether you make a call for five
          minutes or an hour at a time doesn't really make any
          difference.  What makes a really important difference are
          the number of minutes you call in the market, the number of
          setup charges and things like that.  People do not make as
          many calls to ISPs as they make voice calls.  They make
          longer calls to ISPs.  They make more frequent calls to
          voice things.
             There's been something left out of the arithmetic
          if you only look at the length of the call.  You have to
          look at the total number of calls.  You have to look at the
          length of the peak or the Internet service providers are
          lengthening the peak from what the peak was before and stuff
          like that.
             So I think that the congestion thing for people
          dialing in ISPs is really way overblown.  However,
          ultimately you do want to move away from a circuit network. 
          You want to move to some kind of a packet type network in
          the long run because ultimately the goal should be everyone
          should be connected all the time.  I mean, that's really
          what I think the ultimate goal is.  So you've got the short
          term reality and then you've got the long term thing where
          you want to go.
             Now, we've heard this morning in the previous
          panel that virtually none of the big high tech pie in the
          sky things are going to happen right away.  When we talk to
          companies like Bell Atlantic, they tell us it will be seven
          years before they anticipate any kind of meaningful
          penetration of ADSL as a consumer service into the home. 
          And I think that people in the cable business are beginning
          to kind of come to grips with reality over there in terms of
          the wiring of the cable network.
             So what are we really stuck with in the short
          term?  Well, you probably can do ISDNing of the home.  Is
          ISDN bad?  What can you do on ISDN?  You can do video.  You
          can do high quality audio.  You can bond together ISDN
          lines.  You can do really a lot with ISDN.
             So why is ISDN never talked about in forums or
          anything else?  It's because the LECs control it.  They're
          pricing it through the roof and they're sending a signal to
          consumers, don't buy ISDN configurations.  Don't wire your
          house for ISDN.  There's no future.  We will not let you buy
          it no matter what you do.  If you order it, we won't deliver
          it.  We won't promote it.  We'll charge all kinds of bizarre
          fees on things like extra numbers for devices and spuds and
          all that kind of stuff.  So their heart isn't in it.  And so
          people read the writing on the wall and they say, okay. 
          Let's sit around and hope technology can rescue us from this
          low band width technology sort of nightmare that we're in
          right now.
             Now, there are states where commissions have done
          and they've come in and they've whacked the rates quite a
          bit from what the companies ask, but it's uneven.  Because
          not all commissions are sophisticated.  They're not
          motivated.  They don't really know what to do.
             I will tell you that by and large the LECs coming
          in, and you saw it in the recent proposed rulemaking. 
          They're saying that they're not traffic sensitive cost for
          ISDN are roughly about five bucks over what they are for
          POTS service.  That's kind of the numbers they submitted,
          you know, that was presented in one of these tables for
          notice of performing rulemaking, unbundling and stuff.
             And then they say their direct cost of usage are
          roughly in the neighborhood of ten cents per hour, not per
          minute, but per hour.  That's roughly the numbers they come
          in with.  But they ask for fees, really high fees.  So the
          pricing's way out of whack on ISDN.
             There are some exceptions.  Ameritech's done some
          good things because maybe they didn't want to, but they did
          it and a few other places.  But one of my favorite examples
          is in Arkansas where Steve Sanders, who's a Ph.D. in physics
          and an MIT degree in engineering, runs a phone company down
          there.  They have non-blocking switches.  Everybody in the
          whole area can connect at the same time.  They provide ISDN
          for $17.90 a month and it's flat rated.  Plus, they throw in
          free Internet access just to sort of move the ISDN service
          into the market.
             He says that ISDN for the vast majority of people
          in rural America and people outside of areas, the only thing
          they're going to have for a really, really long time.  So I
          think regulars can focus on the tiny minuscule number of
          people they're going to have the sort of space age
          technologies in the short run or the 95 percent of Americans
          that could have 128K in the short run in digital connection. 
          And you can decide where to put your priorities.
             MR. WERBACH:  We're going to need to --
             MR. LOVE:  Wrap it up?
             MR. WERBACH:  Move on.
             MR. LOVE:  Sorry.  Now, in terms of, last page of
          our prepared comments, we pointed to some strategies that we
          think regulators can do.  Several things.  One thing we
          need, I think you need to do is to sort of provide market
          based economic incentives for companies to point any kind of
          a digital technology.  We don't really care what it is.  And
          what we recommend is you look at the penetration rate at
          Bell Atlantic and Nynex and all these guys and have them
          compete against each other.  And you say the ones that have
          the highest penetration rate relative to the other guys, in
          other words it's a sort of invidious comparison, they pay a
          different rate of the universal service fund.  So there's an
          economic cost of not deploying.  There's an economic benefit
          of deploying.  And then all of a sudden, we think attitudes
          will change.
             So that's our principal we think motivator that
          the Commission should follow.  And we also think they should
          provide incentives and things to sort of move people off of
          the circuit thing into some of the new -- picking things up
          at the switch.  We know in Japan they ask people that want
          flat rate service to register phone numbers if they call
          numbers.  That may be a a useful thing in taking data off
          the switch before it gets into the circuit.  We've talked to
          some of the guys about it.  I know my time's up.  Thank you,
          very much.  [applause]
             MR. WERBACH:  Matt.
             MR. KORN:  Thanks.  In deference to my colleagues
          from the local exchange carrier, I'll try to keep my
          comments to three minutes.  I understand three minute hold
          times are kind of preferential in this area.
             I'm Matt Korn from America On Line.  And, of
          course, we're in the headlines almost every day because of
          just how rapidly this industry is growing.  I joined America
          On Line four years ago back when we had only a couple of
          hundred thousand subscribers and 2,000 folks could get onto
          the network at one time.  So it was a modem ratio Jim was
          talking about.  It was actually 1 to 100 back four years
          ago.  We had an excess of modems at the time.
             Really what's happened is we've seen an explosion
          in interest in the Internet.  Just as the American On Lines
          ads on TV say, the future is here now.  It's a good reason
          why the music is set to the Jetsons because the future
          really is here and it's arriving as we sit here and speak.
             The change in member to modem ratios is really
          phenomenal.  It was a year ago it was a 1 to 50 ratio and it
          was a 1 to 30 at the beginning of the summer, I guess the
          end of the summer.  There was a huge interest in the
          Internet over the summer.  Probably almost everyone in the
          room here listened to ads on the TV during the Olympics and
          just every single one of them was followed up with a web
          URL.
             And so we have this explosion of interest and so
          the modem ratio is now approaching 1 to 25 and we're on our
          way to 1 to 20 over the next six months.  So the Internet is
          indeed we'll all look back to 1996 and say this is really
          the time when it came to the public in America in a massive
          way, in a way that it hadn't in the past.
             I should also for those of you who are subscribers
          and members, we're working really hard with our colleagues,
          local exchange carriers, who in general are working very
          closely with us to deploy additional modems in the field. 
          We rely heavily on their technology and circuits in the
          various communities around the country to get our modems
          deployed.
             So we're working hard and we'll have the extra
          $350 million worth of modems and server technology installed
          between now and June.  That is my priority.  And if you hear
          a pager go off in the room, it's actually probably someone
          else's because I think mine doesn't actually beep.  It's one
          that goes --
             There is a lot of confusion about the different
          kinds of congestion on the Internet and I've heard some of
          it in the discussion today.  The busy signals that American
          On Line customers have been talking about really are busy
          signals for the most part of we're out of modems in the
          various cities.  We've got 200,000 modems in our own network
          today and during peak hours.  The vast, vast majority of
          those modems are all busied out.
             My colleague from BBN, John Curran, is here and
          they're a very strong partner of American On Line along with
          Sprint and the Advanced Network Service Company, ANS, in
          deploying these modems.  And they know exactly where the
          busy signals are and they're out there provisioning circuits
          and installing modems.
             It's not busy signals for the most part that
          relate to members.  If you're not trying to dial American On
          Line, it's not a problem and concern.  So we're not looking
          here at an impending melt down of the public switch
          telephone network as a result of American On Line users. 
          What we're looking at here is an awful lot of congestion,
          not dissimilar to the cue we all experienced in the men's
          room trying to all go to the bathroom at the same time
          during the break.
             So, and just as in that case the solution would be
          to install more, that's exactly what we're out there doing.
          I know this isn't the most glamorous metaphor, but it
          actually, it is sort of what's going on if you look at cuing
          theory.
             We should point out that congestion in the
          Internet is also a major concern for American On Line and we
          work closely with our colleagues in the Internet backbone
          business in a number of different areas, particularly we've
          been working real hard over the last few months to try to
          bring in more circuits from more different Internet
          backbones directly into American On Line's facilities so
          that we can cause the transfer of data between one backbone
          and the other to occur on our premises as opposed to being
          out at the Internet maps.  So we think that's one step we
          can take in order to both improve performance for our
          members and improve the overall backbone of the Internet.
             We've invested several hundred million dollars in
          technology to make local copies of very popular web pages at
          AOL.  So that in general most of the time when you go out to
          the web if somebody else has been there before, then it's
          cached locally.
             I don't know that WWW.FCC. -- I don't know your
          full logo, I don't know if that is on the most popular list. 
          But you had mentioned earlier that you'd be putting some of
          the presentation materials out there on the -- out there. 
          And indeed, some of the overhead viewgraphs earlier.  And
          you'll notice that when those are transmitted down to you,
          not only will it go in faster like my colleague was showing
          you a demonstration of mission at 28.8.
             If you go and access it from our technology, we
          spent a lot on compression technology as well.  So that the
          images are compressed, then transmitted down to the members
          and then decompressed.  So that in fact it makes the
          experience of using the Internet at lower speeds.  And I
          should mention that still the majority of American On Line
          members today are accessing the Internet at speeds of 14.4
          or below.  We spent a lot of time talking in this room
          earlier today about high speed technologies.  But consumers
          in America area really still on lower technology speeds. 
          They're at 28.8.
             The corollary to this is the importance of noting
          that consumers will upgrade to higher technologies and
          higher speed services when the incentive is there and the
          price is right.  So we've seen our members upgrade to 24
          baud modems and 14.4 into 28.8 and we'll be upgrading our
          backbone and modem technology in the majority of our own
          networks to support the new X2 technologies.  So consumers
          will be able to provided that the quality of the telephone
          switches in between their homes and our modems is high
          enough.  They'll be able to get connected speeds up to 56K.
             And I should mention that that's just an example
          of American On Line making an investment in our technologies
          prospectively in order to capture more consumers.  And I
          think it's a model that maybe all of us around the table
          here ought to be thinking about in terms of how we ought to
          invest in our business in order to grow it.
             Finally, I did want to point out that though by
          and large we are working real closely with the Bell
          Operating companies and expanding the network, there are
          some limited cases and some of these have made the press in
          recent days of places where there are some engineering.  I
          would really call it inadvertent engineering mistakes in the
          public switch telephone network which do prevent AOL members
          from getting onto our service.
             And generally, this is a misprovisioning between
          some central offices and it's generally very easy to fix. 
          It's really a low level engineering problem.  It's not one
          which is very expensive to fix.  But we work closely with
          the operating companies to predict trafficking patterns. 
          We're willing to work even closer.  But it is important for
          the Commission to realize that we are highly dependent on
          these guys to bring high quality access to our consumers. 
          Because ultimately if there are problems, it's really the
          consumers that are going to suffer here.  And so we ask that
          you help us in that area.  And I think I'll end my comments
          right there for now.  [applause]
             MR. WERBACH:  First, I'd like to give Lee a chance
          to respond to Jamie.  Is there really a congestion problem
          because of Internet usage and if so how does that happen?
             MR. BAUMAN:  Before I even respond to that, let me
          just say I opened my remarks by noting that Pacific Bell is
          a large LEC and a large Internet access provider and that
          both businesses are important to our future.
             And we know that Internet access is a competitive
          business and we're committed to that.  In order to be
          successful in a competitive business, we need to utilize all
          of the methodology that competitive businesses use.  The
          fact that we proceed to move into that business aggressively
          therefore in fact contribute to the issues in our core
          network the same as AOL does, does not mean that therefore
          they are not issues and that any hypocrisy is involved.
             It was interesting that James even noted that
          after he criticized Pacific's early entry plan, one of the
          ads when we were first getting into the business, he noted
          that another company I think in Florida was giving away
          Internet access for free and he praised that as a good
          competitive tool.
             So it's important to note that when competitors
          criticize an organization for certain approaches, it may be
          competitive issue rather than something else.  And Pacific
          Bell will continue to be a strong competitor in the Internet
          access business.
             Now, on the network congestion issue, I was
          frankly surprised to learn here that traffic on the network
          doesn't have anything to do with congestion.  Maybe I
          misheard that, but that seems to be what it said.  In our
          measurements, well, there's about a million active Internet
          users in California.  So it truly is the focus of Internet
          activity for the country right now, leading the country.
             So there's a million.  And for those million
          active residents, customers primarily I'm talking about,
          their average use per day of originating calls for Internet
          is 62 minutes a day.  So 62 minutes originating traffic to
          the Internet, not counting their other traffic.  Now, our
          average residence customer originate about 22 minutes a day
          of traffic.  So that's the average, 22 minutes for all the
          calls of the average residence customer.  So we're seeing
          that an average active Internet customer uses three times
          the number of minutes as does the average residence
          customer.
             We last year had 23 billion minutes of use going
          to Internet access providers in California.  So 23 billion
          minutes.  It's clear that that much traffic has to do
          something in using up ports and trunks in our network.  Any
          analysis will show that to be true.
             We estimate that in 1997 we will spend
          $130 million in adding additional ports and trunks Internet
          work to handle the increased Internet access traffic. In the
          next three years if the pricing rules of the regulation do
          not change and we continue with the current infrastructure,
          the current pricing structures, we will estimate that we
          will spend $600 million in investment in these capabilities.
             Now, we believe that a good portion of that money
          could be much better spent for the benefit of the country in
          building the new forms of data networks that you heard
          talked about this morning.  We think that rather than
          spending that $600 million and augmenting the current
          circuit switch network and perhaps later being surplus
          capacity when we in fact do get the fundamental pricing
          structure changed and people then start using overlay
          networks.
             Rather than spend that $600 and we've heard AOL is
          spending huge amounts of money, I think nationwide they're
          saying $350 million spent in the near future, which wouldn't
          be needed if we invested in the appropriate overlay data
          networks that the focus here needs to be on improving
          incentives to make the investment targeted towards what's
          efficient and effective for customers rather than the
          current structure that everyone agrees is not best.  So,
          yes, there certainly is a capacity issue.  But we're not
          saying our network is falling apart.  We're spending the
          money, a lot of money, to continue to provide high quality
          service.
             MR. WERBACH:  Well, Matt, could you follow up on
          that?  We talked about all the modems that AOL is putting in
          and putting in more to respond to congestion.  But isn't
          that sort of locking you into this circuit technology that
          everyone here has said is inefficient?
             MR. KORN:  Well, we can divide that $350 million
          that we've been talking about into a couple of categories. 
          I would tell you that approximately half, maybe slightly
          less than that, is actually in the modem technology base and
          the other half of that is in server technology at the host
          end.  The server technology at the host end is -- and the
          AOL system today is really agnostic when it comes to the
          technology that it rides over.
             In other words, we have AOL members today who are
          accessing us to cable networks.  We have them that come in
          through ISDN.  We have numbers that come in through ADSL. 
          So the server technology is really we'll work over any of
          the new technologies.
             So the modem technologies are -- that's about half
          of the investment there.  I should just sort of mention we
          heard earlier on the panel that the time to write off
          technology investments is actually kind of like relatively
          quick in this industry.  And we've already mentioned here
          that we've gone from 2,400 baud to 14.4 to 28.8.  The time
          that it's going to take for the American public to switch
          these technologies, the investments that we're making in the
          access point technologies will themselves be written off.
             I think it's important to think about the tradeoff
          that businesses such as American On Line make every day.  In
          order to get more customers, we often look at cutting our
          margins and we've done this historically in order to grow
          our company, in order to grow the industry.  And I find it
          interesting to note that when the phone company, when the
          ABOCs do the same thing in order to sell additional second
          lines, they're looking for regulatory relief here.
             So I would point out that the tradeoffs that we in
          business make every day in an unregulated environment are
          ones which are I'd like to see kind of expanded through the
          monopolistic telephone industry.
             MR. WERBACH:  David, let me ask you, you had
          mentioned some things that telephone companies, Internet
          companies could do to work together in terms of sharing
          information.  It seems like though listening to people talk
          though, that we've got two polar opposites here, people who
          have very different views about how networks work.  What
          kinds of things can actually happen for the different
          industries to get together in a way that leads to something
          more productive?
             MR. LaPIER:  Well, I think in terms of examples of
          interconnect agreements working, Matt gave real examples
          that in their deployment activity, they're working closely
          with crafts people and operations people in the phone
          company.  It's in some respects separable from some
          competitive issues.
             Other examples of how, well, for one thing, I
          think that some clearer understanding of these network
          problems and the way in which the network can be grown and
          then proactively understanding how smaller Internet
          providers can connect to the network and then working out
          incentives to make those incentives more attractive.
             MR. WERBACH:  Okay.  Do we have any questions from
          the audience at this point?  Could we get someone who hasn't
          actually asked a question before?  Over in the corner there.
             MR. BAUMAN:  While we're getting the mike over,
          I'd say one indication of eagerness to work together is how
          much we spend to make that work and the $130 million I
          emphasized we're spending this year certainly seems to be a
          strong statement of commitment to work with all of the ESPs.
             MR. DEUTSCH:  My name is Ken Deutsch.  I'm with
          Issue Dynamics.  I just want to follow up quickly on Jamie's
          math lesson and then ask a question.  The ratios in Jamie's
          math lesson, Jamie if I understood you correctly, have to do
          with consumers connecting not the ISPs and what's happening
          in business on their side.
             And my understanding from the reports I've read
          from the different local phone carriers is that the
          problems, the congestion problems seem to be most acute at
          the COs that are near where the ESP's actually connected to
          the Internet.  And if I understood him correctly, what Matt
          was saying at AOL is that most of the 200,000 modems are
          busy most of the time and if the network is configured for
          one to seven ratio I think most is a little higher just in
          terms of the math on that end.
             And just another question in terms of the issue of
          congestion whether or not there is congestion.  And this is
          directed both to Matt and to Lee and the question is what's
          considered acceptable in your industries for actual
          connection.  Both what is it now, for instance, if I'm
          dialing into AOL, what is my percentage chance of actually
          connecting?  And then what is the ideal that you strive for?
             And the same thing on the phone network.  What is
          my chance of actually making a call and getting room for
          what I'm paying for, either the busy signal or connection? 
          And what is the percentage you aim for in terms of what's
          considered acceptable?
             MR. WERBACH:  Jamie, why don't you go first?
             MR. LOVE:  I think that this issue about the
          difference between the residential consumers and the
          business consumers is important.  By the way, the 7 to 1
          ratio I mentioned for Bell Atlantic is not for business. 
          It's for how they built out the residential networks.  So I
          was referring to that in the context of what residential
          consumers do.
             I think that in terms of your comments about the
          average use, Bell Atlantic could do a service to the
          Commission by providing them with both the ratio of the
          build out for the residential network for the regular public
          switch price network and tell them what the ratio is on
          Pac Bell's ISPN and find out if Pac Bell has more incoming
          lines for the consumer than the normal build out for the
          residential network.  And I believe that if you check that
          out, you'll find that in their own ISPN that they currently
          built out less than they are for the regular voice network.
             Now, as far as the business consumers are -- the
          business lines are concerned, that's actually a separate
          tariff.  It's a separate service.  I'm sure that businesses,
          you know, half of them are above average and half of them
          are below average.  The company gets revenues based on what
          that average is.  And if ISPs are above average, they may or
          they may not be.  I wouldn't be surprised if the AOL
          business tariffs, if their usage probably is above average
          given the low number of lines that they have.
             That's sort of an interesting issue.  It doesn't
          mean that the residential callers are burning the network. 
          It means that the people that are calling don't have many
          incoming lines and it's frequently busy.  So I think that's
          really -- and it's almost a coastal problem because Bell
          Atlantic I think has focused more on that issue where Pac
          Bell has focused more on what the residential users are
          doing.  So that's kind of the distinction you have to make
          there.
             I think what Bell Atlantic wants to do is to move
          my grade people before it gets into the circuit switch into
          some kind of a packet network which they have the technology
          to do.  It's really a question of pricing.  And you have to
          find out how serious the phone companies are to pricing the
          service to the point that the ISPNs actually have an
          economic way to do that.
             MR. WERBACH:  Lee.
             MR. BAUMAN:  Yes, you are correct that the
          congestion issues are located at the offices to which the
          Internet access providers connect.  Pacific Bell has about
          680 central offices and about 60 of those offices cover
          about 90 percent of the Internet access concentration points
          where the Internet access providers connect.
             And so, yes, it's at those offices where the
          connections occur that are the ones where we're spending
          most of the money in adding ports and trunks in and out of
          them.  So it's very easy to isolate just what we're spending
          for the Internet access traffic volume issue as compared to
          the rest of the growth of the residents market itself.
             You asked just what we see as high quality for
          termination of calls and I don't have the exact number, but
          it's approximately 1 in 100 is the number that may not get
          through the first time.  And so that's certainly an order of
          magnitude different ratio than what is seen on a call to an
          Internet access provider.
             MR. KORN:  I think the last question that was
          directed to me was kind of what was the connectivity success
          rate currently today?  Prior to the introduction of our
          unlimited, the success rate was in the 90 percentile range. 
          And today it's less than that.  I'm not going to give you an
          exact number, but it's the result of tremendous interest. 
          So clearly our goal is to return ourselves to that state.
             Yes, you're right that the congestion does get
          worse in the PSTN as you get closer to where the modems are. 
          We work real closely, we've been working really closely with
          U.S. West in one of their regions that the precise exact
          problem of call blocking.  And just by bringing some
          circuits and other COs and by relocating some modems to
          other COs can in fact relieve the congestion issues there in
          the PSTN.  And to the extent there's any actions that are
          possible at a regulatory level that help make the kind of
          like moving calls from one CO to the other like really
          cheap, really inexpensive, then that will help in using some
          of the congestion issues in the PSTN.
             MR. BAUMAN:  I totally agree with the statement
          that the Internet access providers are working well with the
          local exchange companies to find how to work through this
          current challenging time.  So I just want to make sure that
          none of my comments are in any way heard as in any way
          critical of the current intense activity that the Internet
          access providers have to handle this rapid growth in volume. 
          Frankly, I think people are working in the field in an
          excellent manner today to continue to handle the customer
          needs on both sides.
             MR. PEPPER:  On the question generated by the
          floor, and that is we've had a number of technology
          companies come in to us to talk about their particular
          flavors of solving the circuit packet question.  Taking the
          data traffic off the circuit network at some point in the
          network to relieve some of these pressures.  I assume
          they're all coming to you trying to sell their technologies
          to Pac Bell to try and resolve that.
             Can you talk a little bit about the various
          solutions or potential solutions that you're seeing?  What
          are some of the advantages of some of these and how soon do
          you expect Pac Bell and some of the other local carriers to
          begin deploying these technologies?
             MR. BAUMAN:  Certainly.  The concept which looks
          to be most workable is one in which the call originating
          with the customer is sensed at that end office, the first
          point of switching, to determine whether this is a data call
          or a voice call.  So therefore, whether it should stay on
          the circuit switch network or go onto a data network.
             And at that point if this is a data call, say
          Internet access call, the switch would route the traffic to
          a trunk group which would then carry that traffic into a
          dedicated overlay data network.  And that data network would
          then carry the traffic to the point of termination to the
          Internet access provider which doesn't need to be close by. 
          Right now it needs to be close by in order that local
          calling pricing would be utilized.  Therefore, the large
          number of modem poles are spread all around the landscape is
          totally a function of the pricing configuration we have, not
          the desirable technology arrangement.
             And so we would provide or some other competitor
          would provide this overlay data network and the call, the
          traffic would then be carried to some convenient place for
          the Internet access provider which as we heard earlier
          distance is meaning less and less with technology.  And so
          that might be some distant point where a very large volume
          of traffic to that Internet access provider could be
          concentrated and handled in the very most efficient way with
          the most efficient traffic means.
             This would actually permit more competitors to be
          in the market because it would be lower cost for people to
          get into this business.  There are a number of equipment
          suppliers and software suppliers providing these
          configurations and I think it is here now.  We have lab
          deployments.  We have analyzed the configurations and
          they'll work.
             The key issue when you say, well, when will it
          really come into place is it's when we can strike an
          agreement with a first Internet access provider on a price
          for use of such a configuration which will cover the cost of
          that configuration.  And the key reason why that's difficult
          right now is that in California, the price for access lines
          is about $15 a month including the subscriber line charge
          and there's no per minute of use charge.  And so when the
          Internet access provider pays $15 plus their modem cost,
          it's tough to get that up to the equivalent cost of this
          data network which today looks to get about $45.
             MR. PEPPER:  Per month?
             MR. BAUMAN:  Per month.  Per port.
             MR. PEPPER:  Per port.
             MR. BAUMAN:  Yes.  So that's a very rough
          comparison, but you can keep that in mind.  You take $15
          plus whatever the cost is of the modem pool is, the modem
          pools plus their node configuration, their maintenance of
          that and ask what that might be.  But let's say that's
          another $15 perhaps.  You might be at $30.  And we need to
          make that additional jump in California another $15.
             Now, in some states the basic access line charges
          for business access lines are somewhat higher than $15.  In
          some states it may be as high as $30 just for the line.  In
          those states, I think they might be at the break even point
          now.
             MR. PEPPER:  To what extent are therefore you
          really talking about state tariffing issues?
             MR. BAUMAN:  Good point.  You know, the FCC could
          say, wait.  This is a state issue because access prices, the
          access line prices, do not include usage component and they
          do not cover the cost.  And so therefore, it's a state
          issue.  And so we go to the state and say, hey, state. 
          Please fix this.  We need to change these tariffs.  They say
          no way.  It's an FCC issue because the FCC has the ESP
          exemption on switch access charges.  And if only they would
          change that, then that would solve the problem.  
              So we're kind of in the middle between this.
             MR. PEPPER:  Matt, do you want to --
             MR. BAUMAN:  The key point is, yes, there's a
          regulatory issue here and we're glad to work with whoever we
          can work with to get it solved.
             MR. TREST:  That, by the way, is what I referred
          to as the alleged regulatory constraints that are preventing
          them from closer cooperation with the ISPs.
             MR. MAXWELL:  Both Mike and Matt, you now heard
          someone say this is the direction we would like to move. 
          You're the people they're trying to sell that to.  Would you
          like to comment on what they just said, what Lee just said?
             MR. KORN:  I was going to comment first.
             MR. LaPIER:  The data he was saying, we've heard
          in some states the difference may be within ten bucks in
          terms of what sort of triggered the device.  And it seems
          that sort of a lot left on the table.  Or maybe kind of a
          win/win opportunity there.  Part of what you try and do is a
          lot of the astronomical digital rates that you see for
          things like ISDN service are based on really excessive usage
          charges which should really not be an issue if you're into
          the packet switch networks.
             So what you might try and do is say what about as
          an incentive say as you're connecting people with ISDN,
          you're connecting closer to what a POTS line is and with no
          usage charges because once it enters the package switch
          network, you really don't have the same kinds of costs
          imposed on the network.
             And then you start to look at that ten dollars in
          a bit different light because it sort of brings something
          back to the consumer on the other side.  In other words,
          this is what I say win/win.  I mean, maybe the phone
          company's looking to get more money.  An incentive to move
          people to the service, maybe one incentive you could move to
          the service rather than putting usage fees on POTS line is
          to provide a cheaper digital line if you go through the
          packet network.
             In other words, to say the digital line may be
          more expensive if you don't do the digital thing, but
          cheaper if you do do the digital thing.  That way what you
          do is for the higher band width stuff which is where
          everyone wants to migrate if the price is right.  They all
          start migrating to the packet switch network.  You don't
          mess around with the legacy POT situation and you really
          move it in the right direction.
             MR. PEPPER:  Matt, have you been working with any
          of these technologies that you talked about?
             MR. KORN:  We have certainly done trials with ADSL
          and with cable, but not necessarily all of these
          technologies.  But my comment would really be introduce new
          technology which has clear benefits to consumers.  Price it
          attractively, consumers will migrate.  Consumers will use
          it.  Businesses will develop applications to use it. 
          Investment will not go without a return.  We see this over
          and over and over again.  I'm not going to tie it to any
          particular technology.
             MR. PEPPER:  No, except what I'm hearing Lee
          describe is something that would be transparent to the
          residential consumer.  They're still at their end using a
          modem, dialing in.  But there's a service that you as AOL
          would be buying from either Pac Bell or one of the
          competitors to get the traffic off the public network into a
          data overlay and not have to have modems at your end in
          terms of modem banks.  So it's really a question of --
             MR. KORN:  Price it attractively.  Price it
          attractively in a way that has a clear benefit to consumers
          as well as to the business and you'll see migration to the
          technologies.
             MR. BAUMAN:  I agree with that and the key issue
          is attractive compared to what?
             MR. WERBACH:  We have a couple of questions from
          the audience.
             JOHN CURRAN:  I have a question for Lee Bauman. 
          Given that the 60 COs that have that density of Internet
          service providers are also some of the most high tech
          regions in the country in the Bay area where there are many
          corporations with very large dialogue pools that are used
          for telecommuting due to the number of telecommuting
          initiatives that we hold out across the country.
             Given that the busy time on the voice network has
          generally been during the daytime hours and telecommuting
          ones during those same hours as opposed to Internet usage
          which is predominately  an evening activity on the off hours
          of the network, have you looked at alleviating congestion by
          using some of these technologies to work with corporate
          users for their dial up pools which may actually exceed the
          entire ISP dial up base?
             MR. BAUMAN:  We can certainly break this down for
          you in detail.  Yes, my answer is yes we've looked at these
          various combinations and we'd be glad to show you how the
          tradeoffs are made and how it works.  And the residents
          usage is creating additional investment in those offices.
             MR. WERBACH:  We have a question over here.
             DANNY WEITZNER:  Technology.  I have a question
          which I think is for Mr. Bauman, but others may want to jump
          in.  This is really taking Bob Pepper's question forward.  I
          want to understand how this sort of shunting and overlaying
          method works in an ISDN environment.  Jamie talked about
          what I think was a -- he was talking about a packet switched
          ISDN service.  My understanding is most ISDN services are
          actually still circuit switch services.  You're talking
          about spending large amounts of money, one way or the other
          on this sort of shunting option to deal with your congestion
          issues.  How does this sort of play forward as there's more
          digital access in your network?
             MR. BAUMAN:  Very good question.  The call would
          originate from the customer as it does now.  The switch
          would determine whether it's a call that should remain on
          the circuit switch network or go onto the overlay network. 
          The switch would also know whether that call that's coming
          in is an ISDN call, an ADSL call, or whatever flavor it is. 
          And it would then route it to a trunk group which would have
          the appropriate conditioning circuitry on it to present it
          to the packet network.  So if it's an ISDN call, that trunk
          would not need to have the equivalent of a modem in it to go
          from analog to digital.  It would be a less expensive trunk
          interfacing to the packet data network.
             DANNY WEITZNER:  I just want to make sure I
          understand.  Is whatever the shunting technology you have to
          put into place, does that same technology work whether
          you're talking about an analog call or an ISDN line?
             MR. BAUMAN:  Yes, the most commonly proposed
          approach is frankly fairly straight forward for decide where
          the call should go.  It's just what's the telephone number
          that was dialed?
             MR. LOVE:  I mean, ISDN as it's currently
          delivered is a circuit switch service.  What I was referring
          to is what a lot of people think would be sort of the more
          efficient way to have the service delivered in the circuit
          switch thing is just, I mean, if it's ISDN from your home to
          the sort of central office, I mean, that's fine.  Because
          that's the local loop.  You're not -- it's not a shared
          facility.  You're basically a dedicated line.  When you get
          to the central office, that's when the issue of congestion
          sort of becomes interesting.  The technology that Pac Bell
          was talking about and other LACs are talking about is a here
          and now thing.  And that is the question they want to be
          able to dump it before it enters the circuit switch network
          into the packet switch thing.
             And then the question is what they want to do is
          they want to start holding the gun to the ISPs and saying
          you're going to be paying 100 bucks per month or whatever
          per line or some huge number of money per line for incoming
          calls if you don't move to this packet switch network.
             And other people that sort of don't like that
          approach are saying, well, how about we do it a little bit
          differently?  How about we say that the digital services
          which are now charging an arm and a leg for 70 bucks in some
          states, or these huge numbers they have, why don't you
          charge those things closer to their cost if it was routed
          through the packet switch network as opposed to the circuit
          network?  Just sort of reversing.
             I mean, we sort of start out with the idea that
          the phone companies are making a lot of money.  Profits are
          up, stocks are perky like some people referred to.  It's not
          as if they're actually losing money.
             And so when you start talking about kind of, you
          know, in the current environment what needs to be done, our
          first instinct isn't the same as the phone company's which
          is to pack, you know, throw these really big huge fees on
          the ISPs to sort of get them to do what they want, but to
          rather ask the phone company to look what they can do to
          contribute to the answer.
             And part of it is to sort of let digital services
          like ISDN or whatever the alternatives are going to develop,
          start being deployed at a cheaper rate without usage fees if
          they go through the packet network.
             MR. WERBACH:  Okay.  We'll let Matt respond to
          that, then Mike and then we'll take another question.
             MR. KORN:  One quick comment on it.  Kind of in
          the proposal from Lee, you're basically proposing, if I
          understand it correctly, that Pac Bell does the analog to
          digital conversion.  And when you think about how America On
          Line is constructed today, we use a variety of vendors and
          suppliers, EBN, Sprint, ANS.
             Competition in analog digital conversion is like a
          really good thing for consumers because it generally
          heightens the quality of each one of the suppliers because
          they're all in competition with each other.  It's ultimately
          good for consumers.
             So I would sort of shy away from any kind of
          proposal where we end up with one organization which does
          all the AD conversion because ultimately I'm not sure if
          that will benefit the consumers.
             MR. WERBACH:  Mike, why don't you get --
             MR. TREST:  That was exactly the kind of situation
          I requested when I say we want to encourage this cooperation
          which was your question.  Is this cooperation occurring in
          the marketplace today?  And in California, the very roll out
          of any ISDN services were rolled out exactly this way by
          placing one switch in a central area and remoting those
          numbers through this technique to other exchanges in that
          same area.
             And I say if the Pacific Bell and the ISPs and
          their market could cooperate in advance of that by sharing
          information about that plan, we would not have had all the
          fits and starts we had in the deployment of ISDN technology. 
          So I'm saying let's keep the band width of communications a
          little more open than coming to Washington and hearing each
          other across the table.
             MR. BAUMAN:  When I described the configuration,
          you'll remember that I said route it to either our overlay
          data network or someone else's overlay data network and that
          would be the choice of the Internet service providers to how
          they want it to go I assume or the regulators might want the
          customers or whatever.
             But I did say that.  And so it is incorrect to say
          that I'm saying that it has to be us doing the A to B
          conversion.  A switch could route it to a trunk group that
          would be connected to somebody else's data network and the A
          to D conversion would be done by that other party.
             MR. WERBACH:  It this an issue that you've
          discussed with ISPs or is everything just the price that's
          been a limit on putting the service in?
             MR. BAUMAN:  Right now it's pretty much focused at
          just finding a formula that even will work.  Another point I
          want to mention is California is a good place for case
          studies on this because of the large volume and so forth. 
          It's also a good place because the ISDN concern that's being
          stated here on pricing doesn't exist in California and
          Pacific Bell territory either.  We have the lowest prices on
          ISDN in the country.
             MR. PEPPER:  What is that price?
             MR. LOVE:  It's $24.50 metered from 8:00 to 5:00,
          unmetered afterwards.  It's got a new ruling now they're
          going to raise within a year by $5.00 a month and put a 200
          hour cap on the off peak use that's not metered.
             MR. BAUMAN:  We don't know what rates, we don't
          know what adjustment might be.  The California Commission is
          actually meeting on that today.
             MR. PEPPER:  And how many ISDN customers do you
          have now, residential, business?  Do you know that?
             MR. BAUMAN:  Jay, can you help me with that?
             MR. PEPPER:  We can get that.  I appreciate that.
             MR. WERBACH:  Okay.  We have a question over here.
             MR. NEVAS:  I'm Steve Nevas from Cyberbridge
          Associates.  There is one technology that hasn't been
          discussed today and that's broadcast digital television. 
          And I'm wondering if the panel or anyone here would like to
          address the potential for it delivering the Internet via
          this technology, whether over the air or by cable.  And I
          chatted briefly with David Reed and I know he has some
          thoughts about it also.
             MR. BAUMAN:  I could comment on that.  As you
          know, Pacific Bell is actively involved in that business
          also, broadcast digital television, MMDS.  We have plans to
          officially enter that this year in Southern California and
          we've explored various technologies for providing Internet
          access over that also.  And we don't have, that's not
          announced service at this time, but, yes, we've certainly
          been exploring that.
             MR. TREST:  We have been participating in some
          industry intentions to do that primarily from communications
          entertainment companies.  And the demonstrations look that
          it is deliverable over the high speed component of the
          network, the sonnet based infrastructure which characterizes
          our backbone.  But again, the subscriber portion is the
          difficult piece.
             MR. WERBACH:  We've got just a couple of minutes
          left.  One question for everyone on the panel, anyone who
          would answer.  What kind of data would be useful for us or
          for you and your companies in terms of better understanding 
          where the congestion roadblocks are, where the pricing
          limitations are, and how to move forward and address those
          problems in the network.
             MR. TREST:  Well, I could give one and get off of
          my favorite rocking horse here.  I'd like to have data on
          the true unbundled costs for local loop services that are
          hesitantly being avoided for ISP's direct access.  We can't
          get it and if we do the unbundled cost is not known too well
          to us and it's true cost versus its charge which is alleged
          to be much higher, I'd like to see what that data really is.
             MR. BAUMAN:  Our cost of exactly the type you've
          mentioned is filed with the California Utilities Commission.
             MR. TREST:  Then it's my research lack.  I'll
          correct that.
             MR. WERBACH:  Anyone else?  We seem to be having
          disagreements here about information and numbers.  What kind
          of numbers?
             MR. LaPIER:  Some common sense of a model serving
          area and the nature of congestion in that serving area that
          could be pushed one way or the other depending on call
          volumes and so on.  You know, mapped to the data that you're
          providing.  That would eliminate some of the thud related to
          whether the switches are being congested.
             MR. WERBACH:  Okay.
             MR. LOVE.I think good data on usage, you know,
          what the sort of length of the peak is now, the sort of
          shape of it, how it's changed over the last five years as
          people begin to use the Internet, how do Internet users
          compare to voice users in terms of their actual minutes?  I
          mean, a lot of the sort of just basic statistical data.
             And also, I think you really do need to look at in
          terms of when people call Internet service providers, see
          how Internet service providers are setup.  I mean, if they
          can only put five or ten percent of the customers online at
          one time, that sends a, that's a bit of information which
          you can use which is to say that that's a hard constrain on
          how much they can be connected at one time.
             And so I think that the Commission needs to, the
          ISPs some of them are a little reluctant to share that
          information.  They consider it kind of proprietary, but I'm
          sure that they give it to the government in some kind of a
          form where you put it out.
             MR. MAXWELL:  What do you mean by hard constrain?
             MR. LOVE:  Well, okay.  Let's say there's 100 of
          us and we all have an ISP and he has ten modems.  Well, only
          ten of us can be connected to the ISP at one time because
          there are only ten modems.
             MR. MAXWELL:  Why is that a hard constrain as
          opposed to a soft constrain on the part of the provider?
             MR. LaPIER:  They can add more modems.
             MR. LOVE:  Well, maybe you call it a soft
          constrain.  What I mean is maybe it's a -- I don't want to
          --
             MR. LaPIER:  There's a ceiling on the load that
          can be on the switch is what you're trying to say.
             MR. LOVE:  Yeah, it tells you that of the 100
          people, no more than ten of them at any one time are going
          to be connected because they don't have, you know, there's
          only ten modems they can call.  I mean, that's just common
          sense.
             MR. MAXWELL:  But not a hard constrain in the
          sense that it's not possible to do as Matt is suggesting
          moving from 1 to 100 to 1 to 25.
             MR. LOVE:  Oh, yes.  It's true that they could go
          from 1 to 10 to 1 to 5 or something like that.  That's not
          where they are.  I mean, you have to deal with where they
          are and you have to look at where they're headed, of course. 
          I think that things are moving in that direction, but I mean
          a lot of times the people are kind of uninformed about how
          much the Internet's actually used.  They think they use it
          more than they do.  They think everyone else uses it three
          hours a night because maybe they do.  And maybe they're not
          as ordinary and average as they really think they are. 
          Maybe they're kind of an exceptional person.  So the real
          hard data comes from the ISPs.  They have real hard numbers
          which they find it very -- they know exactly how many
          customers and they know exactly how many modems.  And you
          take those two and you divide one by the other and you have
          an interesting number.
             MR. MAXWELL:  I guess then that sort of the
          obvious question would be for the purposes of understanding 
          this from the standpoint of the ISPs, is this data they
          would be willing to share?
             MR. LOVE:  Well, they shared it with me.  I think
          they, but I mean, they don't want it published, you know, by
          the company.  But I'm sure that you could -- if you sent out
          a survey or interviewed some of them, they'll tell you. 
          What they don't want you to do is to give it to their
          competitors basically.
             MR. WERBACH:  Yes, I should mention also that
          outside we had some copies of a survey that an independent
          group called Voters Telecommunication Watch was doing of
          small ISPs, asking questions of them on some of these
          issues.
             MR. BAUMAN:  I would suggest that congestion is
          not the key issue.  Incentives to invest is the key issue. 
          What we heard here is just a matter of being able to justify
          buying another modem.  So it's not the congestion that's the
          issue.  It's incentives to invest and how do those
          incentives cause the competitors to invest in an efficient
          way for the future?  That's what we all must focus upon
          because there's where the core problems exist in this whole
          issue.
             MR. PEPPER:  Well, with that we thank everybody. 
          We're a few minutes over time.  This has been another great
          panel.  We will be reconvening at 2:15.  Before people
          leave, the demonstrations are down the hall in room 845. 
          They're now operating.  So during lunch, you should take the
          opportunity to go in and take a look at what they have down
          there.  Thank you.  We'll see you back here promptly at
          2:15.  Thank you.
             (Whereupon a lunch break was taken.)
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               //                   A F T E R N O O N   S E S S I O N
                                                           (2:19 p.m.)
             MR. PEPPER:  I think everybody, well, not
          everybody, but everybody had an opportunity to see the
          demonstration that's going to continue in Room 845 until
          5:00 o'clock.  We're going to be finishing up before that
          time.  So it will be possible for people who have not had an
          opportunity to see the demos down the hall to do so. 
          They're really great.
             I had a question about whether the proceedings
          will be available on videotape and the answer is yes.  We
          have -- there's information outside on how to obtain a
          videotape of today's forum.  This afternoon's panel will be
          introduced by Elliot Maxwell.  Elliot.
             MR. MAXWELL:  I'd like to welcome you all back and
          to welcome our panel members.  The focus this afternoon
          really is on affordable access.  We talked a little bit in
          the morning about sort of access technologies, later in the
          morning about possible network congestion, ISP congestion,
          the problems, if in fact people do have access.
             Now we get to I think one of the very important
          public policy issues for the Commission is to ensure that
          places that traditionally have been undeserved and
          institutions that traditionally have been undeserved have
          access.  And this is an area that has gotten lots of
          attention as you all know through the universal service
          proceeding.
             There's been a focus in the Telecommunications Act
          of 1996 on access for schools and libraries and world health
          care providers.  And we've asked some of the people who know
          the most about these issues to come join us to talk about
          this, this afternoon.
             Let me briefly introduce the panelists because I
          think most of you know them and they have been participants
          in the past with us in trying to better understand these
          issues.  The panel will start with Glee Harrah Cady who's at
          Netcom and who is the Manager for Public Policy of Netcom. 
          She also was like Madam Defarge in the earlier panel sitting
          there knitting.  And we wondered whose head was going to
          roll.
             Aside from that, she also has a long history of
          involvement with the Internet running back to the time when
          people thought of it as the NSF net and was involved in
          trying with Netcom to figure out what markets they should
          enter.  And so this notion of how the access providers,
          Internet service providers will migrate is of interest to us
          and something in which he's deeply experienced.
             Also joining the panel is Peter Harter who
          represents Netscape.  At a year and a half of Netscape, he's
          probably one of the founding fathers, or persons if that's
          more correct, and goes through the same kinds of issues of
          dramatic growth that the folks from AOL were sort of facing
          at the earlier panel.  And obviously, the question of how
          it's going to be used, what's going to be available to them
          is important to them as a business and important to us as a
          matter of public policy.
             Finally, Danny Weitzner, of the Center for
          Democracy and Technology is here.  Again, an Internet
          veteran.  Here sort of the starting date is about 1991
          before many people had thought about the Internet or heard
          of it or it certainly had become a mass market phenomenon as
          of '96 we're told today.  And he worries about issues of
          public policy for the Center which focuses on the sort of
          representing the public interest in regard to a number of
          questions including questions of censorship, first amendment
          rights and public access as well.  So we're delighted to
          have them here with us, delighted to invite the audience to
          be participating as they did in the earlier panels.  Why
          don't we just start it off with Glee?
             MS. HARRAH CADY:  Thank you, Elliot.  Elliot spoke
          about the area of expertise that I have that might be of
          interest to you all and I'd like to talk to you a little bit
          about how we selected certain kinds of access points, why we
          put them there and why we didn't put them other places. 
          Netcom as you all know is a publicly traded backbone
          Internet provider.  And we have a responsibility to our
          customers, our employees and our stockholders to try and
          provide good service.  That's what the S in Internet service
          provider stands for.  And so this is in light of
          illustration, not an advertisement.
             This is the Netcom backbone and this shows the 230
          access points in the United States.  You can see that there
          are some very large lines that indicate speeds in between
          the two points and as all things printed in the Internet
          environment, of course, it was out of date the minute we
          printed it.  For any of you who'd like to come up later and
          look at the out of date version of the Netcom Internet, I do
          also have a smaller one and will be happy to send you an out
          of date one if you call us up.
             You'll nonce that there are few access points in
          places where there are few people.  One of the reasons that
          that's true is that there are also fewer computers there and
          the computers that are there don't also necessarily have
          modems.  So we had market research information from people
          who sell computers, from people who sell modems, from people
          who sell retail software.  We actually distribute our
          software through a large retail network of people like
          CompUSA and that sort of service.  So that we knew where
          there were people who were interested in buying our product.
             We do know that there are people who are in
          Cheyenne, Wyoming who are interested in buying our product,
          but we didn't believe that there were enough of them in
          order for us to actually go in there.  And let me tell you
          why.
             Without regard to how the backbone is constructed,
          to start a local access point on network, we need -- this is
          the startup cost that I'm going to talk about first.  $5,000
          to locate the site including travel and talking to rental
          agents.  We may need about $5,000 in new power and wiring
          and new construction costs in order to make sure that the
          floors are heavy enough to withstand the racks that are
          going to be put in there.  If the building isn't air
          conditioned, we absolutely need ten tons of air conditioning
          for the minimal amount of set.  So that's another $15,000. 
          And we have a recurring rental cost across the country
          averaged at about $600 a month.
             Our telecommunications costs, for each access
          point we put in, we require three T1s.  Two are minimum for
          each dial up location.  Those are going to be handling the
          modems.  There are 24 modems on each T1 line.  It costs us
          $1,500 to install each T1.  There's another T1 line that is
          the back haul from that location to our local network hub or
          the nearest local hub which is another $1,500.  So there we
          are a $4,500.  Our monthly recurring costs for the modem
          baseline are $45 per line per month on the channelized T1s. 
          The link to the hub, once again this is mileage sensitive,
          it runs around $2,000 a month.  It depends on exactly what
          where we're trying to link to.
             For example, Austin to our Dallas hub may be more
          expensive than Palo Alto to our San Jose hub because it's
          distance sensitive.  But across the backbone of the network,
          it's running about $2,000 a month.
             We also in places where we can operate ISDN
          callback so that when something goes wrong in the links
          between each access point and the network hub that we can
          use those lines to call back to the hub.  Idle ISDN services
          cost $150 a month and if we have to put them in service,
          that costs us $2.00 a minute.  It also costs us I think
          around $150 a line to install and we need four lines for
          lines for ISDN callback.  I'm sorry, I don't have that one
          written down.  So that figure may not be accurate.
             We also put in two measured business lines in each
          access points so that we can call up our routers and
          terminal servers off the network band in case we can't get
          to our routers via our own network.  So that we use that for
          maintenance purposes and also for power cycle up and down. 
          Probably a lot of you are familiar with equipment that will
          allow you to turn on and off the power of something remotely
          and so you need a phone line in to do that.
             So that's where we are on that.  And hardware
          costs.  A modem rack with 48 modems and 12 modem cards runs
          around $40,000.  Then you have to have a frame for a modem
          rack.  You have to have routers, terminal services, CS use,
          DS use, the two small modems which are not too expensive, a
          telephone, the power cycling equipment and an
          uninterruptable power supply and that's another $20,000.
             We also pay about $1,000 a month in monthly
          maintenance fees to have people go out and switch out dead
          modems, fixed cards that have gone dead, redo routers and
          all of those kinds of things.  And while these happen to be
          our costs, I don't believe that they're out of line with any
          of the other large service providers.
             Smaller service providers who are not operating as
          large network and who aren't operating the smallest set at
          48 modems may have different kinds of costs, but they won't
          be dissimilar.  I mean, they will be about the same is what
          I'm saying, particularly in telecommunications costs because
          T1 lines are T1 lines.  And it doesn't make any difference
          if you're a small company or a big company when you're
          buying them.
             So that was I wanted to say that I don't have any
          magic answers for that.  So you see why it would be
          difficult even though culturally desirable to put access in
          the upper peninsula of Michigan or the far western part of
          South Dakota or Cheyenne, Wyoming which actually is one of
          my favorite towns in the country.  Why we wouldn't
          necessarily choose to do that if the payback is not there.
             So the choice that we made was to operate an 800
          network which we rebill per minute and it comes out to about
          8.3 cents a minute in the lower 48.  For Alaska and Hawaii,
          our costs are a bit higher.  So it's $6.95 an hour which is
          divide by 60 and you can figure it out.
             We do bill by the minute and a lot of people do
          use that service.  Those are not the same people, obviously,
          who would be using the service if there were a local
          provider for them.
             The Internet, however, is a very grass roots
          organization and I was speaking yesterday with John Curran
          of BBN and he was telling me about a spot in Western
          Massachusetts where there was seven small Internet service
          providers fighting over a house, a fence and three barns. 
          Another sort of amusing remark saying this is not a heavily
          populated area, but it's being very well served.  Even
          though if you compared my local access point map with John's
          or someone else's access point map.  It would look like
          there's a gap.
             Finally, I want to say that another grassroots
          effort was done by Senator Domenici and the Benton
          Foundation and their report is due out very soon from the
          Benton organization.  For those of you who are not familiar
          with them, they are at WWW.denton.org.
             And they did a workshop that was to try and focus
          the attention of New Mexicans on new opportunities for
          economic development provided by services like the Internet
          and they gathered together a bunch of small Internet service
          providers in New Mexico among which we are not, all right? 
          So I was not at this meeting.  And they talked about the
          barriers and the suggestions that they could think of that
          would help them free access.  And I commend to you their
          study.  Thank you.  [applause]
             MR. HARTER:  First, let me thank the FCC for
          inviting me to speak this afternoon and also for those of
          you who came in this morning late or just go in for this
          afternoon's session.  There are copies of my remarks out on
          the table in the hallway.
             The three basic points Netscape has on universal
          service.  We've been commenting throughout the whole process
          last year and through all that our thinking has to evolved. 
          And to summarize, our three basic points that touch upon
          affordable access and they're as follows:  universal
          service, universal design and universal access.  And I have
          brief definitions for each one of those three.
             Roughly we call those the three pillars of
          universality.  Universal service can be defined as
          affordable Internet access and it requires a competitive,
          efficiently priced basic service.  And I used basic service
          as opposed to POTS, telephone service, because I don't want
          to prejudge what the basic service is.  So allow me to
          indulge in a little ambiguity there.
             The second pillar is universal design and that
          could be defined as Internet services and applications that
          should be accessible to persons with disabilities and
          disabilities being very broadly defined as a conference
          occurring out in the Silicon Valley in April.  It's the
          sixth annual world wide web conference mounted by Stanford,
          W3C which is the world web consortium from MIT and a few
          other institutions.  And that conference theme is
          accessibility.
             And I might want to note that that issue of
          disability access has been part of another rulemaking or
          comment period here at the FCC after the Telecom Act and the
          W3C has taken upon itself at its most recent meeting in
          London last week to focus on societal issues.  And the big
          thrust of that will be trying to move how you take the GUI,
          the Graphical User Interface, which is world web and make it
          accessible to all kinds of persons with disabilities.
             And hopefully through an open standard proceeding
          as opposed to putting the onus upon particular companies and
          their particular products, proprietary or open, no matter
          what technology it is, through an open public discussion we
          can really get the best solutions to market quickest.  Sorry
          for that digression.
             The third pillar in this family is universal
          access and that can be defined as global Internet access
          requiring open, operable and competitive international
          telecommunications regulatory policies.  And again, those
          three bullet points as well as the gist of what I'm going to
          say and my summary remarks are available outside.
             Some key points in universal service could be that
          schools, libraries and health care facilities should receive
          technology neutral subsidies, meaning don't lock them into
          rapidly obsolete network or access technologies.  Whatever
          happens with the universal service proposals that are going
          on these days, the money and how it's going to be spent, I
          think to overlook the fact that people out there in schools
          and libraries and rural areas are very hands on self-reliant
          types of persons, very creative and they have been getting
          on the Internet for a long time.
             Prior to being at Netscape, I did a little non-
          profit work by getting access to schools and libraries in
          rural areas, free nets, community assistance systems,
          specific nets.  They had a variety of names.  And it wasn't
          just one movement.  It was a collection of many different
          movements, not just in this country, but Canada, Finland and
          about seven other countries, about half a million users of
          these systems loosely combined.
             And the fascinating thing was you see modem banks
          in the basements.  They use Macs.  They use Unix.  They use
          PCs and just freeware and donated equipment, even use old
          boat anchor mainframes occasionally.  Universities allowed
          space on their computer service to piggyback on their
          Internet connections.
             And having seen that, starting all the way back at
          Case Western Reserve University in 1986 and seen AT&T,
          Ameritech, Apple Computer and many other companies and
          institutions get involved, it was just using what resources
          were around your neighborhood to make it work.
             And I think so just dumping a lot of money on one
          particular solution or the Cadillac plan.  And if we go
          slowly, we won't invest in technologies that will be out of
          date tomorrow.  And as we all know, this medium is moving so
          quickly that we invest a lot of public funds into something
          that can be not the best technology for America's school
          kids or the libraries or the health care facilities.  I
          think moving slowly forward, progress, examination, trying
          to get creativity from the grassroots is probably a
          reasonable course of action in the area of universal
          service.
             Another point in the pillar of universal service I
          want to mention is Netscape believes that there needs to be
          a proposal for the disaggregation of Internet access from
          Internet services under Section 254(h) of the
          Telecommunications Act.
             And what I mean by this, you separate access from
          services.  Many companies are not just providing a wire and
          say here.  Here you go.  Here's your account.  No, they're
          bundling value added services which consumers want and many
          companies are being very creative, very entrepreneurial.
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               //        MR. HARTER (Continued):  They build customer
          loyalty, brand name identity and they can make their money
          that way, not just on having a plain wire of adding content,
          having hosting services for personal home pages.  There's a
          whole host of new value to services that are being bundled
          in with the plain old axis, the plain wire.
             But from what GUI said, or you just look out
          there, schools just need some way to get to the Internet. 
          They need TCPIP.  We can talk about drilling wires through
          the schools.  You can run into asbestos problems.  You can
          talk about wild slants.  You talk about paying for all kinds
          of content into the classroom, additional access.  I just
          think it needs to be a consideration of do we really need to
          have everything at once, or do we just get TCPIP to the
          school building and let the --
             What's that?
             MS. CADY:  Actually, we call that Internet dial
          tone.
             MR. HARTER:  Oh, Internet dial tone; I like that. 
          But then again, I've been called a TCPIP bigot before so
          I'll have to live with that bias.
             And the social concern about if we don't have this
          proposal considered at least for desegregation, we really
          risk a problem we've seen in other media before -- a
          concentration of media -- and I think if universal service
          is a way -- a back channel or back door -- for services that
          are bundled to be subsidized and put into schools, I think
          it prejudices the idea of having -- not on bundling, but
          just getting the bare minimum basic wire out there.
             And if those providers who bundle services want to
          just discount the hell out of what they added onto the wire,
          and they want to get in there, great; that's fine, too.  But
          somewhere in the thinking here there needs to be a
          separation of access from services.
             Since I had a segu in my opening remarks about
          universal design, I'll skip over that for now and move into
          some final points about universal access.  Looking at the
          international scheme on this point, we've been encouraging
          the FCC in our comments to promote competition
          internationally and trying to get people to use our products
          overseas.
             Being in Switzerland at any point in time -- I was
          there for three weeks in December for this copyright
          conference to the IPO.  The best I could get was 12,000 BPS. 
          You can't surf at that rate.  There were some terminals in
          the conference center put in there by the International
          Telecommunications Union, and that content was pretty good,
          but that was a special facility.  So the state-owned PTT in
          Switzerland just has an infrastructure problem, and many
          people complained about that during the three weeks of the
          conference.
             I think if we're going to lead the information age
          and build a bridge to the 21st century, whatever rhetorical
          phrase one would choose in this town, trying to get people
          to get quality through-put in these markets is a number one
          priority.
             And I think I'll leave one controversial comment
          -- and then I'll pass the mike to Danny here -- there's an
          intersection, interestingly enough, between bandwidth and
          copyright.  Some of the people who fought on the issue of
          replication reproduction in Geneva, on copyright
          reproduction -- the Internet transmits information,
          transports data by copying it along the way; through the
          routers, even on your machine, on your desktop.
             You have client-side cash and there's temporary
          stored information.  You have service out there in-between,
          called proxy service, and there's cash inter-temporary
          copying or reproduction there.  So all this temporary
          copying goes on, and without it the Internet wouldn't work. 
          It would suddenly bog down.  Engineers put cashing in there
          for one reason, performance, to optimize and make most
          efficient use of the network facilities available.
             And some institutions that fought really hard to
          get this issue taken out of the copyright treaty because the
          line within the treaty would have made such reproductions
          infringing, and thus would have changed how we can use
          reproduction on the Internet.
             The schools and libraries really fought hard on
          giving this controversial aspect of the treaty taken out,
          and while there are legitimate copyright concerns to be had
          with this broad reproduction, I think if we're really
          talking about bandwidth and access, and we're talking about
          schools and libraries, reproduction in the copyright arena
          has a nice intersection here that is worth us thinking
          about.  Danny?
             MR. WEITZNER:  Well, that's an interesting note.
             Good afternoon, everyone.  I've just realized that
          the last four or five presentations I've done, I've been the
          last person on the last panel.  So, I don't know what that
          means, but I do notice some eyes kind of closing and people,
          you know, probably wanting to get on the rest of their
          afternoon.
             I will be very brief.  I don't impute any
          intentionality.  I think it's my fault.
             I really want to thank Bob and Elliott and Kevin
          for putting this together, and the whole Commission.  I
          think it's really particularly appropriate that we're
          getting together here to talk about these bandwidth issues,
          because it was really just about five years ago that the
          networks of the future for -- I don't remember if that was a
          forum or what exactly, what sort of thing it was, but it was
          a discussion of the beginnings of a lot of these issues.  It
          was the first time, I think, a lot of people around here
          focused very much on these issues, and you know, that was
          just five years ago, a little less than five years ago; I
          think it was May of '94 -- '91 rather.
             And an enormous amount has happened, really, every
          year since then.  Just about this time in 1992, four years
          ago, the NSF net was finally commercialized after a fair
          amount of pushing and pulling and tugging and shoving.  1993
          was not as good a year.  It was the year of the clipper
          chip, and that was probably just an example of what not to
          do.
             But then 1993 and 1994 really were the years when
          the Worldwide Web sort of rocketed into everyone's
          consciousness, and they were also the years during which,
          all of a sudden, when I would talk about the work that I was
          doing that my friends and my family would actually begin to
          understand because they had heard of this thing called the
          Internet.
             1995 was also not a very good year.  It was the
          year of the Communications Decency Act, but, hopefully,
          we'll have a better year in 1997.  And, I guess that what is
          really striking to me -- and I know that this is a panel
          about access and affordable access, and I think affordable
          access is critical.  I think it's a very hard problem to
          figure out how to really continue the move towards more
          affordability and higher bandwidth.
             I guess that I am going to close this on a
          somewhat contrary note and say that there are other issues
          to consider besides just bandwidth and affordability.  
          Those are critical issues, clearly, and without affordable
          access and without sufficient bandwidth, we get nowhere.
             But what's interesting about the last five years,
          starting with the Networks of the Future forum, is that the
          Internet has developed in absolutely extraordinary ways with
          absolutely inadequate bandwidth, at the ends at least. 
          Clearly, there has been a lot of bandwidth available on the
          backbones.  Many speakers have talked about the fact that
          backbones have grown in a relatively open market
          environment.  Backbones have been able to expand because of
          inter-exchange and other sort of special access facilities.
             But at the ends of the network, especially with
          regard to residential users, the bandwidth has been
          terrible.  It has been affordable, but it has been really
          lousy.  And I think you could draw a graph with curves going
          in two opposite directions, where you would have at the one
          end people in telecommunications policy circles fretting
          about how to increase bandwidth with nothing happening, and
          at the other end the Internet market just kind of more-or-
          less ignoring those discussions, developing at an incredibly
          rapid rate.
             So, what I want to suggest is that as important as
          affordability is, and as important as high quality, high
          bandwidth services are, the Internet, I think, has actually
          succeeded in having brought incredible benefits to this
          country and has the promise of bringing even more incredible
          benefits because of reasons that have nothing to do with
          bandwidth and not much to do with affordability.  I should
          correct that; it has a fair amount to do with affordability,
          but it certainly has very little to do with bandwidth.
             I want to just highlight, very quickly, four
          architectural aspects of the Internet that I think have
          really made it a very important forum for democracy in this
          country, an important new means of democratic
          communications.
             I think that most of you who are here, and
          certainly people who are listening on the Web, already know
          this so I'm not going to belabor it, but the Internet has
          really turned upside down people's relationship with
          communications media.  And my organization, the Center for
          Democracy and Technology, is here focusing on this issue in
          some part because we want to make sure that the Internet
          remains affordable, but really in many ways more because we
          are tremendously excited about the First Amendment potential
          that the Internet has.
             The Internet enables people to communicate in a
          Democratic society such as ours in ways that we have simply
          been unable to communicate in the past; since, you know, the
          proverbial town square when we could all go out and talk to
          each other.  We can't do that very much anymore, but we do
          have the Internet, and I think that that's an
          extraordinarily important development for our democracy.
             I also think it's extraordinarily important for
          what I've always regarded as one of the Commission's core
          missions, which is to promote a diversity of information
          sources and promote access to a diversity of information
          sources.
             The Commission has also tried -- there was
          reference to video dial tone proceeding and other such
          proceedings to advance this goal.  It's been very difficult
          in the broadcast arena.  The Fairness Doctrine has been very
          controversial, and I'm not even going to speculate about
          whether it was ever effective or not because it was before
          my time.
             But I think that the Internet presents itself as
          an extraordinary model for promoting democratic discourse,
          and my simple suggestion to the Commission is to keep in
          mind the characteristics of the Internet that make it such a
          rich, diverse environment.  And whatever the Commission does
          in trying to promote bandwidth and keep things affordable,
          to keep these architectural characteristics in mind, and I'm
          going to go through them very quickly.
             First of all the Internet, as others have said,
          beginning with, I think, John Carr, the Internet is a
          decentralized infrastructure.  There are no gatekeepers on
          the Internet.  There is no centralized point of control on
          the Internet, and very simply what that means is that anyone
          who wants to put up a Web page on the Internet can do that
          without getting permission from anyone else.  And that is a
          unique development, in at least in the history of American
          communications media, and I think it's just very important.
             The second aspect of the decentralized nature of
          the Internet is that really, unlike mass media, it is an
          abundance of communications opportunities.  If you want to
          put a program out on radio or television, you've got to go
          find the radio station or find the TV station or find the
          cable operator, negotiate for channel space.
             It's complicated, it's expensive, and what makes
          it expensive and complicated is that there are only a
          limited number of channels on the radio spectrum, and only a
          limited number of channels on your television, and only a
          limited number of slots on any given cable network.  That
          makes them expensive and it makes it hard to get at.  We
          don't have that problem on the Internet.  So, this
          decentralized and gatekeeper-free environment is
          tremendously important.
             Secondly, the Internet is bi-directional and
          interactive.  This is obvious; everyone who uses the
          Internet knows this.  But if you think about the Internet in
          this regard in contrast to television or radio, when you're
          listening to a political debate on television, you can't
          talk back to the candidate.  It's that simple.
             And you certainly can't talk with the other people
          who happen to be listening to that same program.  The few
          politicians who have been brave enough to go out onto the
          Internet and engage in chat sessions and things like that,
          have discovered that the Internet is quite a different
          environment.  People can talk to each other.  People can
          associate freely.  This is a critical value that the First
          Amendment of the Constitution has always tried to protect: 
          people's ability to associate.
             Well, it's very hard for me to associate with
          someone in Wyoming, especially since GUI doesn't have a
          "POT" there.  I'm sorry; I know.  But the fact is, and what
          is wonderful about the Internet, is that we all can
          associate with people in Wyoming over the Internet even
          though, you know, the leading Internet service providers may
          not have POTS there,  because as GUI pointed out, other
          smaller service providers do have that POT.
             So, the bi-directional nature of Internet
          communications is tremendously important and has to be
          preserved, I think, especially as we look at some of the
          discussions in the cable industry about how to enter the
          Internet market.  Some of the early discussions of the at-
          home network I think raised a lot of questions about whether
          that was really going to be an open network the way the
          Internet has traditionally been open, and I think this is an
          important point to watch.
             Again, picking up on GUI's point, there are since,
          at least -- well, really there have always been multiple
          access points on the Internet.  In the early days of the
          Internet, there were requirements that you were affiliated
          with a university, or the government, or a research
          institution in order to get on.
             But from the very beginning, there were always
          multiple paths to get to the Internet, to get to the
          backbone, and that, I think, has been very important.  It
          means coming back to Cheyenne, Wyoming.  Even if a large
          service provider decides not to provide service in a given
          area, smaller ones can come in.  This is very important.
             And I think that it's that diversity of service,
          the fact that you have large service providers, small
          service providers, service providers which focus on large
          business customers, others which focus on maybe large
          residential customers in urban areas or highly-populated
          areas, and then others that focus on rural areas.  There are
          a number of Internet service providers who really have made
          a specialty of rural, hard-to-serve areas, and I think it
          would be useful for the Commission to talk with those folks
          and see what's happening.  I'm glad -- I didn't know about
          this Benton project; I'm looking forward to seeing that.
             But it is that diversity of service that I think
          will help assure that there is really a diversity of voices
          on the Internet, that you won't be shut out of the Internet
          simply because of where you live.
             Finally, and you all know this, the Internet is an
          environment that is characterized at its core by open
          standards; John Curran mentioned this.  But we only have the
          Worldwide Web.  We only have advanced IP routing protocols
          because the Internet's an open standard environment.  The
          Internet has gone through, in just the five years that we've
          been talking about, extraordinary developments,
          extraordinary changes, and they've been able to happen
          because it's an open environment.
             So, my closing thought is that affordability is
          critical, and figuring out the very real issues about making
          sure that schools and libraries and other community
          institutions have access is critical.  I honestly do not
          present myself as an expert on those issues and hope not to
          minimize them at all.
             What I do think is equally as important and an
          absolutely necessary aspect of any policy that is trying to
          promote broader access to the evolving national information
          infrastructure, is to keep these unique characteristics of
          the Internet alive.  I think that we've all been just handed
          this extraordinary new medium by a relatively small number
          of people in this country who have worked very hard to
          produce it, and it's grown, I think, more than anyone would
          ever have expected.  And I think that our task now is to
          preserve what's unique about it and make sure that more
          people have access to it.
             Thanks very much.
             [Applause.]
             MR. MAXWELL:  In the earlier panel we talked a
          little bit about when the second million broadband access
          subscribers would be met.  That panel could leave people
          either sort of more depressed than they were during the
          conversation of the Telecom Act or with a belief that there
          was some reality that had set in.  People could interpret it
          very differently.
             I'm curious as to your perspectives as to whether
          you would be optimistic about a vision in which we expect
          that there is broad access in traditionally underserved
          areas, or pessimistic about the kind of coverage in the next
          three to five years; whether it's a problem that will go
          away because of a natural evolution in the marketplace, or
          because of wise decisions on universal service or other
          things; or whether it's something where we are going to have
          to simply say, "This will take time.  It may take a lot of
          time and there's not much we can do about it."
             MS. CADY:  I guess that was probably more directed
          to me, being affiliated with a network provider.  I think
          there's a difference between broad access and broad band
          access.  In the broad access, meaning access is available
          today, to everyone who can have, you know, anything from --
          I suppose even 286's in Minuet would work -- and a 1200 baud
          modem.  Now that's not ideal.  You know, you would not want
          to try and submit X-rays across that kind of a connection.
             MR. MAXWELL:  Not if you wanted survival.
             MS. CADY:  No.
             [Laughter.]
             MR. MAXWELL:  It depends how serious the break is.
             MS. CADY:  Yes; that's not a mission critical. 
          You don't want to run mission critical on a 286 across the
          net today.
             So, I think that I would like to make that first
          point.  You know, anybody can get on the net today, assuming
          that we manage to get the appropriate equipment somehow.  I
          think what is going to be harder to predict is, when does
          that underlying access -- just the availability of it and
          the intersection of the need for the broader band meet in a
          way that is going to be reasonable.  When can I get an X-ray
          from an outlying agency on the Rosewood Sioux reservation
          to, I don't know -- the Mayo Clinic or something?  And I
          wish I knew.
             Those kinds of things probably should be handled
          via some of the newer satellite things, where you're trying
          to transmit really wide band width things, and maybe we
          could do something there.  I wish I had a magic answer,
          because you know how much I'd like to have that magic
          answer, but I don't.
             MR. WEITZNER:  I would just add that I think that
          this holy grail of broad-band service to the home has been
          around for such a long time, and it's hard to see very much
          progress in that direction.  I, frankly, don't count most of
          the trials that are going on as progress in that direction. 
          Back -- I can't remember when -- Leland Johnson did a
          terrific study that basically showed -- you know, you want
          real broad band for video, and that the number of
          applications which require truly interactive broadcast
          quality, or now even higher quality video, is essentially
          nil is the residential market.
             MS. CADY:  Games.
             MR. WEITZNER:  Sorry?
             MS. CADY:  Gaming technology.  Gaming technology
          is likely to pay for it, actually.
             MR. WEITZNER:  Well, but whether you need broad-
          band capacity to do that, I don't know.  I think that it's
          very hard to know that far out into the future.  My belief
          is it is pretty far out into the future.  I think that just
          in the efforts to make the first step to digital access to
          simple basic rate ISDN, there has been some amount of
          progress.
             I mean, I think it's worth noting that you open up
          a MAC warehouse or a PC warehouse catalogue today and you
          find ISDN terminal adapters for pretty close to the price of
          state-of-the-art analogue modems.  That, I think, is a sign
          that we're making sort of slow, incremental progress towards
          digital access.  Whatever anyone says, that is, I think, the
          best indication of where the market is going.
             But very few people use those products.  I think
          over time more people will use them, but getting to multi-
          megabyte, bi-directional, broad-band service just seems to
          me like an awfully long way away, and I think it's probably
          -- if that we're adopted as a policy goal, I think that
          could well lead us in the wrong directions.  I think we
          should be focusing on nearer-term, more achievable goals.
             MR. MAXWELL:  Pretty good bandwidth.
             MR. WEITZNER:  Pretty good.  Pretty good is great. 
          And I really do think the experience of the Internet is that
          it's gotten by with pretty good bandwidth, and it's done
          amazing things.  And there are lots of ways to compensate
          for lack of bandwidth.  It's not, as GUI is saying, it's not
          ideal; it's never ideal; you would always like more, but you
          can get by and do an awful lot, and the net has.
             MR. MAXWELL:  One of the interesting numbers that
          comes out of this panel and on the earlier panel, if Lee
          Bauman's number was right and you had people, subscribers,
          spending an hour a day essentially calling an Internet
          service provider, and you then said for those people for
          whom it is not a local access service, we're talking about
          $5.00 a day, you know, running from $5.00 to $10.00 a day on
          distance charges to a provider, that may not be a sufficient
          situation for us to be satisfied with for access.
             MS. CADY:  I think, Elliott, it depends a lot on
          why people are on.  Since -- NetCom used to have a billing
          mechanism that allowed people to remember that they were in
          a shared environment; that is, we charged a certain amount
          for so many hours of prime time and then when it wasn't
          prime time you could do whatever you wanted.  And, at that
          time, the per session usage was, you know, lower than it is
          now, and since we, for competitive reasons, went to a flat
          rate without limit pricing, we've seen monthly on our local
          call part of the network -- in other words, when you
          aggregate all of our access points across the United States,
          the per session time is going up in small increments.  But,
          it's like, you know, the day is getting longer as we get
          closer to the summer solstice.  And so, you know, two or
          three minutes a month per customer over 600,000 customers is
          a lot of minutes.  This is a similar point to the one I
          think Mr. Bauman was making, and I would agree with that.
             The number is creeping up in our 800 service in
          that we're getting more customers and we're getting a little
          bit more, but people on the 800-side of the service are very
          aware that they're paying per-minute charges and so they
          tend to be on and off much quicker, all right?  And so you
          don't see -- I don't know whether you call them bandwidth
          hogs or what -- modem campers.  You know, you don't see
          modem campers on the 800 lines, whereas you might see them
          in these more congested areas where people are afraid that
          they won't get lines.
             MR. MAXWELL:  Any questions from the audience?  In
          the back there.
             MR. DAHNKE:  I'm Roy Dahnke from the SETA
          Corporation.  I don't want to repeat a lot of the things
          that have already been discussed, but one of the things that
          I've not heard any discussion on so far is the possibility
          of paradigm shifts which I think are already just beginning
          to start, where people are using computers to -- we used to
          call "work at home" -- but I think it's really where you
          have business access to do your work, you know, consultant
          types of work all over the world.  It's not just a case of
          being able to be 30 or 60 miles away from home with the
          ability to do work internationally via the terminal.  And I
          think that's one of the things you want to consider as you
          move forward.  Thank you.
             MS. CADY:  If I could just respond to that, I
          think most of the Internet service providers do consider
          that, and many of us are part of consortiums or part of
          larger organizations that allow global roaming access to our
          networks and so we're very conscious of what our business
          customers want.
             MR. SHAPIRO:  My name is Andrew Shapiro.  I'm from
          the Twentieth Century Fund.  I have a question for Danny and
          the other panelists.  I agree about the architectural points
          that you mentioned that are characteristic of a democratic
          Internet, so to speak, and I wonder to the degree to which
          we think there should be policy or regulatory incentives
          eventually.
             I mean this is a question actually relevant to the
          first panel, to the extent the guy from Cable Labs was here
          and also from the second panel, the AOL representative was
          talking about local cashing.  And one of the questions about
          local cashing is whether that in some way goes against one
          of the policies you were talking about, about no
          gatekeepers, and the kind of content neutrality between your
          average, individual teenager who has their own Web site and
          let's say Time-Warner or CNN who has their own site and
          they're supposed to be sort of one is as easy to access as
          the other.  And with local cashing and private networks and
          things like that, there's a question as to whether that's
          really going to be so and whether there should be policy
          prescriptives in place to deal with that, which is the
          question.
             MR. WEITZNER:  Well, I never thought cashing would
          be such an interesting subject.  I guess that I think that
          not withstanding the democratic nature of the net, all
          content on the net is not equal and it is not equal for a
          lot of reasons.
             One interesting reason is what you pointed out,
          that it may not be as easy to get to, and that could be
          because it's not cashed anywhere else or it could be because
          the Web site or the host for the content is sitting at the
          end of a dial-up line as opposed to at the end of a T-3.  So
          those are all issues that I think differentiate between, you
          know, the New York Times on the Web and a handbill on the
          Web.
             It's not obvious to me what sort of policy steps
          one would take.  I guess just my own my own experience in
          being a Web surfer is that the valuable content, I think,
          still does win out over glitzy or easy-to-access content in
          the end, and I guess that I would have First Amendment
          problems at the other end getting the public policy process
          too heavily involved in favoring one kind of content over
          the other or trying to balance out content.
             I think the Web does a -- the Web, especially with
          search engines -- does a reasonably good job of giving all
          content a fighting chance, at least.  It's not risen to the
          level of disparity or inequity that I think we need to do
          something in the policy arena.
             AUDIENCE PARTICIPANT:  Can I just ask if anyone
          from the Commission wants to address that?
             MR. WERBACH:  We're just here to listen.  We don't
          do anything; we just listen.
             [Laughter.]
             MR. HARTER:  Actually, I have a comment on that,
          the gatekeeper point the gentleman in the back of the room
          made in his question, that there is a technology already out
          there that prevents gatekeepers from occurring with this
          local cashing issue.
             If you author a Web page, you can put a command in
          the header field called a progma, and it basically tells
          proxys out there -- and a local cash is only created by some
          kind of proxy server environment, or not only, but that's
          the likely way it got created -- and the progma just
          basically says, "Don't cash me, don't cash this page."
             But frequently, from what I've understood about
          cash and as I've gotten deeper into it from the copyright
          point of view, is that progmas are frequently ignored by
          transport providers.  I'm not going to point any fingers or
          get into that kind of discussion, but you're going to have
          virtual private networks; you're going to have proprietary
          services where you have to subscribe to get in, and you're
          going to have to optimize performance for those paying
          subscribers because they want quality of service.
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               //        MR HARTER (Continued):  And if you need to use
          hierarchal cashing, local cashing, I think there is going to
          come a day on the copyright infringement side of this and
          not on the performance bandwidth access side here in this
          form, where we are going to see all the content in there
          that may be yanked off, and then it will have to be licensed
          in advance.
             In the cable TV model, for example, everything you
          see coming through a set top box is prelicensed.  They don't
          really care how many viewers are actually out there.  They
          don't care how many copies in a sense are out there in that
          virtual private network.
             But in terms of the public Internet, there are
          tools out there like programs, and people invent tools to
          stop things from happening that they don't like happening. 
          People on the net tend to do these kinds of things for the
          hell of it.
             So it's a very important question you've asked. 
          What the resolution is, I don't thing the resolution will
          lie here.  It will happen in Congress this year on the
          copyright and in the international arena when we go back to
          address that right of reproduction.
             Glee?
             MS. CADY:  Well, I think that while the points you
          made were really interesting, Peter, I think the question
          was coming from the opposite point of view, which was my
          personal page, which is on a very small server on the other
          end of a 14/4 modem, quite frankly, is less likely to be
          accessed as quickly as the Netscape pages, not only because
          of the class of server that it is on, or the type of
          connection that it is, but because it's accessed so
          infrequently that it is unlikely to be in anyone's cash.
             And so, therefore, my page is at a disadvantage,
          vis-a-vis, your page; and, is that fair?   Well, possibly
          not, but it is certainly life, isn't it?
             (Laughter.)
             MR. PEPPER:  Glee, actually, I would like to go
          back to something you were talking about earlier, and that
          was pricing structures.  Now, Netcom is changing its pricing
          structure.  And I guess one of the questions --
             MS. CADY:  I was afraid you were going to ask me
          about that.
             MR. PEPPER:  One of the questions is, what is the
          future of flat rate pricing by ISPs?  And if, in fact, flat
          rate pricing, as it has been described by some people as a
          way, within a competitive environment, to get market share
          and get started and get up and running, but then it may not
          be sustainable in the long run; what about institutions like
          schools and libraries that have budget constraints and fixed
          budgets?  So there is really two parts to the question.
             MS. CADY:  Well, I think there are probably about
          47 parts to that question.  The first thing that I want to
          say is that if I were an adequate prognosticator, I would
          have had lots of Netscape stock, and I probably wouldn't
          have been here today.  I would have been being wealthy in
          the Bahamas, right?
             So Netcom has definitely announced that it is
          moving away from the flat rate unlimited fee for
          subscribers.  The way we are choosing to describe that today
          is that we will be developing new services which we hope
          will be of value to our customers.  We're particularly
          interested in the small business/home office kind of market. 
          And we hope to be able to develop a portfolio of services
          that are desirable for that market.
             That doesn't mean we are walking on our current
          customers, of course, and they'll be grandfathered in.  I
          don't actually know what the services will be, nor have the
          new prices been announced.  I don't think that Netcom's move
          was -- let's see, do I want to say it wasn't shocking, but
          it was astonishing at that time or something, you know. 
          Don't be surprised or be shocked that it was there.
             We're in a very competitive, heavy infrastructure
          based environment.  And we are having to invest more and
          more in infrastructure all the time in order to provide what
          a number of our users say is totally inadequate service. 
          Just ask them.
             And I must say that while that was sort of a smart
          ass remark, we tried very, very hard to provide very good
          service, and we can't always.  And that means that we need
          to invest yet more in infrastructure, and that money needs
          to come from somewhere.
             So we need to develop a better match of what we
          can offer to what the customer is willing to pay.  And we
          are hoping to hit that soon.  Our announcements are expected
          sometime in mid-February, you know, and then we'll see.  I
          don't think that it's an unusual move.  We were just the
          first one to make it in this industry.
             MR. PEPPER:  So you see this as a beginning of a
          trend?
             MS. CADY:  Yes, I think so.  Now, to answer the
          next part of the question, what does that mean for schools
          and libraries, it may not mean anything at all.  Because
          what we were talking about there was the dial access in
          what's essentially the individual market.  That's not the
          same as direct, continuous connections.  It's not the same
          as necessarily dial ISCN services.
             In other words, there is a full panoply of
          services that can be offered.  And we offer direct
          connections into schools and libraries now at a considerably
          discounted rate off what we would charge a corporation.  And
          I would expect similar kinds of things to go forward, with
          that in mind.
             We are interested in the school and library
          market, because that's where you grow interest and new
          users.  And this is a model well developed by Apple Computer
          Corporation, and we have all learned from it.
             MR. PEPPER:  Do you see a lot of model camping
          now?  The way you described it earlier, now with -- I know a
          number of the ISPs time people out, with some of the
          broadcast services, or you can have your computer sort of,
          every once in a while, ask for something.  So then at home,
          you can get --
             MS. CADY:  Right.
             MR. PEPPER:  -- essentially the same connection I
          get at the office on a LAN, where it's always on.
             MS. CADY:  We suspect that it is there.  In our
          Canadian subsidiary, we run something called a fair use
          program, which will time you out after so long.  And I did
          actually ask what the length was, but I didn't catch the
          right person in Canada to know what the length is.  And we
          do anticipate putting that in, in the United States, so that
          we don't have people taking modem space, when they aren't
          actually using the service.
             MR. WHITE:  Could I ask a question?
             MR. PEPPER:  Sure.
             MR. WHITE:  Is what's pushing you to shift pricing
          -- is it specifically the modem camping problem; in other
          words, sort of the other end of the problem that some of the
          ABOCs talk about; or is it a broader question of the usage
          of your network, once you get to the other side of the
          modem?
             I'm interested, I guess, because I think --
          especially when thinking about schools and libraries and
          small institutions, some of them certainly will have to live
          in the dial-up world, at least for the foreseeable future. 
          But I know that many libraries in many schools that have
          access have some sort of dedicated access facility, even if
          it's just, you know, a switch 56 kind of connection.
                   And I wonder whether you have the same sort of
          pricing considerations in those sort of low capacity but
          dedicated access facilities as the dial-up.
             MS. CADY:  Well, I think I think low capacity but
          dedicated access, in other words modem to modem, is most
          Internet service providers' least favorite mode of service,
          all right.  It's exactly as expensive to provide that as it
          is to provide it for the one to twenty or one to fifteen or
          whatever your modem ratio is; which I must say, I don't know
          for Netcom.  So I can't answer that question.
             So we price it to make people not want to buy it,
          unless it's the only thing that will meet their need. 
          Because, quite frankly, it's a pain to provide it.  And so
          we are less likely to want to do that.
             Now there is a difference coming up.  I don't know
          if you all know about the net little boom box routers that
          people like -- have you heard of Whistle?  Whistle is a neat
          little product.  I will now do a commercial for Whistle.
             (Laughter.)
             MS. CADY:  They are making a little router that is
          intended to run on a 28/8 modem that comes configured with
          everything that you want.  And you drop it in and you can
          plug five PCs into the back of it and, presto-chango, you've
          got a network.  And it costs -- it retails for around
          $2,000.
             And a number of us ISPs are really interested in
          this, because this is going to help us migrate technology
          out to what we think of is the most under-served market,
          actually, which is the three to five person office.  It's
          really not the home.  People at the home who want our
          service can get it.  But that three to five person office
          who really can't afford a system administrator, who really
          can't afford somebody who knows a whole lot about network
          configuration.  And so this is really -- it's a great little
          product.
             Do you know that Mike has been standing back there
          for a long time, wanting to ask a question?
             MR. MAXWELL:  I know that.  I also know that John
          Curran is fingering his bag, which I assume means that he
          wants to go.  So why don't I call on John, and then Mike
          next.
             MR. CURRAN:  I have a quick question for Peter
          Harter.  In your tenants of universality, you advocate a
          separation from Internet access and Internet service.  And
          I'm sure there are good reasons for that.  I don't really
          understand them.  On the surface, it would be like me
          advocating that web browsers shouldn't have E-mail clients
          built into them.  And so I'm sort of wondering what
          separation is desirable, what basis?
             MR. HARTER:  Well, in the new release, which is
          invaded on our home page, you can be downloaded for a free
          trial basis -- a little commercial.
             MR. CURRAN:  This is commercial-free public
          broadcasting.
             MR. HARTER:  We've broken the navigator in the new
          product called Communicator E-mail, and separated it out
          from the browser.  So consistent with that thinking,
          roughly, to better explain the need for considering the
          desegregation, whether desegregation is actually in the
          public interest, ultimately, I don't know.
             But so far from what we've seen in the overall
          discussion of initial service, and from my experiences in
          the grassroots area prior to being at Netscape, I saw a lot
          of money thrown at situations.  Give us a connection for our
          school, and then whiz-bang-LAN, no one uses it.  So you if
          you throw money at something, it doesn't mean you are going
          to get the goal met.  And the goal is to get advanced
          communication schools to schools, libraries and rural
          hospitals.
             I think tapping into the mind share out there and
          using a little creativity and that grassroots practicality,
          giving them a huge Cadillac access service with the pipe,
          the internal wiring, the content and whatever else you want
          to throw in there -- the kitchen sink -- could be a mistake,
          and a tremendous waste of money.  And if you went to
          technologies, it will be outstripped by someone else's next
          release.
             MR. CURRAN:  Thank you.
             MR. PEPPER:  Mike?
             MR. TREST:  Mike Trest, ATM Net.  I would like to
          focus on the basic statement of broadening the coverage,
          particularly to remote areas.  I've been quite active in the
          Asian Pacific Region, where you haven't discovered what
          remoteness means.  It makes Cheyenne or anything else look
          like a very positive and high population area.
             Inasmuch as I do believe that economic forces or
          the little suppliers or the seven who are fighting over the
          cow and the fence post will come in and fill up the gaps. 
          It is not so in other worlds as one of our speakers have
          identified.
             And in discussions that I've had with the
          incumbent equivalents in the Asian Pacific Region, they are
          stating as public policy that economic development for their
          region, their participation in the information technology
          revolution as a people is so critical and so vital that they
          as governments and regulators are saying, we do not see the
          commercial market springing up on its own the way it has
          here in the West.
             So I suggest that in the remote area concern,
          there may indeed be some encouragement from the regulators
          here in the states to match the encouragement by regulators
          around the world to say that it is in our country's interest
          to take an active role to encourage it.
             Now, I don't want to go all the way back to the
          good old days when everything was subsidized and part of the
          defense or other department of our government to make it
          broadened access to these remote areas.  But I think still
          some form of grant specific or other encouragements that
          state and federal regulators can encourage may be
          appropriate to broaden that coverage and get that
          universality.
             Because we all have been touched to our being
          souls about the advances, the growth in understanding, the
          political advancements and the democratic process that has
          been advanced by those of us who become Internet users.  So
          I encourage, yes, we can expect the commercial organizations
          to do so much.  But in this area, to extremely remote areas,
          I still think there is a role.
             MR. PEPPER:  Peter?
             MR. HARTER:  If I could comment on that, just the
          other day I was speaking to a colleague of mine, Skip
          Brandt, who used to be the Director of the ASPIN program at
          the University of Arizona in Tempe.  ASPIN stands for
          Arizona State Public Information Network.
             And over the past three or four years, through a
          variety of state, corporate, and NSF grants, they put over
          500 notes throughout the state of Arizona.  The first phase,
          their product was to get to schools, K through 12 schools,
          public and private, then community colleges, then all the
          universities.  And included in that program were all the
          Indian reservations, rural areas, urban areas, and that was
          local ingenuity, spearheaded by a university program, some
          federal funding, some corporate funding.  It included
          training, user training.  It included the community
          programs, the libraries.
             So I think what the gentleman in the back of the
          room just said is definitely true.  We've seen it work
          before.  But those grant programs can be with problems at
          times.  But I think there are many good examples of grant
          programs, such as ASPIN, that work out pretty well.  We're
          getting a lot of nodes out there where the marketplace may
          not necessarily justify the capital expenditure by a for-
          profit enterprise by investing in that kind of physical
          plant.
             MR. WERBACH:  Can we go into that a little bit
          more?  Mike made this point, too, that if we agree that we
          want to support universal access or access to under-served
          areas, we have a motto, which universal service in the
          telephone contacts, which on one level has been a great
          success, that we have 94 percent or something of people in
          households that have telephone service, but we also have had
          this very cumbersome, inefficient subsidy mechanism that has
          restrained competition.
             How do we target actions that governments take in
          such a way that they can achieve the benefit while still
          preserving the kinds of diversity and local control that all
          of you have talked about?
             MR. HARTER:  The one difference about a grant
          program versus the subsidiary regime is that grants are like
          a one year, or a three year, or a five year thing.  You get
          the money you want, you spend it, there's a budget.  And
          then the system either has to live on its own, or it was a
          temporary project, to prove a particular point or gather
          some data.
             So after the contributions to the grant program
          end, someone else has to pick up the tab.  So it's a bit
          different.  And that's just to get the infrastructure out
          there, the grant money.  What pays for the maintenance, the
          upkeep, the insurance, replacing dead modems that Glee ran
          through as a business person, the realities of a network,
          you have to keep feeding it, and expanding it and growing
          it.  And that burden may be shifted to the users.  And if
          there is still a need for continued federal funding, that's
          a separate issue, I think.  There are two different funding
          phases here, if you will.
             One of the things that we worked with when I was
          at the NSF net was the NSF's connections program.  And I
          would commend it to you.  It's particular intent at that
          point was for connecting -- well, at the time I worked with
          it, it was the second and third tier of higher education in
          the country, meaning most of the Carnegie class ones were
          connected then.
             And so we were after the smaller institutions. 
          And that was very, very successful in getting people started
          and having enough impetus to go forward, knowing that there
          was a drop dead date, and that they had to have a plan from
          that point forward in order to fund the mechanism, which
          meant that people wouldn't apply for things without a good
          reason.  People wouldn't get a connection, just to have one. 
          They would need to have a reason for wanting it, which is a
          point that we need to come back to.
             I mean, I'm not kind of the feeling that if you
          build it, they will come, all right.  That made a great
          movie, but it's not necessarily -- there needs to be a
          balance between trying to figure out, once again, where the
          need is going to be and can we meet it at the right time.
             And so having the people who really want it and
          can articulate their need articulated to some organization
          that is well qualified to figure out, you know, should they
          have some seen money to start with, I think is a good way to
          do things.
             MR. PEPPER:  In the back?
             BROCK MEEKS:  Brock Meeks with MSNBC.  We keep
          hearing the term, "Yes, we need affordable access."  But can
          any of you put a dollar figure on what the hell affordable
          access is.  It doesn't mean squat to say affordable access
          if you really mean that affordable access is $59 a month or
          $6 an hour, and does affordable access mean we have
          different tiers of affordable access, like Netcom wants to
          do.  That's the first question.
             The second question, Peter, if you were going
          separate access from services, then don't you run the risk
          of turning those with just affordable access into high tech
          ghettos.  They are cut out of the services.  They've
          basically got TCPIP, and that's it, and they are left
          behind.
             MR. HARTER:  I guess I'll jump in first.  If you
          do separate access from services and desegregate, I don't
          know if it will be a high tech ghetto, that certain kind of
          hyperbole certainly eliminates the problem, if you do
          separate it too far.
             But if you just have TCPIP, as opposed to going
          through a modem and getting a busy signal, as many people
          have a problem, today, you can surf all the beautiful pages
          that are out there on the web in the public Internet.  If
          you carve out services in some way, my intention in pointing
          out that desegregation as you separate out the content that
          is bundled, typically, with a wire as part of a proprietary
          subscriber basis.
             So if not giving away some on-line services
          proprietary content for free in some kind of affordable
          access bundle, paid for by the U.S. taxpayer, some people
          may question, do I want that kind of content in my
          neighborhood anyway?  Is that all Mars candy, and not just
          good bread and meat and potatoes. And again I'm going to
          hyperbole, too.
             Again, I'll stress, it's something to consider in
          the process, what ultimately is in the public interest,
          after we go through a discourse, we'll hopefully figure out
          what is in the public interest.
             MR. WHITE:  Brock, I would settle for reasonably
          priced service.
             (Laughter.)
             MR. WHITE:  No, I'm serious.  Reasonably prices
          means that it has some relation to the cost, and it is
          provided in a competitive environment.
             AUDIENCE PARTICIPANT:  That means nothing.
             MR. WHITE:  No, it means quite a bit.  I think
          that a lot of people who have looked at what it costs to
          provide ISDN service, what it costs to provide some of the
          other technologies that are being discussed here, look at
          the underlying technologies and know that they can be
          provided in an affordable and reasonable way to users.  
                   Affordable, obviously, to one person, is different
          than affordable to another person.  There are some things I
          don't consider affordable for myself, because I don't think
          they are worth anything.  And I expect everyone is going to
          make that judgement.
             But I think that the technology -- and this is not
          a principle; this is just a sort of empirical observation --
          these access technologies that we are talking about have
          been designed by smart engineers to be fundamentally
          available to people who want to use them.
             And earlier today, there was a benchmark given of
          sort of somewhere between what phone service cost and what
          cable service cost.  There is a band in there of what people
          are willing to pay.
             I don't think that we need to stand on that
          principle.  I think the principle we need to stand on is
          that we need reasonably priced service, going back to a sort
          of old, you know, in some places, unpopular notion of just
          and reasonable prices, which are based on cost.
             But also prices that are developed in a
          competitive environment, where I have some confidence that
          if Glee tries to charge me $50 a month for the same service
          that I can get for $20 a month somewhere else, that she is
          not going to be around very long.  And I think that's where
          we need to get with this.
             This is not a statement that says in all cases,
          the market solves all problems.  But I actually think in
          this case the technology was developed with enough smarts in
          mind that it can be affordable for people if it is priced
          reasonably.
             MR. HARTER:  Brock, here's a tricky question for
          you.  Say I'm a university student and I get 7 by 24 access
          to the Internet on my university account, and it's a real
          good question.  I've got a real powerful work station or
          terminal in my dorm room.  And I said, "Hell, well, I don't
          want to dial into AOL.  I'll just go to their optional
          plan."  I think you just access their content through a
          TCPIP connection for $995 or whatever it is.
             And there is some Internet provider saying, "You
          can access the Internet through us, through dial-up for $8 a
          month."  And then you pay the $10 AOL and you get in cheaper
          than the $19.95, which they are currently offering.
             Well, say, I get in and it's a public institution. 
          It's a state university.  And it's state tax dollars paying
          for my lower tuition rate and my interconnection there.  Am
          I somehow abusing that by getting that advantage, by not
          having to pay the underlying cost of the transport, the
          connection, getting to this proprietary subscriber base
          environment?  These are questions people ask sometimes about
          how you use a free resource, like a university account for a
          for-profit activity.
             I don't know, is AOL benefitting because many
          young users who want to come into the chat rooms or sports
          areas of their service come into university because the
          connectivity is frankly a lot better, and that relieves the
          burden on AOL to capitalize a bigger infrastructure to meet
          the demand for its services?
             MS. CADY:  But causes congestion.
             MR. MAXWELL:  Questions?  That's all we can get. 
          First here, then over here.
             MR. GOWDA:  Hi, I'm Ihor Gowda with Newbridge
          Networks, and it's a question for either the panel or the
          commission.  It's philosophically related to Mike Trest's
          question, I suppose, but it is more about broad band access
          than broad access, and particularly for schools.
             An application that is very useful in schools that
          requires more broad band access than Internet access is
          interactive distance learning, which generally requires,
          say, up to a T-3s worth of access to do it properly.  Are
          there any policy initiatives of mechanisms that have been
          thought about for -- and Brock Meeks will sympathize with
          this -- for making T-3 access "affordable" to schools in
          order to enable interactive distance learning.
             MR. MAXWELL:  Just as a factual comment, in the
          universal service proceeding, one of the questions was, what
          services would be available under the provisions under the
          Telecom Act for schools and libraries?  The Joint Board
          recommended that it be all commercially available services,
          that there would be discounts applied to those.
             But there have been comments and reply comments
          filed on that.  The Commission has to make a decision on
          that question by May 8th.  But there was nothing in the
          recommended decision by Joint Board or in the notice that
          went out that said, "Well, it has to be this level of
          bandwidth or that level of bandwidth."  It was, in fact, all
          commercially available services, subject to discounts.
             Let me sort of turn over here.
             MR. DOYAN:  Hi, my name is Russell Doyan.  I
          manage the network layer for Saylor.  Saylor is the State of
          Maryland Library and Department of Education network
          project.  We tie schools, library, and government agency
          networks together.  We also provide the public access to
          modem pools in all calling areas of the state.
             FCC Chairman Reed Hundt visited us a couple months
          ago.  And I believe Mr. Hundt to be a champion of schools
          and libraries.  I think we need more champions to step
          forward.  Libraries have always been providers of
          information.  Librarians are the greatest indexers and
          distributors of information.  Teachers have always been
          providers of information, and they shepherd our future.
             Schools and libraries need legislative help in
          building their networks.  When BIN is installed in public
          right-of-ways, it would be helpful if perhaps 30 percent of
          the capacity is allocated to schools and libraries.  They
          need access to raw capacities, not just bundled services,
          VISPs.  This resource sharing that the FCC has started is a
          seed that I believe will show fruit in the decades to come
          for our children and ourselves.
             I would also encourage the FCC to allocate some
          usable frequency band with the schools and libraries, with a
          permanent frequency allocation, and allow them first crack
          at unused or government frequencies that are being migrated
          to the public sector, or to the private sector, before they
          go up on the auction block.  This would allow -- this would
          follow a precedent that has already been set by schools and
          libraries being able to preview government surplus property
          at auctions, and pick that up before it's sold.  Thank you.
             MR. MAXWELL:  This is a fact maybe to leave the
          panel with.  The telephone companies that are eligible for
          raw utility service grants represent probably about half the
          land mass that is considered rural.  And that's about 80
          percent of American territory.
             About 66 percent of RUS eligible telephone
          companies are also Internet service providers.  And there is
          an interesting requirement that by law was imposed on RUS
          grantees to increase the infrastructure capability of the
          RUS grantees to provide better infrastructure to rural
          areas.
             It would be interesting to see what the role of
          these companies will be in the future in reaching schools
          and libraries in previously under-served areas.  And it's
          conceivable, I would guess, that the same kind of mandate
          might be applied to Internet service provision, as was
          applied to infrastructure development.  That obviously
          raises different questions about the relationship between
          the local exchange companies and Internet service providers.
             But there is, again, for purposes of reaching out,
          perhaps another mechanism that will supplement the actions
          that Peter was describing, which getting by with your help
          from your friends, to make these services available to
          people.
             I would like to thank everyone on the panel for
          coming.  I thank you all for a long day's attendance and for
          good questions, and in the future, for helping us try to
          work through these issues.
             MR. PEPPER:  Just one last thing I want to say is,
          again, from our reporter, anybody who has spoken, please
          provide your business card so that we can put that in the
          record.
             I also want to thank everybody on all of the
          panels and our audience who has been here all day.  We have
          found this very, very productive.  This is the beginning of
          a process, not the end of a process.  We hope that people
          participate in the various proceedings here.
             There have been some very important questions
          raised about incentives, innovation, investment, bandwidth,
          access and democracy.  And so we see this as part of an
          interactive process in the tradition of the Internet.
          //
             So thank you all very, very much for
          participating.
             (Whereupon, at 3:40 p.m., the meeting was
          concluded.)
          //
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               //                        REPORTER'S CERTIFICATE
          
          
          FCC DOCKET NO.:      N/A
          
          CASE TITLE:   FCC BANDWIDTH fORUM
          
          HEARING DATE: January 23, 1997
          
          LOCATION:            Washington, D.C.
          
              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:   _01/23/97_           _____________________________
                                        Official Reporter
                                        Heritage Reporting Corporation
                                        1220 "L" Street, N.W.
                                        Washington, D.C. 20005
                                        Shari R. Bowman
          
                            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:   _01/24/97_            ______________________________
                                        Official Transcriber 
                                        Heritage Reporting Corporation
                                        Pamela Stevens
          
                            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:   _01/24/97_            ______________________________
                                        Official Proofreader
                                        Heritage Reporting Corporation
                                        Don R. Jennnings